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 811-8056
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MMA Praxis Mutual Funds
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(Exact name of registrant as specified in charter)
P.O. Box 483, Goshen, IN 46527
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(Address of principal executive offices) (Zip code)
Anthony Zacharski, Dechert LLP, 200 Clarendon Street, 27th Floor,
Boston, MA 02116
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(Name and address of agent for service)
Registrant's telephone number, including area code: (513) 362-8000
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Date of fiscal year end: 12/31
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Date of reporting period: 12/31/06
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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.
Annual Report
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MMA Praxis
Mutual Funds
Annual Report
for the year ending December 31, 2006
Intermediate Income Fund
Core Stock Fund
Value Index Fund
International Fund
[LOGO]
MMA(R)
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Stewardship
Solutions
Long-term
fundamentals
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Table of contents
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Table of contents
Message from the President.....................................................1
MMA Praxis Stewardship Investing Report........................................4
MMA Praxis Intermediate Income Fund
Portfolio managers' letter..................................................8
Performance review..........................................................9
Schedule of portfolio investments .........................................11
Statement of assets and liabilities........................................18
Statement of operations....................................................19
Statements of changes in net assets........................................20
Financial highlights ......................................................21
MMA Praxis Core Stock Fund
Portfolio managers' letter.................................................25
Performance review.........................................................27
Schedule of portfolio investments .........................................29
Statement of assets and liabilities........................................33
Statement of operations....................................................34
Statements of changes in net assets........................................35
Financial highlights ......................................................36
MMA Praxis Value Index Fund
Portfolio manager's letter.................................................40
Performance review.........................................................41
Schedule of portfolio investments .........................................43
Statement of assets and liabilities........................................53
Statement of operations....................................................54
Statements of changes in net assets........................................55
Financial highlights ......................................................56
MMA Praxis International Fund
Portfolio manager's letter.................................................60
Performance review.........................................................62
Schedule of portfolio investments .........................................64
Statement of assets and liabilities........................................73
Statement of operations....................................................74
Statements of changes in net assets........................................75
Financial highlights ......................................................76
Notes to financial statements.................................................79
Report of Independent Registered Public Accounting Firm.......................90
Additional fund information (unaudited).......................................91
Management of the Trust (unaudited)...........................................95
A
Glossary of Terms
Lehman Brothers Aggregate Bond Index is an unmanaged index composed of the
Lehman Brothers Government/Credit Index and the Lehman Brothers Mortgage-Backed
Securities Index and includes treasury issues, agency issues, corporate bond
issues and mortgage-backed securities.
The Morgan Stanley Capital International-Europe, Australia and the Far East
Index (MSCI-EAFE Index) is a widely recognized unmanaged index composed of a
sample of companies representative of the markets of Europe, Australia, Asia and
the Far East.
The Morgan Stanley Capital All Country World Free (ex. U.S.) Index is a widely
recognized, unmanaged index composed of a sample of companies representative of
the markets of both developed and emerging markets throughout the world,
excluding the United States.
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index") is a
widely recognized, unmanaged index of 500 selected common stocks, most of which
are listed on the New York Stock Exchange.
Standard & Poor's 500/Citigroup Value Index (the "S&P 500/Cititgroup Value
Index"), is unmanaged and is constructed by dividing the stocks in the S&P 500
Index into two categories, growth and value, according to price-to-book ratios.
Prior to December 16, 2005, this index represented the S&P/Barra Value Index.
MSCI - Prime Market Value Index represents the value companies of the MSCI Prime
Market 750 Index. The MSCI Prime Market 750 Index represents the Universe of
large and medium capitalization companies in the U.S. equity market.
Gross Domestic Product (the "GDP"), is the measure of the market value of the
goods and services produced by labor and property in the United States.
Consumer Price Index (the "CPI"), is an index of prices used to measure the
change in the cost of basic goods and services in comparison with a fixed base
period.
Price-to-Earnings Ratio (the "P/E Ratio"), is a valuation ratio of a company's
current share price compared to its per-share earnings.
SuperComposite 1500 Index. Large-cap core funds have more latitude in the
companies in which they invest. These funds typically have an average
price-to-earnings ratio, price to-book ratio, and three-year sales-per share
growth value, compared to the S&P 500 Index.
The above indices are unmanaged and do not reflect the deduction of expenses
associated with a mutual fund, such as investment management and fund accounting
fees. An investor cannot invest directly in an index, although they can invest
in the underlying securities.
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Message from the President
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Message from the President
Dear MMA Praxis Shareholder:
The year 2006 proved to be an eventful, and at times, tumultuous year. The
ongoing difficulties in Iraq and the related shift in power in Washington D.C.
were two big stories. But those were not as interesting from an investment
standpoint as the stories on oil prices, the housing market, and Central Bank
policy (Federal Reserve).
After beginning the year around $60 per barrel, oil peaked near $80 per barrel
and fostered the belief among some industry watchers that higher oil prices
would continue indefinitely (pundits were talking about $100 per barrel oil).
Many of the managers and strategists we follow believed oil prices would come
down, which turned out to be true, and oil ended the year at roughly the same
place at which it began.
Federal policy was a big driver of the markets in 2006. Early in the year,
investors were growing concerned about an interest rate "overshoot" causing a
recession. By summer, the Fed had hiked rates by another 125 basis points, and
stocks suffered. Once the Fed announced it was on hold for future rate hikes,
the stock market spent the rest of the year bouncing higher. Today, there is
growing talk of the possibility of a recession that would lead the Fed to begin
cutting rates again. This illustrates the fickle nature of short-term sentiment.
In less than six months, the market went from concerns about rising rates
damaging the economy, to relief that the rate hikes were over, to fears of a
cyclical recession (which would lead to falling rates). In the real world,
underlying fundamentals seldom change that quickly. What appears to be the
message is that objective analysis which focuses on the long-term is an
advantage. Being in "reactive mode" is an almost sure-fire way to get whipsawed,
since the market reflects investors' sentiments instantaneously. But short-term
investor sentiment rarely impacts long-term fundamentals.
2006 investment overview
Most equity asset classes did well in 2006, with smaller company stocks once
again leading large-caps for the year, continuing their run of outperformance
that began in 1999-2000. The small-cap Russell 2000 Index was up 18.2 percent,
while the large-cap Standard & Poor 500 Index was up 15.6 percent. The value
indexes vastly outperformed their growth counterparts regardless of company
size. On the fixed-income side, domestic high-quality, intermediate-term bonds
had a respectable year, with the Lehman Aggregate gaining 4.3 percent.
A broad observation about returns in 2006 is that riskier asset classes
generally did best. With a gain of almost 27 percent, foreign stocks did very
well, but the riskier emerging-markets asset class gained close to 30 percent.
Back home, the high-yield bond benchmark was up about 11.6 percent, while the
riskiest bonds in the high-yield universe--those rated CCC and below--gained
about 19 percent. And as noted, smaller-caps once again outpaced larger-caps.
Investors' willingness to take on risk implies a lower risk premium. However,
valuations for the S&P 500 reflect a different story. The respected market
analysts we follow suggest this index's valuation is either too low or investors
are pricing in an economic slowdown, which would not be a positive for risky
assets. Meanwhile, real interest rates (i.e. adjusted for inflation) are very
low, which usually means bond investors are worried about recession (suggesting
risk aversion). We don't know who will turn out to be right. Valuation analysis
is complicated by the participation of foreign investors and hedge funds, which
have their own agendas that may have little or nothing to do with the
aforementioned observations; for example, interest rates might not be low
because of recession fears, but rather because foreign investors currently
prefer our bonds to their own.
1
The following chart highlights the six-month performance of major market
indices:.
First Half 2006 Second Half 2006 Annual Returns 2006
(1/1/06-6/30/06) (7/1/06-12/31/06) (1/1/06-12/31/06)
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S&P 500 Index(1) 2.71% 12.74% 15.79%
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Lehman Brothers Aggregate
Bond Index(1) -0.73% 5.10% 4.33%
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MSCI Prime Value Index(1) 6.37% 15.03% 22.36%
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MSCI EAFE Index(1) 10.50% 14.80% 26.86%
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Our outlook for stock and bond markets
With the S&P 500 putting up good numbers in 2006, and some market indexes
reaching record levels, stocks may "seem" like they should be getting expensive.
In truth though, the valuation picture has actually changed very little. This is
because earnings have gone up along with stock prices, leaving the relationship
between prices and earnings virtually unchanged. It's worth remembering the new
highs reached by some indexes are only now eclipsing levels first seen nearly
seven years ago.
Where does all this leave us? Reasonably attractive valuations tell us the
market is either somewhat cheap--meaning returns going forward are likely to be
better than average--or the market is discounting a meaningful decline in the
fundamentals. We've seen signs of slowing earnings growth and a deceleration in
the economy. Part of this is normal cyclical behavior, and some may be in
response to the slowdown in the housing market. But in either case, it is clear
we're coming off of a spectacular period of earnings growth, and things are
likely to cool off. But at current valuation levels there is a margin of safety
already factored into the market.
With the Lehman Aggregate Bond Index yielding better than 5 percent, we expect
intermediate-term investment-grade bonds to generate returns in the 4 to 6
percent range over the foreseeable future. The beauty of bonds is that their
returns are based on straightforward math. Individual calendar years can be
higher or lower, depending on the pattern and timing of rate changes. But on
average, we expect bond returns going forward to be generally in line with
investment-grade intermediate term corporate bonds, which according to Ibbotson,
have generated long-term average annual returns of 5.9 percent.
Portfolio performance
MMA Praxis Intermediate Income Fund
The Class A Share (NAV) posted gains of 3.63 percent in 2006. These returns
lagged the benchmark established for the MMA Praxis Intermediate Income Fund
(Lehman Aggregate Bond Index), which returned 4.33 percent over the same time
period. For an in-depth analysis of this Fund's strategy, please read the
co-portfolio manager's commentary found later in this report.
MMA Praxis Core Stock Fund
The MMA Praxis Core Stock Fund Class A Share (NAV) returned 12.10 percent for
the 12-month period ended December 31, 2006. These returns were less than the
established benchmark (S&P 500) for the Fund, which returned 15.79 percent. The
portfolio managers' report will provide an in-depth analysis of those factors
that contributed to the Fund's absolute and relative performance.
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(1) Please refer to the Glossary of Terms on page A for additional information
on the referenced benchmark indices.
2
MMA Praxis Value Index Fund
As noted in the introductory comments, value once again outperformed a growth
style of investing in 2006. For the year, the MMA Praxis Value Index Fund A
Shares (NAV) were up 20.41 percent. The benchmark indexes for this Fund, the
MSCI U.S. Prime Market Value Index, gained 22.36 percent, and the S&P 500
CitiGroup Value Index was up 20.83 percent. (Note: it is not possible to invest
directly in an index, which do not incur expenses like an index mutual fund).
MMA Praxis International Fund
Foreign stock markets enjoyed another outstanding year in 2006, beating their
United States counterparts for a fourth straight year. Global conditions in 2006
were close to ideal for international stocks. The MMA Praxis International Fund
Class A Share (NAV) returned 20.31 percent. The Fund underperformed its
benchmark, the Morgan Stanley EAFE Index, which returned 26.86 percent. Over the
past three years ended December 31, 2006, the MMA Praxis International Fund
Class A Share (NAV) has delivered average annual returns of 15.79 percent, well
above the long-term average annual return for foreign stocks. We caution
investors in this Fund to not expect these stellar returns to continue
indefinitely, as returns will inevitably revert at some point to their
historical averages. Please read the commentary from the portfolio manager for
an in-depth analysis of the Fund's performance and an understanding of the
current investment strategy.
MMA Praxis - Accepting the challenge of integrating faith and finances
Since its inception in 1994, the management of MMA Praxis Mutual Funds has
attempted to generate social (or mission based) returns in addition to
generating financial returns that would assist shareholders to achieve their
financial planning goals. To quote from the Prospectus, "The goal of Praxis is
to join beliefs and deeds, using the tools of socially responsible investing.
The Funds are governed by a policy that applies social and financial criteria to
investment decisions. It is the Company's philosophy that being faithful
stewards means using assets God has entrusted to us to promote economic results
that are in harmony with ethical beliefs. Accordingly, the Adviser will actively
seek ways to promote well-being, peace, and justice through its investment
decisions."
From time-to-time, I like to remind myself and all the investment professionals
at MMA, we are stewards of a mission that makes us unique among modern day
financial services companies. Our mandate would remain unfulfilled if while
generating top quartile investment performance, we ignored the directive to
achieve social returns on behalf of our investors. Rest assured we continually
monitor our performance against BOTH financial and social performance metrics
with the goal of achieving satisfactory returns in both areas. We take seriously
the challenge to be faithful, holistic stewards of the capital you have
entrusted to us.
For a review of your Fund's social performance in 2006, please be sure to read
the report from Mark Regier, MMA's Stewardship Investing Manager, found on page
4.
Closing thoughts
We remain grateful for the trust and confidence you have demonstrated in MMA
Praxis Mutual Funds. Thank you for allowing us to partner with you in meeting
your financial planning goals.
Sincerely,
/s/ John L. Liechty
John L. Liechty
President, MMA Praxis Mutual Funds
3
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MMA Praxis Stewardship Investing Report
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MMA Praxis Stewardship Investing Report
MMA expands stewardship investing staff
We are pleased to announce that in September 2006, Chris Meyer joined MMA as our
new stewardship investing research specialist. Chris, with background in (and
passion for) environmental stewardship, will help increase MMA's capabilities in
issue research and shareholder advocacy. He will also help expand our
information management and reporting efforts.
Expanding the social impact of fixed income investments
MMA Praxis Mutual Funds, seeking to emphasize the opportunities for positive
impact through all our portfolios, is working with its managers to include more
fixed-income investments with strong social implications in the MMA Praxis
Intermediate Income Fund. These investments, while comparable to traditional
investments in terms of financial performance, carry a strong social return in
keeping with our stewardship investing principles. Below is an example of one
such investment.
Investing in immunizing the poor
This fall, the MMA Praxis Intermediate Income Fund purchased $1 million in bonds
issued from the International Finance Facility for Immunization Company (IFFIm).
Governments of a handful of countries have pledged grants that total $4 billion
over 20 years for health and immunization programs in many of the world's
poorest countries. The IFFIm was created to accelerate the availability of these
funds in order to help achieve the United Nation's Millennium Development Goals.
Since the need for capital is urgent, the IFFIm is issuing bonds to raise the
full amount now, while the government grant pledges will be collected over the
next 20 years and used to pay back the bondholders.
The $4 billion to be spent on immunization programs is expected to prevent 5
million child deaths by 2015. MMA's $1 million investment in IFFIm bonds
represents its ongoing commitment to respecting the dignity and value of all
people, specifically through the containment of preventable diseases. It is also
a sound investment. These highly rated bonds carry minimal risk and generate a
market rate of return. For more information, visit IFFIm's Web site:
http://www.iff-immunisation.org/index.html
Increasing attention to violent video game sales
MMA and other members of the Interfaith Center on Corporate Responsibility
(ICCR) engaged some of the largest video game retailers in the country in 2006.
These companies were asked to adopt and enforce video game sales policies to
ensure that mature (M-rated) video games for audiences ages 17 and older,
containing graphic violence, strong sexual content, and racist themes, are not
sold to minors. Behavioral science research increasingly shows that playing
violent video games increases the likelihood of aggressive behavior in children
and youth.
According to the ICCR report, released in December 2006, "It is evident that
retailers are doing well on several fronts; all retailers included in the report
have video game policies to restrict access by young teens to M-rated games; all
display signage about the ESRB [Entertainment Software Rating Board] rating
system; all conduct employee training programs and ongoing education on the
video game rating system for employees; and all have established a system to
identify the age of the purchaser at the register." ICCR was particularly
pleased with both Target's and Best Buy's policies to restrict ads for M-rated
games in teen publications and on television. MMA Praxis Mutual Funds has led
the most recent engagement with Sears/K-Mart, who is just beginning to work with
these issues on a coordinated level. This work will continue in 2007.
4
The ICCR report encourages retailers to improve their reporting in the following
ways:
o Adherence to policy. ICCR would like to encourage the public disclosure of
'mystery shopping' results, coordinated by the ESRB and designed to test
retailer training programs, on an individual company basis (versus industry
aggregates).
o Long- and short-term goals for compliance. ICCR recommends companies set
aggressive goals and objectives, and track results to ensure progress is
being made, with the end goal of 100 percent store compliance.
o Benchmarks or indicators. ICCR suggests companies create indicators to
demonstrate implementation of their policies on violent video games and
evaluate the effectiveness of these programs.
o A balanced assessment. The public needs to understand the challenges
relating to policy implementation. ICCR recognizes both the successes
achieved and the challenges remaining in this area and believes providing a
balanced picture builds credibility.
To view a summary of store policies on sales of violent video games, see the
chart at the end of this commentary.
Assessing excessive executive compensation comparison
The majority of corporations within the retail sector do not have difficulty
meeting the stewardship investing core values of the MMA Praxis Mutual Funds.
However, concerns have arisen relating to responsible management practices in
the area of executive compensation. How much do CEOs deserve to make? Executive
compensation has become a hot issue in many sectors of the investing world.
Sentiments are mixed and the issues complex, but a large and increasingly vocal
percentage of investors agree that extravagant pay coupled with poor performance
is bad business. A comparison of The Home Depot and Costco Wholesale Corp. on
this topic underscores the contrast between extravagant and acceptable executive
pay.
The Home Depot
The Home Depot (HD) is the world's largest home improvement retailer and has
made recognizable progress toward sustainable forestry and in providing green
products. Bob Nardelli left General Electric and became CEO of HD six years ago,
at a time when his reputation alone commanded top dollar, and he began his
tenure with much fanfare. But as the extent of his compensation became clear,
over $240 million during his tenure, and HD's stock price stagnated,
shareholders became critical.
On January 3, 2007, Nardelli was fired by the board of directors. Surprisingly,
it was these same board members who had been the most supportive of Nardelli's
performance and pay package. Why the change? After joining HD, Nardelli
developed a reputation as one of America's most overpaid executives. He made
sweeping structural changes and improved some aspects of the business, but never
delivered on financial expectations. His heavy handed management style also
created tension with employees and store managers.
In 2004, HD quietly altered its method of calculating long-term incentive pay,
in a way that allowed Nardelli and other executives to pocket substantial bonus
money even when HD's financial performance was dismal. When this move became
public, it infuriated a wide variety of investors and shareholder resolutions
were submitted.
MMA used its shareholder votes to lobby for change. While the MMA Praxis Funds
do not own HD stock, it is held within other MMA portfolios. In 2006, MMA voted
for shareholder resolutions that called for increased disclosure of executive
compensation, and withheld votes for board members who were part of the
compensation committee. MMA also supported a proposal allowing investors to
advise on the company's compensation policy. These resolutions were also
strongly supported by mainstream institutional investors and mutual funds. At
least 30 percent of shareholders - a significant number - also withheld support
from 10 of the company's directors.
5
Pressure from concerned shareholders may have contributed to Nardelli's firing.
While he walked away with a fortune in severance pay, HD will take the issue of
executive pay more seriously in the future. The company has stated that its
board will now require two-thirds of its independent directors to approve any
compensation granted to the company's chief executive. This is a step in the
right direction, and MMA will continue to press HD for improved policies.
Costco - executive pay done right
Jim Sinegal, co-founder and CEO of Costco (COST), (4.2 percent, MMA Praxis Core
Stock Fund, December 29, 2006, fourth quarter holdings) embraces a different pay
policy in a market sector not known for its progressive compensation schemes.
Costco operates 473 warehouse stores worldwide and is America's fifth largest
retailer. Unlike the CEOs of similar-sized corporations, Sinegal earns just
$350,000 per year with up to $200,000 in bonuses. Those numbers put him in the
bottom 10 percent of the Standard & Poor 500 Index regarding pay for CEOs, even
though Costco has outperformed most companies in that index.
Keeping executive compensation at a reasonable level helps Costco maintain its
low prices. Yet cost-cutting does not extend to employee compensation. The
average wage at Costco is $17 an hour, and 85 percent of employees have health
coverage. Costco believes its generous employee compensation policy helps the
company by attracting the best workers, keeping employee turnover low, and
increasing worker efficiency. These policies have raised eyebrows among some
stock analysts, but shoppers flock to the stores, employee moral is high, and
Costco's stock price has shown steady growth.
MMA believes Costco deserves acknowledgement for its shockingly reasonable
executive compensation policy and unusually robust employee benefits. But that
does not mean Costco gets a free pass on all other issues. MMA, along with other
faith-based and socially concerned investors, is involved in shareholder
advocacy to encourage Costco to pursue increased energy efficiency, where Costco
has significant room to improve.
Mark A. Regier
Stewardship Investing Services Manager
6
VIDEO GAME RETAILER COMPARISON CHART
Actions Taken By Retailers to Prevent Sales to Minors of Mature (M)
Rated Video Games
(September 2006)
ELEMENTS OF AN EFFECTIVE, RESPONSIBLE, AND BEST BUY CIRCUIT GAME SEARS & TARGET TOYS WAL-
WELL-MONITORED VIDEO GAME SALES POLICY CITY STOP KMART "R" US MART
Has a policy on the sales of video
games to minors * * * * * *
Discloses Video Game Policy in Stores * * * * * *
Discloses Video Game Policy on Web Site * * * * *
Policy is in the game section of the
website * * *
Information about policy/program is in * *
Corporate Social Responsibility Report
Signage featuring rating in stores * * * * * * *
***
Other means to identify M -rated games Enlarged "M" in
circulars
Does not advertise M games in media *** ***
geared to audiences 17 and under No "M" game * No "M" game ads
ads on TV in teen publications
* (Sears
Shop by rating online * * * Only) * *
Age verification in stores * * * * * * *
Online shoppers of M games * * * * *
attest to being 17 or older
***
Separates M games in stores On top
shelves
Employee training program * * * * * * *
Ongoing employee education * * * * * * *
Additional training during holidays * * *
and other peak sales periods
***
Conducts its own audit for (At least 100 * * * *
policy compliance stores per
month)
Rewards employees for compliance ***
Policy includes disciplinary action
for non-compliance * * * * *
Has process to collect, analyze and
report data *** *
Provides results of policy/program in
corporate social responsibility report
and/or website
Senior managers assigned responsibility * * * * *
Senior manager compensation tied to
compliance
Store manager evaluation tied to
compliance ***
Participates in ESRB Retailers Council
(ERC) * * * * *
Does not sell 'AO' games * *
Has refused to sell certain M games * *
*** "Good Practice" Many of the categories selected for inclusion in the chart
are considered to be progressive and proactive practices in the industry, as
noted in ICCR's 2005 report, "Retail Guidelines for the Sale of Violent Video
Games" http://www.iccr.org/issues/violence/videogameretailgdlines121305.pdf
DISCLAIMER: This chart is the result of information gathered from the retailers
noted by members of the Interfaith Center on Corporate Responsibility. It is
intended for informational purposes only. We have made every effort to ensure
the information is reliable, but make no guarantee as its accuracy or
completeness.
We appreciate the cooperation and di sclosure provided by the retailers noted in
this chart.
7
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MMA Praxis Intermediate Income Fund
- -----------------------------------
MMA Praxis Intermediate Income Fund
Annual report to shareholders
Portfolio managers' letter
Economic growth slowed in the third quarter to 2.2 percent before bouncing back
somewhat late in the year thanks to declining oil prices and stronger exports
that partially offset the drag from housing.
Falling commodity prices led to lower rates of Consumer Price Index inflation,
but core (excluding food and energy from CPI) inflation rates remained sticky at
high levels. This divergence of events kept Federal policy on hold with Federal
Funds at 5.25 percent.
Perceptions for the future varied widely, but expectations of a period of below
trend growth and inflation moderation led to a considerable decline in interest
rates and a more inverted yield curve. Most of the decline happened in the third
quarter with only modest changes in the fourth quarter. The largest decline in
rates was for the 10-year Treasury note with a 44 basis point decline. The rest
of the yield curve declined between 34 and 40 basis points. This seemed to fully
build in market expectations of a so-called "soft landing" for the economy where
the Federal Reserve would eventually shift policy to cut rates rather than
increase them.
Such a benign view of the world kept volatility at very low levels. Volatility
in the equity and swap markets fell, which had a positive impact on corporate
bonds and mortgage-backed securities. Both equities and swap markets continued
to outperform the Lehman Aggregate Bond Index, which is the Fund's benchmark.
Relative returns of the Fund were moderately below our expectations. This was
mainly due to our view that the market was over-discounting the probability of a
soft landing. It was pushing long-term rates below levels consistent with a
policy of modest cuts in the Fed Funds rates in 2007. As a result, we kept our
duration moderately short, which hurt our returns relative to the benchmark.
On the other hand, there were a number of positives. First, our exposure to a
Euro denominated bond helped our returns as the dollar weakened. Second, the
fact that we did not hold any U.S. Treasury securities enhanced our performance.
Finally, the extra yield we built into the Fund relative to the benchmark
enhanced our returns.
On balance, our positive gains were not sufficient to fully offset this Fund's
expenses. As a result, the Fund underperformed the benchmark by 41 basis points
in the second half for Class A shares.
Outlook
For 2007, we expect growth to remain below trend and core inflation to subside
modestly. However, growth is not likely to be so weak that the Fed will be
cutting rates any time soon. We believe rate cuts may happen later in the year,
but the market has only belatedly started to recognize the uncertainty of any
Fed policy change.
The key for the year will be the degree to which below trend growth impacts the
unemployment rate. The Fed tends to be very sensitive to even a modest increase
in unemployment and responds fairly quickly with an easier monetary policy.
Given the wide divergence of views by economists for 2007 and recent strength in
employment data, it will most likely be well into the second quarter before the
longer-term direction of the economy emerges. In the mean time, the market will
be very data sensitive.
We do believe tight spreads for every market sector will make it very difficult
for managers to add value this year. Further, it is not certain the dollar will
be much weaker any time soon, limiting opportunities in non-dollar bonds.
Delmar King
MMA Praxis Intermediate Income Fund Co-manager
Benjamin Bailey, CFA(R)
MMA Praxis Intermediate Income Fund Co-manager
8
------------------
Performance review
------------------
MMA Praxis Intermediate Income Fund
Performance review
Average annual total returns as of 12/31/06
[The following table was represented as a bar chart in the printed material.]
Inception
Date 1 Year 3 Year 5 Year 10 Year
---- ------ ------ ------ -------
Class A 5/12/99 3.63% 3.07% 4.35% 4.93%
Class A* 5/12/99 -0.27% 1.76% 3.55% 4.54%
Class B 1/4/94 3.10% 2.58% 3.88% 4.66%
Class B** 1/4/94 -0.87% 1.65% 3.70% 4.66%
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 principal value will fluctuate so that an investor's
shares, when redeemed may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. To obtain
performance information current to the most recent month end, please visit
mmapraxis.com.
* Reflects maximum front-end sales charge of 3.75%.
** The Fund imposes a back-end sales charge (load) on Class B Shares if you
sell your shares before a certain period of time has elasped. This is
called a Contingent Deferred Sales Charge ("CDSC"). The CDSC declines over
five years starting with year one and ending in year six as follows: 4%,
4%, 3%, 2%, 1%.
Class A Share of this Fund were not in existence prior to 5/12/99. Class A
Share performance calculated for any period prior to 5/12/99 is based on the
performance of Class B Share since inception of 1/4/94. The B Share Contingent
Deferred Sales Charge (CDSC) does not apply to performance over 5 years;
therefore, the 10-year return does not reflect the CDSC.
The total return set forth reflects certain expenses that were voluntarily
reduced, reimbursed or paid by third party. In such instances, and without this
activity, total return would have been lower.
9
MMA Praxis Intermediate Income Fund
Performance review (continued)
Growth of $10,000 investment 12/31/96 to 12/31/06
[The following table was represented as a line chart in the printed material.]
Lehman Brothers
Class A* Class B Aggregate Index(1)
12/31/1996 9,625 10,000 10,000
3/31/1997 9,539 9,911 9,944
6/30/1997 9,835 10,218 10,309
9/30/1997 10,107 10,500 10,652
12/31/1997 10,358 10,762 10,965
3/31/1998 10,506 10,916 11,136
6/30/1998 10,721 11,138 11,396
9/30/1998 11,158 11,593 11,878
12/31/1998 11,113 11,546 11,918
3/31/1999 11,034 11,464 11,859
6/30/1999 10,925 11,342 11,755
9/30/1999 10,998 11,407 11,834
12/31/1999 10,934 11,327 11,820
3/31/2000 11,115 11,504 12,081
6/30/2000 11,180 11,573 12,291
9/30/2000 11,487 11,868 12,662
12/31/2000 11,813 12,198 13,194
3/31/2001 12,159 12,545 13,594
6/30/2001 12,220 12,596 13,671
9/30/2001 12,722 13,103 14,302
12/31/2001 12,591 12,956 14,308
3/31/2002 12,506 12,857 14,322
6/30/2002 12,950 13,301 14,851
9/30/2002 13,552 13,908 15,531
12/31/2002 13,727 14,074 15,775
3/31/2003 13,894 14,233 15,995
6/30/2003 14,218 14,551 16,395
9/30/2003 14,205 14,506 16,371
12/31/2003 14,231 14,516 16,423
3/31/2004 14,566 14,843 16,860
6/30/2004 14,233 14,486 16,448
9/30/2004 14,633 14,877 16,973
12/31/2004 14,766 14,995 17,135
3/31/2005 14,710 14,922 17,053
6/30/2005 15,082 15,283 17,566
9/30/2005 14,969 15,145 17,449
12/31/2005 15,035 15,212 17,552
3/31/2006 14,926 15,102 17,437
6/30/2006 14,885 15,060 17,424
9/30/2006 15,397 15,578 18,087
12/31/2006 15,583 15,762 18,312
For performance purposes, the above graph has not been adjusted for CDSC
charges.
This chart represents historical performance of a hypothetical investment of
$10,000 in the Intermediate Income Fund from 6/30/95 to 6/30/06, and represents
the reinvestment of dividends and capital gains in the Fund.
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 principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. To obtain
performance information current to the most recent month end, please visit
www.mmapraxis.com.
The total return set forth reflects certain expenses that were voluntarily
reduced, reimbursed or paid by third party. In such instances, and without this
activity, total return would have been lower.
* Reflects maximum front-end sales charge of 3.75%.
