<PAGE> 1
As filed with the Securities and Exchange Commission on March 3, 1999
Registration No. 33-69724
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | X |
Pre-Effective Amendment No. | |
---
Post-Effective Amendment No. 8 | X |
---
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 | X |
Amendment No. 9 | X |
---
MMA PRAXIS MUTUAL FUNDS
-----------------------
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
---------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number: (614) 470-8000
--------------
Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
----------------------
(Name and Address of Agent for Service)
Copies to:
George L. Stevens
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
| X | It is proposed that this filing will become effective 60 days after
filing pursuant to paragraph (a)(1) of Rule 485.
<PAGE> 2
The MMA Praxis Mutual Funds
MMA PRAXIS GROWTH FUND
MMA PRAXIS INTERMEDIATE INCOME FUND
MMA PRAXIS INTERNATIONAL FUND
Prospectus
May 2, 1999
MMA Capital Management
Investment Adviser
Like shares of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE> 3
TABLE OF CONTENTS
-----------------
RISK/RETURN SUMMARY AND FUND EXPENSES
1 Growth Fund
4 Intermediate Income Fund
7 International Fund
Carefully review this important section which summarizes each Fund's
investments, risks, past performance and fees.
INVESTMENT OBJECTIVES AND STRATEGIES
11 Criteria for Socially Responsible Investing
12 Growth Fund
14 Intermediate Income Fund
15 International Fund
16 Investment Risks
Review this section for details on each Fund's investment strategies and risks.
SHAREHOLDER INFORMATION
18 Pricing of Fund Shares
19 Purchasing and Adding to Your Shares
22 Selling Your Shares
25 Distribution Arrangements/Sales Charges
29 Exchanging Your Shares
32 Dividends, Distributions and Taxes
Review this section for details on how shares are valued, how to purchase, sell
and exchange shares, related charges and payments of dividends and
distributions.
FUND MANAGEMENT
- The Investment Adviser
- Portfolio Managers
- The Distributor and Administrator
Review this section for details on the people and organizations who oversee the
Funds.
FINANCIAL HIGHLIGHTS
Review this section for details on selected financial highlights of the Funds.
BACK COVER
- Where to learn more about the Funds.
<PAGE> 4
RISK/RETURN SUMMARY AND FUND EXPENSES
================================================================================
RISK/RETURN SUMMARY OF THE MMA PRAXIS GROWTH FUND
INVESTMENT OBJECTIVES The Growth Fund seeks capital appreciation.
To a lesser extent, it seeks current income.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in undervalued
securities of medium to large capitalization
companies (those companies whose total market
value is more than $200 million) which
provide products and services that are
consistent with the Fund's socially
responsible criteria.
PRINCIPAL INVESTMENT RISKS Because the value of the Fund's
investments will fluctuate with market
conditions, so will the value of your
investment in the Fund. You could lose money
on your investment in the Fund, or the Fund
could underperform other investments. Some
of the Fund's holdings may underperform its
other holdings. The Fund may invest a
portion of its assets in foreign securities
which can carry additional risks such as
changes in currency exchange rates, a lack
of adequate company information and
political instability.
WHO MAY WANT TO INVEST?
Consider investing in the Fund if you are:
* INVESTING FOR A LONG-TERM GOAL SUCH AS
RETIREMENT (FIVE YEAR INVESTMENT
HORIZON)
* LOOKING TO ADD A GROWTH COMPONENT TO
YOUR PORTFOLIO
* WILLING TO ACCEPT HIGHER RISKS OF
INVESTING IN THE STOCK MARKET IN
EXCHANGE FOR POTENTIALLY HIGHER LONG
TERM RETURNS
This Fund will not be appropriate for anyone:
* SEEKING MONTHLY INCOME
* PURSUING A SHORT-TERM GOAL OR INVESTING
EMERGENCY RESERVES
* SEEKING SAFETY OF PRINCIPAL
1
<PAGE> 5
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Class B Shares of the Growth Fund
have performed and how their performance has varied from year to year. The bar
chart shows changes in the Fund's yearly performance during the four full fiscal
years since its inception on January 4, 1994 to demonstrate that the Fund's
value varied at differing times. The table below it compares the Fund's
performance over time to that of the S&P 500(R) Index(3) and to the Domini 400
Social Index(4)
PERFORMANCE BAR CHART AND TABLE(1)
----------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31(2)
[BAR GRAPH]
<TABLE>
<CAPTION>
1995 1996 1997 1998
<S> <C> <C> <C> <C>
Percentage 33.32% 15.87% 29.15%
</TABLE>
The bar chart above does not reflect the impact of any applicable sales charges
or account fees which would reduce returns. Of course, past performance does not
indicate how the Fund will perform in the future.
- --------------------------------------------------------------------------------
Best quarter: Q_ 199_ + ____%
- --------------------------------------------------------------------------------
Worst quarter: Q_ 199_ - ____%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
GROWTH FUND Fund Past Year Since Inception
Inception
<S> <C> <C> <C>
(with applicable Contingent
Deferred Sales Charge) 1/4/94 __% __%
S&P 500(R) INDEX(2) 1/4/94 __% __%
DOMINI 400
SOCIAL INDEX(3) 1/4/94 __% __%
</TABLE>
The table assumes that shareholders redeem all their fund shares at the end of
the period indicated.
- ----------------
1 Performance depicted is for the Class B Shares only. Class A Shares were
not offered prior to May 1, 1999.
2 Both charts assume reinvestment of dividends and distributions.
3 A widely recognized, unmanaged index of common stocks.
4 An unmanaged index of common stocks generally representative of the
socially responsible investment market.
2
<PAGE> 6
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
As an investor in the Growth Fund, you will pay the following fees and expenses.
Shareholder transaction fees are paid from your account. Annual Fund operating
expenses are paid out of Fund assets, and are reflected in the share price.
<TABLE>
<S> <C> <C>
Shareholder
Transaction
Fees (fees
paid by you
directly) A SHARES B SHARES
Maximum sales
charge (load)
on purchases 5.25%(1) None
- ---------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGE
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 elapsed. This is called a
Contingent Deferred Sales Charge ("CDSC").
<TABLE>
- -------------------------------------------------------------------
<S> <C> <C>
Maximum deferred
sales charge (load) None 4.00%(2)
Annual Fund
Operating
Expenses
(expenses paid from
Fund assets) A SHARES B SHARES
- -------------------------------------------------------------------
Management fee .74% .74%
- -------------------------------------------------------------------
Distribution and
Service (12b-1) fee(3) .50% 1.00%
- -------------------------------------------------------------------
Other expenses .79% .79%
- -------------------------------------------------------------------
Total Fund
Operating expenses 2.03% 2.53%
- -------------------------------------------------------------------
</TABLE>
1 Lower sales charges are available depending upon the amount invested. See
"Distribution Arrangements."
2 The CDSC declines over five years starting with year one and ending in year
six as follows: 4%, 4%, 3%, 2%, 1%.
3 The Distributor is currently limiting the Distribution and Service fees
paid by the Fund for the current fiscal year to 0.30% and 0.85% for Class A
Shares and Class B Shares, respectively. The Distributor may revise or
cancel this expense limitation at any time and will notify you of any
material change.
3
<PAGE> 7
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
Use this table to compare fees and expenses with those of other Funds. It
illustrates the amount of fees and expenses you would pay, assuming the
following:
* $10,000 investment
* 5% annual return
* redemption at the end of each period
* no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison purposes only, your
actual costs will be different.
<TABLE>
<CAPTION>
1 3 5 10
GROWTH FUND Year Years Years Years
<S> <C> <C> <C> <C>
CLASS A SHARES $720 $1,128 $1,561 $2,760
---------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $296 $818 $1,355 $2,866
Assuming no Redemption $256 $788 $1,345 $2,866
---------------------------------------------------------------------
</TABLE>
RISK/RETURN SUMMARY OF THE MMA PRAXIS INTERMEDIATE INCOME FUND
INVESTMENT OBJECTIVES The Intermediate Income Fund seeks current
income. To a lesser extent, it seeks capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in fixed income
securities of all types, consistent with the
Fund's social responsibility criteria.
PRINCIPAL INVESTMENT RISKS Because the value of the Fund's investments
will fluctuate with market conditions and
interest rates, so will the value of your
investment in the Fund. You could lose money
on your investment in the Fund, or the Fund
could underperform other investments. Some
of the Fund's holdings may underperform its
other holdings. The Fund may invest a
portion of its assets in foreign debt
securities which carry additional risks such
as changes in currency exchange rates, a
lack of adequate company information and
political instability.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
* LOOKING TO ADD A MONTHLY INCOME COMPONENT
TO YOUR PORTFOLIO
* SEEKING HIGHER POTENTIAL RETURNS THAN
PROVIDED BY MONEY MARKET FUNDS
* WILLING TO ACCEPT THE RISKS OF PRICE AND
DIVIDEND FLUCTUATIONS
This Fund will not be appropriate for
anyone:
* INVESTING EMERGENCY RESERVES
* SEEKING SAFETY OF PRINCIPAL
4
<PAGE> 8
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Class B Shares of the Intermediate
Income Fund have performed and how their performance has varied from year to
year. The bar chart shows changes in the Fund's yearly performance during the
four full fiscal years since its inception on January 4, 1994 to demonstrate
that the Fund has gained and lost value at differing times. The table below it
compares the Fund's performance over time to that of the Lehman Aggregate Bond
Index.(3)
PERFORMANCE BAR CHART AND TABLE(1)
----------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31(2)
[BAR GRAPH]
<TABLE>
<CAPTION>
1995 1996 1997 1998
<S> <C> <C> <C> <C>
Percentage 17.47% 2.22% 7.60%
</TABLE>
The bar chart above does not reflect the impact of any applicable sales charges
or account fees which would reduce returns. Of course, past performance does not
indicate how the Fund will perform in the future.