Class A Share of this Fund were not in existence prior to 5/12/99. Class A Share
performance calculated for any period prior to 5/12/99 is based on the
performance of Class B Share since inception of 1/4/94.
(1) The Lehman Brothers Aggregate Bond Index is an unmanaged index composed of
the Lehman Brothers Government/Credit Index and the Lehman Brothers
Mortgage-Backed Securities Index and includes Treasury issues, agency
issues, corporate bond issues and mortgage-backed securities, and is
intended to be generally representative of the bond market as a whole.
The above indices are for illustrative purposes only and the Lehman Brothers
Aggregate Bond Index does not reflect the deduction of expenses associated with
a mutual fund, such as investment management and fund accounting fees. The
Fund's performance reflects the deduction of these value-added services. An
investor cannot invest directly in an index, although they can invest in its
underlying securities.
10
MMA Praxis Intermediate Income Fund
Schedule of portfolio investments
December 31, 2006
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 2.7%
Honda Auto Receivables Owner Trust, 4.15%, 10/15/10 ....................... $ 1,000,000 $ 985,036
Massachusetts RRB Special Purpose Trust, 3.78%, 9/15/10 ................... 902,701 891,951
MBNA Credit Card Master Note Trust, Series 2003-A1, 3.30%, 7/15/10 ........ 1,375,000 1,346,106
MBNA Credit Card Master Note Trust, Series 2005-A1, 4.20%, 9/15/10 ........ 1,000,000 987,786
PG&E Energy Recovery Funding LLC, 3.87%, 6/25/11 .......................... 1,168,044 1,146,452
Residential Funding Mortgage Securities, 5.53%, 1/25/36 ................... 1,000,000 997,541
Wachovia Auto Loan Owner Trust, 5.10%, 7/20/11 (a) ........................ 1,000,000 998,644
------------
TOTAL ASSET BACKED SECURITIES .................................................. 7,353,516
------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.3%
JP Morgan Securities, Inc., 4.50%, 9/25/19 ................................ 738,931 720,806
------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 5.1%
Bear Stearns Commercial Mortgage Securities, 5.20%, 12/1/38 ............... 2,000,000 1,975,939
Bear Stearns Commercial Mortgage Securities, 5.12%, 2/11/41 ............... 1,000,000 986,670
Bear Stearns Commercial Mortgage Securities, 4.67%, 6/11/41 ............... 1,000,000 957,320
Bear Stearns Commercial Mortgage Securities, 5.54%, 9/11/41 ............... 2,000,000 2,028,904
Bear Stearns Commercial Mortgage Securities, 4.56%, 2/13/42 ............... 1,000,000 981,797
Bear Stearns Commercial Mortgage Securities, 5.13%, 10/12/42 .............. 1,125,000 1,120,406
JP Morgan Chase Commercial Mortgage Securities, 5.40%, 5/15/45 ............ 1,000,000 1,002,910
JP Morgan Chase Commercial Mortgage Securities, 4.63%, 3/15/46 ............ 1,000,000 982,622
JP Morgan Trust, 4.90%, 10/15/42 .......................................... 1,000,000 979,582
Morgan Stanley Capital, 5.01%, 1/14/42 .................................... 1,000,000 988,739
Morgan Stanley Capital, 4.83%, 6/12/47 .................................... 1,000,000 981,517
Morgan Stanley Capital I, 5.98%, 8/12/41 .................................. 1,000,000 1,040,994
------------
TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES .................................... 14,027,400
------------
CORPORATE BONDS -- 24.2%
AGRICULTURAL SERVICES -- 0.5%
Cargill, Inc., 7.50%, 9/1/26 (a) .......................................... 1,250,000 1,482,384
------------
ASSET MANAGEMENT -- 0.5%
Legg Mason, Inc., 6.75%, 7/2/08 ........................................... 1,300,000 1,325,806
------------
BANKING -- 0.4%
Citigroup, Inc., 5.13%, 5/5/14 (b) ........................................ 1,000,000 986,474
------------
BROADCASTING/CABLE -- 0.7%
Comcast Corp., 5.85%, 1/15/10 (b) ......................................... 1,000,000 1,013,954
Cox Communications, Inc., 4.63%, 1/15/10 .................................. 1,000,000 978,828
------------
1,992,782
------------
BROKERAGE SERVICES -- 0.7%
Goldman Sachs Group, 6.65%, 5/15/09 (b) ................................... 1,000,000 1,032,404
Lehman Brothers Holdings, 7.00%, 2/1/08 (b) ............................... 1,000,000 1,016,902
------------
2,049,306
------------
COMMERCIAL BANKS -- 1.3%
Bank of America Corp., 7.75%, 8/15/15 ..................................... 1,000,000 1,150,495
State Street Corp., 7.35%, 6/15/26 ........................................ 1,000,000 1,186,451
Wells Fargo Co., 5.13%, 9/1/12 (b) ........................................ 1,250,000 1,246,840
------------
3,583,786
------------
COMMERCIAL BANKS - SOUTHERN U.S. -- 0.7%
Bank One Texas, 6.25%, 2/15/08 ............................................ 1,950,000 1,969,640
------------
11
MMA Praxis Intermediate Income Fund
Schedule of portfolio investments, continued
December 31, 2006
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 24.2%, continued
CONSTRUCTION -- 0.7%
D.R. Horton, Inc., 8.50%, 4/15/12 ......................................... $ 1,300,000 $ 1,360,720
KB Home, 8.63%, 12/15/08 (b) .............................................. 500,000 519,508
------------
1,880,228
------------
ELECTRIC - INTEGRATED -- 1.4%
Consolidated Edison, 5.70%, 12/1/36 (b) ................................... 1,000,000 972,679
Midamerican Energy Co., 6.75%, 12/30/31 ................................... 1,500,000 1,662,381
Puget Sound Energy, Inc., 6.74%, 6/15/18 .................................. 1,000,000 1,068,286
------------
3,703,346
------------
ELECTRIC SERVICES -- 0.7%
AEP Texas North Co., Series B, 5.50%, 3/1/13 .............................. 1,000,000 990,268
FPL Energy Caithness Funding, 7.65%, 12/31/18 (a) ......................... 742,893 805,341
------------
1,795,609
------------
ELECTRONIC COMPONENTS - SEMICONDUCTORS -- 0.4%
Applied Materials, Inc., 7.13%, 10/15/17 (b) .............................. 1,000,000 1,095,753
------------
FINANCE - AUTO LOANS -- 0.7%
Ford Motor Credit Co., 7.25%, 10/25/11 .................................... 1,000,000 979,272
Ford Motor Credit Co., 8.00%, 12/15/16 (b) ................................ 500,000 494,075
General Motors Acceptance Corp., 6.75%, 12/1/14 (b) ....................... 500,000 513,567
------------
1,986,914
------------
FINANCIAL SERVICES -- 1.2%
General Electric Capital Corp., 6.88%, 11/15/10 (b) ....................... 1,000,000 1,057,277
General Electric Capital Corp., 6.75%, 3/15/32 (b) ........................ 1,000,000 1,145,278
SLM Corp., 4.00%, 1/15/09 ................................................. 1,000,000 977,794
------------
3,180,349
------------
FIRE, MARINE & CASUALTY INSURANCE -- 0.4%
Berkley Corp., 5.13%, 9/30/10 (b) ......................................... 1,000,000 986,415
------------
FOOD PROCESSING -- 0.7%
Dean Foods Co., 8.15%, 8/1/07 (b) ......................................... 750,000 759,375
Hormel Foods Corp., 6.63%, 6/1/11 ......................................... 1,000,000 1,050,620
------------
1,809,995
------------
GOVERNMENTS (FOREIGN) -- 0.2%
Province of Ontario, 5.70%, 12/1/08 ....................................... 500,000 440,966
------------
INSURANCE -- 1.9%
Allstate Corp., 7.50%, 6/15/13 (b) ........................................ 1,100,000 1,221,797
American International Group, 6.25%, 5/1/36 ............................... 1,000,000 1,062,479
Fidelity National Title, 7.30%, 8/15/11 ................................... 1,000,000 1,050,031
Old Republic International Corp., 7.00%, 6/15/07 .......................... 1,000,000 1,003,995
Principal Life Global, 6.25%, 2/15/12 (a) ................................. 1,000,000 1,041,605
------------
5,379,907
------------
INTERNAL COMBUSTION ENGINES, N.E.C. -- 0.4%
Briggs & Stratton Corp., 8.88%, 3/15/11 ................................... 1,000,000 1,082,500
------------
MEDICAL - BIOMEDICAL/GENETIC -- 0.5%
Amgen, Inc., 4.00%, 11/18/09 (b) .......................................... 1,500,000 1,455,275
------------
12
MMA Praxis Intermediate Income Fund
Schedule of portfolio investments, continued
December 31, 2006
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 24.2%, continued
NATURAL GAS PRODUCTION AND/OR DISTRIBUTION -- 1.7%
Indiana Gas Co., 6.55%, 6/30/28 ........................................... $ 250,000 $ 262,735
Keyspan Gas East, 7.88%, 2/1/10 ........................................... 1,250,000 1,334,465
National Fuel Gas Co., 6.30%, 5/27/08 ..................................... 1,000,000 1,011,084
Northern Natural Gas, 5.38%, 10/31/12 (a) ................................. 1,000,000 991,117
Southern Union Co., 8.25%, 11/15/29 ....................................... 1,050,000 1,164,352
------------
4,763,753
------------
NETWORKING -- 0.4%
Cisco Systems, Inc., 5.25%, 2/22/11 (b) ................................... 1,000,000 1,002,509
------------
OIL & GAS EXPLORATION, PRODUCTION & SERVICES -- 1.9%
Burlington Resources, Inc., 7.38%, 3/1/29 ................................. 1,073,000 1,282,170
Conoco, Inc., 6.95%, 4/15/29 (b) .......................................... 1,075,000 1,221,067
Pemex Project, 7.38%, 12/15/14 ............................................ 500,000 550,500
Ras Laffan, 5.83%, 9/30/16 (a) ............................................ 1,000,000 1,002,940
XTO Energy, Inc., 7.50%, 4/15/12 .......................................... 1,000,000 1,086,456
------------
5,143,133
------------
PRINTING -- 0.2%
Idearc, Inc., 8.00%, 11/15/16 (a) ......................................... 500,000 507,500
------------
PUBLISHING - JOURNALS -- 0.5%
Thomson Corp., 6.20%, 1/5/12 .............................................. 1,200,000 1,235,022
------------
REAL ESTATE -- 0.4%
EOP Operating LP, 7.00%, 7/15/11 .......................................... 1,000,000 1,082,179
------------
RESTAURANTS -- 0.4%
YUM! Brands, Inc., 8.88%, 4/15/11 (b) ..................................... 1,000,000 1,121,771
------------
RETAIL - BUILDING PRODUCTS -- 0.5%
Home Depot, Inc., 5.25%, 12/16/13 (b) ..................................... 500,000 496,282
Home Depot, Inc., 5.40%, 3/1/16 (b) ....................................... 1,000,000 978,046
------------
1,474,328
------------
RETAIL - DISCOUNT -- 0.8%
Dollar General Corp., 8.63%, 6/15/10 ...................................... 1,000,000 1,062,500
Wal-Mart Stores, 7.55%, 2/15/30 (b) ....................................... 1,000,000 1,212,898
------------
2,275,398
------------
RETAIL - FOOD -- 0.4%
Delhaize America, Inc., 8.13%, 4/15/11 (b) ................................ 1,000,000 1,078,756
------------
SUPRANATIONAL BANK -- 0.7%
Corporation Andina de Fomento, 5.20%, 5/21/13 ............................. 1,000,000 982,505
IFFIM, 5.00%, 11/14/11 (a) ................................................ 1,000,000 991,083
------------
1,973,588
------------
TELECOMMUNICATIONS -- 0.4%
Embarq Corp., 6.74%, 6/1/13 (b) ........................................... 1,000,000 1,023,508
------------
TELEPHONE - INTEGRATED -- 0.8%
Sprint Capital Corp., 7.63%, 1/30/11 (b) .................................. 1,000,000 1,070,701
Verizon Communications, 5.55%, 2/15/16 (b) ................................ 1,000,000 996,544
------------
2,067,245
------------
13
MMA Praxis Intermediate Income Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 24.2%, continued
TRANSPORTATION SERVICES -- 0.7%
Canadian National Railways, 4.40%, 3/15/13 ................................ $ 1,000,000 $ 951,005
Golden State Petroleum Transportation, 8.04%, 2/1/19 ...................... 1,000,000 1,045,700
------------
1,996,705
------------
UTILITIES - NATURAL GAS -- 0.4%
Michigan Consolidated Gas Co., 8.25%, 5/1/14 .............................. 1,000,000 1,153,510
------------
TOTAL CORPORATE BONDS .......................................................... 66,086,340
------------
CORPORATE NOTES -- 1.2%
COMMUNITY DEVELOPMENT -- 1.2%
MMA Community Development Investment, Inc., 2.98%, 1/1/07, (c)+ ........... 1,350,000 1,350,000
MMA Community Development Investment, Inc., 4.47%, 1/1/07, (c)+ ........... 2,025,000 2,025,000
------------
TOTAL CORPORATE NOTES .......................................................... 3,375,000
------------
INTEREST ONLY BONDS -- 0.3%
FREDDIE MAC -- 0.2%
5.00%, 5/15/23 ............................................................ 1,566,411 50,583
5.00%, 4/15/29 ............................................................ 2,000,000 403,530
------------
....................................................................... 454,113
------------
GOVERNMENT NATIONAL MORTGAGE ASSOC. -- 0.1%
1.03%, 4/16/07 ............................................................ 10,738,912 372,504
------------
TOTAL INTEREST ONLY BONDS ...................................................... 14,305,323 826,617
------------
MUTUAL FUNDS -- 0.6%
MUTUAL FUNDS -- 0.6%
Pax World High Yield Fund ................................................. 187,869 1,604,401
------------
U.S. GOVERNMENT AGENCIES -- 63.5%
FANNIE MAE -- 31.8%
5.25%, 1/15/09 ............................................................ 4,400,000 4,418,822
7.25%, 1/15/10 ............................................................ 2,950,000 3,138,487
7.45%, 10/1/11 ............................................................ 2,996,911 2,991,179
6.13%, 3/15/12 ............................................................ 3,700,000 3,895,852
4.38%, 7/17/13 ............................................................ 5,250,000 5,057,377
4.13%, 4/15/14 ............................................................ 5,500,000 5,214,285
7.35%, 1/1/15 ............................................................. 338,204 365,144
5.00%, 4/15/15 ............................................................ 3,250,000 3,256,312
7.00%, 7/1/15 ............................................................. 18,732 19,419
5.00%, 7/1/18 ............................................................. 938,804 924,990
5.00%, 9/1/18 ............................................................. 1,194,217 1,176,644
7.00%, 11/1/19 ............................................................ 142,314 147,320
7.00%, 11/1/19 ............................................................ 78,196 80,947
5.00%, 7/1/23 ............................................................. 1,705,037 1,661,138
5.00%, 4/1/24 ............................................................. 1,696,446 1,651,759
5.00%, 4/1/25 ............................................................. 2,110,719 2,053,956
5.00%, 7/1/25 ............................................................. 1,901,011 1,849,887
5.00%, 10/1/25 ............................................................ 2,261,247 2,200,435
14
MMA Praxis Intermediate Income Fund
Schedule of portfolio investments, continued
December 31, 2006
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 63.5%, continued
5.50%, 11/1/25 ............................................................ $ 1,779,831 $ 1,768,968
8.50%, 9/1/26 ............................................................. 337,073 361,495
6.63%, 11/15/30 ........................................................... 3,500,000 4,176,542
6.50%, 5/1/31 ............................................................. 146,855 149,627
6.50%, 6/1/32 ............................................................. 344,219 352,109
6.00%, 10/1/32 ............................................................ 301,395 304,146
5.00%, 2/1/33 ............................................................. 1,570,022 1,518,728
5.50%, 3/1/33 ............................................................. 817,270 809,107
5.50%, 4/1/33 ............................................................. 623,681 617,323
5.55%, 6/1/33 ............................................................. 480,939 484,941
6.00%, 8/1/33 ............................................................. 538,270 541,924
4.29%, 10/1/33 ............................................................ 1,319,935 1,298,548
6.00%, 10/1/33 ............................................................ 650,635 655,053
4.10%, 2/1/34 ............................................................. 1,815,063 1,827,678
5.50%, 2/1/34 ............................................................. 1,247,081 1,232,376
5.50%, 2/1/34 ............................................................. 1,139,660 1,126,221
3.91%, 4/1/34 ............................................................. 444,127 454,107
4.19%, 5/1/34 ............................................................. 932,305 920,649
5.50%, 5/1/34 ............................................................. 1,271,331 1,258,372
6.00%, 8/1/34 ............................................................. 2,217,503 2,232,559
5.50%, 10/1/34 ............................................................ 1,418,425 1,403,219
5.50%, 11/1/34 ............................................................ 1,489,531 1,471,967
6.00%, 11/1/34 ............................................................ 2,646,405 2,664,374
5.50%, 1/1/35 ............................................................. 1,489,492 1,471,928
5.50%, 1/1/35 ............................................................. 2,198,125 2,174,560
5.00%, 10/1/35 ............................................................ 2,759,015 2,663,313
5.50%, 10/1/35 ............................................................ 3,382,184 3,343,554
6.00%, 10/1/35 ............................................................ 1,685,629 1,697,075
5.50%, 4/1/36 ............................................................. 2,817,117 2,784,942
6.00%, 6/1/36 ............................................................. 1,909,236 1,922,199
5.50%, 11/1/36 ............................................................ 2,980,684 2,945,535
------------
86,737,092
------------
FEDERAL FARM CREDIT BANK -- 0.7%
4.88%, 12/16/15 ........................................................... 2,000,000 1,983,502
FEDERAL HOME LOAN BANK -- 2.5%
4.13%, 8/13/10 ............................................................ 1,000,000 973,605
6.63%, 11/15/10 ........................................................... 900,000 951,780
3.88%, 6/14/13 ............................................................ 300,000 281,982
4.50%, 9/16/13 ............................................................ 1,250,000 1,216,262
4.75%, 12/16/16 ........................................................... 2,500,000 2,447,687
5.50%, 7/15/36 ............................................................ 1,000,000 1,043,454
------------
6,914,770
------------
15
MMA Praxis Intermediate Income Fund
Schedule of portfolio investments, continued
December 31, 2006
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 63.5%, continued
FREDDIE MAC -- 25.2%
9.00%, 6/1/08 ............................................................. $ 563 $ 606
3.88%, 6/15/08 ............................................................ 2,500,000 2,457,878
6.75%, 1/15/09 ............................................................ 153,432 154,244
5.75%, 3/15/09 ............................................................ 5,450,000 5,533,909
3.75%, 7/15/09 ............................................................ 2,000,000 2,620,920
4.13%, 7/12/10 ............................................................ 1,987,000 1,936,339
4.00%, 9/1/10 ............................................................. 1,190,663 1,152,360
6.88%, 9/15/10 ............................................................ 2,081,000 2,216,679
5.00%, 7/15/14 ............................................................ 2,700,000 2,703,302
4.75%, 1/19/16 ............................................................ 1,400,000 1,376,512
5.25%, 4/18/16 ............................................................ 3,500,000 3,571,414
5.50%, 9/1/17 ............................................................. 1,026,278 1,028,022
6.00%, 9/1/17 ............................................................. 1,440,466 1,459,852
5.00%, 10/1/17 ............................................................ 772,560 761,335
5.50%, 11/1/17 ............................................................ 1,214,115 1,216,367
6.00%, 2/1/18 ............................................................. 736,385 746,902
5.00%, 5/1/18 ............................................................. 671,737 661,440
4.50%, 6/1/18 ............................................................. 1,978,597 1,911,547
5.00%, 9/1/18 ............................................................. 1,073,328 1,056,874
5.00%, 9/1/18 ............................................................. 1,095,616 1,079,128
5.00%, 10/1/18 ............................................................ 1,157,711 1,140,209
5.00%, 11/1/18 ............................................................ 1,116,511 1,099,395
5.00%, 4/1/19 ............................................................. 1,944,775 1,912,833
7.00%, 2/1/30 ............................................................. 899,668 922,909
7.50%, 7/1/30 ............................................................. 759,644 787,024
5.00%, 12/15/30 ........................................................... 2,000,000 1,952,392
6.50%, 2/1/31 ............................................................. 46,964 47,834
7.00%, 3/1/31 ............................................................. 451,091 462,744
6.75%, 3/15/31 ............................................................ 2,050,000 2,481,896
5.00%, 4/15/31 ............................................................ 2,000,000 1,958,089
6.50%, 8/1/31 ............................................................. 38,297 39,195
6.50%, 2/1/32 ............................................................. 351,838 360,091
6.00%, 10/1/32 ............................................................ 1,104,806 1,115,596
5.50%, 8/1/33 ............................................................. 1,662,409 1,646,507
5.50%, 11/1/33 ............................................................ 1,259,202 1,247,157
5.50%, 12/1/33 ............................................................ 1,039,242 1,029,301
2.93%, 5/1/34 ............................................................. 731,236 721,812
3.03%, 5/1/34 ............................................................. 1,156,884 1,148,054
6.00%, 11/1/34 ............................................................ 1,050,537 1,060,068
5.00%, 7/1/35 ............................................................. 1,815,816 1,752,657
5.00%, 7/1/35 ............................................................. 2,751,288 2,655,590
5.50%, 3/1/36 ............................................................. 1,934,386 1,913,410
5.50%, 6/1/36 ............................................................. 2,910,479 2,876,220
5.50%, 6/1/36 ............................................................. 2,904,432 2,872,060
6.00%, 6/1/36 ............................................................. 1,975,968 1,990,582
------------
68,839,255
------------
16
MMA Praxis Intermediate Income Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 63.5%, continued
GOVERNMENT NATIONAL MORTGAGE ASSOC.-- 1.9%
7.50%, 9/15/07 ............................................................ $ 15,065 $ 15,773
6.75%, 4/15/16 ............................................................ 98,378 101,208
7.00%, 12/20/30 ........................................................... 158,227 162,819
6.50%, 4/20/31 ............................................................ 180,990 185,323
6.50%, 7/20/31 ............................................................ 157,440 160,945
6.50%, 10/20/31 ........................................................... 338,894 347,007
7.00%, 10/20/31 ........................................................... 98,933 101,804
7.00%, 3/20/32 ............................................................ 384,912 396,081
6.50%, 5/20/32 ............................................................ 202,735 207,528
5.50%, 1/20/34 ............................................................ 702,248 703,028
6.93%, 9/15/39 ............................................................ 2,028,686 2,093,030
6.85%, 10/15/39 ........................................................... 720,046 742,633
------------
5,217,179
------------
SMALL BUSINESS ADMINISTRATION -- 0.0%
6.00%, 9/25/18 ............................................................ 94,801 95,515
------------
TENNESSEE VALLEY AUTHORITY -- 1.4%
6.25%, 12/15/17 ........................................................... 2,000,000 2,201,954
4.65%, 6/15/35 ............................................................ 1,750,000 1,606,616
3,808,570
------------
TOTAL U.S. GOVERNMENT AGENCIES ................................................. 173,595,883
------------
SHORT TERM INVESTMENTS -- 0.7%
Northern Institutional Government Select Portfolio ........................ 1,931,839 1,931,839
------------
SECURITIES HELD AS COLLATERAL FOR SECURITIES LENDING -- 4.0%
Northern Institutional Liquid Asset Portfolio ............................. 10,896,934 10,896,934
------------
TOTAL INVESTMENTS (Cost $282,853,590) -- 102.6% ................................ $280,418,736
Liabilities in excess of other assets -- (2.6%) ........................... (7,021,313)
------------
NET ASSETS -- 100.0% ........................................................... $273,397,423
============
- -----------------
(a) 144A security is restricted as to resale to institutional investors. These
securities have been deemed liquid under guidelines established by the
Board of Trustees. At December 31, 2006, these securities were valued at
$7,820,614 or 2.86% of net assets.
(b) All or part of this security was on loan, as of December 31, 2006.
(c) Represents affiliated restricted security as to resale to investors and is
not registered under the Securities Act of 1933. These securities have
been deemed illiquid under guidelines established by the Board of
Trustees. Acquisition date and current cost: MMA Community Development
Investment, Inc., 2.98% - 12/01, $1,350,000 and MMA Community Development
Investment, Inc., 4.47% - 12/01, $2,025,000. At December 31, 2006 these
securities had an aggregate market value of $3,375,000, representing 1.2%
of net assets.
+ Variable rate security. Rates presented are the rates in effect at
December 31, 2006. Date presented reflects next rate change date.
See notes to financial statements.
17
- -----------------------------------
Statement of assets and liabilities
- -----------------------------------
MMA Praxis Intermediate Income Fund
Statement of assets and liabilities
December 31, 2006
ASSETS:
Investments, at value (cost $268,581,656)* ............................................. $ 266,146,802
Investments in affiliates, at value (cost $3,375,000) .................................. 3,375,000
Investments held as collateral for securities loaned, at value ......................... 10,896,934
--------------
Total Investments .................................................................. 280,418,736
--------------
Interest and dividends receivable ...................................................... 2,715,406
Receivable for capital shares sold ..................................................... 1,556,696
Receivable for investments sold ........................................................ 37,920
Prepaid expenses ....................................................................... 31,797
--------------
Total Assets ....................................................................... 284,760,555
--------------
LIABILITIES:
Distributions payable to shareholders .................................................. 195,136
Payable for capital shares redeemed .................................................... 90,823
Payable for securities loaned .......................................................... 10,896,934
Accrued expenses and other payables:
Investment advisory fees ............................................................. 88,626
Affiliates ........................................................................... 20,223
Distribution fees .................................................................... 24,289
Trustees fees ........................................................................ 345
Other ................................................................................ 46,756
--------------
Total Liabilities .................................................................. 11,363,132
--------------
NET ASSETS:
Capital ................................................................................ 278,856,840
Accumulated net investment income ...................................................... 34,957
Accumulated net realized loss on investments, foreign currency transactions ............ (3,059,520)
Net unrealized depreciation on investments ............................................. (2,434,854)
--------------
Net Assets ........................................................................... $ 273,397,423
==============
Net Assets
Class A .............................................................................. $ 41,349,766
Class B .............................................................................. 25,826,537
Class I .............................................................................. 206,221,120
--------------
Total .............................................................................. $ 273,397,423
==============
Shares Outstanding
(unlimited number of shares authorized with $.01 par value)
Class A .............................................................................. 4,281,969
Class B .............................................................................. 2,672,554
Class I .............................................................................. 21,375,339
--------------
Total .............................................................................. 28,329,862
==============
Net asset value
Class A - Redemption Price Per Share (A) ............................................. $ 9.66
==============
Class A - Maximum Sales Charge ....................................................... 3.75%
==============
Class A - Maximum Offering Price Per Share
[100%/(100%-Maximum Sales Charge) of
net asset value adjusted to the nearest cent] ....................................... $ 10.04
==============
Class B - offering price per share**(A) .............................................. $ 9.66
==============
Class I - offering price per share**(A) .............................................. $ 9.65
==============
* Includes securities on loan of $10,508,887.
** Redemption price per share varies by length of time shares are held.
(A) Net proceeds upon redemption may include a redemption fee.
See notes to financial statements.
18
-----------------------
Statement of operations
-----------------------
MMA Praxis Intermediate Income Fund
Statement of operations
For the year ended December 31, 2006
INVESTMENT INCOME:
Interest ............................................................................... $ 13,574,176
Dividends .............................................................................. 23,562
Income from securities lending ......................................................... 19,912
Interest from affiliates ............................................................... 123,131
--------------
Total Investment Income ............................................................ 13,740,781
--------------
EXPENSES:
Investment advisory fees ............................................................... 1,344,398
Distribution fees-Class A .............................................................. 268,779
Distribution fees-Class B .............................................................. 211,570
Shareholder servicing fees-Class A ..................................................... 268,512
Shareholder servicing fees-Class B ..................................................... 70,527
Administration fees .................................................................... 376,435
Legal fees and expenses ................................................................ 75,744
Custodian fees ......................................................................... 33,965
Trustees' fee and expenses ............................................................. 30,250
Other expenses ......................................................................... 210,348
--------------
Total expenses before reductions/reimbursements .................................... 2,890,528
Expenses waived by Investment Adviser ................................................ (299,777)
Expenses reduced by Distributor ...................................................... (339,040)
Expenses reduced by Custodian ........................................................ (26,465)
--------------
Net Expenses ....................................................................... 2,225,246
--------------
Net Investment Income .................................................................. 11,515,535
--------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments, foreign currency transactions and swap contracts ..... (789,940)
Change in unrealized appreciation/depreciation of investments
and foreign currency translations during the year .................................... (1,152,028)
Change in unrealized appreciation/depreciation of swap contracts during the year ....... 6,516
--------------
Net realized and unrealized loss on investments and foreign currency transactions ...... (1,935,452)
--------------
Net increase in net assets resulting from operations ................................... $ 9,580,083
==============
See notes to financial statements.
19
- -----------------------------------
Statements of changes in net assets
- -----------------------------------
MMA Praxis Intermediate Income Fund
Statements of changes in net assets
Year Ended Year Ended
December 31, December 31,
2006 2005
- ---------------------------------------------------------------------------------------------------------------------------
From Investment Activities:
Net investment income .......................................................... $ 11,515,535 $ 10,101,878
Net realized gain (loss) on investments and foreign currency transactions ...... (789,940) 511,246
Change in unrealized appreciation/depreciation of investments
and foreign currency translations during the year ......................... (1,145,512) (6,041,791)
------------ ------------
Net increase in net assets resulting from operations ........................... 9,580,083 4,571,333
------------ ------------
Distributions to Class A Shareholders:
From net investment income ................................................ (4,529,498) (9,492,380)
Distributions to Class B Shareholders:
From net investment income ................................................ (1,056,652) (1,306,408)
Distributions to Class I Shareholders:
From net investment income ................................................ (6,127,725) --
------------ ------------
Change in net assets from distributions to shareholders ........................ (11,713,875) (10,798,788)
------------ ------------
Change in net assets from capital transactions ................................. 1,020,852 10,631,576
------------ ------------
Change in net assets ........................................................... (1,112,940) 4,404,121
Net Assets:
Beginning of year ......................................................... 274,510,363 270,106,242
------------ ------------
End of year ............................................................... $273,397,423 $274,510,363
============ ============
Accumulated (distributions in excess of) net investment income ................. $ 34,957 $ (64,079)
============ ============
See notes to financial statements.
20
--------------------
Financial highlights
--------------------
MMA Praxis Intermediate Income Fund
Financial highlights
For a share outstanding throughout the year indicated.
Class A Shares
------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year ............ $ 9.73 $ 9.95 $ 9.99 $ 10.05 $ 9.69
----------- ----------- ----------- ----------- -----------
Investment Activities:
Net investment income ...................... 0.38 0.37 0.39 0.39 0.48
Net realized and unrealized gains (losses)
from investments, foreign currency
transactions and swap contracts .......... (0.04) (0.19) (0.02) (0.03) 0.37
----------- ----------- ----------- ----------- -----------
Total from Investment Activities ........... 0.34 0.18 0.37 0.36 0.85
----------- ----------- ----------- ----------- -----------
Distributions:
Net investment income ...................... (0.41) (0.40) (0.41) (0.42) (0.49)
----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees (a) ...... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .................. $ 9.66 $ 9.73 $ 9.95 $ 9.99 $ 10.05
=========== =========== =========== =========== ===========
Total Return (excludes sales charge) .......... 3.63% 1.82% 3.77% 3.67% 9.02%
Ratios/Supplemental Data:
Net assets at end of year (000) ............ $ 41,350 $ 239,583 $ 231,369 $ 39,270 $ 32,931
Ratio of expenses to
average net assets ....................... 0.93% 0.94% 0.91% 0.85% 0.85%
Ratio of net investment income
to average net assets .................... 4.19% 3.77% 3.69% 3.85% 4.94%
Ratio of expenses to average
net assets* .............................. 1.28% 1.23% 1.33% 1.58% 1.69%
Portfolio Turnover (b) ........................ 34.19% 37.79% 30.29% 47.58% 58.16%
- -------------------------------------------------------------------------------------------------------------------------------
* During the year, certain expenses were reduced, reimbursed or paid by a
third party. If such expense reductions had not occurred, the ratios would
have been as indicated.
(a) Amount rounds to less than $0.005 per share.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
21
MMA Praxis Intermediate Income Fund
Financial highlights, continued
For a share outstanding throughout the year indicated.
Class B Shares
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year ............ $ 9.73 $ 9.94 $ 9.98 $ 10.05 $ 9.69
----------- ----------- ----------- ----------- -----------
Investment Activities:
Net investment income ...................... 0.37 0.33 0.33 0.34 0.45
Net realized and unrealized gains
(losses) from investments ............. (0.08) (0.20) (0.01) (0.03) 0.36
----------- ----------- ----------- ----------- -----------
Total from Investment Activities ........... 0.29 0.13 0.32 0.31 0.81
----------- ----------- ----------- ----------- -----------
Distributions:
Net investment income ...................... (0.36) (0.34) (0.36) (0.38) (0.45)
----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees (a) ...... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .................. $ 9.66 $ 9.73 $ 9.94 $ 9.98 $ 10.05
=========== =========== =========== =========== ===========
Total Return (excludes redemption charge) ..... 3.10% 1.34% 3.30% 3.14% 8.64%
Ratios/Supplemental Data:
Net assets at end of year (000) ............ $ 25,827 $ 34,927 $ 39,506 $ 44,238 $ 41,544
Ratio of expenses to
average net assets ....................... 1.36% 1.39% 1.38% 1.30% 1.20%
Ratio of net investment income
to average net assets .................... 3.77% 3.31% 3.31% 3.41% 4.59%
Ratio of expenses to average net assets* ... 1.77% 1.79% 1.91% 2.07% 2.19%
Portfolio Turnover (b) ........................ 34.19% 37.79% 30.29% 47.58% 58.16%
- -------------------------------------------------------------------------------------------------------------------------------
* During the year, certain expenses were reduced, reimbursed or paid by a
third party. If such activity had not occurred, the ratios would have been
as indicated.
(a) Amount rounds to less than $0.005 per share.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued. See notes to
financial statements. MMA Praxis Intermediate Income Fund Financial
highlights, continued For a share outstanding throughout the period
indicated.
See notes to financial statements.
22
MMA Praxis Intermediate Income Fund
Financial highlights, continued
For a share outstanding throughout the year indicated.
Class I Shares
----------------
Period Ended
December 31,
2006 (a)
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ....................... $ 9.47
------------
Investment Activities:
Net investment income ................................... 0.29
Net realized and unrealized gains from investments ...... 0.18
------------
Total from Investment Activities ........................ 0.47
------------
Distributions:
Net investment income ................................... (0.29)
Paid-in capital from redemption fees ....................... -- (b)
------------
Net Asset Value, End of Period ............................. $ 9.65
============
Total Return (excludes redemption charge) .................. 5.07%(c)
Ratios/Supplemental Data:
Net assets at end of period (000) ....................... $ 206,221
Ratio of expenses to average net assets ................. 0.63%(d)
Ratio of net investment income to average net assets .... 4.47%(d)
Ratio of expenses to average net assets* ................ 0.76%(d)
Portfolio Turnover (e) ..................................... 34.19%
- --------------------------------------------------------------------------------
* During the year, certain expenses were reduced, reimbursed or paid by a
third party. If such activity had not occurred, the ratios would have been
as indicated.
(a) For the period from May 1, 2006 (commencement of operations) through
December 31, 2006.
(b) Amount rounds to less than $0.005 per share. (c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
23
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--------------------------
MMA Praxis Core Stock Fund
--------------------------
MMA Praxis Core Stock Fund
Annual report to shareholders
Portfolio managers' letter
Market environment
During the 12-months ended December 31, 2006, the stock market, as measured by
the Standard & Poor's 500 Index, increased by 15.79 percent. United States
economic activity, as measured by the Gross Domestic Product, increased by 1.8
percent in the last calendar quarter of 2005 and between 2.2 percent and 5.6
percent over each of the first three calendar quarters of 2006. Interest rates,
as measured by the 10-year Treasury bond, began 2006 a little above 4.4 percent,
peaked in June at about 5.1 percent, and ended the year just below 4.6 percent.
MMA Praxis Core Stock Fund performance overview
Davis Selected Advisers, L.P. began managing the MMA Praxis Core Stock Fund on
January 3, 2006. Over the 12-months ended December 31, 2006, the Class A shares
of the Fund increased by 12.10 percent, compared to its benchmark, the S&P's 500
Index, which increased by 15.79 percent.
o Consumer discretionary companies were the most important contributors to
the Fund's performance. The Fund benefited from careful stock selection in
this sector as the Fund's consumer discretionary companies out-performed
the Index. Comcast and Harley-Davidson were among the top contributors to
performance. Apollo Group (purchased in March 2006) and Expedia were among
the top detractors from performance.
o Diversified financial and banking companies also made important
contributions to performance. Three diversified financial companies,
JPMorgan Chase, Citigroup, and American Express, and two banking
companies, Golden West Financial (acquired by Wachovia in October 2006)
and Wells Fargo, were among the top contributors to performance.
o The Fund has significant investments in insurance companies. While
insurance companies made a positive contribution to performance, they
under-performed the Index. Berkshire Hathaway was among the top
contributors to performance. Progressive, Transatlantic Holdings, and
Marsh McLennan (sold in June 2006) were among the top detractors from
performance.
o The Fund's investments in telecommunication service and energy companies
also contributed to the Fund underperforming the Index. Telecommunication
service companies were the strongest performing sector of the Index, but
the telecommunication service companies owned by the Fund did not perform
as well. While energy companies made positive contributions to the Fund's
performance, they also underperformed the Index. One energy company,
ConocoPhillips, was among the top contributors to performance. One
telecommunication services company, Sprint Nextel (purchased in March
2006), and one energy company, EOG Resources, were among the top
detractors from performance.
o The Fund had approximately 6 percent of its assets invested in foreign
companies as of December 31, 2006. As a group, the foreign companies owned
by the Fund underperformed the S&P 500 Index.
Market thoughts
In our work on individual companies, we noted that the shares of large,
high-quality, global growth companies seemed unusually cheap compared with the
rest of the market, particularly smaller, more cyclical, slower growth
companies, often described as "value stocks". Throughout the first half of 2006,
instead of closing, this gap just seemed to widen further. This out-performance
of the so-called value-sector has had the usual effect of attracting more and
more interest. Whereas in the late 1990s we only read about growth, we now only
read about value. The spread between the performance of value versus growth
indices over the last five to seven years is almost as wide as it was during the
bubble, only in the opposite direction.
25
Then, as now, investors are mistaken to think of growth and value as two
different approaches to investing. Growth is simply a component of value.
Companies that grow profitably are more valuable than companies that don't. As a
result, to the extent that investors are overweighting one component of the
equation, there are often opportunities. In the late 1990s, the market
overweighted the growth side and underweighted the value side. In recent years,
the market seems to be doing the opposite. As a result, we purchased positions
in growth companies such as Proctor and Gamble, Dell, Microsoft, Carmax,
Walmart, and Newscorp among others during the past several years.
Stocks in these companies and a number of other high-quality growth companies
still look attractive to us. We would note that beginning just about the time
energy began to come down, the growth indices began to stir. While too early to
say for certain, it seems this last six months may mark the beginning of a
return to more normal quality spreads.
Christopher C. Davis
Portfolio Manager and CEO of Davis Advisors
Kenneth C. Feinberg
Portfolio Manager
26
------------------
Performance review
------------------
MMA Praxis Core Stock Fund
Performance review
Average annual total returns as of 12/31/06
[The following table was represented as a bar chart in the printed material.]
Inception
Date 1 Year 3 Year 5 Year 10 Year
---- ------ ------ ------ -------
Class A 5/12/99 12.10% 7.70% 3.96% 5.56%
Class A* 5/12/99 6.21% 5.79% 2.85% 4.99%
Class B 1/4/94 11.38% 7.02% 3.32% 5.11%
Class B** 1/4/94 7.38% 6.14% 3.14% 5.11%
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 principal value will fluctuate so that an investor's
shares, when redeemed may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. To obtain
performance information current to the most recent month end, please visit
mmapraxis.com.
* Reflects maximum front-end sales charge of 5.25%.
** The Fund imposes a back-end sales charge (load) on Class B Shares if you
sell your shares before a certain period of time has elasped. This is
called a Contingent Deferred Sales Charge ("CDSC"). The CDSC declines over
five years starting with year one and ending in year six as follows: 4%,
4%, 3%, 2%, 1%.
Class A Share of this Fund were not in existence prior to 5/12/99. Class A Share
performance calculated for any period prior to 5/12/99 is based on the
performance of Class B Share since inception of 1/4/94. The B Share Contingent
Deferred Sales Charge (CDSC) does not apply to performance over 5 years;
therefore, the 10-year return does not reflect the CDSC.
The total return set forth reflects certain expenses that were voluntarily
reduced, reimbursed or paid by third party. In such instances, and without this
activity, total return would have been lower.
27
Growth of $10,000 investment 12/31/96 to 12/31/06
[The following table was represented as a line chart in the printed material.]
Standard &
Poor's
500 Composite
Stock
Class A* Class B Index (1)
12/31/1996 9,475 10,000 10,000
3/31/1997 9,669 10,205 10,268
6/30/1997 11,006 11,616 12,061
9/30/1997 11,668 12,314 12,964
12/31/1997 12,235 12,913 13,336
3/31/1998 13,574 14,326 15,197
6/30/1998 12,913 13,628 15,698
9/30/1998 11,056 11,668 14,137
12/31/1998 12,964 13,682 17,148
3/31/1999 13,489 14,236 18,002
6/30/1999 15,066 15,884 19,271
9/30/1999 13,998 14,748 18,068
12/31/1999 14,608 15,347 20,756
3/31/2000 15,299 16,045 21,232
6/30/2000 14,968 15,676 20,668
9/30/2000 14,825 15,494 20,468
12/31/2000 14,546 15,189 18,866
3/31/2001 13,480 14,062 16,629
6/30/2001 13,868 14,430 17,602
9/30/2001 12,273 12,755 15,018
12/31/2001 13,400 13,893 16,623
3/31/2002 13,629 14,113 16,668
6/30/2002 12,194 12,617 14,435
9/30/2002 10,339 10,669 11,940
12/31/2002 10,968 11,312 12,948
3/31/2003 10,519 10,827 12,540
6/30/2003 11,640 11,965 14,471
9/30/2003 11,849 12,154 14,854
12/31/2003 13,026 13,344 16,662
3/31/2004 13,325 13,629 16,944
6/30/2004 13,514 13,807 17,236
9/30/2004 13,075 13,334 16,913
12/31/2004 14,022 14,274 18,474
3/31/2005 13,662 13,884 18,077
6/30/2005 13,798 14,001 18,325
9/30/2005 14,030 14,212 18,985
12/31/2005 14,518 14,687 19,381
3/31/2006 14,769 14,941 20,197
6/30/2006 14,679 14,850 19,906
9/30/2006 15,183 15,359 21,034
12/31/2006 16,276 16,459 22,443
For performance purposes, the above graph has not been adjusted for CDSC
charges.
This chart represents historical performance of a hypothetical investment of
$10,000 in the Core Stock Fund from 6/30/95 to 6/30/96, and represents the
reinvestment of dividends and capital gains in the Fund.
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 principal value will fluctuate so that an investor's
shares, when redeemed may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. To obtain
performance information current to the most recent month end, please visit
mmapraxis.com.
The total return set forth reflects certain expenses that were voluntarily
reduced, reimbursed or paid by third party. In such instances, and without this
activity, total return would have been lower.
* Reflects maximum front-end sales charge of 5.25%.
Class A Share of this Fund were not in existence prior to 5/12/99. Class A Share
performance calculated for any period prior to 5/12/99 is based on the
performance of Class B Share since inception of 1/4/94.
(1) The S&P 500 Composite Stock Price Index (the "S&P 500R Index") is a widely
recognized, unmanaged index of 500 selected common stocks, most of which
are listed on the New York Stock Exchange.
The above index is for illustrative purposes only and does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. The Fund's performance reflects the
deduction of these value-added services. An investor cannot invest directly in
an index, although they can invest in its underlying securities.
28
---------------------------------
Schedule of portfolio investments
---------------------------------
MMA Praxis Core Stock Fund
Schedule of portfolio investments
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.0%
ADVERTISING SERVICES -- 0.3%
WPP Group plc ADR (b) .......................................................... 15,700 $ 1,063,518
------------
AUTOMOTIVE -- 0.3%
CarMax, Inc. (a) ............................................................... 22,200 1,190,586
------------
BANKS -- 10.4%
Commerce Bancorp, Inc. (b) ..................................................... 65,700 2,317,239
HSBC Holdings plc .............................................................. 616,851 11,246,221
Mellon Financial Corp. ......................................................... 42,800 1,804,020
State Street Corp. ............................................................. 11,200 755,328
Wachovia Corp. ................................................................. 164,474 9,366,794
Wells Fargo & Co. .............................................................. 292,000 10,383,520
------------
35,873,122
------------
BROADCASTING/CABLE -- 4.8%
Comcast Corp., Class A (a) ..................................................... 317,500 13,296,900
Liberty Media Holding Corp - Capital, Series A (a) ............................. 11,735 1,149,795
NTL, Inc. (b) .................................................................. 72,658 1,833,888
------------
16,280,583
------------
BROKERAGE SERVICES -- 4.7%
JPMorgan Chase & Co. ........................................................... 337,000 16,277,100
------------
BUILDING MATERIALS & CONSTRUCTION -- 0.8%
Vulcan Materials Co. (b) ....................................................... 31,400 2,821,918
------------
BUSINESS SERVICES -- 1.5%
Iron Mountain, Inc. (a)(b) ..................................................... 121,200 5,010,408
------------
COMPUTER EQUIPMENT & SERVICES -- 0.3%
Nokia Oyj ADR (b) ............................................................. 45,000 914,400
------------
COMPUTERS & PERIPHERALS -- 1.5%
Dell, Inc. (a) ................................................................. 98,800 2,478,892
Hewlett-Packard Co. ............................................................ 62,200 2,562,018
------------
5,040,910
------------
CONSTRUCTION -- 1.0%
Martin Marietta Materials, Inc. (b) ............................................ 31,600 3,283,556
------------
CONSUMER FINANCIAL SERVICES -- 6.5%
American Express Co. ........................................................... 297,800 18,067,526
H&R Block, Inc. ................................................................ 176,800 4,073,472
------------
22,140,998
------------
CONSUMER GOODS & SERVICES -- 1.3%
Procter & Gamble Co. ........................................................... 67,400 4,331,798
------------
CONTAINERS - PAPER & PLASTIC -- 2.5%
Sealed Air Corp. (b) ........................................................... 133,900 8,692,788
------------
COSMETICS & TOILETRIES -- 0.5%
Avon Products, Inc. ............................................................ 49,100 1,622,264
------------
29
MMA Praxis Core Stock Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.0%, continued
E-COMMERCE -- 1.5%
Amazon.com, Inc. (a)(b) ........................................................ 66,700 $ 2,631,982
Expedia, Inc. (a)(b) ........................................................... 25,300 530,794
IAC/InterActiveCorp. (a)(b) .................................................... 22,200 824,952
Liberty Media Holding Corp - Interactive, Class A (a) .......................... 58,575 1,263,463
------------
5,251,191
------------
FINANCIAL SERVICES -- 6.3%
Ameriprise Financial, Inc. ..................................................... 84,500 4,605,250
Citigroup, Inc. ................................................................ 158,500 8,828,450
Moody's Corp. .................................................................. 76,300 5,269,278
Morgan Stanley ................................................................. 36,500 2,972,195
------------
21,675,173
------------
FOOD PRODUCTS -- 0.7%
The Hershey Co. (b) ............................................................ 46,500 2,315,700
------------
INSURANCE -- 14.4%
Ambac Financial Group, Inc. .................................................... 2,700 240,489
American International Group, Inc. ............................................. 243,400 17,442,044
Aon Corp. ...................................................................... 71,100 2,512,674
Berkshire Hathaway, Inc., Class A (a)(b) ....................................... 126 13,858,740
Chubb Corp. .................................................................... 20,300 1,074,073
Markel Corp. (a)(b) ............................................................ 700 336,070
Principal Financial Group, Inc. ................................................ 23,400 1,373,580
Sun Life Financial, Inc. (b) ................................................... 14,000 592,900
The Progressive Corp. .......................................................... 348,000 8,428,560
Transatlantic Holdings, Inc. (b) ............................................... 60,200 3,738,420
------------
49,597,550
------------
MANUFACTURING -- 4.9%
Tyco International Ltd. ........................................................ 550,600 16,738,240
------------
METAL MINING -- 0.3%
Rio Tinto plc .................................................................. 16,900 899,524
------------
MINERALS -- 0.3%
BHP Billiton plc ............................................................... 47,600 871,090
------------
MULTIMEDIA -- 2.0%
News Corp., Class A ............................................................ 316,300 6,794,124
------------
NEWSPAPERS -- 0.3%
Gannett Co., Inc. .............................................................. 16,300 985,498
------------
OIL & GAS EXPLORATION, PRODUCTION & SERVICES -- 10.5%
ConocoPhillips ................................................................. 247,900 17,836,405
Devon Energy Corp. ............................................................. 126,200 8,465,496
EOG Resources, Inc. ............................................................ 107,200 6,694,640
Transocean, Inc. (a) ........................................................... 40,100 3,243,689
------------
36,240,230
------------
30
MMA Praxis Core Stock Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.0%, continued
PHARMACEUTICALS -- 4.3%
Cardinal Health, Inc. .......................................................... 54,700 $ 3,524,321
Caremark Rx, Inc. (b) .......................................................... 93,300 5,328,363
Express Scripts, Inc. (a) ...................................................... 20,900 1,496,440
UnitedHealth Group, Inc. ....................................................... 79,100 4,250,043
------------
14,599,167
------------
RECREATIONAL PRODUCTS -- 2.3%
Harley-Davidson, Inc. .......................................................... 112,600 7,934,922
------------
RETAIL -- 7.7%
Bed Bath & Beyond, Inc. (a) .................................................... 54,400 2,072,640
Costco Wholesale Corp. ......................................................... 272,000 14,380,640
Lowe's Cos., Inc. .............................................................. 63,100 1,965,565
Sears Holdings Corp. (a)(b) .................................................... 5,700 957,201
Wal-Mart Stores, Inc. .......................................................... 154,900 7,153,282
------------
26,529,328
------------
RETAIL - ONLINE -- 0.3%
Hunter Douglas N.V ............................................................. 11,700 940,572
------------
SCHOOLS & EDUCATIONAL SERVICES -- 0.3%
Apollo Group, Inc., Class A (a)(b) ............................................. 27,400 1,067,778
------------
SOFTWARE & COMPUTER SERVICES -- 2.6%
Microsoft Corp. ................................................................ 299,300 8,937,098
------------
TELECOMMUNICATIONS -- 1.9%
SK Telecom Co. Ltd. ADR (b) .................................................... 79,500 2,105,160
Sprint Nextel Corp. ............................................................ 231,700 4,376,813
------------
6,481,973
------------
TRANSPORTATION SERVICES -- 1.0%
Kuehne & Nagel International AG ............................................... 19,000 1,382,314
United Parcel Service, Inc., Class B ........................................... 27,800 2,084,444
------------
3,466,758
------------
TOTAL COMMON STOCKS ............................................................ 335,869,865
------------
COMMERCIAL PAPER -- 1.1%
3 Pillars, 5.31%, 1/2/07 ....................................................... 3,667,000 3,666,459
------------
SHORT TERM INVESTMENTS -- 0.0%
Northern Institutional Government Select Portfolio ............................. 399 399
------------
CORPORATE NOTES -- 1.2%
COMMUNITY DEVELOPMENT -- 1.2%
MMA Community Development Investment, Inc., 2.98%, 1/1/07, (c)+ ................ 1,595,000 1,595,000
MMA Community Development Investment, Inc., 4.47%, 1/1/07, (c)+ ................ 2,370,000 2,370,000
------------
TOTAL CORPORATE NOTES .......................................................... 3,965,000
------------
31
MMA Praxis Core Stock Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
SECURITIES HELD AS COLLATERAL FOR SECURITIES LENDING -- 8.4%
Krediet Bank Letter of Credit .................................................. -- $ 1,080,190
Northern Institutional Liquid Asset Portfolio .................................. 27,855,421 27,855,421
------------
TOTAL SECURITIES HELD AS COLLATERAL FOR SECURITIES LENDING ..................... 28,935,611
------------
TOTAL INVESTMENTS (Cost $331,286,598) -- 108.7% ................................ $372,437,334
Liabilities in excess of other assets -- (8.7%) ........................... (29,714,977)
------------
NET ASSETS -- 100.0% ........................................................... $342,722,357
============
(a) Non-income producing securities.
(b) All or part of this security was on loan, as of December 31, 2006.
(c) Represents affiliated restricted security as to resale to investors and is
not registered under the Securities Act of 1933. These securities have
been deemed illiquid under guidelines established by the Board of
Trustees. Acquisition date and current cost: MMA Community Development
Investment, Inc., 2.98% - 12/01, $1,595,000 and MMA Community Development
Investment, Inc., 4.47% - 12/01, $2,370,000. At December 31, 2006, these
securities had an aggregate market value of $3,965,000 Representing 1.2%
of net assets.
+ Variable rate security. Rates presented are the rates in effect at
December 31, 2006. Date presented reflects next rate change date.
ADR - American Depositary Receipt
plc - Public Liability Company
UNREALIZED
FUTURES CONTRACTS PURCHASED CONTRACTS APPRECIATION
--------------- ------------
S&P 500 Index Futures Contract, expiring March, 2007
(underlying face amount at value $3,928,100) 11 $ 7,563
See notes to financial statements.
32
-----------------------------------
Statement of assets and liabilities
-----------------------------------
MMA Praxis Core Stock Fund
Statement of assets and liabilities
December 31, 2006
ASSETS:
Investments, at value (cost $298,385,987)* ............................................. $ 339,536,723
Investments in affiliates, at value (cost $3,965,000) .................................. 3,965,000
Investments held as collateral for securities loaned, at value ......................... 28,935,611
--------------
Total Investments .................................................................. 372,437,334
--------------
Cash held as collateral for futures contracts .......................................... 154,000
Interest and dividends receivable ...................................................... 329,998
Receivable for capital shares sold ..................................................... 97,143
Receivable for investments sold ........................................................ 35,000
Prepaid expenses ....................................................................... 36,765
--------------
Total Assets ....................................................................... 373,090,240
--------------
LIABILITIES:
Payable for capital shares redeemed .................................................... 954,108
Payable for securities loaned .......................................................... 28,935,611
Payable for investments purchased ...................................................... 92,097
Payable for variation margin on futures contracts ...................................... 14,850
Accrued expenses and other payables:
Investment advisory fees ............................................................. 214,934
Affiliates ........................................................................... 22,104
Distribution fees .................................................................... 66,196
Trustees fees ........................................................................ 1,542
Other ................................................................................ 66,441
--------------
Total Liabilities .................................................................. 30,367,883
--------------
NET ASSETS:
Capital ................................................................................ 304,551,515
Accumulated net investment income ...................................................... 102,601
Accumulated net realized loss on investments and futures contracts ..................... (3,090,058)
Net unrealized appreciation on investments ............................................. 41,150,736
Unrealized appreciation of futures contracts ........................................... 7,563
--------------
Net Assets ........................................................................... $ 342,722,357
==============
Net Assets
Class A .............................................................................. $ 95,185,066
Class B .............................................................................. 73,972,518
Class I .............................................................................. 173,564,773
--------------
Total .............................................................................. $ 342,722,357
==============
Shares Outstanding
(unlimited number of shares authorized with $.01 par value)
Class A .............................................................................. 6,181,300
Class B .............................................................................. 5,019,826
Class I .............................................................................. 11,234,829
--------------
Total .............................................................................. 22,435,955
==============
Net asset value
Class A - Redemption Price Per Share(A) .............................................. $ 15.40
==============
Class A - Maximum Sales Charge ....................................................... 5.25%
==============
Class A - Maximum Offering Price Per Share
[100%/(100%-Maximum Sales Charge) of
net asset value adjusted to the nearest cent] ...................................... $ 16.25
==============
Class B - offering price per share**(A) .............................................. $ 14.74
==============
Class I - offering price per share **(A) ............................................. $ 15.45
==============
* Includes securities on loan of $28,261,391.
** Redemption price per share varies by length of time shares are held.
(A) Net proceeds upon redemption may include a redemption fee.
See notes to financial statements.
33
- -----------------------
Statement of operations
- -----------------------
MMA Praxis Core Stock Fund
Statement of operations
For the year ended December 31, 2006
INVESTMENT INCOME:
Dividends .............................................................................. $ 4,475,794
Foreign tax withholding ................................................................ (60,229)
Interest ............................................................................... 551,436
Income from securities lending ......................................................... 22,321
Interest from affiliates ............................................................... 142,356
--------------
Total Investment Income ............................................................ 5,131,678
--------------
EXPENSES:
Investment advisory fees ............................................................... 2,394,430
Distribution fees-Class A .............................................................. 338,699
Distribution fees-Class B .............................................................. 594,615
Reimbursement of Fund expenses paid by Adviser ......................................... 458,697
Administration fees .................................................................... 471,210
Shareholder servicing fees-Class A ..................................................... 338,027
Shareholder servicing fees-Class B ..................................................... 198,227
Legal fees and expenses ................................................................ 96,934
Custodian fees ......................................................................... 26,294
Trustees' fee and expenses ............................................................. 35,000
Other expenses ......................................................................... 292,686
--------------
Total expenses before reductions/reimbursements .................................... 5,244,819
Expenses reduced by Distributor ...................................................... (417,317)
Expenses reduced by Custodian ........................................................ (9,494)
--------------
Net Expenses ....................................................................... 4,818,008
--------------
Net Investment Income .................................................................. 313,670
--------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments and futures contracts ................................. 19,440,865
Change in unrealized appreciation/depreciation of investments during the year .......... 17,801,001
Change in unrealized appreciation/depreciation of futures contracts during the year .... 58,138
--------------
Net realized and unrealized gain on investments and futures contracts .................. 37,300,004
--------------
Net increase in net assets resulting from operations ................................... $ 37,613,674
==============
See notes to financial statements.
34
-----------------------------------
Statements of changes in net assets
-----------------------------------
MMA Praxis Core Stock Fund
Statements of changes in net assets
Year Ended Year Ended
December 31, December 31,
2006 2005
- ---------------------------------------------------------------------------------------------------------------------------
From Investment Activities:
Net investment income .......................................................... $ 313,670 $ 854,245
Net realized gain on investments and futures contracts ......................... 19,440,865 15,920,554
Change in unrealized appreciation/depreciation of investments and
futures contracts during the year ......................................... 17,859,139 (6,880,782)
------------ ------------
Net increase in net assets resulting from operations ........................... 37,613,674 9,894,017
------------ ------------
Distributions to Class A Shareholders:
From net investment income ................................................ -- (887,403)
From net realized gain on investment ...................................... (4,511,679) --
------------ ------------
Distributions to Class B Shareholders:
From net realized gain on investment ...................................... (3,639,759) --
------------ ------------
Distributions to Class I Shareholders:
From net realized gain on investment ...................................... (8,171,169) --
------------ ------------
Change in net assets from distributions to shareholders ........................ (16,322,607) (887,403)
------------ ------------
Change in net assets from capital transactions ................................. 8,975,997 (21,969,154)
------------ ------------
Change in net assets ........................................................... 30,267,064 (12,962,540)
Net Assets:
Beginning of year ......................................................... 312,455,293 325,417,833
------------ ------------
End of year ............................................................... $342,722,357 $312,455,293
============ ============
Accumulated net investment income .............................................. $ 102,601 $ --
============ ============
See notes to financial statements.
35
- --------------------
Financial highlights
- --------------------
MMA Praxis Core Stock Fund
Financial highlights
For a share outstanding throughout the year indicated.