- --------------------------------------------------------------------------
Best quarter: Q_ 199_ +____%
- --------------------------------------------------------------------------
Worst quarter: Q_ 199_ -____%
- --------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
INTERMEDIATE INCOME FUND Fund Past Year Since Inception
Inception
<S> <C> <C> <C>
(with applicable CDSC) 1/4/94 __% __%
LEHMAN AGGREGATE BOND
INDEX(2) 1/4/94 __% __%
</TABLE>
The table assumes that shareholders redeem all their fund shares at the end of
the period indicated.
- -------------------
1 Performance depicted is for the Class B Shares only. Class A Shares were
not offered prior to May 1, 1999.
2 Both charts assume reinvest of dividends and distributions.
3 An unmanaged index generally representative of the bond market as a whole.
5
<PAGE> 9
RISK/RETURN SUMMARY AND FUND EXPENSES
- -------------------------------------
FEES AND EXPENSES
- -----------------
As an investor in the Intermediate Income Fund, you will pay the following fees
and expenses. Shareholder transaction fees are paid from your account. Annual
Fund operating expenses are paid out of Fund assets, and are reflected in the
share price.
<TABLE>
<S> <C> <C>
Shareholder
Transaction
Fees (fees
paid by you
directly) A SHARES B SHARES
Maximum sales
charge (load)
on purchases 3.75%(1) None
- -------------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGE
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 elapsed. This is called a
Contingent Deferred Sales Charge.
<TABLE>
- -------------------------------------------------------------------
<S> <C> <C>
Maximum deferred sales charge (load) None 4.00%(2)
Annual Fund
Operating
Expenses
(expenses paid from
Fund assets) A SHARES B SHARES
- -------------------------------------------------------------------
Management fee(3) .50% .50%
- -------------------------------------------------------------------
Distribution and
Service (12b-1) fee(4) .50% 1.00%
- -------------------------------------------------------------------
Other expenses .87% .87%
- -------------------------------------------------------------------
Total Fund
Operating expenses 1.87% 2.37%
- -------------------------------------------------------------------
</TABLE>
1 Lower sales charges are available depending upon the amount invested. See
"Distribution Arrangements."
2 The CDSC on Class B Shares declines over five years starting with year one
and ending in year six as follows: 4%, 4%, 3%, 2%, 1%.
3 The Adviser is currently limiting the management fee paid by the Fund for
the current fiscal year to 0.40% of the Fund's average daily net assets.
The Adviser may revise or cancel this expense limitation at any time and
will notify you of any material change.
4 The Distributor is currently limiting the Distribution and Service fees
paid by the Fund for the current fiscal year to 0.19% and 0.54% for Class A
Shares and Class B Shares, respectively. The Distributor may revise or
cancel this expense limitation at any time and will notify you of any
material change.
6
<PAGE> 10
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
Use this table to compare fees and expenses with those of other Funds. It
illustrates the amount of fees and expenses you would pay, assuming the
following:
* $10,000 investment
* 5% annual return
* redemption at the end of each period
* no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison purposes only, your
actual costs will be different.
<TABLE>
<CAPTION>
1 3 5 10
INCOME FUND Year Years Years Years
<S> <C> <C> <C> <C>
CLASS A SHARES $558 $941 $1,348 $2,483
----------------------------- ------- ---------- --------- ---------
CLASS B SHARES
Assuming Redemption $280 $769 $1,275 $2,706
Assuming no Redemption $240 $739 $1,265 $2,706
----------------------------- ------- ---------- --------- ---------
</TABLE>
RISK/RETURN SUMMARY OF MMA PRAXIS INTERNATIONAL FUND
INVESTMENT OBJECTIVES The International Fund seeks capital
appreciation. To a lesser extent, it seeks
current income.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity
securities of foreign companies which mean
companies organized under the laws of,
headquartered in, or whose common equity
securities are principally traded in
countries outside the United States.
PRINCIPAL INVESTMENT RISKS Because the value of the Fund's investments
will fluctuate with market conditions, so
will the value of your investment in the
Fund. You could lose money on your
investment in the Fund, or the Fund could
underperform other investments. Some of the
Fund's holdings may underperform its other
holdings. Because the Fund invests primarily
in foreign securities, it is subject to the
additional risks presented by foreign
investments such as changes in currency
exchange rates, a lack of adequate company
information and political instability.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
* INVESTING FOR A LONG-TERM GOAL SUCH AS
RETIREMENT (FIVE YEAR INVESTMENT HORIZON)
* LOOKING TO ADD A GROWTH COMPONENT TO YOUR
PORTFOLIO
* LOOKING TO ADD FOREIGN INVESTMENT HOLDINGS
TO YOUR PORTFOLIO
7
<PAGE> 11
This Fund will not be appropriate for
anyone:
* INVESTING FOR MONTHLY INCOME
* PURSUING A SHORT-TERM GOAL OR INVESTING
EMERGENCY RESERVES
* SEEKING SAFETY OF PRINCIPAL
* SEEKING A STABLE SHARE PRICE
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Class B Shares of the
International Fund have performed and how their performance has varied from year
to year. The bar chart shows the Fund's performance during its first full fiscal
year since its inception on April 1, 1997. The table below it compares the
Fund's performance over time to that of the Morgan Stanley Capital
International/Europe Australia and Far East Index.(3)
PERFORMANCE BAR CHART AND TABLE(1)
----------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31(2)
[BAR GRAPH]
<TABLE>
<CAPTION>
1998
<S> <C>
Percentage
</TABLE>
The bar chart above does not reflect the impact of any applicable sales charges
or account fees which would reduce returns. Of course, past performance does not
indicate how the Fund will perform in the future.
- -------------------------------------------------------------
Best quarter: Q_ 1998 +____%
- -------------------------------------------------------------
Worst quarter: Q_ 1998 -____%
- -------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
INTERNATIONAL FUND Fund Past Year Since
Inception Inception
<S> <C> <C> <C>
(with applicable CDSC) 4/1/97 __% __%
MORGAN STANLEY CAPITAL
INTERNATIONAL/ EUROPE, 4/1/97 __% __%
AUSTRALIA and FAR EAST INDEX(2)
</TABLE>
The table assumes that shareholders redeem all their fund shares at the end of
the period indicated.
- ----------------------
1 Performance depicted is for the Class B Shares only. Class A Shares were
not offered prior to May 1, 1999.
2 Both charts assume reinvestment of dividends and distributions.
3 An unmanaged index generally representative of international stocks.
8
<PAGE> 12
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
As an investor in the International Fund, you will pay the following fees and
expenses. Shareholder transaction fees are paid from your account. Annual Fund
operating expenses are paid out of Fund assets, and are reflected in the share
price.
<TABLE>
<S> <C> <C>
Shareholder
Transaction
Fees (fees
paid by you
directly) A SHARES B SHARES
Maximum sales
charge (load)
on purchases 5.25%(1) None
- ----------------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGE
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 elapsed. This is called a
Contingent Deferred Sales Charge ("CDSC").
<TABLE>
- ----------------------------------------------------------------------
<S> <C> <C>
Maximum deferred
sales charge (load) None 4.00%(2)
Annual Fund
Operating
Expenses
(expenses paid from
Fund assets) A SHARES B SHARES
- ----------------------------------------------------------------------
Management fee .90% .90%
- ----------------------------------------------------------------------
Distribution and
Service (12b-1) fee(3) .50% 1.00%
- ----------------------------------------------------------------------
Other expenses 1.29% 1.29%
- ----------------------------------------------------------------------
Total Fund
operating expenses 2.69% 3.19%
- ----------------------------------------------------------------------
</TABLE>
1 Lower sales charges are available depending upon the amount invested. See
"Distribution Arrangements."
2 The CDSC on Class B Shares declines over five years starting with year one
and ending in year six as follows: 4%, 4%, 3%, 2%, 1%.
3 The Distributor is currently limiting the Distribution and Service fees
paid by the Fund for the current fiscal year to 0.30% and 0.68% for Class A
Shares and Class B Shares, respectively. The Distributor may revise or
cancel this expense limitation at any time and will notify you of any
material change.
9
<PAGE> 13
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
Use this table to compare fees and expenses with those of other Funds. It
illustrates the amount of fees and expenses you would pay, assuming the
following:
* $10,000 investment
* 5% annual return
* redemption at the end of each period
* no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison purposes only, your
actual costs will be different.
<TABLE>
<CAPTION>
1 3 5 10
INTERNATIONAL FUND Year Years Years Years
<S> <C> <C> <C> <C>
CLASS A SHARES $783 $1,316 $1,875 $3,388
------------------------------ -------- -------- --------- ---------
CLASS B SHARES
Assuming Redemption $362 $1,013 $1,679 $3,494
Assuming no Redemption $322 $983 $1,669 $3,494
------------------------------ -------- -------- --------- ---------
</TABLE>
10
<PAGE> 14
INVESTMENT OBJECTIVES AND STRATEGIES
CRITERIA FOR SOCIALLY RESPONSIBLE INVESTING
Although Praxis is a word more commonly used in theological circles
than in the context of mutual funds and finance, MMA Capital Management (the
"Adviser") believes that it captures the essence of the MMA Praxis Mutual Fund's
(the "Company's") investment philosophy. Praxis refers to a way of joining
belief and action. It holds that faith detached from works is merely escapism.
The goal of the Company is to join beliefs with deeds, using the tools
of socially responsible investing. The Company is governed by a policy that
applies social and financial screens 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 human
well-being, peace, and justice through its investment decisions.
When considering an investment, the Adviser analyzes the performance of
the issuing company not only for its financial strengths and outlook, but also
for the company's performance on social issues. That is based on the tenet that
social investing is good business. By utilizing social investing screens, the
Company can encourage corporations to be good stewards of their resources, to
care for the environment, and to create work environments that benefit both the
employees and the shareholders.
Investors should understand, however, that socially responsible
investing outside the United States can be more difficult. Countries have quite
different laws and regulations governing the securities markets, financial and
company disclosure, environmental, labor, health and welfare standards and
practices. Generally, there is less information available to the public about
the business activities and practices of foreign companies. As a result, it is
more difficult to effectively apply social investing screens abroad than it is
in the United States. Accordingly, the International Fund may unintentionally
invest in foreign companies that may engage in a line of business or other
practices that do not meet the Fund's social screens. Nevertheless, it is the
goal of the Adviser (the term Adviser includes Oeschle International Advisors,
LLC (the "Sub-Adviser") where appropriate in the context) to avoid investment in
such companies domestically, and international and foreign investments will be
screened to attempt to assure that the Fund's investments are socially
responsible based upon the Company's principles. When the Company becomes aware
that it has invested in a company that may be engaged in an activity which is
inconsistent with the Company's principles, it may first seek to use its
influence to change that activity and may eventually determine to sell its
investment. The Company is not under any strict time schedule to make a decision
to sell such investments.
Among the Company's principles are the following:
1. Peace. Peace is a major concern. The manufacture and support of
military armaments are not consistent with the Company's values. Thus, the
Adviser restricts investments in major military contractors and in arms
production by avoiding investments in:
* companies on the most recent list of the United
States Department of Defense's 50 largest contractors;
11
<PAGE> 15
'
* United States companies with 5 percent or more of their gross
sales in defense contracts;
* United States Treasury Bills, Notes and Bonds since
a portion of the proceeds from such securities are used to finance
military expenditures; and
* foreign companies for which the ratio of military
equipment sales to gross revenues is 5% or greater.
2. JUSTICE. In all investments in United States based companies, the
Adviser seeks appropriate means to advocate justice and/or focus on investments
which support and enhance the quality of human life. In this connection the
Adviser will seek to invest in those companies whose products provide for basic
human needs such as food, clothing and housing. In addition to considering the
product produced, the Adviser will seek to advocate justice by investing in
companies that provide for equal employment opportunities, that have positive
community relationships, and that strive to create wholesome work environments
for their employees.
3. STEWARDSHIP AND HEALTH. Some businesses are involved with products
that are not consistent with stewardship and health. The Adviser will avoid
investments in companies that manufacture alcoholic beverages or tobacco and
companies involved in the manufacture or direct operation of gambling equipment
or facilities. The Adviser favors companies that provide products or services
that promote a better quality of life such as health care, housing, food, and
education.
4. RESPONSIBLE MANAGEMENT. The conduct of business is the
responsibility of a company's management. As a matter of general policy, the
Funds favor companies with positive job training programs, effective equal
employment opportunities, and positive environmental records. The Adviser avoids
investments in companies that are proven to be involved in or are consistently
unconcerned about practices that are significantly detrimental to the natural
environment. As noted above, varying disclosure and legal standards in other
countries make it more difficult to effectively apply this policy abroad than in
the United States. The International Fund may unintentionally make investments
in foreign companies that do not adhere to the same standards as United States
domiciled companies. However, the International Fund will attempt to give
preference to companies for which there is a basis for concluding that
management has not engaged in significantly harmful employment, environmental or
social practices. The International Fund will also avoid those companies
significantly involved in activities known to the Adviser to be socially or
environmentally harmful.
Consistent with the foregoing investment criteria for socially
responsible investing, the Board of Trustees of the Company has authorized the
Funds to make certain types of community development investments. These consist
of investments in local community oriented investment programs which are
intended to provide economic growth and opportunity in areas deemed suitable for
investments of this type. The objective of such community development
investments is to foster sustainable social and economic well-being through the
use of targeted investments. The Adviser has developed specific guidelines which
it relies upon when making community development investments.
- --------------------------------------------------------------------------------
MMA PRAXIS GROWTH FUND
- --------------------------------------------------------------------------------
Ticker Symbol: Class A None Class B MMPGX
---- -----
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
- -------------------------------------------
INVESTMENT OBJECTIVE
The primary investment objective of the Growth Fund is to seek
capital appreciation with current income being a secondary investment objective.
12
<PAGE> 16
POLICIES AND STRATEGIES
Through value-oriented investing, the Fund invests primarily
in undervalued securities of medium to large capitalization companies (i.e.,
those companies having greater than $200 million in assets) which, in the
Adviser's view, provide products and services that are consistent with the
Company's socially responsible criteria.
Consistent with the Growth Fund's investment objective, the Fund:
* invests substantially all, but in no event less than 65%, of the
value of its total assets in equity securities
* invests in the following types of equity securities: common
stocks, preferred stocks, securities convertible into common
stocks, warrants and any rights to purchase common stocks
* may invest in fixed income securities consisting of corporate
notes, bonds and debentures that are rated investment grade at
the time of purchase
* may invest in obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government (excluding U.S.
Treasury instruments)
* may invest in the securities of foreign issuers and may acquire
sponsored and unsponsored American Depositary Receipts and
European Depositary Receipts
* may invest in convertible securities which are securities which
are convertible into or exchangeable for common stock
* may engage in repurchase transactions pursuant to * which the
Fund purchases a security and simultaneously commits to resell
that security to the seller (either a bank or a securities
dealer) at an agreed upon price on an agreed upon date (usually
within seven days of purchase)
13
<PAGE> 17
* may invest in other investment companies
MMA PRAXIS INTERMEDIATE INCOME FUND
- --------------------------------------------------------------------------------
Ticker Symbol: Class A None Class B MMPlX
---- -----
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
- -------------------------------------------
INVESTMENT OBJECTIVE
The primary investment objective of the Income Fund is to seek
current income with capital appreciation as a secondary objective.
POLICIES AND STRATEGIES
Under normal market conditions the Fund will invest
substantially all, but in no event less than 65%, of the value of its total
assets in fixed income securities of all types, consistent with the Company's
socially responsible criteria. Under normal market conditions the Fund will
maintain a dollar-weighted average maturity of three to ten years.
Consistent with the Intermediate Income Fund's investment objective, the
Fund:
* invests in fixed income securities consisting of bonds, fixed
income preferred stocks, debentures, notes, zero-coupon
securities, mortgage-related and other asset-backed securities,
state municipal or industrial revenue bonds, obligations issued
or guaranteed by agencies or instrumentalities of the U.S.
Government, debt securities convertible into, or exchangeable
for, common stocks, foreign debt securities, guaranteed
investment contracts, income participation loans, first mortgage
loans and participation certificates in pools of mortgages
issued or guaranteed by agencies of instrumentalities of the
U.S. Government
* may invest up to 10% of its assets in fixed income securities
rated within the six highest rating categories at the time of
purchase by one or more NRSROs.
* may engage in repurchase transactions pursuant to which the Fund
purchases a security and simultaneously commits to resell that
security to the seller (either a bank or a securities dealer) at
an agreed upon price on an agreed upon date (usually within
seven days of purchase)
* may purchase securities on a when-issued or delayed-delivery
basis in which a security's price and yield are fixed on a
specific date but payment
14
<PAGE> 18
and delivery are scheduled for a future date beyond the standard
settlement period
* may invest in other investment companies
In the event that the Adviser determines that current market
conditions are not suitable for the Fund's typical investments, the Adviser may
instead, for temporary defensive purposes during such unusual market conditions,
invest all or any portion of the Fund's assets in money market instruments and
repurchase agreements.
MMA PRAXIS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Ticker Symbol: Class A None Class B MMPNX
---- -----
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
- -------------------------------------------
INVESTMENT OBJECTIVE
The primary investment objective of the International Fund is
to seek capital appreciation with current income as a secondary objective.
POLICIES AND STRATEGIES
The Fund invests at least 65% of the value of its total assets
in equity securities of foreign companies which means companies organized under
the laws of, headquartered in, or whose common equity securities are principally
traded outside the United States. The Fund will normally invest in at least 8
different countries outside the United States. The Fund's Sub-Adviser attempts
to identify opportunities for return based on a strategy that seeks out
securities markets that it believes are undervalued and then overweighting those
markets while controlling risk through country and issuer diversification.
Consistent with the International Fund's investment objective, the Fund:
* invests in common stocks of foreign issuers
* invests in sponsored and unsponsored depository receipts
* invests in options, warrants and other securities convertible
into common stocks
* may invest up to 35% of its total assets in investment grade
fixed-income instruments
* may purchase and sell foreign currencies on a spot or forward
basis
15
<PAGE> 19
* may engage in repurchase transactions pursuant to which the Fund
purchases a security and simultaneously commits to resell that
security to the seller (either a bank or a securities dealer) at
an agreed upon price on an agreed upon date (usually within
seven days of purchase)
* may engage in options transactions
* may engage in futures transactions as well as invest in options
on futures contracts solely for hedging purposes
* may lend securities to qualified brokers, dealers, banks and
other financial institutions for the purpose of realizing
additional income
* may purchase securities on a when-issued or delayed-delivery
basis in which a security's price and yield are fixed on a
specific date but payment and delivery are scheduled for a
future date beyond the standard settlement period
* may invest in other investment companies
In the event that the Sub-Adviser determines that current market
conditions are not suitable for the Fund's typical investments, the Sub-Adviser
may instead, for temporary defensive purposes, invest all or any portion of the
Fund's assets in U.S. equity securities, money market instruments, U.S.