Class A Shares
-------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year ............ $ 14.42 $ 13.99 $ 13.06 $ 11.00 $ 13.44
----------- ----------- ----------- ----------- -----------
Investment Activities:
Net investment income ...................... 0.04 0.07 0.08 0.05 0.04
Net realized and unrealized gains
(losses) from investments .............. 1.70 0.42 0.92 2.01 (2.48)
----------- ----------- ----------- ----------- -----------
Total from Investment Activities ........... 1.74 0.49 1.00 2.06 (2.44)
----------- ----------- ----------- ----------- -----------
Distributions
Net investment income ...................... -- (0.06) (0.07) -- (a) --
Net realized gain .......................... (0.76) -- -- -- --
Tax return of capital ...................... -- -- -- -- (a) --
----------- ----------- ----------- ----------- -----------
Total Distributions ........................ (0.76) (0.06) (0.07) -- --
----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees (a) ...... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .................. $ 15.40 $ 14.42 $ 13.99 $ 13.06 $ 11.00
=========== =========== =========== =========== ===========
Total Return (excludes sales charge) .......... 12.10% 3.52% 7.65% 18.77% (18.15%)
Ratios/Supplemental Data:
Net assets at end of year (000) ............ $ 95,185 $ 208,640 $ 202,474 $ 41,244 $ 25,314
Ratio of expenses to average net assets .... 1.49% 1.34% 1.33% 1.25% 1.20%
Ratio of net investment income to
average net assets ...................... 0.19% 0.50% 1.04% 0.45% 0.35%
Ratio of expenses to average net assets* ... 1.74% 1.60% 1.65% 1.86% 1.94%
Portfolio Turnover (b) ........................ 72.41% 32.66% 9.99% 7.68% 10.20%
- --------------------------------------------------------------------------------------------------------------------------------
* During the year, certain expenses were reduced, reimbursed or paid by a
third party. If such expense reductions had not occurred, the ratios would
have been as indicated.
(a) Amount rounds to less than $0.005 per share.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
36
MMA Praxis Core Stock Fund
Financial highlights, continued
For a share outstanding throughout the year indicated.
Class B Shares
-------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year ............ $ 13.92 $ 13.53 $ 12.67 $ 10.74 $ 13.19
----------- ----------- ----------- ----------- -----------
Investment Activities:
Net investment income (loss) .............. (0.09) (0.02) 0.01 (0.02) (0.02)
Net realized and unrealized gains
(losses) from investments ............... 1.67 0.41 0.87 1.95 (2.43)
----------- ----------- ----------- ----------- -----------
Total from Investment Activities ........... 1.58 0.39 0.88 1.93 (2.45)
----------- ----------- ----------- ----------- -----------
Distributions:
Net investment income ...................... -- -- (0.02) -- --
Net realized gain .......................... (0.76) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions ......................... (0.76) -- (0.02) -- --
----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees (a) ...... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .................. $ 14.74 $ 13.92 $ 13.53 $12.67 $ 10.74
=========== =========== =========== =========== ===========
Total Return (excludes redemption charge) ..... 11.38% 2.88% 6.96% 17.97% (18.57%)
Ratios/Supplemental Data:
Net assets at end of year (000) ............... $ 73,973 $ 103,815 $ 121,817 $ 127,348 $ 111,598
Ratio of expenses to average net assets .... 2.13% 1.99% 1.98% 1.90% 1.75%
Ratio of net investment income (loss)
to average net assets .................... (0.52%) (0.14%) 0.50% (0.21%) (0.20%)
Ratio of expenses to average net assets* ... 2.23% 2.09% 2.22% 2.33% 2.44%
Portfolio Turnover (b) ........................ 72.41% 32.66% 9.99% 7.68% 10.20%
- --------------------------------------------------------------------------------------------------------------------------------
* During the year, certain expenses were reduced, reimbursed or paid by a
third party. If such activity had not occurred, the ratios would have been
as indicated.
(a) Amount rounds to less than $0.005 per share.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
37
MMA Praxis Core Stock Fund
Financial highlights, continued
For a share outstanding throughout the period indicated.
Class I Shares
----------------
Period Ended
December 31,
2006 (a)
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ....................... $ 14.76
------------
Investment Activities:
Net investment income .................................... 0.04
Net realized and unrealized gain from investments ........ 1.41
------------
Total from Investment Activities ....................... 1.45
------------
Distributions:
Net realized gain ...................................... (0.76)
------------
Net Asset Value, End of Period ............................. $ 15.45
============
Total Return (excludes redemption charge) .................. 9.86% (b)
Ratios/Supplemental Data:
Net assets at end of period (000) ....................... $ 173,565
Ratio of expenses to average net assets ................. 1.02%(c)
Ratio of net investment income to average net assets .... 0.43%(c)
Ratio of expenses to average net assets* ................ 1.03%(c)
Portfolio Turnover (d) ..................................... 72.41%
- --------------------------------------------------------------------------------
* During the year, certain expenses were reduced, reimbursed or paid by a
third party. If such activity had not occurred, the ratios would have been
as indicated.
(a) For the period from May 1, 2006 (commencement of operations) through
December 31, 2006.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
38
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- ---------------------------
MMA Praxis Value Index Fund
- ---------------------------
MMA Praxis Value Index Fund
Annual report to shareholders
Portfolio manager's letter
Yet again the value style of investing bested the growth style in 2006. We don't
know when the large company growth style of investing will regain its
prominence, but as firm believers in reversion to the mean in these matters, we
believe growth's day is coming. Nonetheless, investing in large, reasonably
valued companies proved to be a good investment strategy in 2006.
As described in the semiannual report, the MMA Praxis Value Index Fund is
managed to track the returns of a custom benchmark, drawn from the companies in
the MSCI Prime Market Value Index after MMA's stewardship investing screens are
applied. Because of this, we expect the Fund's returns to deviate from the
returns of the MSCI Prime Market Value Index for any or all of the following
reasons: the Fund's stewardship investing screens, fees applied to shares of the
Fund, and the portfolio management strategies we use to target the
characteristics of the custom benchmark.
During the second half of the year, MMA's stewardship investing screens had
minimal impact as measured by the 0.35 percent difference in return between the
MSCI Prime Market Value Index (15.04 percent) and MMA's custom value index
(14.69 percent). The Fund's A class shares generated a return of 14.05 percent
during the second half of the year, and a 20.41 percent return for the entire
year. The majority of the underperformance of the A shares of the Fund relative
to MMA's custom benchmark was due to the fees charged to the Fund. A smaller
amount was due to the portfolio management strategies we used. These strategies
included the use of software to choose an optimal portfolio having the
characteristics of MMA's custom value index without having to purchase all of
the securities in the custom value index. This is also called full replication.
The optimization technique is used to minimize trading and other costs
associated with full replication.
The Fund will continue to be managed in the same manner in the coming year with
the goal to deliver returns that reflect the large company value style of
investing in the context of Praxis' stewardship investing strategy.
Chad Horning, CFA(R)
MMA Praxis Value Index Fund Co-manager
40
------------------
Performance review
------------------
MMA Praxis Value Index Fund
Performance review
Average annual total returns as of 12/31/06
[The following table was represented as a bar chart in the printed material.]
Inception Since
Date 1 Year 3 Year 5Year Inception
---- ------ ------ ----- ---------
Class A 5/1/01 20.41% 13.05% 7.77% 4.50%
Class A* 5/1/01 14.08% 11.04% 6.61% 3.52%
Class B 1/4/94 19.85% 12.44% 7.21% 3.96%
Class B** 1/4/94 15.85% 11.64% 7.06% 3.96%
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 principal value will fluctuate so that an investor's
shares, when redeemed may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. To obtain
performance information current to the most recent month end, please visit
mmapraxis.com.
* Reflects maximum front-end sales charge of 5.25%.
** The Fund imposes a back-end sales charge (load) on Class B Shares if you
sell your shares before a certain period of time has elasped. This is
called a Contingent Deferred Sales Charge ("CDSC"). The CDSC declines over
five years starting with year one and ending in year six as follows: 4%,
4%, 3%, 2%, 1%.
The total return set forth reflects certain expenses that were voluntarily
reduced, reimbursed or paid by third party. In such instances, and without this
activity, total return would have been lower.
41
Growth of $10,000 investment 5/1/01 to 12/31/06
[The following table was represented as a line chart in the printed material.]
MSCI US Prime
Market Value
Class A* Class B Index (1)
5/1/2001 9,479 10,000 10,000
6/30/2001 9,261 9,376 9,903
9/30/2001 7,933 8,012 9,118
12/31/2001 8,368 8,448 9,718
3/31/2002 8,340 8,409 10,105
6/30/2002 7,321 7,370 9,116
9/30/2002 5,849 5,877 7,461
12/31/2002 6,460 6,486 8,071
3/31/2003 6,123 6,138 7,637
6/30/2003 7,253 7,342 8,977
9/30/2003 7,407 7,489 9,186
12/31/2003 8,422 8,509 10,469
3/31/2004 8,607 8,686 10,698
6/30/2004 8,625 8,771 10,866
9/30/2004 8,743 8,881 11,006
12/31/2004 9,522 9,654 12,085
3/31/2005 9,305 9,434 12,044
6/30/2005 9,530 9,745 12,254
9/30/2005 9,878 10,091 12,757
12/31/2005 10,104 10,299 12,964
3/31/2006 10,645 10,847 13,656
6/30/2006 10,668 10,966 13,790
9/30/2006 11,334 11,620 14,710
12/31/2006 12,167 12,464 15,863
This chart represents historical performance of a hypothetical investment of
$10,000 in the Value Index Fund from 5/1/01 to 6/30/06, and represents the
reinvestment of dividends and capital gains in the Fund.
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 principal value will fluctuate so that an investor's
shares, when redeemed may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. To obtain
performance information current to the most recent month end, please visit
mmapraxis.com.
The total return set forth reflects certain expenses that were voluntarily
reduced, reimbursed or paid by third party. In such instances, and without this
activity, total return would have been lower.
* Reflects maximum front-end sales charge of 5.25%.
(1) The MSCI US Prime Market Value Index represents the value companies of the
MSCI US Prime Market 750 Index. (The MSCI US Prime Market 750 Index
represents the universe of large and medium capitalization companie in the
US equity market. This index targets for inclusion 750 companies and
represents, as of October 29, 2004, approximately 86% of the
capitalization of the US equity market.) The MSCI US Prime Market Value
Index is a subset of the MSCI US Prime Market 750 Index.
The above index is for illustrative purposes only and does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. The Fund's performance reflects the
deduction of these value-added services. An investor cannot invest directly in
an index, although they can invest in its underlying securities.
42
---------------------------------
Schedule of portfolio investments
---------------------------------
MMA Praxis Value Index Fund
Schedule of portfolio investments
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.9%
ADVERTISING AGENCIES -- 0.1%
Interpublic Group of Co., Inc. (a)(b) .......................................... 5,910 $ 72,338
------------
AIRLINES -- 0.2%
Southwest Airlines Co. ......................................................... 7,260 111,223
------------
APPAREL MANUFACTURERS -- 0.4%
Hanesbrands, Inc. (a) .......................................................... 1,091 25,769
Jones Apparel Group, Inc. ...................................................... 1,590 53,154
Liz Claiborne, Inc. ............................................................ 1,620 70,405
V.F. Corp. ..................................................................... 1,430 117,375
------------
266,703
------------
AUTOMOTIVE -- 0.5%
Avis Budget Group, Inc. ........................................................ 2,516 54,572
BorgWarner, Inc. ............................................................... 1,300 76,726
Ford Motor Co. (b) ............................................................. 20,480 153,805
------------
285,103
------------
BANKS -- 15.5%
Bank of America Corp. .......................................................... 48,790 2,604,897
Bank of New York Co., Inc. ..................................................... 8,420 331,495
BB&T Corp. ..................................................................... 6,280 275,880
Berkshire Hathaway, Inc., Class B (a) .......................................... 30 109,980
Comerica, Inc. ................................................................. 2,970 174,280
Compass Bancshares, Inc. (b) ................................................... 1,640 97,826
Fifth Third Bancorp. (b) ....................................................... 6,800 278,324
First Horizon National Corp. (b) ............................................... 3,000 125,340
Huntington Bancshares, Inc. .................................................... 5,670 134,663
KeyCorp ........................................................................ 4,870 185,206
M & T Bank Corp. ............................................................... 1,220 149,035
Marshall & Ilsley Corp. ........................................................ 2,970 142,887
Mellon Financial Corp. ......................................................... 4,600 193,890
National City Corp. ............................................................ 7,670 280,415
Northern Trust Corp. ........................................................... 2,561 155,427
People's Bank (b) .............................................................. 2,340 104,411
Popular, Inc. (b) .............................................................. 6,040 108,418
Regions Financial Corp. ........................................................ 10,145 379,423
Sovereign Bancorp, Inc. (b) .................................................... 6,368 161,684
SunTrust Banks, Inc. ........................................................... 3,760 317,532
U.S. Bancorp ................................................................... 19,730 714,029
UnionBanCal Corp. .............................................................. 2,010 123,113
Wachovia Corp. ................................................................. 22,350 1,272,832
Wells Fargo & Co. .............................................................. 36,320 1,291,538
Zions Bancorp .................................................................. 1,420 117,065
------------
9,829,590
------------
BEVERAGES -- 2.2%
Coca-Cola Company .............................................................. 24,460 1,180,195
Coca-Cola Enterprises, Inc. .................................................... 5,760 117,619
Pepsi Bottling Group, Inc. ..................................................... 3,670 113,440
------------
1,411,254
------------
43
MMA Praxis Value Index Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.9%, continued
BROADCAST SERVICES & PROGRAMMING -- 0.7%
CBS Corp., Class B ............................................................. 7,670 $ 239,151
Clear Channel Communications, Inc. ............................................. 5,350 190,139
------------
429,290
------------
BROKERAGE SERVICES -- 6.8%
Bear Stearns Cos., Inc. ........................................................ 1,600 260,448
JPMorgan Chase & Co. ........................................................... 36,650 1,770,194
Lehman Brothers Holdings, Inc. ................................................. 5,910 461,689
Merrill Lynch & Co. ............................................................ 9,600 893,760
Morgan Stanley ................................................................. 11,640 947,845
------------
4,333,936
------------
BUSINESS SERVICES -- 0.3%
ARAMARK Corp., Class B ......................................................... 1,420 47,499
Fidelity National Information Services, Inc. ................................... 2,151 86,234
Manpower, Inc. ................................................................. 970 72,682
------------
206,415
------------
CHEMICALS - GENERAL -- 1.1%
Air Products & Chemicals, Inc. ................................................. 2,340 164,455
Lyondell Chemical Co. .......................................................... 3,730 95,376
PPG Industries, Inc. ........................................................... 1,910 122,641
Praxair, Inc. .................................................................. 2,450 145,359
Rohm and Haas Company .......................................................... 2,740 140,069
------------
667,900
------------
COMMUNICATIONS SERVICES -- 0.2%
NTL, Inc. (b) .................................................................. 3,830 96,669
------------
COMPUTER SERVICES -- 0.4%
Electronic Data Systems Corp. .................................................. 5,340 147,117
First Data Corp. ............................................................... 4,970 126,834
------------
273,951
------------
COMPUTER STORAGE DEVICES -- 0.3%
Seagate Technology ............................................................. 6,260 165,890
------------
COMPUTERS & PERIPHERALS -- 4.4%
EMC Corp. (a) .................................................................. 1,000 13,200
Hewlett-Packard Co. ............................................................ 28,490 1,173,503
International Business Machines Corp. .......................................... 15,090 1,465,993
NCR Corp. (a) .................................................................. 1,430 61,147
Sun Microsystems, Inc. (a) ..................................................... 14,980 81,192
------------
2,795,035
------------
CONGLOMERATES -- 0.6%
Emerson Electric Co. ........................................................... 8,520 375,476
------------
CONSTRUCTION SERVICES -- 0.3%
D.R. Horton, Inc. .............................................................. 4,110 108,874
Lennar Corp. ................................................................... 1,730 90,756
------------
199,630
------------
CONSUMER FINANCIAL SERVICES -- 0.2%
H&R Block, Inc. ................................................................ 4,390 101,146
------------
44
MMA Praxis Value Index Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.9%, continued
CONSUMER PRODUCTS -- 0.3%
General Mills, Inc. ............................................................ 3,500 $ 201,600
------------
CONTAINERS - PAPER & PLASTIC -- 0.1%
Avery Dennison Corp. ........................................................... 1,380 93,743
------------
COSMETICS & TOILETRIES -- 0.5%
Kimberly-Clark Corp. ........................................................... 4,310 292,865
------------
DISTRIBUTION -- 0.3%
Genuine Parts Co. .............................................................. 2,980 141,342
W.W. Grainger, Inc. ............................................................ 1,080 75,535
------------
216,877
------------
ELECTRIC SERVICES -- 1.5%
Alliant Energy Corp. ........................................................... 2,010 75,918
Consolidated Edison, Inc. (b) .................................................. 3,430 164,880
FPL Group, Inc. (b) ............................................................ 4,580 249,244
Mirant Corp. (a)(b) ............................................................ 2,930 92,500
NiSource, Inc. ................................................................. 4,520 108,932
NRG Energy, Inc. (a) ........................................................... 1,650 92,417
Pepco Holdings, Inc. ........................................................... 4,130 107,421
TXU Corp. ...................................................................... 730 39,573
------------
930,885
------------
ELECTRONIC & ELECTRICAL - GENERAL -- 0.3%
Arrow Electronics, Inc. (a) .................................................... 2,680 84,554
LSI Logic Corp. (a)(b) ......................................................... 8,960 80,640
------------
165,194
------------
ENERGY -- 0.5%
Valero Energy Corp. ............................................................ 6,600 337,656
------------
FINANCIAL SERVICES -- 10.0%
Ambac Financial Group, Inc. .................................................... 1,500 133,605
American Capital Strategies Ltd. (b) ........................................... 2,180 100,847
Ameriprise Financial, Inc. ..................................................... 2,770 150,965
Capital One Financial Corp. .................................................... 5,752 441,869
CIT Group, Inc. ................................................................ 3,120 174,002
Citigroup, Inc. ................................................................ 50,060 2,788,341
Countrywide Financial Corp. .................................................... 7,200 305,640
Federal Home Loan Mortgage Corp. ............................................... 7,390 501,781
Federal National Mortgage Association .......................................... 10,750 638,442
MBIA, Inc. ..................................................................... 2,670 195,070
MGIC Investment Corp. .......................................................... 1,650 103,191
PNC Financial Services Group, Inc. ............................................. 3,230 239,149
T. Rowe Price Group, Inc. ...................................................... 1,580 69,157
Washington Mutual, Inc. ........................................................ 10,200 463,998
------------
6,306,057
------------
FIRE, MARINE, AND CASUALTY INSURANCE -- 0.3%
Transatlantic Holdings, Inc. ................................................... 1,150 71,415
White Mountains Insurance Group Ltd. (b) ....................................... 170 98,503
------------
169,918
------------
45
MMA Praxis Value Index Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.9%, continued
FOOD DISTRIBUTORS & WHOLESALERS -- 0.5%
Dean Foods Co. (a) ............................................................. 1,320 $ 55,810
Sara Lee Corp. ................................................................. 8,730 148,672
SUPERVALU, Inc. ................................................................ 3,784 135,278
------------
339,760
------------
FOOD PROCESSING -- 1.1%
Bunge Ltd. (b) ................................................................. 1,570 113,841
ConAgra Foods, Inc. ............................................................ 5,730 154,710
H.J. Heinz Co. ................................................................. 3,630 163,386
Hormel Foods Corp. ............................................................. 1,010 37,713
Kellogg Co. .................................................................... 3,520 176,211
McCormick & Co. ................................................................ 1,310 50,514
------------
696,375
------------
FOOD PRODUCTS -- 0.6%
Campbell Soup Co. .............................................................. 4,170 162,171
J.M. Smucker Co. (b) ........................................................... 1,250 60,588
Kraft Foods, Inc. (b) .......................................................... 5,210 185,997
------------
408,756
------------
FOOD STORES -- 0.5%
Kroger Co. ..................................................................... 7,560 174,409
Safeway, Inc. .................................................................. 4,910 169,690
------------
344,099
------------
FORESTRY -- 0.2%
Plum Creek Timber Co., Inc. .................................................... 3,030 120,746
------------
FURNITURE & HOME FURNISHINGS -- 0.1%
Leggett & Platt, Inc. .......................................................... 2,290 54,731
------------
HEALTH CARE SERVICES -- 0.3%
AmerisourceBergen Corp. (b) .................................................... 2,330 104,757
Triad Hospitals, Inc. (a) ...................................................... 1,810 75,712
------------
180,469
------------
HOTELS & MOTELS -- 0.2%
Starwood Hotels & Resorts Worldwide, Inc. ...................................... 1,154 72,125
Wyndham Worldwide Corp. (a) .................................................... 2,314 74,094
------------
146,219
------------
HOUSEHOLD PRODUCTS -- 0.2%
Newell Rubbermaid, Inc. ........................................................ 3,410 98,720
------------
INDUSTRIAL GOODS & SERVICES -- 0.2%
Masco Corp. .................................................................... 4,850 144,870
------------
INSURANCE -- 9.5%
Allstate Corp. ................................................................. 6,950 452,515
American International Group, Inc. ............................................. 27,280 1,954,885
Aon Corp. ...................................................................... 3,370 119,096
Assurant, Inc. ................................................................. 1,560 86,190
Chubb Corp. .................................................................... 4,530 239,682
CIGNA Corp. .................................................................... 1,430 188,145
Cincinnati Financial Corp. ..................................................... 1,540 69,777
46
MMA Praxis Value Index Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.9%, continued
INSURANCE -- 9.5%, continued
Everest Re Group ............................................................... 940 $ 92,223
First American Corp. ........................................................... 1,690 68,749
Genworth Financial, Inc. ....................................................... 5,000 171,050
Hartford Financial Services Group, Inc. ........................................ 3,130 292,060
Lincoln National Corp. ......................................................... 3,055 202,852
Marsh & McLennan Cos., Inc. .................................................... 6,340 194,384
MetLife, Inc. .................................................................. 7,690 453,787
Principal Financial Group, Inc. ................................................ 2,960 173,752
Prudential Financial, Inc. ..................................................... 5,040 432,734
Radian Group, Inc. ............................................................. 1,200 64,692
SAFECO Corp. ................................................................... 1,930 120,722
The PMI Group, Inc. ............................................................ 1,600 75,472
The St. Paul Travelers Companies, Inc. ......................................... 7,340 394,085
Torchmark Corp. ................................................................ 1,040 66,310
UnumProvident Corp. ............................................................ 3,910 81,250
WellPoint, Inc. (a) ............................................................ 110 8,656
------------
6,003,068
------------
INSURANCE PROPERTY-CASUALTY -- 0.7%
ACE Ltd. ....................................................................... 3,640 220,475
Fidelity National Title, Class A (a) ........................................... 3,334 79,616
XL Capital Ltd. ................................................................ 2,340 168,527
------------
468,618
------------
IRON & STEEL -- 0.2%
United States Steel Corp. ...................................................... 1,380 100,933
------------
MACHINERY -- 0.7%
Deere & Co. .................................................................... 2,300 218,660
Ingersoll-Rand Co. Ltd. ........................................................ 4,150 162,390
Stanley Works .................................................................. 1,320 66,383
------------
447,433
------------
MANUFACTURING -- 1.3%
3M Co. ......................................................................... 100 7,793
Cooper Industries Ltd., Class A ................................................ 1,170 105,803
SPX Corp. ...................................................................... 1,110 67,888
Tyco International Ltd. ........................................................ 19,460 591,584
Whirlpool Corp. (b) ............................................................ 840 69,737
------------
842,805
------------
MEDICAL SUPPLIES -- 0.9%
Baxter International, Inc. ..................................................... 6,960 322,875
Hillenbrand Industry, Inc. (b) ................................................. 1,580 89,949
Thermo Fisher Scientific, Inc. (a) ............................................. 3,260 147,645
------------
560,469
------------
MOTION PICTURES -- 0.1%
Regal Entertainment Group ...................................................... 3,650 77,818
------------
47
MMA Praxis Value Index Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.9%, continued
MULTIMEDIA -- 1.3%
Time Warner, Inc. .............................................................. 39,010 $ 849,638
------------
NATURAL GAS UTILITIES -- 0.3%
Kinder Morgan, Inc. ............................................................ 1,540 162,855
------------
NEWSPAPERS -- 0.7%
E.W. Scripps Co. ............................................................... 2,000 99,880
Gannett Co., Inc. .............................................................. 2,590 156,592
McClatchy Co., Class A (b) ..................................................... 773 33,471
The Washington Post Company, Class B ........................................... 102 76,051
Tribune Co. (b) ................................................................ 2,490 76,642
------------
442,636
------------
OFFICE EQUIPMENT & SERVICES -- 0.8%
Pitney Bowes, Inc. ............................................................. 5,890 272,059
Xerox Corp. (a) ................................................................ 13,430 227,639
------------
499,698
------------
OIL - INTEGRATED -- 2.3%
ConocoPhillips ................................................................. 17,970 1,292,941
Hess Corp. ..................................................................... 3,170 157,137
------------
1,450,078
------------
OIL & GAS EXPLORATION, PRODUCTION & SERVICES -- 2.1%
Anadarko Petroleum Corp. ....................................................... 5,240 228,045
Apache Corp. ................................................................... 3,550 236,111
Devon Energy Corp. ............................................................. 4,680 313,934
ENSCO International, Inc. ...................................................... 1,830 91,610
GlobalSantaFe Corp. ............................................................ 2,700 158,706
Pioneer Natural Resources ...................................................... 1,870 74,220
Rowan Cos., Inc. (b) ........................................................... 1,540 51,128
The Williams Cos., Inc. ........................................................ 7,440 194,333
------------
1,348,087
------------
OIL & GAS OPERATIONS -- 0.8%
Chesapeake Energy Corp. (b) .................................................... 4,700 136,534
Cimarex Energy Co. (b) ......................................................... 1,460 53,290
Newfield Exploration Co. (a) ................................................... 1,550 71,223
Noble Energy, Inc. ............................................................. 1,940 95,196
Pride International, Inc. (a) .................................................. 2,140 64,200
Sunoco, Inc. ................................................................... 1,500 93,540
------------
513,983
------------
OIL & GAS TRANSMISSION -- 0.7%
El Paso Corp. .................................................................. 8,480 129,574
KeySpan Corp. .................................................................. 2,670 109,951
Sempra Energy .................................................................. 3,160 176,865
------------
416,390
------------
PAPER PRODUCTS -- 0.9%
International Paper Co. ........................................................ 5,350 182,435
MeadWestvaco Corp. ............................................................. 3,520 105,811
Temple-Inland, Inc. ............................................................ 1,600 73,648
Weyerhaeuser Co. ............................................................... 2,730 192,875
------------
554,769
------------
48
MMA Praxis Value Index Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.9%, continued
PHARMACEUTICALS -- 6.1%
Abbott Laboratories ............................................................ 16,690 $ 812,970
Bristol-Myers Squibb Co. ....................................................... 21,530 566,670
Eli Lilly and Co. .............................................................. 11,690 609,049
Hospira, Inc. (a) .............................................................. 2,380 79,920
Merck & Co., Inc. .............................................................. 23,630 1,030,267
Omnicare, Inc. ................................................................. 1,520 58,718
Wyeth .......................................................................... 14,390 732,739
------------
3,890,333
------------
PRINTING - COMMERCIAL -- 0.2%
R.R. Donnelley & Sons Co. ...................................................... 3,070 109,108
------------
PUBLISHING -- 0.2%
Idearc, Inc. (a)(b) ............................................................ 1,526 43,720
R.H. Donnelley Corp. (b) ....................................................... 990 62,103
------------
105,823
------------
RAILROADS -- 0.4%
Norfolk Southern Corp. ......................................................... 4,530 227,814
------------
RAW MATERIALS -- 0.2%
Vulcan Materials Co. ........................................................... 1,250 112,338
------------
REAL ESTATE INVESTMENT TRUST -- 2.2%
Archstone-Smith Trust .......................................................... 2,530 147,271
Developers Diversified Realty Corp. (b) ........................................ 1,650 103,868
Equity Office Properties Trust ................................................. 3,800 183,046
Equity Residential ............................................................. 3,310 167,983
General Growth Properties, Inc. ................................................ 2,770 144,677
iStar Financial, Inc. .......................................................... 1,850 88,467
Kimco Realty Corp. ............................................................. 2,910 130,805
Public Storage, Inc. ........................................................... 1,670 162,825
United Dominion Realty Trust, Inc. ............................................. 2,300 73,117
Vornado Realty Trust ........................................................... 1,650 200,474
------------
1,402,533
------------
REAL ESTATE OPERATIONS -- 2.1%
AMB Property Corp. ............................................................. 1,260 73,849
Apartment Investment & Management Co. .......................................... 1,630 91,313
AvalonBay Communities, Inc. .................................................... 870 113,144
Boston Properties, Inc. ........................................................ 1,290 144,325
Duke Realty Corp. (b) .......................................................... 1,920 78,528
Host Hotels & Resorts, Inc. .................................................... 5,692 139,739
Macerich Co. ................................................................... 1,250 108,213
ProLogis ....................................................................... 2,800 170,155
Realogy Corp. (a) .............................................................. 2,892 87,685
Simon Property Group, Inc. ..................................................... 2,450 248,160
SL Green Realty Corp. (b) ...................................................... 480 63,734
------------
1,318,845
------------
49
MMA Praxis Value Index Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.9%, continued
RECREATIONAL ACTIVITIES -- 0.6%
Carnival Corp. ................................................................. 6,610 $ 324,220
Royal Caribbean Cruises Ltd. ................................................... 1,910 79,036
------------
403,256
------------
RECREATIONAL PRODUCTS -- 0.2%
Mattel, Inc. ................................................................... 5,220 118,285
------------
RESIDENTIAL BUILDING CONSTRUCTION -- 0.4%
Centex Corp. ................................................................... 1,610 90,595
KB Home ........................................................................ 1,140 58,459
Pulte Homes, Inc. .............................................................. 3,470 114,926
------------
263,980
------------
RESTAURANTS -- 1.0%
McDonald's Corp. ............................................................... 12,310 545,702
Tim Hortons, Inc. (b) .......................................................... 1,730 50,101
Wendy's International, Inc. (b) ................................................ 1,278 42,289
------------
638,092
------------
RETAIL -- 1.0%
Circuit City Stores, Inc. ...................................................... 2,090 39,668
Limited Brands, Inc. ........................................................... 4,530 131,098
Nordstrom, Inc. ................................................................ 1,040 51,314
Sherwin-Williams Co. ........................................................... 1,770 112,537
The Gap, Inc. .................................................................. 9,860 192,269
Tiffany & Co. (b) .............................................................. 1,990 78,088
------------
604,974
------------
SAVINGS & LOANS -- 0.2%
Hudson City Bancorp, Inc. ...................................................... 7,260 100,769
------------
SCIENTIFIC & TECHNICAL INSTRUMENTS -- 0.1%
Applera Corp. - Applied Biosystems Group ....................................... 1,930 70,812
------------
SEMICONDUCTORS -- 0.3%
Intersil Corp. (b) ............................................................. 2,580 61,714
Maxim Integrated Products, Inc. ................................................ 4,060 124,317
186,031
------------
SOFTWARE & SERVICES -- 0.6%
BMC Software, Inc. (a) ......................................................... 1,540 49,588
Cadence Design Systems, Inc. (a) ............................................... 4,610 82,565
Symantec Corp. (a) ............................................................. 2,200 45,870
VeriSign, Inc. (a) ............................................................. 9,530 229,197
------------
407,220
------------
TELECOMMUNICATIONS -- 7.5%
ALLTEL Corp. ................................................................... 4,200 254,016
AT&T, Inc. ..................................................................... 41,520 1,484,339
BellSouth Corp. ................................................................ 19,520 919,587
CenturyTel, Inc. ............................................................... 1,880 82,081
Sprint Nextel Corp. ............................................................ 31,140 588,235
Telephone & Data Systems, Inc. ................................................. 2,540 137,998
Verizon Communications, Inc. ................................................... 30,610 1,139,916
Windstream Corp. ............................................................... 8,712 123,885
------------
4,730,057
------------
50
MMA Praxis Value Index Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 98.9%, continued
TELECOMMUNICATIONS-SERVICES & EQUIPMENT -- 0.3%
Avaya, Inc. (a) ................................................................ 3,670 $ 51,307
Embarq Corp. ................................................................... 1,480 77,789
Tellabs, Inc. (a) .............................................................. 6,190 63,509
------------
192,605
------------
WASTE MANAGEMENT -- 0.1%
Republic Services, Inc. ........................................................ 1,700 69,139
------------
TOTAL COMMON STOCKS ............................................................ 62,562,381
------------
SHORT TERM INVESTMENTS -- 0.7%
Northern Institutional Government Select Portfolio ............................. 449,491 449,491
------------
CORPORATE NOTES -- 0.8%
COMMUNITY DEVELOPMENT -- 0.8%
MMA Community Development Investment, Inc., 2.98%, 1/1/07, (c)+ ................ 175,000 175,000
MMA Community Development Investment, Inc., 4.47%, 1/1/07, (c)+ ................ 335,000 335,000
------------
TOTAL CORPORATE NOTES .......................................................... 510,000
------------
SECURITIES HELD AS COLLATERAL FOR SECURITIES LENDING -- 5.6%
Anz Bank Government Letter of Credit ........................................... 7,066 7,066
Banco Santander Central Hispano Letter of Credit ............................... 120,919 120,919
Bank of New York City Letter of Credit ......................................... 71 71
Chase Manhattan Letter of Credit ............................................... 1 1
Krediet Bank Letter of Credit .................................................. 21,875 21,875
Lloyds Letter of Credit ........................................................ 49,465 49,465
LOCC HSBC Letter of Credit ..................................................... 14,134 14,134
Monte Dei Paschi Di Siena Letter of Credit ..................................... 17,666 17,666
National Australia Letter of Credit ............................................ 35,332 35,332
Northern Institutional Liquid Asset Portfolio .................................. 3,177,011 3,177,011
Paribas Letter of Credit ....................................................... 42,399 42,399
Royal Bank Canada Letter of Credit ............................................. 21,199 21,199
San Paolo IMI Bank Letter of Credit ............................................ 24,733 24,733
Standard Chartered Bank Letter of Credit ....................................... 10,600 10,600
Westpac Letter of Credit ....................................................... 6,996 6,996
------------
TOTAL SECURITIES HELD AS COLLATERAL FOR SECURITIES LENDING ..................... 3,549,467
------------
51
MMA Praxis Value Index Fund
Schedule of portfolio investments, continued
December 31, 2006
VALUE
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $53,271,605) -- 106.0%.................................. $ 67,071,339
Liabilities in excess of other assets -- (6.0%)............................ (3,776,394)
------------
NET ASSETS -- 100.0%............................................................ $ 63,294,945
============
- ----------
(a) Non-income producing securities.
(b) All or part of this security was on loan, as of December 31, 2006.
(c) Represents affiliated restricted security as to resale to investors and is
not registered under the Securities Act of 1933. These securities have
been deemed illiquid under guidelines established by the Board of
Trustees. Acquisition date and current cost: MMA Community Development
Investment, Inc., 2.98% - 7/02, $175,000 and MMA Community Development
Investment, Inc., 4.47% - 12/01, $335,000. At December 31, 2006 these
securities had an aggregate market value of $510,000, representing 0.8% of
net assets.
+ Variable rate security. Rates presented are the rates in effect at
December 31, 2006. Date presented reflects next rate change date.
plc - Public Liability Co.
UNREALIZED
FUTURES CONTRACTS PURCHASED CONTRACTS APPRECIATION
--------------- ------------
S&P 500 Index Futures Contract, expiring March, 2007
(underlying face amount at value $357,100) 1 $ 688
See notes to financial statements.
52
-----------------------------------
Statement of assets and liabilities
-----------------------------------
MMA Praxis Value Index Fund
Statement of assets and liabilities
December 31, 2006
ASSETS:
Investments, at value (cost $49,212,138)* .............................................. $ 63,011,872
Investments in affiliates, at value (cost $510,000) .................................... 510,000
Investments held as collateral for securities loaned, at value ......................... 3,549,467
--------------
Total Investments .................................................................. 67,071,339
--------------
Cash held as collateral for futures contracts .......................................... 14,000
Interest and dividends receivable ...................................................... 98,976
Receivable for capital shares sold ..................................................... 112,028
Receivable for investments sold ........................................................ 1,750
Prepaid expenses ....................................................................... 14,069
--------------
Total Assets ....................................................................... 67,312,162
--------------
LIABILITIES:
Distributions payable to shareholders .................................................. 135,291
Payable for capital shares redeemed .................................................... 5,239
Payable for investments purchased ...................................................... 271,205
Payable for securities loaned .......................................................... 3,549,467
Payable for variation margin on futures contracts ...................................... 1,350
Accrued expenses and other payables:
Investment advisory fees ............................................................. 7,418
Affiliates ........................................................................... 299
Distribution fees .................................................................... 11,409
Trustees fees ........................................................................ 1,119
Other ................................................................................ 34,420
--------------
Total Liabilities .................................................................. 4,017,217
--------------
NET ASSETS:
Capital ................................................................................ 49,655,384
Accumulated net investment income ...................................................... 5,407
Accumulated net realized loss on investments and futures contracts ..................... (166,268)
Net unrealized appreciation on investments ............................................. 13,799,734
Unrealized appreciation of futures contracts ........................................... 688
--------------
Net Assets ......................................................................... $ 63,294,945
==============
Net Assets
Class A .............................................................................. $ 22,426,372
Class B .............................................................................. 13,839,882
Class I .............................................................................. 27,028,691
--------------
Total .............................................................................. $ 63,294,945
==============
Shares Outstanding
(unlimited number of shares authorized with $.01 par value)
Class A .............................................................................. 1,962,621
Class B .............................................................................. 1,212,985
Class I .............................................................................. 2,376,068
--------------
Total ................................................................................ 5,551,674
==============
Net asset value
Class A - Redemption Price Per Share(A) .............................................. $ 11.43
==============
Class A - Maximum Sales Charge ....................................................... 5.25%
==============
Class A - Maximum Offering Price Per Share
[100%/(100%-Maximum Sales Charge) of
net asset value adjusted to the nearest cent] ...................................... $ 12.06
==============
Class B - offering price per share**(A) .............................................. $ 11.41
==============
Class I - offering price per share**(A) .............................................. $ 11.38
==============
* Includes securities on loan, $3,453,823.
** Redemption price per share varies by length of time shares are held.
(A) Net proceeds upon redemption may include a redemption fee.
See notes to financial statements.
53
- -----------------------
Statement of operations
- -----------------------
MMA Praxis Value Index Fund
Statement of operations
For the year ended December 31, 2006
INVESTMENT INCOME:
Dividends .............................................................................. $ 1,459,414
Foreign tax withholding ................................................................ (57)
Interest ............................................................................... 5,782
Income from securities lending ......................................................... 2,843
Interest from affiliates ............................................................... 16,845
--------------
Total Investment Income ............................................................ 1,484,827
--------------
EXPENSES:
Investment advisory fees ............................................................... 170,546
Distribution fees-Class A .............................................................. 68,492
Distribution fees-Class B .............................................................. 92,933
Shareholder servicing fees-Class A ..................................................... 68,486
Shareholder servicing fees-Class B ..................................................... 30,978
Administration fees .................................................................... 79,571
Legal fees and expenses ................................................................ 86,076
Reimbursement of Fund expenses paid by Adviser ......................................... 4,734
Trustees' fee and expenses ............................................................. 35,250
Custodian fees ......................................................................... 6,324
Other expenses ......................................................................... 128,836
--------------
Total expenses before reductions/reimbursements .................................... 772,226
Expenses reimbursed by Investment Adviser ............................................ (9,996)
Expenses reduced by Distributor ...................................................... (93,269)
Expenses reduced by Custodian ........................................................ (5,475)
--------------
Net Expenses ....................................................................... 663,486
--------------
Net Investment Income .................................................................. 821,341
--------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments and futures contracts ................................. 3,952,768
Change in unrealized appreciation/depreciation of investments during the year .......... 5,995,193
Change in unrealized appreciation/depreciation of futures contracts during the year .... 10,438
--------------
Net realized and unrealized gain on investments and futures contracts .................. 9,958,399
--------------
Net increase in net assets resulting from operations ................................... $ 10,779,740
==============
See notes to financial statements.
54
-----------------------------------
Statements of changes in net assets
-----------------------------------
MMA Praxis Value Index Fund
Statements of changes in net assets
Year Ended Year Ended
December 31, December 31,
2006 2005
- --------------------------------------------------------------------------------------------------------------------------
From Investment Activities:
Net investment income .......................................................... $ 821,341 $ 665,305
Net realized gain on investments and futures contracts ......................... 3,952,768 553,329
Change in unrealized appreciation/depreciation of investments and
futures contracts during the year ......................................... 6,005,631 1,728,467
------------ ------------
Net increase in net assets resulting from operations ........................... 10,779,740 2,947,101
------------ ------------
Distributions to Class A Shareholders:
From net investment income .................................................. (229,838) (567,190)
From net realized gain on investment ........................................ (1,046,612) --
Distributions to Class B Shareholders:
From net investment income .................................................. (84,278) (98,099)
From net realized gain on investment ........................................ (653,735) --
Distributions to Class I Shareholders:
From net investment income .................................................. (473,923) --
From net realized gain on investment ........................................ (1,273,012) --
------------ ------------
Change in net assets from distributions to shareholders ........................ (3,761,398) (665,289)
------------ ------------
Change in net assets from capital transactions ................................. 4,598,465 6,229,137
------------ ------------
Change in net assets ........................................................... 11,616,807 8,510,949
Net Assets:
Beginning of year ........................................................... 51,678,138 43,167,189
------------ ------------
End of year ................................................................. $ 63,294,945 $ 51,678,138
============ ============
Accumulated (distributions in excess of) net investment income ................. $ 5,407 $ (16,939)
============ ============
See notes to financial statements.
55
- --------------------
Financial highlights
- --------------------
MMA Praxis Value Index Fund
Financial highlights
For a share outstanding throughout the year indicated.
Class A Shares
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year ............ $ 10.09 $ 9.65 $ 8.65 $ 6.72 $ 8.79
----------- ----------- ----------- ----------- -----------
Investment Activities:
Net investment income ...................... 0.22 0.15 0.12 0.10 0.07
Net realized and unrealized gains (losses)
from investments ..................... 1.82 0.44 1.00 1.93 (2.07)
----------- ----------- ----------- ----------- -----------
Total from Investment Activities ........... 2.04 0.59 1.12 2.03 (2.00)
----------- ----------- ----------- ----------- -----------
Distributions:
Net investment income ...................... (0.13) (0.15) (0.12) (0.10) (0.07)
Net realized gain .......................... (0.57) -- -- -- --
Tax return of capital ...................... -- -- -- -- (a) --
----------- ----------- ----------- ----------- -----------
Total Distributions ........................ (0.70) (0.15) (0.12) (0.10) (0.07)
----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees (a) ...... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .................. $ 11.43 $ 10.09 $ 9.65 $ 8.65 $ 6.72
=========== =========== =========== =========== ===========
Total Return (excludes sales charge) .......... 20.41% 6.12% 13.07% 30.38% (22.81%)
Ratios/Supplemental Data:
Net assets at end of year (000) ............ $ 22,426 $ 39,874 $ 33,640 $ 25,815 $ 15,071
Ratio of expenses to average net assets .... 1.11% 1.04% 1.04% 0.95% 0.95%
Ratio of net investment income
to average net assets .................... 1.52% 1.55% 1.45% 1.49% 0.98%
Ratio of expenses to average net assets* ... 1.37% 1.30% 1.48% 1.71% 2.13%
Portfolio Turnover (b) ........................ 55.37% 25.25% 24.76% 35.21% 30.61%
- ------------------------------------------------------------------------------------------------------------------------------
* During the period, certain expenses were reduced, reimbursed or paid by a
third party. If such expense reductions had not occurred, the ratios would
have been as indicated.
(a) Amount rounds to less than $0.005 per share.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
56
MMA Praxis Value Index Fund
Financial highlights, continued
For a share outstanding throughout the year indicated.
Class A Shares
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year ............ $ 10.07 $ 9.62 $ 8.64 $ 6.71 $ 8.78
----------- ----------- ----------- ----------- -----------
Investment Activities:
Net investment income ...................... 0.10 0.09 0.08 0.07 0.03
Net realized and unrealized gains (losses)
from investments ......................... 1.88 0.45 0.98 1.93 (2.07)
----------- ----------- ----------- ----------- -----------
Total from Investment Activities ........... 1.98 0.54 1.06 2.00 (2.04)
----------- ----------- ----------- ----------- -----------
Distributions:
Net investment income ...................... (0.07) (0.09) (0.08) (0.07) (0.03)
Net realized gain .......................... (0.57) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions ........................ (0.64) (0.09) (0.08) (0.07) (0.03)
----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees .......... --(a) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .................. $ 11.41 $ 10.07 $ 9.62 $ 8.64 $ 6.71
=========== =========== =========== =========== ===========
Total Return (excludes redemption charge) ..... 19.85% 5.61% 12.31% 29.82% (23.24%)
Ratios/Supplemental Data:
Net assets at end of year (000) ............ $ 13,840 $ 11,804 $ 9,155 $ 5,651 $ 3,227
Ratio of expenses to average net assets .... 1.67% 1.59% 1.60% 1.50% 1.50%
Ratio of net investment income
to average net assets .................... 0.93% 1.00% 0.91% 0.94% 0.44%
Ratio of expenses to average net assets* ... 1.89% 1.78% 1.99% 2.21% 2.64%
Portfolio Turnover (b) ........................ 55.37% 25.25% 24.76% 35.21% 30.61%
- ------------------------------------------------------------------------------------------------------------------------------
* During the period, certain expenses were reduced, reimbursed or paid by a
third party. If such expense reductions had not occurred, the ratios would
have been as indicated.
(a) Amount rounds to less than $0.005 per share.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
57
MMA Praxis Value Index Fund
Financial highlights, continued
For a share outstanding throughout the period indicated.
Class I Shares
----------------
Period Ended
December 31,
2006 (a)
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ....................... $ 10.90
------------
Investment Activities:
Net investment income .................................. 0.12
Net realized and unrealized gains from investments ..... 1.13
------------
Total from Investment Activities ....................... 1.25
------------
Distributions:
Net investment income .................................. (0.20
Net realized gain ...................................... (0.57
------------
Total Distributions ..................................... (0.77
------------
Net Asset Value, End of Period ............................. $ 11.38
============
Total Return (excludes redemption charge) .................. 11.67%(b)
Ratios/Supplemental Data:
Net assets at end of period (000) ...................... $ 27,029
Ratio of expenses to average net assets ................ 0.89%(c)
Ratio of net investment income to average net assets ... 1.69%(c)
Ratio of expenses to average net assets* ............... 0.95%(c)
Portfolio Turnover (d) ..................................... 55.37
- --------------------------------------------------------------------------------
* During the period, certain expenses were reduced, reimbursed or paid by a
third party. If such activity had not occurred, the ratios would have been
indicated.
(a) For the period from May 1, 2006 (commencement of operations) through
December 31, 2006.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
58
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- -----------------------------
MMA Praxis International Fund
- -----------------------------
MMA Praxis International Fund
Annual report to shareholders
Portfolio manager's letter
In 2006, we made some major shifts in portfolio structure. Geographically, these
involved sizeable reductions in both Japan and the United Kingdom in favor of
increased weights in Europe, emerging markets, and, to a lesser extent, Asia
ex-Japan. Japan, the largest move, had been a strong performing market in the
latter part of 2005 and we had moved to a rare overweight position by year end,
participating in the upside of the market. However, we adopted a more negative
outlook for the economy and market, and began reducing our weights there,
starting with sales of retailers and financials and moving most of the proceeds
into European markets. These markets and the European economy in general began
to show some promise and we viewed Germany as the most attractive. Financials
and industrials across Europe were represented through some new and increased
holdings.
Second quarter 2006 experienced a market environment that revealed whiffs of
both euphoria and panic, creating a mini-bubble and burst all within a single
quarter. This pivoted around May 10 and was particularly felt in the equity
leadership areas of small cap, emerging markets, and the economic sectors of
materials, industrials, and commodities. Markets moved from a mindset of limited
concern about risk, to revisiting the possible downside in asset and equity
prices.
These conditions led us to adopt a more defensive posture in the portfolio and
to increase cash. While the markets achieved some level of stability in the
third quarter and finished out the year with a robust final quarter, we were
wary of the strength of the recovery and placed emphasis on larger cap global
companies, particularly those with strong balance sheets, solid and predicable
cash flows, and shareholder-friendly managements. These companies have been out
of favor with investors for some time and were trading at very attractive
relative multiples at mid-year.
Changes in sector weight were largely accounted for by increases in Information
Technology, Telecom Services, and Consumer Staples funded by reductions in
Consumer Discretionary, Utilities, and Health Care.
Contributors to performance
On a country basis, Germany, France, Brazil, and Hong Kong had the largest
positive effect on the portfolio in 2006. Overweight positions in Germany and
France, both strong performing markets, were rewarded along with outperformance
by portfolio holdings in each. One stock that stood out was, Sodexho, the French
catering company with a global reach. It continued to deliver solid revenue
growth driven by outsourcing and its strong position in several sectors. Another
was Germany's IVG Immobilien, a commercial real estate company that benefited
from increased demand and rentals for European real estate, as well as from its
holdings of underground natural gas storage caverns, which appreciated strongly.
Real estate was a similarly positive exposure in Argentina where the dominant
mall developer IRSA-Inversiones' strength reflected the country's improved
economic position while in the United Kingdom. British Land was very strong also
on increased demand and rental levels. KCI Konecranes International, the
Finnish-based leading provider of cranes used in port facilities also proved to
be a successful stock pick. In Brazil, an improved economic outlook and
certainty on the outcome of the presidential election there helped propel the
market with strong contributions from two new holdings: Banco do Brasil and
Companhia Vale do Rio Doce, the world's largest producer of iron ore, and from
TIM Participacoes, the mobile cell phone provider. China Unicom, the Hong
Kong-quoted provider of telecom services in a rapidly growing Chinese market was
a bright star.
On a sector basis for the 12-month period, the strongest contributors to
performance were Information Technology and Telecommunication Services. In both
sectors our superior stock selection proved to be beneficial. In Information
Technology, the biggest contributor for the 12-month period was Nintendo. The
Japanese game console manufacturer rose strongly throughout the year on
heightened expectations that its next generation game console, "The Wii," will
dominate its space. In Industrials the Dutch temporary employment company, USG
People, was a strong contributor supported by the view that it would be an early
beneficiary of the expected pick-up in demand for labor as economies recover and
European employment regulations eased.
60
Detractors from performance
On a country basis, the United Kingdom, Sweden, the Netherlands, and South Korea
were the most negative countries. In the United Kingdom, an underweight in a
strong performing market combined with underperformance in some individual
holdings hurt the portfolio. BP, the portfolio's heaviest individual weight,
suffered from the fall of oil prices during the second half of the year. They
also suffered as a result of fallout from the fatal 2005 explosion at its Texan
oil refinery (the third largest oil refinery in the United States) and more
recent pipeline problems in its Prudhoe Bay, Alaska oilfield in August 2006.
Sweden detracted due to an underweight in a strong performing market. In the
Netherlands, electronics company, Phillips, suffered from difficulties in its
joint venture with Korea's LG. In Japan, some individual holdings, including
retailers, Yamada Denki and Isetan, and financials Takefuji and Orix, showed the
greatest weakness for the period. The Bank of Japan had failed to increase
interest rates and this prevented Japanese banks from increasing their net
interest margins. Japanese financials are also somewhat of a proxy for the
overall market, which was weak in 2006 following the sharp run-up in the second
half of 2005.
On a sector basis, the largest detractors were Consumer Discretionary,
Materials, and Financials. Our overweight and stock selection in Consumer
Discretionary detracted from performance. In Materials, Toray Industries, the
Japanese leader in advance materials was the leading detractor for the sector.
The negative impact in Financials was largely from the Japanese holdings.
The stewardship investing screens applied to the Fund appear to have had a
slightly negative impact on the Fund's return during the year. Deviation of the
Fund's returns from its unscreened benchmark, the MSCI EAFE Index, is to be
expected in part due to the comprehensive application of the screens across
industries and countries and due to the portfolio management strategies used in
managing the Fund.
Strategy and outlook
This part of our annual report is always the most difficult because no one has a
crystal ball. Yet any investment report without an "outlook" can seem like a
farmer without a plough.
What seems more valuable is to outline again what our investment philosophy is
regarding the portfolio, and how we are positioned for the investment journey
ahead. Generally speaking, we try to keep risk low and generate good investment
performance over the long term. Some years this philosophy leads to
underperformance, such as in the tech go-go period and in 2006, which was a
period of abundant liquidity when high risk-taking had a big payoff. In other
years, this philosophy has lead to outperformance, such as in the 2000 to 2002
tech wreck bear market. We look for businesses we can understand, that are not
too expensive, have good balance sheets, and are generally stable earners with
predictable future cash flows. Finally, we seek managements that align the
interests of the company with those of shareholders. Currently, we find that
many large dominant companies are on the bargain counter. They are out of favor,
and have become increasingly so over the last few years. It is very difficult to
know when these blue chips will come back into favor, but we do know they are
inexpensive for their quality and satisfy their criteria outlined above. Here
are some representative examples of companies we own that have high sustainable
ROE's, and P/E's that are inexpensive relative to their ROE's - one indication
of good valuation. In addition, they have many of the characteristics mentioned
previously that we look for.
Market Value P/E ROE Yield
Company $Bn X % %
------------------- -------- -------- -------- --------
Toyota 226 15.7 14.0 1.40
Nestle 145 17.0 17.8 2.45
Royal Bank of Scotland 123 9.1 16.1 3.45
Novartis 160 17.2 20.0 2.07
Telefonica 106 12.6 18.3 4.50
Canon 80 17.1 16.3 1.70
Cemex 24 8.9 12.8 2.00
In 2007, we will continue to focus on these kinds of companies, because that is
where we believe the genuine investment value lies, especially when adjusted for
risk.
Gilman C. Gunn, III
MMA Praxis International Fund Manager
61
- ------------------
Performance review
- ------------------
MMA Praxis International Fund
Performance review
Average annual total returns as of 12/31/06
[The following table was represented as a bar chart in the printed material.]
Inception Since
Date 1 Year 3 Year 5 Year Inception
---- ------ ------ ------ ---------
Class A 5/12/99 20.31% 15.79% 9.76% 6.10%
Class A* 5/12/99 14.01% 13.73% 8.59% 5.52%
Class B 4/1/97 19.45% 14.92% 9.07% 5.64%
Class B** 4/1/97 15.45% 14.16% 8.93% 5.64%
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 principal value will fluctuate so that an investor's
shares, when redeemed may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. To obtain
performance information current to the most recent month end, please visit
mmapraxis.com.
* Reflects maximum front-end sales charge of 5.25%.
** The Fund imposes a back-end sales charge (load) on Class B Shares if you
sell your shares before a certain period of time has elasped. This is
called a Contingent Deferred Sales Charge ("CDSC"). The CDSC declines over
five years starting with year one and ending in year six as follows: 4%,
4%, 3%, 2%, 1%.
Class A Share of this Fund were not in existence prior to 5/12/99. Class A Share
performance calculated for any period prior to 5/12/99 is based on the
performance of Class B Share since inception of 4/1/97. The B Share Contingent
Deferred Sales Charge (CDSC) does not apply to performance over 5 years;
therefore, the 10-year return does not reflect the CDSC.
The total return set forth reflects certain expenses that were voluntarily
reduced, reimbursed or paid by third party. In such instances, and without this
activity, total return would have been lower.
62
Growth of $10,000 investment 4/1/97 to 12/31/06
[The following table was represented as a line chart in the printed material.]
MSCI EAFE
Class A* Class B Index (1)
4/1/1997 9,479 10,000 10,000
6/30/1997 10,902 11,501 11,306
9/30/1997 10,949 11,550 11,234
12/31/1997 10,085 10,639 10,361
3/31/1998 11,737 12,382 11,893
6/30/1998 12,496 13,183 12,028
9/30/1998 10,867 11,464 10,326
12/31/1998 12,503 13,190 12,468
3/31/1999 12,762 13,463 12,650
6/30/1999 13,327 14,060 12,980
9/30/1999 14,083 14,830 13,559
12/31/1999 17,811 18,731 15,871
3/31/2000 18,222 19,143 15,863
6/30/2000 16,588 17,401 15,245
9/30/2000 15,267 15,996 14,024
12/31/2000 14,209 14,867 13,656
3/31/2001 12,213 12,763 11,791
6/30/2001 11,612 12,110 11,688
9/30/2001 9,706 10,102 10,058
12/31/2001 10,596 11,015 10,760
3/31/2002 10,723 11,146 10,821
6/30/2002 10,137 10,517 10,611
9/30/2002 8,128 8,423 8,522
12/31/2002 8,553 8,841 9,074
3/31/2003 7,669 7,920 8,336
6/30/2003 8,976 9,257 9,968
9/30/2003 9,566 9,846 10,783
12/31/2003 10,873 11,180 12,628
3/31/2004 11,324 11,613 13,184
6/30/2004 10,942 11,204 13,242
9/30/2004 10,872 11,120 13,211
12/31/2004 12,508 12,767 15,240
3/31/2005 12,427 12,658 15,225
6/30/2005 12,248 12,457 15,111
9/30/2005 13,337 13,546 16,688
12/31/2005 14,030 14,235 17,377
3/31/2006 15,182 15,372 19,023
6/30/2006 15,085 15,266 19,202
9/30/2006 15,439 15,625 19,967
12/31/2006 16,880 17,083 22,044
For performance purposes, the above graph has not been adjusted for CDSC
charges.
This chart represents historical performance of a hypothetical investment of
$10,000 in the International Fund from 4/1/97 to 6/30/06, and represents the
reinvestment of dividends and capital gains in the Fund.
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 principal value will fluctuate so that an investor's
shares, when redeemed may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. To obtain
performance information current to the most recent month end, please visit
mmapraxis.com.
The total return set forth reflects certain expenses that were voluntarily
reduced, reimbursed or paid by third party. In such instances, and without this
activity, total return would have been lower.
* Reflects maximum front-end sales charge of 5.25%.
Class A Share of this Fund were not in existence prior to 5/12/99. Class A Share
performance calculated for any period prior to 5/12/99 is based on the
performance of Class B Share since inception of 4/1/97.
(1) The MSCI EAFE Index is a widely recognized, unmanaged index composed of a
sample of companies representative of the developed markets throughout the
world, excluding the United States and Canada.
The above index is for illustrative purposes only and does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. The Fund's performance reflects the
deduction of these value-added services. An investor cannot invest directly in
an index, although they can invest in its underlying securities.