Government-related securities and repurchase agreements.
INVESTMENT RISKS
RISK FACTORS: ALL FUNDS
An investment in the Funds is subject to investment risks, including
the possible loss of the principal amount invested.
Generally, the Funds will be subject to the following risks:
* MARKET RISK: Market risk refers to the risk related to investments in
securities in general and the daily fluctuations in the securities markets.
The Funds' performance per share will change daily based on many factors,
including fluctuation in interest rates, the quality of the instruments in
each Fund's investment portfolio, national and international economic
conditions and general market conditions.
* INTEREST RATE RISK: Interest rate risk refers to the risk that the value of
the Funds' fixed income securities can change in response to changes in
prevailing interest rates causing volatility and possible loss of value as
rates increase.
* CREDIT RISK: Credit risk refers to the risk related to the credit quality
of the issuer of a security held in a Fund's portfolio. The Funds could
lose money if the issuer of a security is unable to meet its financial
obligations.
16
<PAGE> 20
* YEAR 2000 RISK: Like other funds and business organizations around the
world, the Funds could be adversely affected if the computer systems used
by the Adviser, the Sub-Adviser and the Funds' other service providers do
not properly process and calculate date related information for the year
2000 and beyond. In addition, Year 2000 issues may adversely affect
companies in which the Funds invest where, for example, such companies
incur substantial costs to address Year 2000 issues or suffer losses caused
by the failure to adequately or timely do so.
The Funds have been advised that the Adviser and the Fund's other service
providers (i.e., Sub-Adviser, Administrator, Transfer Agent, Fund
Accounting Agent, Custodian and Distributor) have developed and are
implementing clearly defined and documented plans intended to minimize
risks to services critical to the Funds' operations associated with Year
2000 issues. Internal efforts include a commitment to dedicate adequate
staff and funding to identify and remedy Year 2000 issues, and specific
actions such as taking inventory of software systems, determining inventory
items that may not function properly after December 31, 1999, reprogramming
or replacing such systems, and retesting for Year 2000 readiness. The
Fund's Adviser and service providers are likewise seeking assurances from
their respective vendors and suppliers that such entities are addressing
any Year 2000 issues, and each provider intends to engage, where
appropriate, in private and industry or "streetwide" interface testing of
systems for Year 2000 readiness.
In the event that any systems upon which the Funds are dependent are not
Year 2000 ready by December 31, 1999, administrative errors and account
maintenance failures would likely occur.
While the ultimate costs or consequences of incomplete or untimely
resolution of Year 2000 issues by the Adviser or the Funds' service
providers cannot be accurately assessed at this time, the Funds currently
have no reason to believe that the Year 2000 plans of the Adviser and each
Fund's service providers will not be completed by December 31, 1999, or
that the anticipated costs associated with full implementation of their
plans will have a material adverse impact on either their business
operations or financial condition of those of the Funds. The Funds and the
Adviser will continue to closely monitor developments relating to this
issue, including development by the Adviser and the Funds' service
providers of contingency plans for providing back-up computer services in
the event of a systems failure or the inability of any provider to achieve
Year 2000 readiness. Separately, the Adviser will monitor potential
investment risk related to Year 2000 issues.
SPECIFIC RISK FACTORS: THE INTERNATIONAL FUND - FOREIGN SECURITIES
- -------------------------------------------------------------------
The Funds, and in particular the International Fund, may invest in foreign
securities which involve investment risks different from those associated with
domestic securities. Foreign investments may be riskier than U.S. investments
because of unstable international political and economic conditions, foreign
controls on investment and currency exchange rates, withholding taxes, or a lack
of adequate company information, lack of liquidity, and lack of government
regulation.
The International Fund may invest up to 20% of its assets in countries
with less developed securities markets. Investments in such emerging markets
present greater risk than investing in foreign issuers in general. The risk of
political or social upheaval is greater in
17
<PAGE> 21
emerging markets. In addition, a number of emerging markets restrict foreign
investment in stocks. Inflation and rapid fluctuations in inflation rates have
had and may continue to have negative effects on the economies and securities
markets of certain emerging market countries. Moreover, many of the emerging
securities markets are relatively small, have low trading volumes, suffer
periods of relative illiquidity, and are characterized by significant price
volatility.
Please see the Statement of Additional Information for more information about
these investment policies.
SHAREHOLDER INFORMATION
- -----------------------
PRICING OF FUND SHARES
- ----------------------
HOW NAV IS CALCULATED
The NAV is calculated by adding the total value of the Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
TOTAL ASSETS - LIABILITIES
--------------------------
Number of Shares
Outstanding
1. NAV is calculated separately for Class A Shares and Class B Shares.
2. You can find each Fund's NAV daily in The Wall Street Journal and other
newspapers.
Per share net asset value (NAV) for each Fund is determined and its shares are
priced at the close of regular trading on the New York Stock Exchange, normally
at 4:00 p.m. Eastern time on days the Exchange is open.
Your order for purchase, sale or exchange of shares is priced at the next NAV
calculated after your order is accepted by the Fund plus any applicable sales
charge as noted in the section on "Distribution Arrangements/Sales Charges."
This is what is known as the offering price.
Each Fund's securities are generally valued at current market prices. If market
quotations are not available, prices will be based on fair value as determined
by the Funds' Trustees.
18
<PAGE> 22
PURCHASING AND ADDING TO YOUR SHARES
You may purchase the Funds through the Distributor or through investment
representatives, who may charge additional fees and may require higher minimum
investments or impose other limitations on buying and selling shares. If you
purchase shares through an investment representative, that party is responsible
for transmitting orders by close of business and may have an earlier cut-off
time for purchase and sale requests. Consult your investment representative for
specific information.
<TABLE>
<CAPTION>
ACCOUNT TYPE MINIMUM MINIMUM
INITIAL INVESTMENT SUBSEQUENT
CLASS A AND
CLASS B
<S> <C> <C>
Regular $ 500 $ 50
(non-retirement)
Retirement $ 500 $ 50
Automatic
Investment Plan $ 50 $ 50
</TABLE>
All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks are not accepted.
A Fund may waive its minimum purchase requirement and the Distributor may reject
a purchase order if it considers it in the best interest of the Fund and its
shareholders
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
BY REGULAR MAIL
Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "MMA Praxis Mutual Funds"
3. Mail to: MMA Praxis Mutual Funds, P.O. Box 182446, Columbus, OH 43218-2446
Subsequent:
1. Use the investment slip attached to your account statement.
Or, if unavailable,
2. Include the following information on a piece of paper:
* Fund name and Class A or Class B
* Amount invested
* Account name
* Account number
Include your account number on your check.
3. Mail to: MMA Praxis Mutual Funds, P.O. Box 182446, Columbus, OH 43218-2446
BY OVERNIGHT SERVICE
See instructions 1-2 above for subsequent investments.
4. Send to: MMA Praxis Mutual Funds
19
<PAGE> 23
c/o BISYS Fund Services,
Attn: T.A. Operations, 3435 Stelzer Road, Columbus, OH 43219.
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be a
United States Bank. Your bank or broker may charge for this service.
Establish electronic purchase option on your account application or call
1-800-9-PRAXIS. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-9-PRAXIS to arrange a transfer from your bank account.
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial institutions to send funds to each other, almost
instantaneously. With an electronic purchase or sale, the transaction is made
through the Automated Clearing House (ACH) and may take up to eight days to
clear. There is generally no fee for ACH transactions.
- --------------------------------------------------------------------------------
BY WIRE TRANSFER
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
For initial investment:
Please call 1-800-9-PRAXIS for a confirmation number and instructions for
returning your completed application.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
Huntington National Bank
Routing Number: ABA #044000024
DDA#0189607545
Include:
Your name
Your confirmation number
After instructing your bank to wire the funds, call 1-800-9-PRAXIS to advise us
of the amount being transferred and the name of your bank.
You can add to your account by using the convenient options described below. The
Fund reserves the right to change or eliminate these privileges at any time with
60 days notice.
20
<PAGE> 24
AUTOMATIC INVESTMENT PLAN
You can make automatic investments in the Funds from your bank account.
Automatic investments can be as little as $50, once you've invested the minimum
required to open the account.
To invest regularly from your bank account:
* Complete the Automatic Investment Plan portion on your Account
Application. Make sure you note:
* Your bank name, address and account number
* The amount you wish to invest automatically (minimum $50)
* How often you want to invest (every month, 4 times a
year, twice a year or once a year)
* Attach a voided personal check.
- --------------------------------------------------------------------------------
Dividends and Distributions
- ---------------------------
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Dividends are higher for Class A shares than for Class B shares, because Class A
shares have lower distribution expenses. Capital gains are distributed at least
annually.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE
OWNED YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION
DATE, SOME OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A
DISTRIBUTION.
- --------------------------------------------------------------------------------
21
<PAGE> 25
SELLING YOUR SHARES
- -------------------
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Fund, its transfer agent, or your
investment representative. Normally you will receive your proceeds within a week
after your request is received. See section on "General Policies on Selling
Shares" below.