63
- ---------------------------------
Schedule of portfolio investments
- ---------------------------------
MMA Praxis International Fund
Schedule of portfolio investments
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 96.8%
ARGENTINA -- 0.7%
AGRICULTURE -- 0.1%
Cresud S.A. ADR (b) ............................................................ 11,503 $ 201,303
------------
BANKS -- 0.2%
Banco Macro Bansud S.A. (b) .................................................... 12,846 400,924
------------
REAL ESTATE -- 0.4%
IRSA Inversiones y Representaciones S.A. (a) ................................... 29,331 495,986
------------
1,098,213
------------
AUSTRALIA -- 1.1%
AIRPORT DEVELOPMENT -- 0.3%
Macquarie Airports ............................................................. 148,104 420,833
------------
FINANCIAL SERVICES -- 0.4%
National Australia Bank Ltd. ................................................... 19,842 632,714
------------
GOLD MINING -- 0.2%
Newcrest Mining Ltd. (b) ....................................................... 19,962 415,169
------------
INVESTMENT COMPANIES -- 0.2%
Macquarie Infrastructure Group (b) ............................................. 109,776 299,795
------------
1,768,511
------------
BELGIUM -- 1.2%
CHEMICALS-SPECIALTY -- 0.2%
Umicore ........................................................................ 2,341 398,639
------------
ELECTRONIC COMPONENTS -- 0.1%
Barco N.V ..................................................................... 2,031 184,990
------------
SPECIAL PURPOSE ENTITY -- 0.9%
Compagnie Nationale a Portefeuille (CNP)/National
Portefeuille Maatschappij (NPM) ........................................... 3,900 251,540
Groupe Bruxelles Lamber S.A .................................................... 9,356 1,124,498
------------
1,376,038
------------
1,959,667
------------
BERMUDA -- 0.3%
INSURANCE -- 0.3%
Catlin Group Ltd. .............................................................. 47,215 476,172
------------
BRAZIL -- 0.9%
BANKS -- 0.1%
Banco do Brasil S.A ............................................................ 8,000 239,633
------------
MINERALS -- 0.8%
Companhia Vale do Rio Doce ADR (b) ............................................. 44,187 1,314,121
------------
1,553,754
------------
CANADA -- 0.5%
GOLD MINING -- 0.2%
Meridian Gold, Inc. (a)(b) ..................................................... 14,876 413,404
------------
TELECOMMUNICATIONS -- 0.3%
BCE, Inc. ...................................................................... 15,800 425,416
------------
838,820
------------
64
MMA Praxis International Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 96.8%, continued
CHINA -- 0.2%
TRANSPORTATION SERVICES -- 0.2%
Sinotrans Ltd. ................................................................. 841,000 $ 303,821
------------
DENMARK -- 0.3%
BANKS -- 0.1%
Danske Bank A/S ................................................................ 4,800 213,296
------------
INSURANCE -- 0.2%
Trygvesta AS (b) .............................................................. 4,526 345,750
------------
559,046
------------
FINLAND -- 0.4%
FINANCIAL SERVICES -- 0.2%
Sampo Oyj ...................................................................... 10,500 281,090
------------
MACHINERY & ENGINEERING -- 0.2%
KCI Konecranes Oyj ............................................................. 15,400 453,330
------------
734,420
------------
FRANCE -- 12.7%
BANKS -- 1.6%
BNP Paribas S.A ................................................................ 25,089 2,737,253
------------
BUILDING & CONSTRUCTION -- 1.8%
Bouygues S.A ................................................................... 14,351 921,245
Compagnie de Saint Gobain ...................................................... 17,789 1,494,646
Imerys S.A ..................................................................... 6,748 600,376
------------
3,016,267
------------
COMPUTER-AIDED DESIGN -- 0.8%
Dassault Systemes S.A. (b) ..................................................... 17,354 920,904
Ingenico S.A. (a)(b) ........................................................... 16,047 412,005
------------
1,332,909
------------
CONSULTING SERVICES -- 0.2%
Altran Technologies S.A. (a) ................................................... 28,115 256,451
------------
ELECTRIC SERVICES -- 0.7%
Carbone Lorraine S.A ........................................................... 3,035 170,870
Schneider Electric S.A ......................................................... 8,739 970,167
------------
1,141,037
------------
FOOD DIVERSIFIED -- 1.1%
Sodexho Alliance S.A ........................................................... 28,957 1,816,812
------------
FOOD RETAIL -- 1.4%
Carrefour S.A .................................................................. 39,772 2,411,888
------------
INSURANCE -- 1.5%
Axa ............................................................................ 25,661 1,038,906
CNP Assurances (b) ............................................................. 13,160 1,469,653
------------
2,508,559
------------
MEDIA -- 1.5%
Vivendi Universal S.A .......................................................... 63,303 2,474,295
------------
OFFICE AUTOMATION & EQUIPMENT -- 1.0%
Neopost S.A .................................................................... 13,560 1,703,167
------------
65
MMA Praxis International Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 96.8%, continued
TELECOMMUNICATIONS -- 0.4%
France Telecom S.A ............................................................. 25,623 $ 708,603
------------
TIRE & RUBBER -- 0.7%
Michelin (b) ................................................................... 11,914 1,140,209
------------
21,247,450
------------
GERMANY -- 9.2%
APPAREL MANUFACTURERS -- 0.4%
Adidas Salomon AG .............................................................. 13,911 694,678
------------
BANKS -- 1.7%
Deutsche Bank AG ............................................................... 19,994 2,680,998
------------
BUILDING & CONSTRUCTION -- 0.6%
Bilfinger Berger AG ............................................................ 12,605 922,808
------------
CHEMICALS -- 0.4%
BASF AG ........................................................................ 7,578 741,145
------------
ELECTRIC-INTEGRATED -- 1.4%
RWE AG (b) ..................................................................... 21,409 2,358,650
------------
INSURANCE -- 0.7%
Allianz AG ..................................................................... 5,669 1,159,243
------------
MACHINERY / PRINT TRADE -- 0.2%
Heidelberger Druckmaschin ...................................................... 6,664 315,980
------------
PHARMACEUTICALS -- 1.2%
Fresenius AG ................................................................... 9,775 2,091,002
------------
REAL ESTATE -- 1.4%
IVG Immobilien AG .............................................................. 48,465 2,110,568
Patrizia Immobilien AG (a)(b) .................................................. 10,529 307,718
------------
2,418,286
------------
SOFTWARE -- 1.2%
SAP AG ......................................................................... 37,300 1,986,248
------------
15,369,038
------------
GREECE -- 0.2%
FINANCIAL SERVICES -- 0.2%
Hellenic Exchanges S.A ......................................................... 16,136 296,925
------------
HONG KONG -- 2.9%
DIVERSIFIED FINANCIAL SERVICES -- 0.6%
Guoco Group Ltd. ............................................................... 76,000 937,994
------------
REAL ESTATE INVESTMENT / MANAGEMENT -- 0.3%
Hysan Development Company Ltd. ................................................. 221,000 578,192
------------
REAL ESTATE OPERATORS/DEVELOPERS -- 0.3%
Chinese Estates Holdings Ltd. (b) .............................................. 370,000 448,093
------------
TELECOMMUNICATIONS -- 1.2%
China Unicom Ltd. .............................................................. 1,460,000 2,139,799
------------
TELEVISION -- 0.5%
Television Broadcasts Ltd. ..................................................... 125,000 763,342
------------
4,867,420
------------
66
MMA Praxis International Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 96.8%, continued
HUNGARY -- 0.1%
OIL COMP INTEGRATED -- 0.1%
MOL Hungarian Oil and Gas Nyrt. (b) ............................................ 1,913 $ 217,126
------------
INDIA -- 0.2%
BANKS -- 0.2%
ICICI Bank Ltd. ................................................................ 8,874 370,401
------------
IRELAND -- 2.0%
BANKS -- 0.6%
Anglo Irish Bank Corp. plc ..................................................... 50,914 1,051,817
------------
BUILDING PRODUCTS -- 0.4%
CRH plc ........................................................................ 15,115 630,099
------------
FINANCIAL SERVICES -- 1.0%
Irish Life & Permanent plc ..................................................... 61,359 1,703,360
------------
3,385,276
------------
ISRAEL -- 0.6%
PHARMACEUTICALS -- 0.6%
Teva Pharmaceutical Industries Ltd. ............................................ 31,067 965,562
------------
ITALY -- 1.6%
BANKS -- 0.2%
UniCredito Italiano S.p.A ...................................................... 44,115 386,672
------------
FINANCIAL SERVICES -- 1.1%
IFI-Istituto Finanziario Industriale S.p.A. (a) ................................ 24,364 736,500
IFIL-Investments S.p.A ......................................................... 128,060 1,048,079
------------
1,784,579
------------
RETAIL -- 0.3%
Geox S.p.A ..................................................................... 36,323 563,389
------------
2,734,640
------------
JAPAN -- 15.7%
AUTOMOTIVE -- 1.9%
Toyota Motor Corp. ............................................................. 48,000 3,210,621
------------
BANKS -- 2.3%
Bank of Yokohama Ltd. .......................................................... 157,000 1,229,561
Chiba Bank ..................................................................... 64,000 541,019
Mitsubishi Tokyo Financial Group, Inc. ......................................... 63 778,203
Sumitoma Mitsui Financial Group, Inc. .......................................... 82 840,637
Sumitomo Trust & Banking Co. ................................................... 41,000 429,965
------------
3,819,385
------------
BUILDING & CONSTRUCTION -- 0.3%
Okumura Corp. (b) .............................................................. 91,000 450,393
------------
CHEMICALS -- 0.8%
Hitachi Chemical Co. Ltd. ...................................................... 18,000 496,113
Sanyo Chemical Industries Ltd. (b) ............................................. 6,000 40,284
Sumitomo Chemical Co. Ltd. ..................................................... 53,000 411,067
Tokuyama Corp. (b) ............................................................. 27,000 411,109
------------
1,358,573
------------
67
MMA Praxis International Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 96.8%, continued
COSMETICS & TOILETRIES -- 0.8%
Kao Corp. ...................................................................... 30,000 $ 809,210
Shiseido Company Ltd. .......................................................... 28,000 607,033
------------
1,416,243
------------
ELECTRONIC & ELECTRICAL - GENERAL -- 2.2%
CANON, Inc. .................................................................... 34,000 1,914,205
Fanuc Ltd. ..................................................................... 4,900 482,568
Sharp Corp. .................................................................... 43,000 740,725
THK CO. Ltd. ................................................................... 27,000 696,525
------------
3,834,023
------------
ELECTRONIC COMPONENTS - SEMICONDUCTORS -- 0.1%
Tokyo Electron Ltd. ............................................................ 2,900 228,579
------------
ENTERTAINMENT SYSTEMS -- 2.2%
Nintendo Co. Ltd. .............................................................. 14,200 3,687,072
------------
FINANCIAL SERVICES -- 1.0%
Mizuho Financial Group ......................................................... 134 957,102
Orix Corp. ..................................................................... 2,340 677,392
------------
1,634,494
------------
FOOD PRODUCTS & SERVICES -- 0.2%
Ezaki Glico Co. Ltd. ........................................................... 28,000 289,400
------------
GAS DISTRIBUTION -- 0.5%
TOKYO GAS CO. LTD .............................................................. 156,000 829,780
------------
INSURANCE -- 0.8%
Mitsui Sumitomo Insurance Co. .................................................. 83,000 908,080
Sompo Japan Insurance, Inc. .................................................... 32,000 391,244
------------
1,299,324
------------
MOTION PICTURES & SERVICES -- 0.2%
Toho Co. Ltd. .................................................................. 14,500 261,964
------------
REAL ESTATE INVESTMENT / MANAGEMENT -- 0.7%
Mitsubishi Estate Co. Ltd. ..................................................... 22,000 569,388
Tokyo Tatemono Co. Ltd. (b) .................................................... 61,000 679,686
------------
1,249,074
------------
RETAIL -- 0.6%
Takashimaya Co. Ltd. ........................................................... 31,000 438,150
Yamada Denki Co. Ltd. (b) ...................................................... 6,500 551,657
------------
989,807
------------
SOFTWARE -- 0.4%
SQUARE ENIX CO. LTD. (b) ....................................................... 25,300 663,300
------------
TEXTILES -- 0.7%
TORAY INDUSTRIES, INC .......................................................... 151,000 1,131,818
------------
26,353,850
------------
MEXICO -- 0.9%
BROADCAST SERVICES -- 0.3%
Grupo Televisa S.A ............................................................. 18,735 506,032
------------
BUILDING PRODUCTS -- 0.5%
Cemex S.A. ADR ................................................................. 21,861 739,558
------------
68
MMA Praxis International Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 96.8%, continued
RETAIL -- 0.1%
Controladora Comercial Mexicna S.A. de C.V ..................................... 92,400 $ 239,478
------------
1,485,068
------------
NETHERLANDS -- 4.8%
BANKS -- 0.8%
ABN AMRO Holding N.V ........................................................... 41,632 1,338,181
------------
BUILDING & CONSTRUCTION -- 0.2%
Koninklijke Boskalis Westminster N.V ........................................... 3,987 394,726
------------
CHEMICALS -- 0.5%
Akzo Nobel N.V ................................................................. 14,671 894,920
------------
ELECTRONIC & ELECTRICAL - GENERAL -- 0.9%
Philips Electronics N.V ........................................................ 38,693 1,459,256
------------
FINANCIAL SERVICES -- 1.3%
ING Groep N.V .................................................................. 49,006 2,172,942
------------
FOOD DIVERSIFIED -- 0.7%
Unilever NV .................................................................... 42,582 1,163,550
------------
TELECOMMUNICATIONS -- 0.4%
Koninklijke (Royal) KPN N.V .................................................... 48,200 685,254
------------
8,108,829
------------
NORWAY -- 2.4%
OIL COMP-INTEGRATED -- 1.6%
Statoil ASA (b) ................................................................ 97,900 2,594,787
------------
TELECOM SERVICES -- 0.8%
Telenor ASA (b) ................................................................ 75,000 1,410,430
------------
4,005,217
------------
RUSSIA -- 0.6%
STEEL -- 0.2%
Evraz Group GDR ................................................................ 11,960 307,252
------------
TELECOMMUNICATIONS -- 0.4%
AFK Sistema .................................................................... 22,458 718,656
------------
1,025,908
------------
SINGAPORE -- 1.3%
DIVERSIFIED OPERATIONS -- 0.9%
Keppel Corp. Ltd. .............................................................. 133,000 1,526,343
------------
FINANCIAL SERVICES -- 0.4%
DBS Group Holdings Ltd. ........................................................ 47,000 692,619
------------
2,218,962
------------
SOUTH AFRICA -- 0.2%
METALS -- 0.1%
Impala Platinum Holdings Ltd. .................................................. 8,035 210,604
------------
MINING -- 0.1%
Gold Fields Ltd. (b) ........................................................... 10,964 207,000
------------
417,604
------------
SOUTH KOREA -- 0.5%
AUTOMOTIVE -- 0.2%
Hyundai Motor Co. Ltd. GDR (b) ................................................. 14,605 298,380
------------
69
MMA Praxis International Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 96.8%, continued
FOOD PRODUCTS -- 0.2%
Lotte Confectionary Co. Ltd. (a) ............................................... 275 $ 358,181
------------
TELECOMMUNICATIONS -- 0.1%
KT Corp. (a) ................................................................... 4,730 236,755
------------
893,316
------------
SPAIN -- 4.1%
APPAREL -- 0.5%
Industria de Diseno Textil, S.A ................................................ 15,649 843,028
------------
BANKS -- 0.8%
Banco Santander Central Hispano S.A ............................................ 69,540 1,297,994
------------
UTILITIES - TELECOMMUNICATIONS -- 2.8%
Telefonica S.A ................................................................. 223,212 4,749,756
------------
6,890,778
------------
SWEDEN -- 1.6%
METALS -- 0.4%
Assa Abloy AB .................................................................. 27,800 605,001
------------
RETAIL -- 0.3%
AB Lindex (b) .................................................................. 40,400 517,790
------------
WIRELESS COMMUNICATIONS -- 0.9%
Telefonaktiebolaget LM Ericsson ................................................ 366,000 1,478,091
------------
2,600,882
------------
SWITZERLAND -- 10.0%
CHEMICALS -- 0.9%
Lonza Group AG ................................................................. 16,746 1,447,151
------------
FINANCIAL SERVICES -- 1.1%
Credit Suisse Group ............................................................ 3,050 213,387
UBS AG ......................................................................... 26,232 1,594,157
------------
1,807,544
------------
FOOD PRODUCTS -- 4.0%
Lindt & Spruengli AG ........................................................... 498 1,229,367
Nestle S.A ..................................................................... 15,688 5,574,808
------------
6,804,175
------------
INSURANCE -- 0.6%
Swiss Re ....................................................................... 12,298 1,045,608
------------
INVESTMENT COMPANIES -- 0.6%
Pargesa Holding AG ............................................................. 8,613 981,112
------------
PHARMACEUTICALS -- 2.8%
Novartis AG .................................................................... 30,306 1,747,227
Roche Holding AG ............................................................... 16,636 2,983,148
------------
4,730,375
------------
16,815,965
------------
TAIWAN -- 1.6%
FINANCIAL SERVICES -- 0.4%
Chinatrust Financial Holding Co. Ltd. .......................................... 765,160 639,835
------------
SEMICONDUCTORS -- 0.6%
United Microelectronics Corp. ADR .............................................. 1,540,000 956,962
------------
70
MMA Praxis International Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 96.8%, continued
TELECOMMUNICATIONS -- 0.6%
Chunghwa Telecom Co. Ltd. ...................................................... 607,660 $ 1,130,009
------------
2,726,806
------------
TURKEY -- 0.3%
HOUSEWARES -- 0.3%
Turk Sise ve Cam Fabrikalari AS (a) ............................................ 128,719 454,613
------------
UNITED KINGDOM -- 17.7%
BANKS -- 5.2%
HBOS plc ....................................................................... 31,765 704,783
HSBC Holdings plc .............................................................. 39,136 713,514
HSBC Holdings plc (b) .......................................................... 59,600 1,092,650
Lloyds TSB Group plc ........................................................... 137,718 1,541,287
Royal Bank of Scotland Group plc ............................................... 108,778 4,247,592
Standard Chartered plc ......................................................... 6,867 200,638
------------
8,500,464
------------
CONTAINERS -- 0.4%
Rexam plc ...................................................................... 59,986 617,304
------------
ELECTRIC SERVICES -- 0.2%
Centrais Electricas Brasileiras S.A ............................................ 18,400,000 412,506
------------
INSURANCE -- 0.6%
Amlin plc ...................................................................... 67,123 427,529
Aviva plc ...................................................................... 12,635 203,511
Prudential plc ................................................................. 31,372 429,741
------------
1,060,781
------------
MEDICAL PRODUCTS -- 0.3%
Smith & Nephew plc ............................................................. 49,480 516,941
------------
MINERALS -- 2.3%
Anglo American plc ............................................................. 6,146 299,808
BHP Billiton plc ............................................................... 126,405 2,313,237
Rio Tinto plc .................................................................. 24,592 1,308,941
------------
3,921,986
------------
OIL COMP-INTEGRATED -- 5.1%
BG Group plc ................................................................... 59,090 801,907
BP plc ......................................................................... 445,824 4,954,570
Royal Dutch Shell plc - Class A ................................................ 72,773 2,543,813
------------
8,300,290
------------
PHARMACEUTICALS -- 0.8%
GlaxoSmithKline plc ............................................................ 52,478 1,380,162
------------
REAL ESTATE OPERATORS/DEVELOPERS -- 1.6%
British Land Co. plc ........................................................... 82,318 2,764,621
------------
TELECOMMUNICATIONS -- 1.2%
Vodafone Group plc ............................................................. 710,503 1,968,788
------------
29,443,843
------------
TOTAL COMMON STOCKS ............................................................ 162,187,903
------------
71
MMA Praxis International Fund
Schedule of portfolio investments, continued
December 31, 2006
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK -- 0.3%
GERMANY -- 0.3%
AUTOMOTIVE -- 0.3%
Porsche AG ..................................................................... 389 $ 496,532
------------
CORPORATE NOTES -- 1.0%
COMMUNITY DEVELOPMENT -- 1.0%
DOMESTIC -- 1.0%
MMA Community Development Investment, Inc., 2.98%, 1/1/07, (c)+ ................ 495,000 495,000
MMA Community Development Investment, Inc., 4.47%, 1/1/07, (c)+ ................ 1,180,000 1,180,000
------------
TOTAL CORPORATE NOTES .......................................................... 1,675,000
------------
SECURITIES HELD AS COLLATERAL FOR SECURITIES LENDING -- 10.4%
Northern Institutional Liquid Asset Portfolio .................................. 17,468,263 17,468,263
U.S. Treasury Bond, 6.00%, 2/15/26 ............................................. 19 22
U.S. Treasury Bond, 6.63%, 2/15/27 ............................................. 34,363 42,753
------------
TOTAL SECURITIES HELD AS COLLATERAL FOR SECURITIES LENDING ..................... 17,511,038
------------
TOTAL INVESTMENTS (Cost $140,794,049) -- 108.5% ................................ 181,870,473
Liabilities in excess of other assets -- (8.5%) ............................ (14,249,319)
------------
NET ASSETS -- 100.0% ........................................................... $167,621,154
============
- ----------
(a) Non-income producing securities.
(b) All or part of this security was on loan, as of December 31, 2006.
(c) Represents affiliated restricted security as to resale to investors and is
not registered under the Securities Act of 1933. These securities have
been deemed illiquid under guidelines established by the Board of
Trustees. Acquisition date and current cost: MMA Community Development
Investment, Inc., 2.98% - 12/01, $495,000 and MMA Community Development
Investment, Inc., 4.47% - 12/01, $1,180,000. At December 31, 2006 these
securities had an aggregate market value of $1,675,000, Representing 1.0%
of net assets.
+ Variable rate security. Rates presented are the rates in effect at
December 31, 2006. Date presented reflects next rate change date.
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
plc - Public Liability Company
See notes to financial statements.
72
-----------------------------------
Statement of assets and liabilities
-----------------------------------
MMA Praxis International Fund
Statement of assets and liabilities
December 31, 2006
ASSETS:
Investments, at value (cost $121,608,011)* ............................................. $ 162,684,435
Investments in affiliates, at value (cost $1,675,000) .................................. 1,675,000
Investments held as collateral for securities loaned, at value ......................... 17,511,038
-------------
Total Investments ................................................................... 181,870,473
-------------
Cash ................................................................................... 3,293,617
Foreign currency, at value (cost $353,664) ............................................. 355,056
Unrealized appreciation on foreign forward currency exchange contracts ................. 233
Interest and dividends receivable ...................................................... 127,894
Receivable for capital shares sold ..................................................... 37,891
Receivable for investments sold ........................................................ 106,891
Tax reclaim receivable ................................................................. 189,525
Prepaid expenses ....................................................................... 21,385
-------------
Total Assets ........................................................................ 186,002,965
-------------
LIABILITIES:
Distributions payable to shareholders .................................................. 156,756
Payable for capital shares redeemed .................................................... 404,973
Payable for investments purchased ...................................................... 53,032
Payable for securities loaned .......................................................... 17,511,038
Unrealized depreciation on foreign currency exchange contracts ......................... 32
Accrued expenses and other payables:
Investment advisory fees ............................................................ 126,839
Affiliates .......................................................................... 4,099
Distribution fees ................................................................... 44,185
Trustees fees ....................................................................... 29
Other ............................................................................... 80,828
-------------
Total Liabilities ................................................................... 18,381,811
-------------
NET ASSETS:
Capital ................................................................................ 135,737,469
Distribution in excess of net investment income ........................................ (1,302,855)
Accumulated net realized loss on investments and foreign currency transactions ......... (7,889,884)
Net unrealized appreciation on investments and foreign currency translations ........... 41,076,424
-------------
Net Assets .......................................................................... $ 167,621,154
=============
Net Assets
Class A ............................................................................. $ 44,836,989
Class B ............................................................................. 24,186,245
Class I ............................................................................. 98,597,920
-------------
Total ............................................................................. $ 167,621,154
=============
Shares Outstanding
(unlimited number of shares authorized with $.01 par value)
Class A ............................................................................. 3,149,873
Class B ............................................................................. 1,728,557
Class I ............................................................................. 6,943,079
-------------
Total ............................................................................. 11,821,509
=============
Net asset value
Class A - Redemption Price Per Share (A) ............................................ $ 14.23
=============
Class A - Maximum Sales Charge ...................................................... 5.25%
=============
Class A - Maximum Offering Price Per Share
[100%/(100%-Maximum Sales Charge) of
net asset value adjusted to the nearest cent] ..................................... $ 15.02
=============
Class B - offering price per share**(A) ............................................. $ 13.99
=============
Class I- offering price per share**(A) .............................................. $ 14.20
=============
* Includes securities on loan of $16,695,571
** Redemption price per share varies by length of time shares are held.
(A) Net proceeds upon redemption may include a redemption fee.
See notes to financial statements.
73
- -----------------------
Statement of operations
- -----------------------
MMA Praxis International Fund
Statement of operations
For the year ended December 31, 2006
INVESTMENT INCOME:
Dividends .............................................................................. $ 4,660,666
Foreign tax withholding ................................................................ (713,479)
Interest ............................................................................... 2,179
Income from securities lending ......................................................... 35,716
Interest from affiliates ............................................................... 57,036
-------------
Total Investment Income ............................................................. 4,042,118
-------------
EXPENSES:
Investment advisory fees ............................................................... 1,417,576
Administration fees .................................................................... 220,537
Distribution fees-Class A .............................................................. 176,455
Distribution fees-Class B .............................................................. 183,437
Shareholder servicing fees-Class A ..................................................... 176,258
Shareholder servicing fees-Class B ..................................................... 61,146
Reimbursement of Fund expenses paid by Adviser ......................................... 245,583
Custodian fees ......................................................................... 138,931
Legal fees and expenses ................................................................ 96,248
Trustees' fee and expenses ............................................................. 32,400
Expenses ............................................................................... 229,570
-------------
Total expenses before reductions/reimbursements ................................... 2,978,141
Expenses reimbursed by Investment Adviser ........................................... (875)
Expenses reduced by Distributor ..................................................... (200,716)
Expenses reduced by Custodian ....................................................... (141,601)
-------------
Net Expenses ...................................................................... 2,634,949
-------------
Net Investment Income .................................................................. 1,407,169
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments and foreign currency transactions ..................... 14,968,084
Change in unrealized appreciation/depreciation of investments
and foreign currency translations during the year ................................... 12,974,631
-------------
Net realized and unrealized gain on investments and foreign currency
transactions ........................................................................ 27,942,715
-------------
Net increase in net assets resulting from operations ................................... $ 29,349,884
=============
See notes to financial statements.
74
-----------------------------------
Statements of changes in net assets
-----------------------------------
MMA Praxis International Fund
Statements of changes in net assets
Year Ended Year Ended
December 31, December 31,
2006 2005
- -------------------------------------------------------------------------------------------------------------------------
From Investment Activities:
Net investment income .......................................................... $ 1,407,169 $ 874,790
Net realized gain on investments and foreign currency transactions ............. 14,968,084 13,174,668
Change in unrealized appreciation/depreciation of investments
and futures contracts during the year ..................................... 12,974,631 2,258,943
------------ ------------
Net increase in net assets resulting from operations ........................... 29,349,884 16,308,401
------------ ------------
Distributions to Class A Shareholders:
From net investment income .................................................. (390,536) (1,424,269)
Distributions to Class B Shareholders:
From net investment income .................................................. (120,020) (138,729)
Distributions to Class I Shareholders:
From net investment income .................................................. (1,439,082) --
------------ ------------
Change in net assets from distributions to shareholders ........................ (1,949,638) (1,562,998)
------------ ------------
Change in net assets from capital transactions ................................. (6,332,799) (6,572,436)
------------ ------------
Change in net assets ........................................................... 21,067,447 8,172,967
Net Assets:
Beginning of year ........................................................... 146,553,707 138,380,740
------------ ------------
End of year ................................................................. $167,621,154 $146,553,707
============ ============
Distributions in excess of net investment income ............................... $ (1,302,855) $ (740,494)
============ ============
See notes to financial statements.
75
- --------------------
Financial highlights
- --------------------
MMA Praxis International Fund
Financial highlights
For a share outstanding throughout the year indicated.
Class A Shares
----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year ............ $ 11.94 $ 10.78 $ 9.43 $ 7.45 $ 9.28
----------- ----------- ----------- ----------- -----------
Investment Activities:
Net investment income ...................... 0.16 0.08 0.01 0.04 0.01
Net realized and unrealized gains
(losses) from investments ............... 2.26 1.22 1.37 2.00 (1.79)
----------- ----------- ----------- ----------- -----------
Total from Investment Activities ........... 2.42 1.30 1.38 2.04 (1.78)
----------- ----------- ----------- ----------- -----------
Distributions:
Net investment income ...................... (0.13) (0.14) (0.03) (0.06) (0.03)
Tax return of capital ...................... -- -- -- -- (0.02)
----------- ----------- ----------- ----------- -----------
Total Distributions ........................ (0.13) (0.14) (0.03) (0.06) (0.05)
----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees (a) ...... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .................. $ 14.23 $ 11.94 $ 10.78 $ 9.43 $ 7.45
=========== =========== =========== =========== ===========
Total Return (excludes sales charge) .......... 20.31% 12.16% 14.68% 27.53% (19.29%)
Ratios/Supplemental Data:
Net assets at end of year (000) ............ $ 44,837 $ 121,173 $ 115,687 $ 97,396 $ 68,989
Ratio of expenses to average net assets ... 1.76% 1.58% 1.63% 1.50% 1.45%
Ratio of net investment income to
average net assets ....................... 0.85% 0.74% 0.16% 0.49% 0.11%
Ratio of expenses to average net assets* ... 2.09% 1.90% 2.01% 2.14% 2.24%
Portfolio Turnover (b) ....................... 82.77% 71.93% 81.85% 145.51% 76.38%
----------
* During the year, certain expenses were reduced, reimbursed or paid by a
third party. If such expense reductions had not occurred, the ratios would
have been as indicated.
(a) Amount rounds to less than $0.005 per share.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
76
MMA Praxis International Fund
Financial highlights, continued
For a share outstanding throughout the year indicated.
Class B Shares
----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year ............ $ 11.77 $ 10.62 $ 9.32 $ 7.39 $ 9.23
----------- ----------- ----------- ----------- -----------
Investment Activities:
Net investment loss ...................... (0.06) (0.01) (0.05) (0.01) (0.04)
Net realized and unrealized gains
(losses) from investments .............. 2.34 1.22 1.35 1.98 (1.78)
----------- ----------- ----------- ----------- -----------
Total from Investment Activities ......... 2.28 1.21 1.30 1.97 (1.82)
----------- ----------- ----------- ----------- -----------
Distributions:
Net investment income ...................... (0.06) (0.06) --(a) (0.04) --
Tax return of capital ...................... -- -- -- -- (0.02)
----------- ----------- ----------- ----------- -----------
Total Distributions ........................ (0.06) (0.06) -- (0.04) (0.02)
----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees (a) ...... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .................. $ 13.99 $ 11.77 $ 10.62 $ 9.32 $ 7.39
=========== =========== =========== =========== ===========
Total Return (excludes redemption charge) .... 19.45% 11.50% 13.95% 26.73% (19.73%)
Ratios/Supplemental Data:
Net assets at end of year (000) ............ $ 24,186 $ 25,381 $ 24,094 $ 21,468 $ 17,608
Ratio of expenses to average net assets .... 2.41% 2.23% 2.28% 2.15% 2.00%
Ratio of net investment income to
average net assets ....................... 0.17% 0.10% (0.49%) (0.15%) (0.44%)
Ratio of expenses to average net assets* ... 2.57% 2.39% 2.51% 2.63% 2.74%
Portfolio Turnover (b) ........................ 82.77% 71.93% 81.85% 145.51% 76.38%
- -----------------------------------------------------------------------------------------------------------------------------
* During the year, certain expenses were reduced, reimbursed or paid by a
third party. If such expense reductions had not occurred, the ratios would
have been as indicated.
(a) Amount rounds to less than $0.005 per share.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
77
MMA Praxis International Fund
Financial highlights, continued
For a share outstanding throughout the period indicated.
Class I Shares
---------------
Period Ended
December 31,
2006 (a)
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ....................... $ 13.52
------------
Investment Activities:
Net investment income ................................... 0.10
Net realized and unrealized gains from investments ...... 0.78
------------
Total from Investment Activities ........................ 0.88
------------
Distributions:
Net investment income ................................... (0.20)
------------
Net Asset Value, End of Period ............................. $ 14.20
============
Total Return (excludes redemption charge) .................. 6.61%(b)
Ratios/Supplemental Data:
Net assets at end of period (000) ....................... $ 98,598
Ratio of expenses to average net assets ................. 1.28%(c)
Ratio of net investment income to average net assets .... 1.23%(c)
Ratio of expenses to average net assets* ................ 1.39%(c)
Portfolio Turnover (d) ..................................... 82.77%
- --------------------------------------------------------------------------------
* During the year, certain expenses were reduced, reimbursed or paid by a
third party. If such activity had not occurred, the ratios would have been
as indicated.
(a) For the period from May 1, 2006 (commencement of operations) through
December 31, 2006.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
78
-----------------------------
Notes to financial statements
-----------------------------
MMA Praxis Mutual Funds
Notes to financial statements
December 31, 2006
1. Organization:
The MMA Praxis Mutual Funds (the "Trust") is an open-end management investment
company established as a Delaware business trust under a Declaration of Trust
dated September 27, 1993, as amended and restated December 1, 1993, and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Trust currently consists of the MMA Praxis Intermediate Income Fund,
the MMA Praxis Core Stock Fund, the MMA Praxis Value Index Fund, and the MMA
Praxis International Fund (individually a "Fund", collectively "the Funds").
These are also known as the Intermediate Income Fund, Core Stock Fund, Value
Index Fund, and International Fund.
The Funds currently offer three classes of shares; Class A, Class B and Class I.
Each class of shares in a Fund has identical rights and privileges except with
respect to fees paid under the distribution and shareholder servicing
agreements, voting rights on matters affecting a single class of shares and the
exchange privileges of each class of shares.
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Trust. In addition, in the normal course of business, the Trust
enters into contracts with its vendors and others that provide general
indemnification. Each Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against a Fund.
However, based on experience, the Trust expects the risk of loss to be remote.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with U.S. generally accepted accounting principles ("GAAP"). The
preparation of financial statements 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 for the reporting
period. Actual results could differ from those estimates.
Securities Valuation:
Securities are valued at market values determined on the basis of the latest
available bid prices in the principal market (closing sales prices if the
principal market is an exchange) in which such securities are normally traded.
Investments in investment companies are valued at their respective net asset
values as reported by such companies. The differences between the cost and
market values of investments are reflected as either unrealized appreciation or
depreciation.
The Funds use various independent pricing services to value most of their
investments. A pricing service would normally consider such factors as yield,
risk, quality, maturity, type of issue, trading characteristics, special
circumstances and other factors it deems relevant in determining valuations of
normal institutional trading units of debt securities and would not rely
exclusively on quoted prices. When fair valuing foreign securities held by the
International Fund, certain pricing services might use computerized pricing
models to systematically calculate adjustments to foreign security closing
prices based on the latest market movements. Such pricing models utilize market
data that has been obtained between the local market close and the NYSE close to
compute adjustments to foreign security close prices. The methods used by the
pricing service and the valuations so established will be reviewed by the
Adviser under general supervision of the Funds' Board of Trustees. Securities
for which market quotations are not readily available, or are unreliable, are
valued at their fair value as determined in good faith in accordance with
consistently applied procedures established by and under the general supervision
of the Board of Trustees. Money Market instruments and other debt securities
with a remaining maturity of less than 60 days are valued at amortized cost,
which approximates market.
79
MMA Praxis Mutual Funds
Notes to financial statements, continued
December 31, 2006
Investments in restricted securities are valued by the Board of Trustees or
valued pursuant to valuation procedures approved by the Board of Trustees (the
"Valuation Procedures"). The Valuation Procedures contemplate the Board's
delegation of the implementation of the Valuation Procedures to the Adviser. In
valuing restricted securities under the Valuation Procedures, the Adviser will
consider (but is not limited to) certain specific and general factors enumerated
in the Valuation Procedures. The Valuation Procedures require that the Adviser
report to the Board at each of its regular quarterly meetings regarding
valuation of restricted securities and actions taken in connection with the
Valuation Procedures.
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
The changes to current generally accepted accounting principles from the
application of this Statement relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. As of December 31, 2006, the Funds do not believe the
adoption of SFAS No. 157 will impact the amounts reported in the financial
statements, however, additional disclosures may be required about the inputs
used to develop the measurements and the effect of certain of the measurements
reported on the statement of changes in net assets for a fiscal period.
Securities Transactions and Related Income:
Security transactions are accounted for on the trade date. Gains or losses
realized on sales of securities are determined by comparing the identified cost
of the security lot sold with the net sales proceeds. Interest income is
recognized on the accrual basis and includes, where applicable, the pro rata
amortization of premium or accretion of discount. Dividend income is recorded on
the ex-dividend date. Income and realized and unrealized gains and losses on
investments are allocated to each class of shares based upon relative net assets
or other appropriate basis.
Risks associated with Foreign Securities and Currencies:
Investments in securities of foreign issuers carry certain risks not ordinarily
associated with investments in securities of domestic issuers. Such risks
include adverse future political and economic developments and the possible
imposition of exchange controls or other foreign governmental laws and
restrictions. In addition, with respect to certain countries, there is the
possibility of expropriation of assets, confiscatory taxation, political or
social instability or diplomatic developments which could adversely affect
investments in those countries.
Certain countries may also impose substantial restrictions on investments on
their capital markets by foreign entities, including restriction on investment
in issuers or industries deemed sensitive to the relevant nation's interests.
These factors may limit the investment opportunities available or result in lack
of liquidity and high price volatility with respect to securities of issuers
from developing countries.
Foreign Currency Translation:
The market value of investment securities, other assets and liabilities of the
Intermediate Income Fund, the Value Index Fund and the International Fund
denominated in foreign currencies are translated into U.S. dollars at the
current exchange rate at the close of each business day. Purchases and sales of
securities, income receipts and expense payments are translated into U.S.
dollars based at the exchange rate on the date of the transaction.
80
MMA Praxis Mutual Funds
Notes to financial statements, continued
December 31, 2006
The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized/unrealized gain (loss) from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Funds' books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from the changes in the value of assets and
liabilities including investments in securities at fiscal year end, resulting
from changes in the exchange rate.
Forward Foreign Currency Contracts:
The International Fund may enter into forward foreign currency exchange
contracts for the purchase or sale of specific foreign currencies at a fixed
price on a future date. Risks may arise upon entering these contracts for the
potential inability of counterparties to meet the terms of their contracts and
from unanticipated movements in the value of a foreign currency relative to the
U.S. dollar. The International Fund will enter into forward contracts as a hedge
against specific transactions or portfolio positions to protect against adverse
currency movements. The forward foreign currency exchange contracts are adjusted
by the daily exchange rate of the underlying currency and any gains or losses
are recorded for financial statement purposes as unrealized until the contract
settlement date, at which time the International Fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed. As of December 31, 2006, the
International Fund had the following forward foreign currency exchange contracts
outstanding as follows:
Settlement To Receive / Initial Market Net Unrealized Net Unrealized
Date To Deliver Value Value Appreciation Depreciation
- -------------------------------------------------------------------------------------------------------
Contracts to Buy
1/2/07 18,149 EUR $ 23,826 $ 23,957 $ 131 $ --
1/3/07 15,547 EUR $ 20,474 $ 20,523 $ 50 $ --
1/4/07 6,478 EUR $ 8,550 $ 8,551 $ 1 $ --
Contracts to Sell
1/4/07 1,595,202 JPY $ 13,441 $ 13,405 $ 36 $ --
1/5/07 1,604,577 JPY $ 13,500 $ 13,485 $ 15 $ --
1/9/07 802,239 JPY $ 6,743 $ 6,746 $ -- $ 3
1/3/07 5,844 CHF $ 4,790 $ 4,796 $ -- $ 6
1/5/07 83,426 CHF $ 68,449 $ 68,473 $ -- $ 23
-------------- --------------
$ 233 $ 32
============== ==============
- -------------------------------------------------------------------------------------------------------
EUR - Euro
JPY - Japanese Yen
CHF - Swiss Franc
81
MMA Praxis Mutual Funds
Notes to financial statements, continued
December 31, 2006
Futures Contracts:
The Funds may invest in futures contracts (stock or bond index futures contracts
or interest rate futures contracts) to hedge or manage risks associated with a
Funds' securities investments. To enter into a futures contract, an amount of
cash and cash equivalents, equal to a certain percentage of the market value of
the futures contracts, is deposited in a segregated account with the Fund's
Custodian and/or in a margin account with a broker to collateralize the position
and thereby ensure that the use of such futures is unleveraged. Positions in
futures contracts may be closed out only on an exchange that provides a
secondary market for such futures. However, there can be no assurance that a
liquid secondary market will exist for any particular futures contract at any
specific time. Thus, it may not be possible to close a futures position. In the
event of adverse price movements, a Fund would continue to be required to make
daily cash payments to maintain its required margin. In such situations, if a
Fund had insufficient cash, it might have to sell portfolio securities to meet
daily margin requirements at a time when it would be disadvantageous to do so.
In addition, a Fund might be required to make delivery of the instruments to
underlying futures contracts it holds. The inability to close the futures
position also could have an adverse impact on a Fund's ability to hedge or
manage risks effectively.
Successful use of futures by a Fund is also subject to MMA Capital Management's
(the "Adviser") ability to predict movements correctly in the direction of the
market. There is an imperfect correlation between movements in the price of the
future and movements in the price of the securities that are the subject of the
hedge. In addition, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Due to the
possibility of price distortion in the futures market and because of the
imperfect correlation between the movements in the cash market and movements in
the price of futures, a correct forecast of general market trends or interest
rate movements by the Adviser may still not result in a successful hedging
transaction over a short time frame.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond the limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
to substantial losses.
The trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.
Swap Agreements:
The Funds may enter into event-linked swaps, including credit default swaps. The
credit default swap market allows a Fund to manage credit risk through buying
and selling credit protection on specific names or a basket of names. The
transactions are documented through swap documents. A "buyer" of credit
protection agrees to pay a premium to a counterparty to assume the credit risk
of an issuer upon the occurrence of certain events. The "seller" of credit
protection receives a premium from a counterparty and agrees to assume the
credit risk of an issuer upon the occurrence of certain events.
82
MMA Praxis Mutual Funds
Notes to financial statements, continued
December 31, 2006
Securities Lending:
In order to generate additional income, each Fund may, from time to time,
subject to its investment objectives and policies, lend its portfolio securities
to broker-dealers, banks, or institutional borrowers of securities pursuant to
agreements requiring that the loans be secured by collateral equal in value to
100% of the value of the securities loaned. Collateral for loans of portfolio
securities must consist of: (1) cash in U.S. dollars, to be invested in the
Northern Institutional Liquid Asset Portfolio, (2) obligations issued or
guaranteed by the U.S. Treasury or by any agency or instrumentality of the U.S.
Government, or (3) irrevocable, non-transferable, stand-by letters of credit
issued by banks domiciled or doing business within the U.S. and meeting certain
credit requirements at the time of issuance. This collateral will be valued
daily by the Adviser. Should the market value of the loaned securities increase,
the borrower is required to furnish additional collateral to that Fund.
During the time portfolio securities are on loan, the borrower pays the Fund any
dividends or interest received on such securities. Loans are subject to
termination by the Fund or the borrower at any time. While the Fund does not
have a right to vote on securities on loan, each Fund intends to terminate the
loan and regain the right to vote if that is considered important with respect
to the investment. While the lending of securities may subject a Fund to certain
risks, such as delays or an inability to regain the securities in the event the
borrower were to default or enter into bankruptcy, each Fund will have the
contract right to retain the collateral described above.
The Northern Trust Company serves as the Securities Lending Agent. For providing
this service, the Securities Lending Agent retains 40% of the securities lending
income. The securities lending income is shown net of fees on the Statement of
operations. For the year ended December 31, 2006, the Funds had securities on
loan as follows:
Fee paid to Market Market Value
Northern Trust Value of of Loaned
Company Collateral Securities
- --------------------------------------------------------------------------------
Intermediate Income Fund $ 13,261 $ 10,896,934 $ 10,508,887
Core Stock Fund 14,842 28,935,611 28,261,391
Value Index Fund 1,885 3,549,467 3,453,823
International Fund 23,803 17,511,038 16,695,571
Community Development Investments:
Consistent with the investment criteria for socially responsible investing, the
Board of Trustees of the Funds has authorized the Funds to make certain types of
community development investments. In connection with the community development
investments, the Funds have received from the Securities and Exchange Commission
("SEC") an exemptive order that would permit each of the Funds to invest a
limited portion of their respective net assets in securities issued by an
affiliate of MMA Capital Management (the "Adviser"), MMA Community Development
Investments, Inc. ("MMA CDI"). MMA CDI is a not-for-profit corporation that was
organized specifically to promote community development investing and it seeks
to fund its efforts primarily through the sale to investors of interests in
certain investment pools that it has established (the "CDI-Notes"). Assets
raised through offerings of CDI-Notes are then invested directly in non-profit
and not-for-profit community development organizations. Each Fund, in accordance
with guidelines established by the Board of Trustees and in compliance with the
SEC's exemptive order, would be permitted to invest up to 3% of its net assets
in CDI-Notes. CDI-Notes have certain specific risk factors associated with them.
These types of investments offer a rate of return below the prevailing market
rate at acquisition and are considered illiquid, unrated and below-investment
grade. They also involve a greater risk of default or price decline than
investment-grade securities. However, these investments have been determined by
the Board of Trustees as being a beneficial way to carry out each Fund's goals
for stewardship investing at the community level. In addition, these investments
are valued in accordance with procedures approved by the Board of Trustees.
83
MMA Praxis Mutual Funds
Notes to financial statements, continued
December 31, 2006
Dividends and Distributions:
Dividends from net investment income are declared and paid monthly for the
Intermediate Income Fund. Dividends from the net investment income are declared
and paid semi-annually for the Core Stock Fund, the Value Index Fund, and the
International Fund. Distributable net realized capital gains, if any, are
declared and distributed at least annually.
The amounts of dividends from net investment income and distributions from net
realized gains are determined in accordance with federal income tax regulations,
which may differ from GAAP. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the composition of net assets
based on their federal tax-basis treatment; temporary differences do not require
reclassification.
Federal Income Taxes:
It is each Fund's policy to continue to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies, as defined in applicable sections of Subchapter M of the Internal
Revenue Code, and to distribute timely all of its net investment company taxable
income and net capital gains to shareholders. Therefore, no federal income tax
provision is required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends and capital gains earned on foreign
investments at various rates. Where available, the International Fund will file
for claims on foreign taxes withheld.
Other:
Expenses that are directly related to a Fund are charged directly to that Fund.
Other operating expenses of the Trust are prorated to each Fund on the basis of
relative net assets to the Trust or another reasonable basis. Expenses specific
to a class are charged directly to that class.
Each Fund maintains a cash balance with its Custodian and receives a reduction
of its custody fees and expenses for the amount of interest earned on such
uninvested cash balance. For financial reporting purposes for the year ended
December 31, 2006, custodian fees and expenses reduced by the Custodian were
$26,465, $9,494, $5,475 and $141,601 for the Intermediate Income Fund, the Core
Stock Fund, the Value Index Fund and the International Fund, respectively. There
was no effect on net investment income. The Funds could have invested such cash
amounts in an income-producing asset if they had not agreed to a reduction of
fees or expenses under the expense offset arrangement with their Custodian.
The Funds will charge a redemption fee of 2.00% of the total redemption amount
if you sell or exchange your shares after holding them for less than 30 days
subject to certain exceptions and limitations described in the prospectus.
84
MMA Praxis Mutual Funds
Notes to financial statements, continued
December 31, 2006
3. Purchases and Sales of Securities:
Purchases and sales of securities (excluding short-term debt securities having
maturities one year or less and U.S. Government Securities) for the year ended
December 31, 2006 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
Intermediate Income Fund $ 36,562,457 $ 41,401,240
Core Stock Fund 226,441,979 229,012,732
Value Index Fund 32,695,441 31,122,650
International Fund 125,745,931 136,361,836
4. Related Party Transactions:
Menno Insurance Service, Inc. d/b/a MMA Capital Management, (the "Adviser") (a
separate corporate entity controlled by Mennonite Mutual Aid, Inc.), provides
investment advisory services to the Funds. Under the terms of the investment
advisory agreement, the Adviser is entitled to receive fees based on a
percentage of the average daily net assets of each of the Funds as follows:
0.50% for the Intermediate Income Fund; 0.74% for the Core Stock Fund; 0.30% for
the Value Index Fund and 0.90% for the International Fund. Evergreen Investment
Management Company, LLC, serves as the sub-adviser to the International Fund.
The Adviser entered into expense limitation agreements pursuant to which the
Adviser agreed to waive fees and/or reimburse expenses to the extent necessary
in order to limit the total annual fund operating expenses (excluding brokerage
costs, interest, taxes, dividends, fees paid to vendors providing fair value
pricing and fund compliance services, legal fees, costs relating to such
services and extraordinary expenses).
Effective May 1, 2005, each Fund has agreed to repay the Adviser for the amounts
waived and/or reimbursed by the Adviser pursuant to the expense limitation
agreement provided that such repayment does not cause the total annual fund
operating expenses of Class A and Class B of each Fund to exceed 0.86% and
1.31%, respectively, for the Intermediate Income Fund, 1.26% and 1.91%,
respectively, for the Core Stock Fund, 0.96% and 1.51%, respectively, for the
Value Index Fund, and 1.50% and 2.15%, respectively, for the International Fund.
Effective May 1, 2006, the Funds have agreed to repay the Adviser for the
amounts waived and/or reimbursed by the Adviser pursuant to the expense
limitation agreement provided that such repayment does not cause the total
annual fund operating expenses of Class A, Class B, and Class I of each Fund to
exceed 0.86%, 1.31% and 0.61%, respectively, for the Intermediate Income Fund,
1.43%, 2.08%, and 1.18%, respectively, for the Core Stock Fund, 0.96%, 1.51%,
and 0.71%, respectively, for the Value Index Fund, and 1.67%, 2.32% and 1.42%,
respectively, for the International Fund. The Adviser has agreed to maintain
these expense limitations with regard to the Funds through December 31, 2006.
For the year ended December 31, 2006, the Adviser waived investment advisory
fees in the Intermediate Income Fund, Value Index Fund, and International Fund
in the amount of $299,777, $9,996, and $875, respectively. For the year ended
December 31, 2006, the Core Stock Fund, Value Index Fund and International Fund
repaid the Adviser in the amounts of $458,697, $4,734, and $245,583 for fees
waived during the year ended December 31, 2006, respectively.
As of December 31, 2006, the Funds had the following amounts (and year of
expiration) subject to repayment to the Adviser:
Fund Fees Waived Repayment Expires Balance
- ------------------------ --------------- ----------------- ---------------
Intermediate Income Fund 2004 2007 $ 365,525
2005 2008 134,653
2006 2009 299,777
Core Stock Fund 2004 2007 446,557
Value Index Fund 2006 2009 9,996
International Fund 2004 2007 227,962
2006 2009 875
85
MMA Praxis Mutual Funds
Notes to financial statements, continued
December 31, 2006
During the year ended December 31, 2006, amounts subject to repayment to the
Adviser expired as follows:
Fund Balance
- ------------------------ ------------
Intermediate Income Fund $ 384,992
Core Stock Fund 90,785
Value Index Fund 60,609
International Fund 182,479
Integrated Investment Services, Inc. ("Integrated", formerly Integrated Fund
Services, Inc.) provides administrative, accounting, transfer agency,
shareholder servicing and dividend disbursing services on behalf of the Trust.
For these services, Integrated receives an annual fee, paid monthly, from each
Fund.
IFS Fund Distributors, Inc. ("Underwriter") is the Funds' principal underwriter
and, as such, acts as exclusive agent for distribution of the Funds' shares.
Under the terms of the Underwriting Agreement between the Trust and the
Underwriter, the Underwriter earned $9,220, $30,463, $22,470 and $16,394 from
underwriting and broker commissions on the sale of shares of the Intermediate
Income Fund, Core Stock Fund, Value Index Fund, and International Fund,
respectively, for the year ended December 31, 2006. In addition, the Underwriter
collected $11,265, $26,726, $2,363, and $3,445 of contingent deferred sales
loads of the Intermediate Income Fund, Core Stock Fund, Value Index, and
International Fund, respectively.
The Trust has adopted a Plan of Distribution (12b-1 plan) for each Fund under
which each Fund may directly incur or reimburse the Adviser or the Underwriter
for expenses related to the distribution and promotion of shares. Class A shares
of each Fund may each pay an annual fee of up to 0.50% of average daily net
assets of such Fund's Class A shares. The Adviser or Underwriter may use up to
0.25% of the 12b-1 fee for shareholder servicing and up to 0.25% for
distribution. Class B shares of each Fund may each pay an annual fee of up to
1.00% of the average daily net assets of such Fund's Class B shares. The Adviser
or Underwriter may incur 0.25% of the 12b-1 fee for shareholder servicing and up
to 0.75% for distribution. Class I shares do not have a 12b-1 plan.
Under the terms of the Compliance Services Agreement between the Trust and
Integrated, Integrated provides certain compliance services to the Trust,
including developing and assisting in implementing a compliance program for
Integrated on behalf of the Trust and providing administrative support services
to the Funds' Compliance Program and Chief Compliance Officer.
Certain officers of the Trust are affiliated with the Adviser and/or Integrated.
Such officers are not paid any fees directly by the Funds for serving as
officers of the Trust.
86
MMA Praxis Mutual Funds
Notes to financial statements, continued
December 31, 2006
5. Capital Share Transactions:
Transactions in shares of the Funds are summarized below:
Intermediate Income Fund Core Stock Fund
-------------------------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
-------------------------------------------------------------------------
Capital Transactions:
Class A Shares:
Proceeds from shares issued $ 23,368,669 $ 32,408,348 $ 53,164,019 $ 29,090,957
Dividends reinvested 3,662,931 7,325,276 4,346,989 763,982
Cost of shares redeemed (219,524,652) (25,225,814) (180,382,298) (30,953,564)
Redemption fees 324 -- 492 --
--------------- --------------- --------------- ---------------
Class A Share Transactions $ (192,492,728) $ 14,507,810 $ (122,870,798) $ (1,098,625)
=============== =============== =============== ===============
Class B Shares:
Proceeds from shares issued $ 1,528,574 $ 3,220,936 $ 4,217,838 $ 5,821,732
Dividends reinvested 980,447 1,207,386 3,583,895 9
Cost of shares redeemed (11,364,388) (8,304,556) (42,019,845) (26,692,270)
Redemption fees 21 -- 346 --
--------------- --------------- --------------- ---------------
Class B Share Transactions $ (8,855,346) $ (3,876,234) $ (34,217,766) $ (20,870,529)
=============== =============== =============== ===============
Class I Shares:
Proceeds from shares issued $ 217,127,370 -- $ 169,448,285 --
Dividends reinvested 4,708,496 -- 8,008,878 --
Cost of shares redeemed (19,466,940) -- (11,392,602) --
--------------- --------------- --------------- ---------------
Class I Share Transactions $ 202,368,926 -- $ 166,064,561 --
=============== =============== =============== ===============
Net increase (decrease)
from capital transactions $ 1,020,852 $ 10,631,576 $ 8,975,997 $ (21,969,154)
=============== =============== =============== ===============
Share Transactions:
Class A Shares:
Issued 2,424,912 3,286,362 3,635,980 2,092,157
Reinvested 381,386 744,269 284,489 54,554
Redeemed (23,152,922) (2,556,857) (12,209,841) (2,221,367)
--------------- --------------- --------------- ---------------
Change in Class A Shares (20,346,624) 1,473,774 (8,289,372) (74,656)
=============== =============== =============== ===============
Class B Shares:
Issued 158,841 326,273 296,580 436,151
Reinvested 102,142 122,694 244,969 --
Redeemed (1,178,373) (843,610) (2,982,376) (1,991,235)
--------------- --------------- --------------- ---------------
Change in Class B Shares (917,390) (394,643) (2,440,827) (1,555,084)
=============== =============== =============== ===============
Class I Shares:
Issued 22,925,879 -- 11,470,215 --
Reinvested 491,461 -- 522,432 --
Redeemed (2,042,001) -- (757,818) --
--------------- --------------- --------------- ---------------
Change in Class I Shares 21,375,339 -- 11,234,829 --
=============== =============== =============== ===============
Net increase (decrease)
from share transactions 111,325 1,079,131 504,630 (1,629,740)
=============== =============== =============== ===============
Value Index Fund International Fund
-------------------------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
-------------------------------------------------------------------------
Capital Transactions:
Class A Shares:
Proceeds from shares issued $ 10,532,393 $ 8,394,187 $ 13,741,809 $ 13,034,316
Dividends reinvested 1,182,575 435,011 366,496 1,188,251
Cost of shares redeemed (33,573,159) (4,654,565) (109,243,398) (19,580,189)
Redemption fees 49 -- 4,888 --
--------------- --------------- --------------- ---------------
Class A Share Transactions $ (21,858,142) $ 4,174,633 $ (95,130,205) $ (5,357,622)
=============== =============== =============== ===============
Class B Shares:
Proceeds from shares issued $ 2,903,509 $ 3,353,838 $ 2,088,970 $ 2,355,254
Dividends reinvested 721,496 95,344 116,352 134,393
Cost of shares redeemed (3,118,121) (1,394,678) (7,689,316) (3,704,461)
Redemption fees 12 -- 167 --
--------------- --------------- --------------- ---------------
Class B Share Transactions $ 506,896 $ 2,054,504 $ (5,483,827) $ (1,214,814)
=============== =============== =============== ===============
Class I Shares:
Proceeds from shares issued $ 34,150,512 -- $ 102,907,600 --
Dividends reinvested 1,447,608 -- 1,127,601 --
Cost of shares redeemed (9,648,409) -- (9,753,968) --
--------------- --------------- --------------- ---------------
Class I Share Transactions $ 25,949,711 -- $ 94,281,233 --
=============== =============== =============== ===============
Net increase (decrease)
from capital transactions $ 4,598,465 $ 6,229,137 $ (6,332,799) $ (6,572,436)
=============== =============== =============== ===============
Share Transactions:
Class A Shares:
Issued 977,633 866,001 1,063,909 1,202,582
Reinvested 104,969 44,166 27,289 109,446
Redeemed (3,072,964) (477,425) (8,088,650) (1,767,755)
--------------- --------------- --------------- ---------------
Change in Class A Shares (1,990,362) 432,742 (6,997,452) (455,727)
=============== =============== =============== ===============
Class B Shares:
Issued 268,930 348,972 164,400 220,149
Reinvested 64,342 9,710 9,082 13,048
Redeemed (291,985) (144,184) (601,902) (344,623)
--------------- --------------- --------------- ---------------
Change in Class B Shares 41,287 214,498 (428,420) (111,426)
=============== =============== =============== ===============
Class I Shares:
Issued 3,122,110 -- 7,598,524 --
Reinvested 128,668 -- 84,548 --
Redeemed (874,710) -- (739,993) --
--------------- --------------- --------------- ---------------
Change in Class I Shares 2,376,068 -- 6,943,079 --
=============== =============== =============== ===============
Net increase (decrease)
from share transactions 426,993 647,240 (482,793) (567,153)
=============== =============== =============== ===============
87
MMA Praxis Mutual Funds
Notes to financial statements, continued
December 31, 2006
6. Federal Income Tax Information:
The character of dividends paid to shareholders for federal income tax purposes
during the years ended December 31, 2006 and 2005 was as follows:
Intermediate International
Income Fund Core Stock Fund Value Index Fund Fund
2006 2005 2006 2005 2006 2005 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
From ordinary income $11,713,875 $10,798,788 $ 154,509 $ 854,926 $ 971,847 $ 665,289 $1,949,638 $1,562,998
From long-term capital gains -- -- 16,168,098 32,477 2,789,551 -- -- --
----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------
Total distributions $11,713,875 $10,798,788 $16,322,607 $ 887,403 $3,761,398 $ 665,289 $1,949,638 $1,562,998
=========== =========== =========== ========== ========== ========== =========== ==========
The following information is computed on a tax basis for each item as of
December 31, 2006:
Intermediate Core Value
Income Stock Index International
Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------
Tax cost of portfolio investments $ 282,932,541 $ 331,371,152 $ 53,561,550 $ 142,931,277
----------------------------------------------------------------
Gross unrealized appreciation 1,532,048 47,444,596 14,153,778 40,693,221
Gross unrealized depreciation (4,045,853) (6,378,414) (643,989) (1,754,025)
----------------------------------------------------------------
Net unrealized appreciation
(depreciation) (2,513,805) 41,066,182 13,509,789 38,939,196
Undistributed ordinary income 35,379 102,601 138,360 213,137
Capital loss carryforward (2,912,479) (2,829,151) -- (7,268,447)
Post-October losses (68,512) (168,790) (8,588) --
Other temporary differences -- -- -- (201)
----------------------------------------------------------------
Accumulated earnings (deficit) $ (5,459,417) $ 38,170,842 $ 13,639,561 $ 31,883,685
================================================================
The difference between book basis and tax basis net unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales and investments in Passive Foreign Investment Companies.