- --------------------------------------------------------------------------------
WITHDRAWING MONEY FROM YOUR
FUND INVESTMENT
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares or a
redemption of shares.
- --------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE
When you sell Class B shares, you will be charged a fee for any shares that have
not been held for a sufficient length of time. These fees will be deducted from
the money paid to you. See the section on "Distribution Arrangements/Sales
Charges" below for details.
22
<PAGE> 26
INSTRUCTIONS FOR SELLING SHARES
By telephone 1. Call 1-800-9-PRAXIS with instructions
(unless you have declined as to how you wish to
telephone sales privileges) receive your funds (mail, wire,
electronic transfer).
- ------------------------------------- ------------------------------------------
By mail 1. Call 1-800-9-PRAXIS to request
redemption forms or write a
letter of instruction indicating:
* your Fund and account number
* amount you wish to redeem
* address where your check should be sent
* account owner signature
2. Mail to:
MMA PRAXIS MUTUAL FUNDS
P.O. Box 182446
Columbus, OH 43218-2446
- ------------------------------------- ------------------------------------------
By overnight service See instruction 1 above.
2. Send to
MMA PRAXIS MUTUAL FUNDS
c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, OH 43219
- ------------------------------------- ------------------------------------------
Wire transfer Call 1-800-9-PRAXIS to request a wire
You must indicate this option transfer.
on your application.
If you call by 4 p.m. Eastern time, your
payment will normally be wired to your
bank on the next business day.
The Fund may charge a wire transfer
fee. Note: Your financial
institution may also charge a
separate fee.
AUTOMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly or
annual basis. The minimum withdrawal is $50. To activate this feature:
* Make sure you've checked the appropriate box on the Account Application. Or
call 1-800-9-PRAXIS.
* Include a voided personal check.
* Your account must have a value of $10,000 or more to start withdrawals.
* If the value of your account falls below $500, you may be asked to add
sufficient funds to bring the account back to $500, or the Fund may close
your account and mail the proceeds to you.
23
<PAGE> 27
No CDSC will be assessed on redemptions made in accordance with this feature
that do not exceed 12% of an account's net asset value on an annualized basis.
For example, monthly and quarterly redemptions will not be subject to a CDSC if
they do not exceed 1% or 3%, respectively, of an account's net asset value on
the redemption date. Any redemptions in accordance with this feature in excess
of this limit are still subject to the applicable CDSC.
GENERAL POLICIES ON SELLING SHARES
- ----------------------------------
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Redemption requests requiring a signature guarantee which include each of
the following.
* Redemptions over $10,000
* Your account registration or the name(s) in your account has changed
within the last 15 days
* The check is not being mailed to the address on your account
* The check is not being made payable to the owner of the account
* The redemption proceeds are being transferred to another Fund account
with a different registration.
A signature guarantee can be obtained from a financial institution,
such as a bank, broker-dealer, credit union, clearing agency, or savings
association.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to insure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders. If appropriate precautions have not been taken, the
Transfer Agent may be liable for losses due to unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, you cannot redeem any
portion of it until the Transfer Agent is satisfied that the check has cleared
(which may require up to 15 business days). You can avoid this delay by
purchasing shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission ("SEC") in order to protect
remaining shareholders.
REDEMPTION IN KIND
The Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(for example, more than 1% of the Fund's net assets). If the Fund deems it
advisable for the benefit of all shareholders, redemption in kind will consist
of securities equal in market value to your shares, net of any CDSC. When you
convert these securities to cash, you will pay brokerage charges.
24
<PAGE> 28
CLOSING OF SMALL ACCOUNTS
If your account falls below $500, the Fund may ask you to increase your balance.
If it is still below $500 after 60 days, the Fund may close your account and
send you the proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that remain
uncashed for six months will be canceled and the money reinvested in the Fund.
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
This section describes the sales charges and fees you will pay as an investor in
the Funds and ways to qualify for reduced sales charges.
<TABLE>
<CAPTION>
- ----------------------- ------------------------------ ------------------------------
Class A Class B
- ----------------------- ------------------------------ ------------------------------
<S> <C> <C>
Sales Charge (Load) Front-end sales charge; No front-end sales charge. A
reduced sales charges contingent deferred sales
available. (1) charge (CDSC) may be imposed
on shares redeemed
within six years
after purchase.
Maximum investment
is $250,000.
- ------------------------ ------------------------------- ------------------------------
Distribution and Service Subject to annual Subject to annual distribution
(12b-1) Fee distribution and shareholder and shareholder servicing fees
servicing fees of up to .50% of up to 1.00% of the Fund's
of the Fund's total assets. assets.
- ----------------------- ------------------------------ -------------------------------
Fund Expenses Lower annual expenses then Higher annual expenses than
Class B shares. Class A shares.
- ----------------------- ------------------------------ -------------------------------
</TABLE>
1 You may incur a contingent deferred sales charge on shares redeemed within
two years of a purchase of $1 million or more.
CALCULATION OF SALES CHARGES
CLASS A SHARES
Class A shares are sold at their public offering price. This price includes the
initial sales charge. Therefore, part of the money you invest will be used to
pay the sales charge. The remainder is
25
<PAGE> 29
invested in Fund shares. The sales charge decreases with larger purchases. There
is no sales charge on reinvested dividends and distributions.
The current sales charge rates for each of the Funds are as follows:
FOR THE GROWTH FUND AND THE INTERNATIONAL FUND
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER ALLOWANCE
AS A % OF AS A % OF AS A % OF
YOUR INVESTMENT OFFERING PRICE YOUR NET INVESTMENT OFFERING PRICE
- ----------------------------- ---------------------- ------------------- -------------------
<S> <C> <C> <C>
Up to $49,999 5.25% 5.54% 4.75%
- ----------------------------- ---------------------- ------------------- -------------------
$50,000 up to $99,999 4.00% 4.17% 3.50%
- ----------------------------- ---------------------- ------------------- -------------------
$100,000 up to $249,999 3.00% 3.09% 2.50%
- ----------------------------- ---------------------- ------------------- -------------------
$250,000 up to $499,999 2.00% 2.04% 1.50%
- ----------------------------- ---------------------- ------------------- -------------------
$500,000 up to $999,999 1.50% 1.52% 1.00%
- ----------------------------- ---------------------- ------------------- -------------------
$1,000,000 and above(2) 0.00% 0.00% 0.00%
- ----------------------------- ---------------------- ------------------- -------------------
</TABLE>
FOR THE INTERMEDIATE INCOME FUND
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER ALLOWANCE
AS A % OF AS A % OF AS A % OF
YOUR INVESTMENT OFFERING PRICE YOUR NET INVESTMENT OFFERING PRICE
- ----------------------------- ---------------------- ------------------- -------------------
<S> <C> <C> <C>
Up to $49,999 3.75% 3.90% 3.50%
- ----------------------------- ---------------------- ------------------- -------------------
$50,000 up to $99,999 3.25% 3.36% 3.00%
- ----------------------------- ---------------------- ------------------- -------------------
$100,000 up to $249,999 2.50% 2.56% 2.25%
- ----------------------------- ---------------------- ------------------- -------------------
$250,000 up to $499,999 1.50% 1.52% 1.25%
- ----------------------------- ---------------------- ------------------- -------------------
$500,000 up to $999,999 0.75% 0.76% 0.50%
- ----------------------------- ---------------------- ------------------- -------------------
$1,000,000 and above(2) 0.00% 0.00% 0.00%
- ----------------------------- ---------------------- ------------------- -------------------
</TABLE>
CLASS B SHARES
Class B shares of the Funds are offered at NAV, without any up-front sales
charge. Therefore, all the money you invest is used to purchase Fund shares.
However, if you sell your shares of a Fund before the fifth anniversary of
purchase, you will have to pay a contingent deferred sales charge at the time of
redemption. The CDSC will be based upon the lower of the NAV at the time of
purchase or the NAV at the time of redemption according to the schedule below.
There is no CDSC on reinvested dividends or distributions.
- ------------
2 There is no initial sales charge on purchases of $1 million or more. However,
a contingent deferred sales charge (CDSC) of up to 1.00% of the purchase price
will be charged to the shareholder if shares are redeemed in the first year
after purchase, or up to .50% if redeemed in the second year after purchase.
This charge will be based on the lower of your cost for the shares or their NAV
at the time of redemption. There will be no CDSC on reinvested distributions.
26
<PAGE> 30
<TABLE>
<CAPTION>
- --------------------------------------- -------------------------------------
CDSC as a % of Dollar
Years Since Purchase Amount Subject to Charge
- --------------------------------------- -------------------------------------
<S> <C>
0-1 4.00%
1-2 4.00%
2-3 3.00%
3-4 2.00%
4-5 1.00%
more than 5 None
- -------------------------------------- --------------------------------------
</TABLE>
If you sell some but not all of your shares, certain shares not subject to the
CDSC (i.e., shares purchased with reinvested dividends) will be redeemed first,
followed by shares subject to the lowest CDSC (typically shares held for the
longest time).
For example, assume an investor purchased 100 shares at $10 a share (for a total
cost of $1,000), three years later the shares have a net asset value of $12 per
share and during that time the investor acquired 10 additional shares through
dividend reinvestment. If the investor then makes one redemption of 50 shares
(resulting in proceeds of $600, 50 shares X $12 per share), the first 10 shares
redeemed will not be subject to the contingent deferred sales charge because
they were acquired through reinvestment of dividends. With respect to the
remaining 40 shares redeemed, the contingent deferred sales charge is charged at
$10 per share (because the original purchase price of $10 per share is lower
than the current net asset value of $12 per share). Therefore, only $400 of the
$600 such investor received from selling his or her shares will be subject to
the contingent deferred sales charge, at a rate of 3.00% (the applicable rate in
the third year after purchase).
SALES CHARGE REDUCTIONS
Reduced sales charges for Class A shares are available to shareholders with
investments of $50,000 or more. In addition, you may qualify for reduced sales
charges under the following circumstances.
* Letter of Intent. You inform the Fund in writing that you intend to
purchase enough shares over a 13-month period to qualify for a reduced
sales charge. You must include a minimum of 5% of the total amount you
intend to purchase with your letter of intent.
* Rights of Accumulation. When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.
* Combination Privilege. Combine accounts of multiple Funds or accounts of
immediate family household members (spouse and children under 21) to
achieve reduced sales charges. Shareholders must instruct the Fund in
writing to have the household accounts combined in order to qualify for the
Combination Privilege.
SALES CHARGE WAIVERS
The following qualify for waivers of Class A Shares front end sales charges and
Class B Shares CDSC:
(1) following the death or disability (as defined in the Statement of
Additional Information) of a Shareholder (CDSC Waiver);
(2) to the extent that the redemption represents a minimum required
distribution from an Individual Retirement Account or other retirement plan
to a Shareholder who has attained the age of 70 1/2 (CDSC Waiver);
(3) for accounts owned by Trustees of the Company, officers, directors,
employees and retired employees of (a) the Adviser and its affiliates and
(b) The BISYS Group, Inc. and its affiliates, and spouses and children
under the age of 21 of each of the foregoing;
(4) for accounts owned by employees (and their spouses and children under the
age of 21) of any broker-dealer with whom the Distributor enters into a
dealer agreement to sell Shares of the Funds;
27
<PAGE> 31
(5) to the extent that the redemption is involuntary (CDSC Waiver);
(6) for accounts owned by all MMA Capital Management and Mennonite Foundation
investment advisory accounts;
(7) for investment advisors or financial planners who place trades for their
own accounts or the accounts of their clients, and who charge a management,
consulting or other fee for their services; and clients of such investments
advisors or financial planners who place trades for their own accounts if
the accounts are linked to the master account of such investment advisor or
financial planner on the books and records of the broker or agent: such
accounts include retirement and deferred compensation plans and trusts used
to fund those plans, including, but not limited to, those defined in
Section 401(a), 403(b) or 457 of the Internal Revenue Code and "rabbi
trusts;"
(8) provided that the Shareholder withdraws no more than 12% of the account
value annually using the Auto Withdrawal Plan feature, subject to the
limitation set forth under "Auto Withdrawal Plan", above, (CDSC Waiver);
and
(9) for accounts owned by employees of firms that have entered into an
agreement to offer the Funds as part of their retirement or deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in Section 401(a), 403(b) or 457 of the Internal
Revenue Code; and
(10) for investment of proceeds from redemptions from another mutual fund
complex within 90 days after redemption, provided you had paid a front-end
sales charge when acquiring those shares.
For items 1 and 2 above, shareholders must notify the Distributor either
directly or through their broker-dealers, at the time of purchase or redemption,
that they are entitled to a waiver of the sales charge contingent deferred sales
charge. For Items 3, 4, 6 and 7 above, shareholders must notify the Distributor
directly, AT THE TIME OF PURCHASE, that they are entitled to a waiver of the
contingent deferred sales charge in case of a redemption. The waiver will be
granted subject to confirmation of the investor's situation.
The Distributor and the Adviser, at their expense, may provide compensation to
dealers in connection with sales of Shares of a Fund. Shares sold subject to the
waiver of the Contingent Deferred Sales Charge are not eligible for the payment
of such compensation.
REINSTATEMENT PRIVILEGE
If you have sold Class A Shares or Class B, shares and decide to reinvest in the
Fund within a 90 day period, you will not be charged the applicable sales load
on amounts up to the value of the shares you sold. You must provide a written
reinstatement request and payment within 90 days of the date your instructions
to sell were processed.
DISTRIBUTION AND SERVICE (12b-1) FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and distribution
of the Fund's shares and/or for providing shareholder services. 12b-1 fees are
paid from Fund assets on an ongoing basis, and will increase the cost of your
investment.
* The 12b-1 fees vary by share class as follows:
* Class A shares pay a 12b-1 fee of up to .50% of the average daily net
assets of a Fund. The Distributor may use up to .25% of the 12b-1 fee for
shareholder servicing and up to .25% for distribution.
28
<PAGE> 32
* Class B shares pay a 12b-1 fee of up to 1.00% of the average daily net
assets of the applicable Fund. This will cause expenses for Class B shares
to be higher and dividends to be lower than for Class A shares. The
Distributor may use up to .25% of the 12b-1 fee for shareholder servicing
and up to .75% for distribution.
* The higher 12b-1 fee on Class B shares, together with the CDSC, help the
Distributor sell Class B shares without an "up-front" sales charge. In
particular, these fees help to defray the Distributor's costs of advancing
brokerage commissions to investment representatives.
Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
distribution and service fees.
EXCHANGING YOUR SHARES
INSTRUCTIONS FOR EXCHANGING SHARES
You can exchange your shares in one Fund for shares of another MMA Praxis Mutual
Fund, usually without paying additional sales charges (see "Notes" below). No
transaction fees are charged for exchanges.
You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable.
Exchanges may be made by sending a written request to MMA Praxis Mutual Funds,
P.O. Box 182446, Columbus OH 43218-2446, or by calling 1-800-9-PRAXIS. Please
provide the following information:
* Your name and telephone number
* The exact name on your account and account number
* Taxpayer identification number (usually your Social Security number)
* Dollar value or number of shares to be exchanged
* The name of the Fund from which the exchange is to be made and the
account number.
* The name of the Fund into which the exchange is being made. If this
is an existing account, please provide the account number.
Exchanges between Class A and Class B are prohibited.
See "Selling your Shares" for important information about telephone
transactions.
NOTES ON EXCHANGES
To prevent disruption in the management of the Funds ,due to market timing
strategies, exchange activity may be limited to 4 exchanges within a calendar
year.
The registration and tax identification numbers of the two accounts must be
identical.
The Exchange Privilege (including automatic exchanges) may be changed or
eliminated at any time upon a 60-day notice to shareholders.
MMA PRAXIS INDIVIDUAL
RETIREMENT ACCOUNT ("IRA")
An MMA Praxis IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement programs.
MMA Praxis IRA contributions may be tax-deductible and earnings are
tax-deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted or eliminated for individuals who participate in
certain employer pension plans and whose annual income exceeds certain limits.
Existing IRAs and future contributions up to the IRA maximums, whether
deductible or not, still earn income on a tax-deferred basis.
29
<PAGE> 33
An MMA Praxis Salary Reduction Simplified Employee Pension Plan
("SAR-SEP/IRA") offers employers with 25 or fewer eligible employees the ability
to establish a SEP/IRA that permits salary reduction contributions. A SEP/IRA
may be established on a group basis by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions into IRA's on behalf of
all eligible employees.
All MMA Praxis IRA distribution requests must be made in writing to
BISYS Fund Services. Any additional deposits to an MMA Praxis IRA must
distinguish the type and year of the contribution.
For more information on an MMA Praxis IRA or, to request an MMA Praxis
IRA application, call the Funds at 1-800-9-PRAXIS. Shareholders are advised to
consult a tax adviser regarding IRA contribution and withdrawal requirements and
restrictions.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA PLANS)
An MMA Praxis SIMPLE Plan gives employers the ability to offer tax
deferred IRA accounts to their employees that are funded with salary reduction
contributions and employer matching or non-elective contributions.
403(b)(7) DEFINED CONTRIBUTION PLAN
An MMA Praxis 403(b)(7) Defined Contribution Plan offers employers that
are tax-exempt organizations the ability to establish tax-deferred accounts for
their employees that also permit salary reduction contributions.
DIRECTED DIVIDENDS
A shareholder, with an account having a current market value of at
least $5,000, may elect to have all income dividends and capital gains
distributions reinvested in one of the Company's other Funds (provided the other
Fund is maintained at its minimum required balance). The entire directed
dividend (100%) must be reinvested into the other Fund if this option is chosen.
This option is available only to the same shareholder involving Funds with the
same shareholder registration.
The Directed Dividend Option may be modified or terminated by the
Company at any time after notice to the participating shareholders.
Participation in the Directed Dividend Option may be terminated or changed by
the shareholder at any time by writing the Distributor.
AUTOMATIC VOLUNTARY CHARITABLE CONTRIBUTIONS TO THE MENNONITE FOUNDATION
The Mennonite Foundation, Inc. was organized as a not-for-profit,
public foundation in 1952 and received 501(c)(3) tax status in 1953. The
Foundation's primary purposes are to facilitate the missions of church
institutions through a wide range of planned giving and asset management
services, and to provide stewardship education seminars in church and other
settings.
In keeping with the socially responsible objectives of MMA Praxis
Mutual Funds, Fund shareholders may elect to make automatic, voluntary
contributions of all or a percentage of their income dividends and/or capital
gains to The Mennonite Foundation, Inc. In order to make such
30
<PAGE> 34
an election, shareholders must elect to receive income dividends and/or capital
gain distributions in cash. Shareholders may indicate their desire to contribute
by completing the appropriate section of the account application regarding
dividend elections. In order to qualify for the automatic charitable
contributions plan, shareholders are required to maintain a minimum balance of
$10,000 in the account from which voluntary contributions are made.