As of December 31, 2006, the following Funds had net capital loss carryforwards
to offset future net capital gains, if any:
Amount Expires
- --------------------------------------------------------------------------------
Intermediate Income Fund $ 270,941 2008
532,675 2009
673,793 2010
157,433 2012
1,277,637 2014
----------
$2,912,479
==========
Core Stock Fund $2,829,151 2011
==========
International Fund $7,268,447 2010
==========
88
MMA Praxis Mutual Funds
Notes to financial statements, continued
December 31, 2006
During the year ended December 31, 2006, the following Funds utilized capital
loss carryforwards:
Core Stock Fund $ 8,195,892
Value Index Fund $ 456,985
International Fund $15,361,436
Certain reclassification, the result of permanent differences between financial
statement and income tax reporting requirements, have been made to the
components of capital. These reclassifications have no impact on the net assets
or net asset value per share of the Funds and are designed to present each
Fund's capital accounts on a tax basis. The following reclassifications have
been made to the following Funds for the year ended December 31, 2006:
Accumulated Accumulated
Paid-In Net Investment Net Realized
Capital Income (Loss) Gains (Losses)
- --------------------------------------------------------------------------------
Intermediate Income Fund -- $ 297,376 $ (297,376)
Core Stock Fund -- (211,069) 211,069
Value Index Fund -- (10,956) 10,956
International Fund -- (19,892) 19,892
On July 13, 2006, the FASB released FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed
in the financial statements. FIN 48 requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Funds' tax returns
to determine whether the tax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax benefit or expense in
the current year. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as of the
effective date. Recent SEC guidance allows implementing FIN 48 in fund NAV
calculations as late as the fund's last NAV calculation in the first required
financial statement reporting period. As a result, the Fund will incorporate FIN
48 in its semi annual report on June 30, 2007. Management is in the process of
determining the impact of adoption.
89
- -------------------------------------------------------
Report of Independent Registered Public Accounting Firm
- -------------------------------------------------------
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of the
MMA Praxis Mutual Funds
We have audited the accompanying statement of assets and liabilities, including
the schedules of portfolio investments, of the MMA Praxis Mutual Funds
(comprised of the MMA Praxis Intermediate Income Fund, MMA Praxis Core Stock
Fund, MMA Praxis Value Index Fund and MMA Praxis International Fund)
(collectively, the Funds) as of December 31, 2006, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Funds' internal controls over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Funds' internal controls over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2006, by correspondence with
the custodian. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
MMA Praxis Mutual Funds as of December 31, 2006, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
February 26, 2007
90
---------------------------
Additional fund information
---------------------------
MMA Praxis Mutual Funds
Additional fund information (unaudited)
December 31, 2006
Security Allocation:
The MMA Praxis Mutual Funds invested, as a percentage of net assets, in the
following industries as of the year ended December 31, 2006.
- -------------------------------------------------------
Intermediate Income Fund
- -------------------------------------------------------
Percentage of
Security Allocation Net Assets
- -------------------------------------------------------
Fannie Mae 31.8%
Freddie Mac 25.2%
Corporate Bonds 24.2%
Commercial Mortgage Backed Securities 5.1%
Securities Lending Collateral 4.0%
Asset Backed Securities 2.7%
Federal Home Loan Bank 2.5%
Government National Mortgage Assoc 1.9%
Tennessee Valley Authority 1.4%
Corporate Notes 1.2%
Federal Farm Credit Bank 0.7%
Short Term Investments 0.7%
Mutual Funds 0.6%
Collateralized Mortgage Obligations 0.3%
Interest Only Bonds 0.3%
Small Business Administration 0.0%
- -------------------------------------------------------
Total 102.6%
=======================================================
- -------------------------------------------------------
Core Stock Fund
- -------------------------------------------------------
Percentage of
Security Allocation Net Assets
- -------------------------------------------------------
Common Stocks 98.0%
Securities Lending Collateral 8.4%
Corporate Notes 1.2%
Commercial Paper 1.1%
Short Term Investments 0.0%
- -------------------------------------------------------
Total 108.7%
=======================================================
- -------------------------------------------------------
Value Index Fund
- -------------------------------------------------------
Percentage of
Security Allocation Net Assets
- -------------------------------------------------------
Common Stocks 98.9%
Securities Lending Collateral 5.6%
Corporate Notes 0.8%
Short Term Investments 0.7%
- -------------------------------------------------------
Total 106.0%
- -------------------------------------------------------
- -------------------------------------------------------
International Fund
- -------------------------------------------------------
Percentage of
Security Allocation Net Assets
- -------------------------------------------------------
United Kingdom 17.7%
Japan 15.7%
France 12.7%
Securities Lending Collateral 10.4%
Switzerland 10.0%
Germany 9.2%
Netherlands 4.8%
Spain 4.1%
Hong Kong 2.9%
Norway 2.4%
Ireland 2.0%
Italy 1.6%
Sweden 1.6%
Taiwan 1.6%
Singapore 1.3%
Belgium 1.2%
Australia 1.1%
Corporate Notes - Domestic 1.0%
Brazil 0.9%
Mexico 0.9%
Argentina 0.7%
Israel 0.6%
Russia 0.6%
Canada 0.5%
South Korea 0.5%
Finland 0.4%
Bermuda 0.3%
Denmark 0.3%
Preferred Stock 0.3%
Turkey 0.3%
China 0.2%
Greece 0.2%
India 0.2%
South Africa 0.2%
Hungary 0.1%
- -------------------------------------------------------
Total 108.5%
=======================================================
91
MMA Praxis Mutual Funds
Additional fund information, continued (unaudited)
December 31, 2006
Dividend Received Deduction:
For corporate shareholder, the following ordinary dividends paid during the year
ended December 31, 2006 qualify for the corporate dividends received deduction:
Value Index Fund 100%
International Fund 3%
Proxy Voting:
The Adviser and Sub-Adviser are responsible for exercising the voting rights
associated with the securities purchased and held by the Funds. A description of
the policies and procedures that the Adviser and Sub-Adviser use in fulfilling
this responsibility and information regarding how those proxies were voted
during the twelve month period ended June 30 are available (i) without charge,
upon request, by calling (800) 977-2947; and (ii) on the Securities and Exchange
Commission's ("commission's") Web site at http://www.sec.gov.
Quarterly Portfolio Disclosure:
The Trust files a complete listing of the Schedules of portfolio investments for
each Fund as of the end of the first and third quarters of each fiscal year on
Form N-Q. The complete listing (i) is available on the Commission's Web site,
(ii) may be reviewed and copied at the Commission's Public Reference Room in
Washington, DC; and (iii) will be made available to shareholders upon request by
calling (800) 977-2947. Information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
The Statement of Additional Information contains more information about the
Funds and can be obtained free of charge by calling (800) 977-2947.
92
MMA Praxis Mutual Funds
Additional fund information, continued (unaudited)
December 31, 2006
Expense Comparison:
As a shareholder of the MMA Praxis Mutual Funds, you incur two types of costs:
(1) transaction costs, including sales charges (loads) on purchases, reinvested
dividends, or other distributions; redemption fees; and exchange fees; (2)
ongoing costs, including management fees; distribution and service 12b-1 fees;
and other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the MMA Praxis Mutual Funds and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period from July 1, 2006 through December 31,
2006.
Actual Expenses:
The table below provides information about actual account values and actual
expenses. You may use the information below, together with the amount you
invested, to estimate the expenses that you paid over the period. Simply divide
your account value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number in the table under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
Beginning Ending Expense Paid Expense Ratio
Account Value Account Value During Period* During Period**
7/1/06 12/31/06 7/1/06-12/31/06 7/1/06-12/31/06
- ----------------------------------------------------------------------------------------------------
Intermediate Income Fund
Class A $ 1,000.00 $ 1,046.70 $ 4.49 0.87%
Class B 1,000.00 1,044.00 6.80 1.32%
Class I 1,000.00 1,048.10 3.20 0.62%
Core Stock Fund
Class A 1,000.00 1,108.70 7.66 1.44%
Class B 1,000.00 1,105.10 11.12 2.10%
Class I 1,000.00 1,110.60 5.40 1.02%
Value Index Fund
Class A 1,000.00 1,140.50 6.37 1.18%
Class B 1,000.00 1,136.60 9.30 1.73%
Class I 1,000.00 1,141.80 4.98 0.92%
International Fund
Class A 1,000.00 1,119.00 9.40 1.76%
Class B 1,000.00 1,114.90 12.85 2.41%
Class I 1,000.00 1,121.80 6.85 1.28%
* Expenses are equal to the average account value times the Fund's
annualized expense ratio multiplied by the number of days in the most
recent fiscal half-year divided by the number of days in the fiscal year.
** Annualized.
93
MMA Praxis Mutual Funds
Additional fund information, continued (unaudited)
December 31, 2006
Hypothetical Example for Comparison Purposes:
The table below provides information about hypothetical account values and
hypothetical expenses based on each MMA Praxis Mutual Fund's expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare this 5% hypothetical example
with the 5% hypothetical examples that appear in the shareholder reports of
other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
Beginning Ending Expense Paid Expense Ratio
Account Value Account Value During Period* During Period**
7/1/06 12/31/06 7/1/06-12/31/06 7/1/06-12/31/06
- ----------------------------------------------------------------------------------------------------
Intermediate Income Fund
Class A $ 1,000.00 $ 1,020.82 $ 4.43 0.87%
Class B 1,000.00 1,018.55 6.72 1.32%
Class I 1,000.00 1,022.08 3.16 0.62%
Core Stock Fund
Class A 1,000.00 1,017.94 7.33 1.44%
Class B 1,000.00 1,014.64 10.64 2.10%
Class I 1,000.00 1,020.09 5.17 1.02%
Value Index Fund
Class A 1,000.00 1,019.25 6.01 1.18%
Class B 1,000.00 1,016.50 8.77 1.73%
Class I 1,000.00 1,020.55 4.70 0.92%
International Fund
Class A 1,000.00 1,016.33 8.94 1.76%
Class B 1,000.00 1,013.06 12.23 2.41%
Class I 1,000.00 1,018.75 6.51 1.28%
* Expenses are equal to the average account value times the Fund's
annualized expense ratio multiplied by the number of days in the most
recent fiscal half-year divided by the number of days in the fiscal year.
** Annualized.
94
MMA Praxis Mutual Funds
Additional fund information, continued (unaudited)
December 31, 2006
INFORMATION FOR SHAREHOLDERS REGARDING THE RENEWAL OF THE INVESTMENT ADVISORY
AGREEMENT WITH MMA CAPITAL MANAGEMENT
At a meeting held on November 20, 2006, the Board of Trustees of the Funds
approved the continuation of the Investment Advisory Agreement between each of
the Funds and Menno Insurance Service, Inc., d/b/a MMA Capital Management. The
Board of Trustees requested and received from MMA Capital Management information
relating to the Investment Advisory Agreement and the Funds. In concluding that
it was in the best interests of the Funds and their shareholders to retain MMA
Capital Management for an additional year, the Board, including a majority of
those Trustees who are not "interested persons" of the Funds or MMA Capital
Management (the "Independent Trustees") advised by independent legal counsel,
gave weight to the following factors, among others:
Nature, Quality and Extent of Services
The Trustees discussed the nature, quality and extent of services MMA Capital
Management would provide to the Funds in the coming year, noting MMA Capital
Management's representation that it expected no material changes to services or
investment strategy in the coming year. Among other things, the Trustees
considered MMA Capital Management's shareholder servicing and compliance
efforts. The Board concluded that it was satisfied with the nature, quality and
extent of services provided to the Funds by MMA Capital Management.
Investment Performance of the Funds and MMA
The Trustees reviewed year-to-date and historical performance data for the
Funds, and considered the Funds' historical performance relative to their
benchmarks and unrestricted peer groups. Based upon discussions regarding each
Fund's performance, the Trustees determined that they generally were satisfied
with the long term performance of each Fund and of MMA Capital Management,
particularly in light of the SRI processes and philosophies as compared to each
Fund's peer group members.
Costs of Services and Profitability of MMA and Affiliates
The Trustees then reviewed information and data regarding the costs of providing
the advisory services to the Funds and the profits to be realized by MMA Capital
Management and its affiliates from their relationship with the Funds.
Representatives of MMA Capital Management addressed the Trustees' questions
concerning guidelines for manager selection, payment of platform fees, revenue
sharing arrangements and expense waivers and reimbursements. In their review of
the Funds' total expenses, the Trustees considered MMA Capital Management's fee,
as well as other Fund expenses, such as transfer agent fees, custodial, legal
and audit fees. The Trustees also noted the effects of MMA Capital Management's
voluntary expense waivers and expense reimbursements on fees and expense levels.
As part of their review, the Trustees considered the expense ratios and
profitability information by Fund compared to peer group fund expense ratios and
profitability information. Finally, the Board reviewed the fee structures and
other information provided by MMA Capital Management regarding its services to
other clients before concluding that the costs of the services provided to the
Funds by MMA Capital Management were fair.
Economies of Scale
The Trustees considered the extent to which economies of scale would be realized
as the Funds grow and whether the investment advisory fee rates reflect those
economies of scale for the benefit of the Funds' shareholders. MMA Capital
Management represented to the Trustees that MMA Capital Management would
consider appropriate breakpoints as the Funds grow in size, but that the Funds'
asset values had not yet reached a level at which economies of scale could be
realized. The Board then considered the information provided regarding the fee
breakpoint levels of peer group funds, and concluded that asset levels did not
justify breakpoints at this time.
95
MMA Praxis Mutual Funds
Additional fund information, continued (unaudited)
December 31, 2006
Other Benefits
The Trustees discussed the extent to which MMA Capital Management and its
affiliates might derive other benefits, including soft dollar credits or other
similar benefits from MMA Capital Management's relationship with the Funds. The
Trustees noted that that MMA Capital Management had voluntarily discontinued the
practice of generating soft dollar credits to purchase third-party research
services in 2004. Discussion ensued regarding other potential benefits to MMA
Capital Management and its affiliates from their relationship with the Funds,
and the Board concluded that such benefits were not material.
INFORMATION FOR SHAREHOLDERS REGARDING THE RENEWAL OF THE SUB-INVESTMENT
ADVISORY AGREEMENT WITH EVERGREEN
At a meeting held on November 20, 2006, the Board of Trustees of the Funds
approved the continuation of the Sub-Investment Advisory Agreement between Menno
Insurance Service, Inc., d/b/a MMA Capital Management, and Evergreen Investment
Management Company, LLC, with respect to portfolio management of MMA Praxis
International Fund. The Board of Trustees requested and received from Evergreen
information relating to the Sub-Investment Advisory Agreement and the
International Fund. In concluding that it was in the best interests of the
International Fund and its shareholders to continue the relationship with
Evergreen for an additional year, the Board, including a majority of the
Independent Trustees advised by independent legal counsel, gave weight to the
following factors, among others:
Nature, Quality and Extent of Services
The Trustees considered the nature, quality and extent of services Evergreen
would provide to the International Fund in the coming year, including
Evergreen's representation that it expected no material changes to services or
investment strategy in the coming year. Among other things, the Trustees
considered Evergreen's compliance capabilities, its compliance record with
respect to the International Fund, and the quality of communication among MMA
Capital Management, Evergreen and the Board. The Trustees also considered
Evergreen's portfolio managers, and conflicts of interest and best execution
practices. The Board concluded that it was satisfied with the nature, quality
and extent of services provided to the International Fund by Evergreen.
Investment Performance of the International Fund and Evergreen
The Trustees reviewed year-to-date and historical performance data for the
International Fund, and considered the Fund's historical performance relative to
its benchmark and peer group. The Board concluded that, while the comparative
performance of the International Fund over the past one and three year periods
has been less than satisfactory, the peer funds were not limited in their stock
selection by SRI criteria. In addition, the Trustees took into account that MMA
Capital Management expressed confidence that Evergreen's management style will
benefit the International Fund in the long term and provide for satisfactory
long term performance.
Costs of Services and Profitability of Evergreen and Affiliates
The Trustees considered the costs of the services provided by Evergreen to the
International Fund and the profits to be realized by Evergreen and its
affiliates from their relationship with the International Fund. The Trustees
discussed the comparative fee and profitability information provided by
Evergreen. The Board then concluded that the costs of the services to be
provided to the International Fund and the profits to be realized by Evergreen
and its affiliates from the relationship with the International Fund were fair
in light of the industry comparisons provided.
96
MMA Praxis Mutual Funds
Additional fund information, continued (unaudited)
December 31, 2006
Economies of Scale
The Trustees noted that Evergreen's sub-advisory fee schedule currently
incorporates breakpoints. The Trustees also acknowledged Evergreen's
representation that Evergreen would consider additional breakpoints as assets in
the International Fund grow to levels where economies of scale would be
realized.
Other Benefits
The Trustees considered the extent to which Evergreen or its affiliates would
derive other benefits, including soft dollar credits or other similar benefits,
from Evergreen's relationship with the International Fund. Discussion then
ensued regarding Evergreen's soft dollar practices. The Board concluded that
Evergreen did not derive material benefits, other than its sub-advisory fees and
traditional soft-dollar benefits, from its relationship with the International
Fund.
INFORMATION FOR SHAREHOLDERS REGARDING THE RENEWAL OF THE SUB-INVESTMENT
ADVISORY AGREEMENT WITH DAVIS
At a meeting held on November 20, 2006, the Board of Trustees of the Funds
approved the continuation of the Sub-Investment Advisory Agreement between Menno
Insurance Service, Inc., d/b/a MMA Capital Management, and Davis Selected
Advisers, L.P., with respect to portfolio management of MMA Praxis Core Stock
Fund. The Board of Trustees requested and received from Davis information
relating to the Sub-Investment Advisory Agreement and the Core Stock Fund. In
concluding that it was in the best interests of the Core Stock Fund and its
shareholders to continue the relationship with Davis for an additional year, the
Board, including a majority of the Independent Trustees advised by independent
legal counsel, gave weight to the following factors, among others:
Nature, Quality and Extent of Services
The Trustees considered the nature, quality and extent of services Davis would
provide to the Core Stock Fund in the coming year, including Davis's
representation that it expected no material changes to services or investment
strategy in the coming year. Among other things, the Trustees considered Davis's
compliance capabilities, its compliance record with respect to the Core Stock
Fund, and the quality of communication among MMA Capital Management, Davis and
the Board. The Trustees also considered Davis's portfolio managers, and
conflicts of interest and best execution practices. The Board concluded that it
was satisfied with the nature, quality and extent of services provided to the
Core Stock Fund by Davis.
Investment Performance of the Core Stock Fund and Davis
The Trustees reviewed year-to-date and historical performance data for the Core
Stock Fund, and considered the Fund's historical performance relative to its
benchmark and peer group. The Board concluded that, while the comparative
performance of the Core Stock Fund over the past one, three and five year
periods has been less than satisfactory, the peer funds were not limited in
their stock selection by SRI criteria. In addition, the Trustees acknowledged
that MMA Capital Management recently had taken the step of hiring Davis as
sub-adviser for the Fund. The Trustees also took into account that MMA Capital
Management expressed confidence that Davis's management style will benefit the
Core Stock Fund in the long term and provide for satisfactory long term
performance.
Costs of Services and Profitability of Davis and Affiliates
The Trustees considered the costs of the services provided by Davis to the Core
Stock Fund and the profits to be realized by Davis and its affiliates from their
relationship with the Core Stock Fund. The Trustees discussed the comparative
fee and profitability information provided by Davis. The Board then concluded
that the costs of the services to be provided to the Core Stock Fund and the
profits to be realized by Davis and its affiliates from the relationship with
the Core Stock Fund were fair in light of the industry comparisons provided.
98
MMA Praxis Mutual Funds
Additional fund information, continued (unaudited)
December 31, 2006
Economies of Scale
The Trustees noted that Davis's sub-advisory fee schedule currently incorporates
breakpoints. The Trustees also acknowledged Davis's representation that the firm
would consider additional breakpoints as assets in the Core Stock Fund grow to
levels where economies of scale could be realized.
Other Benefits
The Trustees considered the extent to which Davis or its affiliates would derive
other benefits, including soft dollar credits or other similar benefits, from
Davis's relationship with the Core Stock Fund. The Board concluded that Davis
did not derive material benefits, other than its sub-advisory fees, from its
relationship with the Core Stock Fund.
90
-----------------------
Management of the Trust
-----------------------
MMA Praxis Mutual Funds
Management of the Trust (unaudited)
Listed below is basic information regarding the Trustees and principal officers
of the Trust. The Trust's Statement of Additional Information includes
additional information about the Trustees and is available, without charge, upon
request by calling (800) 977-2947.
Position
with the
Company,
Term of Number of
Office and Portfolios in Other
Length Fund Complex Trusteeships
Name, Age and of Time Principal Occupation During Overseen Held by
Address Served the Past Five Years by Trustee Trustee
- ----------------------------------------------------------------------------------------------------------------------
Interested
Trustees(1)
- ----------------------------------------------------------------------------------------------------------------------
Howard L. Brenneman* Chairman and President and CEO, Mennonite Mutual Aid 4 N/A
1110 North Main Street Trustee, (December 1991 - July 2005); Business
Goshen, IN 46528 Indefinite, and Financial Consultant and Director
Birth date: 3/26/40 since 12/2/93 of Strategic Planning and Development,
Prairie View, Inc., mental health facility
(1986 - 1991)
- ----------------------------------------------------------------------------------------------------------------------
(1) This Trustee is an "interested" person under the Investment Company Act of 1940 because of his affiliation with
the Adviser.
Independent Trustees
- ----------------------------------------------------------------------------------------------------------------------
Bruce Harder* Trustee, Retired; Executive Director for Finance 4 N/A
1110 North Main Street Indefinite, and Administration, Tri-Met, the
Goshen, IN 46528 since 2/11/00 Tri-County Metropolitan Transportation
Birth date: 1/17/41 District of Oregon, public
transportation system for Portland,
Oregon (1986 - 2003); Chairman of the
Board, Mennonite Mutual Aid, Goshen
Indiana (1997 - 2003)
Karen Klassen Harder, Trustee, Professor, Bluffton University
Ph.D. Indefinite, (September 2001 - present); Professor,
1110 North Main Street since 12/2/93 Bethel College (January 1990 - 2001) 4 N/A
Goshen, IN 46528
Birth date: 1/22/56
Richard Reimer, Trustee, Retired; Professor of Economics -
Ph.D. Indefinite, Emeritus since 1996, The College of 4 N/A
1110 North Main Street since 12/2/93 Wooster (1962 - 1996); former Board
Goshen, IN 46528 member, Mennonite Mutual Aid, Goshen,
Birth date: 10/6/31 Indiana (through December 2001)
R. Clair Sauder Trustee, Partner, Encore Enterprises, LLC,
1110 North Main Street Indefinite, retail home furnishings (May 2001 4 N/A
Goshen, IN 46528 since 6/30/02 - present); Partner, C&D Enterprises
Birth date: 1/11/43 Unlimited, commercial real estate
(1982 - present)
Donald E. Trustee, Senior Partner, the law firm of
Showalter, Esq. Indefinite, Wharton, Aldhizer, & Weaver 4 N/A
1110 North Main Street since 12/2/93 (June 1965 - present); Director,
Goshen, IN 46528 Rockingham Heritage Bank (April 1998 -
Birth date: 2/23/41 present)
- ----------------------------------------------------------------------------------------------------------------------
99
MMA Praxis Mutual Funds
Management of the Trust (unaudited), continued
Position with the Company, Term Principal Occupation
Name, Age and Address of Office and Length of Time Served During the Past Five Years
- ----------------------------------------------------------------------------------------------------------------------
John L. Liechty President, Indefinite, Executive Management, Mennonite
1110 North Main Street since 8/19/97 Mutual Aid (1976 - present)
Goshen, IN 46528
Birth date: 6/12/54
Marlo J. Kauffman Vice President, Indefinite, Financial Services Operation Manager, Mennonite
1110 North Main Street since 12/2/93 Mutual Aid (1981 - present); President, MMA
Goshen, IN 46527 Securities, Inc. (2003 - present); OSJ Principal,
Birth date: 9/19/56 ProEquities, Inc., a broker-dealer (1994 -
present)
Steven T. McCabe Treasurer, Indefinite, Vice President Fund Accounting and Financial
303 Broadway, Suite 1100 since 9/23/05 Reporting of Integrated Investment Services, Inc.
Cincinnati, OH 45202 (2004-present); Vice President-Custody Services
Birth date: 6/5/64 (2003-2004) Fifth Third Bank; Assistant Vice
President and Director of Mutual Fund
Accounting (1997-2003) Fifth Third Bank
Brian E. Hirsch Chief Compliance Officer, Vice President-Compliance of IFS Financial
303 Broadway, Suite 1100 Indefinite, Services, Inc., Director of Compliance of Fort
Cincinnati, OH 45202 since 9/23/05 Washington Brokerage Services, Inc.; Chief
Birth date: 12/29/56 Compliance Officer of Puglisi & Co. from 2001
until 2002
Jay S. Fitton Secretary, Indefinite, Director and Senior Counsel of Integrated
303 Broadway, Suite 1100 since 5/22/06 Investment Services, Inc. and IFS Fund
Cincinnati, OH 45202 Distributors, Inc.
Birth date: 1/31/70
- ----------------------------------------------------------------------------------------------------------------------
100
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Integrated Investment Services, Inc.
303 Broadway, Suite 1100
Cincinnati, OH 45202
Item 2. Code of Ethics.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to its principal executive officer and principal
financial officer. During the period covered by this report, no amendments were
made to the provisions of the code of ethics, nor did the registrant grant any
waivers, including any implicit waivers, from the provisions of the code of
ethics.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that the registrant has at
least one audit committee financial expert serving on its audit committee. Mr.
R. Clair Sauder is the registrant's "audit committee financial expert" and is
"independent", as each term is defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. Audit fees totaled $61,100 for the December 31, 2006 fiscal year
and $51,000 for the December 31, 2005 fiscal year, including fees associated
with the annual audit and filings of the registrant's Form N-1A and Form N-SAR.
(b) Audit-Related Fees. There were no audit-related fees for the December 31,
2006 or December 31, 2005 fiscal years.
(c) Tax Fees. Tax fees totaled $8,600 for the December 31, 2006 fiscal year and
$9,000 for the December 31, 2005 fiscal year and consisted of fees for tax
compliance services during both years.
(d) All Other Fees. There were no other fees for the December 31, 2006 or
December 31, 2005 fiscal years.
(e) (1) Audit Committee Pre-Approval Policies.
(A) Audit Services
Before an auditor is engaged by the funds to render audit services, the
committee shall review and approve the engagement. (see also "delegation"
below.)
(B) Permissible Non-Audit Services
The committee shall review and approve in advance any proposal (except as
set forth in (1) through (3) below) that the funds employ their auditor to
render "permissible non-audit services" to the funds. (a "permissible non-audit
service" is defined as a non-audit service that is not prohibited by rule
2-01(c)(4) of regulation s-x1 or other applicable law or regulation.) The
committee shall also review and approve in advance any proposal (except as set
forth in (1) through (3) below) that the adviser, and any entity controlling,
controlled by, or under common control with the adviser that provides ongoing
services to the funds (an "adviser-affiliated service provider"), employ the
funds' auditor to render non-audit services, if such engagement would relate
directly to the operations and financial reporting of the funds. As a part of
its review, the committee shall consider whether the provision of such services
is consistent with the auditor's independence. (see also "delegation" below.)
pre-approval by the committee of non-audit services is not required so Long as:
(1) (a) with respect to the funds, the aggregate amount of all such
permissible non-audit services provided to the funds constitutes no more than 5%
of the total amount of revenues paid to the auditor by the funds during the
fiscal year in which the services are provided; (b) with respect to the adviser
and any adviser-affiliated service provider, the aggregate amount of all such
non-audit services provided constitutes no more than 5% of the total amount of
revenues (of the type that would have to be pre-approved by the committee) paid
to the auditor by the funds, the adviser and any adviser-affiliated service
provider during the fiscal year in which the services are provided;
(2) such services were not recognized by the funds at the time of the
engagement to be non-audit services; and
(3) such services are promptly brought to the attention of the
committee and approved prior to the completion of the audit by the committee or
its delegate(s) (as defined below).
(C) Delegation
The committee may delegate to one or more of its members ("delegates")
authority to pre-approve the auditor's provision of audit services or
permissible non-audit services to the funds, or the provision of non- audit
services to the adviser or any adviser-affiliated service provider. Any
pre-approval determination made by a delegate shall be presented to the full
committee at its next meeting. The committee shall communicate any pre-approval
made by it or a delegate to the fund administrator/fund accounting agent, who
will ensure that the appropriate disclosure is made in the funds' periodic
reports and other documents as required under the federal securities laws.
- ----------
(1) non-audit services that are prohibited by rule 2-01(c)(4) of regulation
s-x include: (i) bookkeeping or other services related to accounting
records or financial statements of the audit client; (ii) financial
information systems design and implementation; (iii) appraisal or
valuation services, fairness opinions, or contribution-in-kind reports;
(iv) actuarial services; (v) internal audit outsourcing services; (vi)
management functions; (vii) human resources; (viii) broker-dealer,
investment adviser, or investment banking services; (ix) legal services;
and (x) expert services unrelated to the audit.
(e)(2) All services described in paragraphs (b) through (d) of Item 4 were
approved by the Audit Committee.
(f) Not applicable
(g) The aggregate non-audit fees for services to the registrant, its investment
adviser and any entity controlling, controlled by, or under common control with
the adviser that provides ongoing services to the registrant were $8,600 for the
fiscal year ended December 31, 2006 and $9,000 for the fiscal year ended
December 31, 2005.
(h) Not applicable
Item 5. Audit Committee of Listed Registrants.
Not applicable
Item 6. Schedule of Investments.
The Schedule of Investments in securities of unaffiliated issuers is included in
the Annual Report.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant does not have procedures by which shareholders may recommend
nominees to its Board of Trustees.
Item 11. Controls and Procedures.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940), as of a date within 90 days of the filing date of this report, the
registrant's principal executive officer and principal financial officer have
concluded that the registrant's disclosure controls and procedures are
effective.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's last fiscal half-year that have materially
affected, or are reasonably likely to materially affect, the registrant's
internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of Ethics for Senior Financial Officers was filed on March 11,
2005 with Form N-CSR for period ending December 31, 2004 and is hereby
incorporated by reference.
(a)(2) Certifications required by Item 12(a)(2) of Form N-CSR are filed
herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MMA Praxis Mutual Funds
By (Signature and Title)
/s/ John L. Liechty
- ----------------------------
John L. Liechty
President
Date: March 5, 2007
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/ John L. Liechty
- ----------------------------
John L. Liechty
President
Date: March 5, 2007
By (Signature and Title)
/s/ Steven T. McCabe
- ----------------------------
Steven T. McCabe
Treasurer
Date: March 5, 2007