The Foundation will manage contributions received from shareholders in
the Foundation's "Charitable Gift Fund," under current operating procedures. A
shareholder may advise the Foundation, with respect to their contributions, as
to the identity of desired charitable distributees, and the possible timing and
amounts of distributions. The Charitable Gift Fund has a minimum distribution
amount of $100. The Foundation retains legal and equitable control of the
Charitable Gift Fund, and follows a published list of guidelines when
determining whether to make a distribution. Shareholders with an account balance
under $10,000 may also participate in The Mennonite Foundation Charitable Gift
Fund by making contributions directly to the Foundation.
In 1998, the Foundation disbursed $____________to church and charitable
organizations.
Contributions to the Foundation are charitable contributions and,
subject to tax law limitations, are tax deductible on the itemized tax return of
the contributor. Shareholders who contribute to the Foundation will receive an
annual report of Foundation activities during the year.
The directors of the Foundation serve in a voluntary capacity and are
not paid directly or indirectly for their service to the Foundation, except for
expenses associated with directors' meetings. The Foundation and the Adviser
share a common board of directors and also have certain officers in common.
You may obtain additional information, including the operating procedures of the
Charitable Gift Fund, by writing to The Mennonite Foundation, 1110 N. Main
Street, P. O. Box 483, Goshen, Indiana, 46528.
CHARITABLE GIFT OPTION
The Charitable Gift Option allows certain Shareholders of the Funds to
designate all or any portion of their accounts to automatically be transferred
to a church or charitable organization at the death of the Shareholder. To
participate in the Charitable Gift Option, Shareholders should call
1-800-9-PRAXIS for more information and to receive the necessary enrollment
forms. For a Shareholder to change the Charitable Gift Option instructions or to
discontinue the feature, a written request of the Shareholder must be sent to
the Distributor. It shall be the responsibility of the Shareholder to ascertain
the tax-exempt qualification of a receiving organization. Neither the Company,
the Adviser, nor the Distributor will verify the qualifications of any receiving
organizations, or issue any charitable receipts. An Investor should consult with
his or her own tax counsel and estate planner as to the availability and tax and
probate consequences of this feature of the Funds under applicable state or
federal law.
31
<PAGE> 35
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income a Fund receives is paid out, less expenses, in the form of dividends
to its shareholders. Income dividends on the Growth Fund are usually paid
quarterly and income dividends on the International Fund are usually paid
semiannually. Dividends on the Intermediate Income Fund are usually paid
monthly. Capital gains for all Funds are distributed at least annually.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
An exchange of shares is considered a sale, and any related gains may be subject
to applicable taxes.
Dividends generally are taxable as ordinary income. Taxation on capital gains
will vary with the length of time the Fund has held the security - not how long
the shareholder has been in the Fund.
Dividends are taxable in the year in which they are paid, even if they appear on
your account statement the following year.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements. There
is a penalty on certain pre-retirement distributions from retirement accounts.
Consult your tax adviser about the federal, state and local tax consequences in
your particular circumstances.
The Funds are required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Funds with their certified taxpayer identification number in compliance with IRS
rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
FUND MANAGEMENT
- ---------------
THE INVESTMENT ADVISER
MMA Capital Management, ("MMA" or the "Adviser"), 1110 North Main
Street, Goshen, Indiana 46528 is the investment adviser for the Funds. The
Adviser, which is a separate corporate entity controlled by the board of
directors of Mennonite Mutual Aid, Inc., is a registered investment adviser with
the SEC. The Adviser has over $_____ million in assets under management,
primarily through management of large accounts for individuals and institutions,
which amount excludes the assets managed by the Adviser for the Funds. MMA has
retained Oechsle International Advisors, LLC ("Oechsle") as investment
sub-adviser to the International Fund. Oechsle, which is located at One
International Place, Boston, Massachusetts 02110 specializes in international
investment management and currently has approximately $__ billion in assets
under management.
32
<PAGE> 36
MMA makes the day-to-day investment decisions for the Growth Fund and the
Intermediate Income Fund and oversees Oechsle's investments for the
International Fund. In addition, MMA continuously reviews, supervises and
administers each Fund's investment programs. For these advisory services, the
Funds paid the following fees during the fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
======================================== ==========================
PERCENTAGE OF AVERAGE
NET ASSETS AS OF 12/31/98
- ---------------------------------------- --------------------------
<S> <C>
Growth Fund .74%
- ---------------------------------------- --------------------------
Intermediate Income Fund .41%*
- ---------------------------------------- --------------------------
International Fund .82%*
- ---------------------------------------- --------------------------
</TABLE>
* The Adviser waived a portion of its fees for the fiscal year ended December
31, 1998. Contractual fees (as a percentage of average daily net assets) were
0.50% and 0.90% for the Intermediate Income Fund and the International Fund,
respectively.
PORTFOLIO MANAGERS
The following individuals serve as portfolio managers for the Funds and are
primarily responsible for the day-to-day management of the Funds' portfolios:
INCOME FUND
Delmar King Delmar King has 27 years of investment experience
with Mennonite Mutual Aid. He received a BA in
Economics from Goshen College and received a
Masters Degree in Business Administration from
Indiana University in 1971. Delmar serves on the
Investment Committee of the Elkhart County
Community Foundation.
GROWTH FUND
Keith Yoder Keith Yoder has 15 years of investment experience.
Keith was a trust investment officer for a
regional bank from 1987 until 1992 when he joined
Mennonite Mutual Aid to manage MMA Capital
Management along with the stock portfolios for the
various Mennonite Mutual Aid entities. Keith is a
Chartered Financial Analyst, a Certified Public
Accountant and a member of the Association for
Investment Management and Research.
INTERNATIONAL FUND
Martina Oechsle Vasconcelles Martina Oechsle is a limited partner of Oechsle
and a portfolio manager/research analyst. Martina
joined Oechsle in February 1990. She received a
BA in Economics and Psychology from Northwestern
University and an MBA in Finance from the
University of Chicago Graduate School of
Business.
Kathleen Harris Kathleen Harris is a limited partner of Oechsle
and a portfolio manager/research analyst. Kathleen
joined Oechsle in January 1995. Prior to her
employment with Oechsle, she was Portfolio Manager
and Investment Director for the State of Wisconsin
Investment Board, where
33
<PAGE> 37
she managed international equity assets. She
received a BS in Finance from the University of
Illinois and an MBA in Finance from the University
of Chicago Graduate School of Business.
The Statement of Additional Information has more detailed information about MMA
and Oechsle and other service providers
THE DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services is the Fund's distributor and administrator. Their address
is 3435 Stelzer Road, Columbus, OH 43219.
CAPITAL STRUCTURE- MMA Praxis Mutual Funds was organized as a Delaware business
trust on September 27, 1993 and overall responsibility for the management of the
Funds is vested in the Board of Trustees. Shareholders will each be liable for
all obligations of a Fund in which they hold shares. However, the risk of a
shareholder incurring financial loss on account of liability is limited to
circumstances in which both inadequate insurance exists and a Fund itself is
unable to meet its obligations. Shareholders are entitled to one vote for each
full share held and a proportionate fractional vote for any fractional shares
held and will vote in the aggregate and not by series except as otherwise
expressly required by law.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or shorter periods, as applicable).
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate an investor would have earned on
an investment in a Fund assuming the reinvestment of all dividends and
distributions. This information has been audited by PricewaterhouseCoopers LLC,
whose report, along with each Fund's financial statements, are included in the
annual report of the Funds, which is available upon request. The information
presented is for Class B Shares only. Class A Shares were not offered prior to
May 1, 1999.
<TABLE>
<CAPTION>
GROWTH FUND
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR JANUARY 4,
ENDED ENDED ENDED ENDED 1994 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD........ $15.72 $13.57 $12.07 $9.74 $10.00
------- ------- ------ ----- ------
Investment Activities
Net investment income.... -- 0.04 0.07 0.10 0.09
Net realized and
unrealized gains
(losses) from
investments.............. 0.84 3.86 1.85 3.12 (0.07)
------- ------- ------ ----- ------
Total from Investment
Activities................. 0.84 3.90 1.92 3.22 0.02
------- ------- ------ ----- ------
Distributions
Net investment income.... -- (0.04) (0.07) (0.10) (0.09)
Net realized gains....... (1.27) (1.71) (0.35) (0.79) (0.19)
------- ------- ------ ----- ------
Total Distributions........ (1.27) (1.75) (0.42) (0.89) (0.28)
------- ------- ------ ----- ------
NET ASSET VALUE, END OF
PERIOD..................... $ 15.29 $ 15.72 $13.57 $12.07 $9.74
======= ======= ======= ====== =======
Total Return (excludes
redemption charge)......... 5.96% 29.15% 15.87% 33.32% 0.27%(b)
RATIOS/SUPPLEMENTAL
DATA:
Net Assets at end of
period (000)............. $136,976 $104,309 $58,907 $30,906 $18,009
Ratio of expenses to
average net assets....... 1.69% 1.72% 1.74% 1.75% 1.75%(c)
Ratio of net investment
income to average net
assets................... (0.02)% 0.22% 0.61% 0.90% 1.02%(c)
Ratio of expenses to
average net assets*...... 2.53%** 2.66%** 2.55%** 2.81% 3.25%(c)
Ratio of net investment
income (loss)
to average net
assets*.................. (0.86)% (0.71%) (0.17%) (0.16)% (0.48)%(c)
Portfolio Turnover....... 91.32% 53.26% 33.98% 48.91% 35.22%
</TABLE>
* During the period certain expenses were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and reimbursements had not
occurred, the ratios would have been as indicated.
** During the years ended December 31, 1998, 1997 and 1996, the Fund received
credits from its custodian for interest earned on uninvested cash balances
which were used to offset custodian fees. If such credits had not occurred,
the expense ratio would have been as indicated. The ratio of net investment
income was not affected.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
<PAGE> 38
<TABLE>
<CAPTION>
INTERMEDIATE INCOME FUND
--------------------------------------------------------------------------
YEAR YEAR YEAR YEAR JANUARY 4,
ENDED ENDED ENDED ENDED 1994 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD...... $10.01 $9.84 $10.17 $9.14 $10.00
------ ----- ------ ----- ------
Investment Activities
Net investment income.. 0.54 0.55 0.54 0.53 0.45
Net realized and
unrealized gains (losses)
from investments....... 0.17 0.17 (0.33) 1.03 (0.86)
------ ---- ------ ---- ------
Total from Investment
Activities............... 0.71 0.72 0.21 1.56 (0.41)
---- ---- ---- ---- ------
Distributions
Net investment income.. (0.54) (0.55) (0.54) (0.53) (0.45)
Net realized gains..... (0.01) -- -- -- --
------- ------ ------- ------ ------
Total Distributions...... (0.55) (0.55) (0.54) (0.53) (0.45)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD................... $10.17 $10.01 $9.84 $10.17 $9.14
====== ====== ===== ====== =====
Total Return (excludes
redemption charge)....... 7.29% 7.60% 2.22% 17.47% (4.09)%(b)
RATIOS/SUPPLEMENTAL
DATA:
Net Assets at end of
period (000)........... $42,388 $33,339 $27,568 $23,470 $17,849
Ratio of expenses to
average net assets..... 1.10% 1.10% 1.10% 1.10% 1.10%(c)
Ratio of net investment
income to average net
assets................. 5.37% 5.65% 5.50% 5.49% 4.96%(c)
Ratio of expenses to
average net assets..... 2.37%** 2.62% 2.52%** 2.64% 2.83%(c)
Ratio of net investment
income (loss)
to average net assets*. 4.10% 4.15% 4.15% 3.95% 3.23%(c)
Portfolio Turnover..... 33.89% 60.05% 30.25% 31.57% 4.95%
</TABLE>
- ----------
* During the period certain expenses were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** During the years ended December 31, 1998, 1997 and 1996, the Fund received
credits from its custodian for interest earned on uninvested cash balances
which were used to offset custodian fees. If such credits had not occurred,
the expense ratio would have been as indicated. The ratio of net investment
income was not affected.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
<PAGE> 39
<TABLE>
<CAPTION>
INTERNATIONAL FUND
------------------
YEAR APRIL 1, 1997
ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........... $10.62 $10.00
------ ------
Investment Activities
Net investment income (loss).................. (0.02) (0.05)
Net realized and unrealized gains (losses) from
investments................................... 2.56 0.69
---- ----
Total from Investment Activities............... 2.54 0.64
---- ----
Distributions
In excess of net investment income........... (0.10)
In excess of net realized gains.............. (0.01) (0.02)
----- -----
Total Distributions........................... (0.11) (0.02)
----- -----
NET ASSET VALUE, END OF PERIOD................ $13.05 $10.62
====== ======
Total Return (excludes redemption charge).... 23.98% 6.40% (b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000)............ $31,163 $17,245
Ratio of expenses to average net assets...... 1.99% 2.00%(c)
Ratio of net investment income (loss) to average net
assets........................................ (0.32%) (0.93%)(c)
Ratio of expenses to average net assets*...... 3.19% 4.29%(c)
Ratio of net investment income (loss) to average net
assets*....................................... (1.52%) (3.21%)(c)
Portfolio Turnover............................ 47.19% 51.46%
</TABLE>
- -----------------
* During the period certain expenses were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
<PAGE> 40
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS:
The Funds' annual and semi-annual reports to shareholders contain additional
information on each Fund's investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including their operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.
- --------------------------------------------------------------------------------
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION AND
DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING A BROKER THAT SELLS THE
FUNDS. OR CONTACT THE FUNDS AT:
MMA PRAXIS MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-9-PRAXIS
- --------------------------------------------------------------------------------
You can review each Fund's reports and the SAI at the Public Reference Room of
the Securities and Exchange Commission. You can get text-only copies:
* For a fee, by writing the Public Reference
Section of the Commission, Washington, D.C.
20549-6009 or calling 1-800-SEC-0330.
* Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-08056.
35
<PAGE> 41
MMA Praxis Intermediate Income Fund
MMA Praxis Growth Fund
MMA Praxis International Fund
Each an Investment Portfolio of the
MMA Praxis Mutual Funds
Statement of Additional Information
May 2, 1999
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the prospectus for the MMA Praxis Intermediate Income Fund,
the MMA Praxis Growth Fund and the MMA Praxis International Fund, dated the same
date as the date hereof (the "Prospectus"). The MMA Praxis Intermediate Income
Fund, the MMA Praxis Growth Fund and the MMA Praxis International Fund are
hereinafter referred to individually as the "Income Fund," the "Growth Fund" and
the "International Fund," respectively, and are hereinafter referred to
collectively as the "Funds". The Funds are separate investment portfolios of the
MMA Praxis Mutual Funds (the "Company"), an open-end management investment
company that currently consists of three separate investment portfolios. This
Statement of Additional Information is incorporated in its entirety into the
Prospectus. Copies of the Prospectus may be obtained by writing the Company at
3435 Stelzer Road, Columbus, Ohio 43219 or by telephoning toll free (800)
9-PRAXIS.
<PAGE> 42
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
MMA PRAXIS MUTUAL FUNDS...........................................................................................1
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS..................................................................1
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS................................................................1
INVESTMENT RESTRICTIONS.......................................................................................13
PORTFOLIO TURNOVER............................................................................................14
NET ASSET VALUE..................................................................................................14
VALUATION OF THE FUNDS........................................................................................14
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...................................................................15
MATTERS AFFECTING REDEMPTION..................................................................................15
WAIVER OF CONTINGENT DEFERRED SALES CHARGE....................................................................16
MANAGEMENT OF THE COMPANY........................................................................................16
TRUSTEES AND OFFICERS.........................................................................................16
INVESTMENT ADVISER............................................................................................19
PORTFOLIO TRANSACTIONS........................................................................................21
ADMINISTRATOR.................................................................................................22
DISTRIBUTOR...................................................................................................24
CUSTODIAN.....................................................................................................25
TRANSFER AGENCY, SHAREHOLDER SERVICING AND FUND ACCOUNTING SERVICES...........................................25
AUDITORS......................................................................................................26
LEGAL COUNSEL.................................................................................................26
ADDITIONAL INFORMATION...........................................................................................26
DESCRIPTION OF SHARES.........................................................................................26
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES..................................................................27
ADDITIONAL TAX INFORMATION....................................................................................27
CALCULATION OF PERFORMANCE DATA...............................................................................32
PERFORMANCE COMPARISONS.......................................................................................35
PRINCIPAL SHAREHOLDERS........................................................................................36
MISCELLANEOUS.................................................................................................37
FINANCIAL STATEMENTS.............................................................................................37
APPENDIX.........................................................................................................39
</TABLE>
ii
<PAGE> 43
STATEMENT OF ADDITIONAL INFORMATION
MMA PRAXIS MUTUAL FUNDS
The MMA Praxis Mutual Funds (the "Company") is an open-end
management investment company which currently offers three separate investment
portfolios (the "Funds"). Each Fund is a diversified portfolio of the Company.
Much of the information contained in this Statement of Additional Information
expands upon subjects discussed in the Prospectus of the Funds. Capitalized
terms not defined herein are defined in the Prospectus. No investment in Shares
of a Fund should be made without first reading the Prospectus.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
Additional Information on Portfolio Instruments
- -----------------------------------------------
The following policies supplement the investment objectives,
policies and risk factors of the Funds as set forth in the Prospectus. Each of
these policies will be applied subject to the social responsibility criteria set
forth in the Prospectus.
BANK OBLIGATIONS. The Funds may invest in bank obligations
such as bankers' acceptances, certificates of deposit, and time deposits.
Bankers' acceptances are negotiable drafts or bills of
exchange typically drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Funds will be those guaranteed by
domestic and foreign banks having, at the time of investment, capital, surplus,
and undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements).
Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank or a savings and loan association
for a definite period of time and earning a specified return. Certificates of
deposit and time deposits will be those of domestic and foreign banks and
savings and loan associations, if (a) at the time of investment the depository
institution has capital, surplus, and undivided profits in excess of
$100,000,000 (as of the date of its most recently published financial
statements), or (b) the principal amount of the instrument is insured in full by
the Federal Deposit Insurance Corporation.
COMMERCIAL PAPER. Commercial paper consists of unsecured
promissory notes issued by corporations. Issues of commercial paper normally
have maturities of less than nine months and fixed rates of return.
The Funds may purchase commercial paper consisting of issues
rated at the time of purchase "A-2" or better by S&P, "Prime-2" or better by
Moody's or such issues with comparable ratings by other NRSROs. The Funds may
also invest in commercial paper that is not rated but is determined by the
Adviser under guidelines established by the Company's Board of Trustees, to be
of comparable quality.
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VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master
demand notes, in which the Funds may invest, are unsecured demand notes that
permit the indebtedness thereunder to vary and provide for periodic adjustments
in the interest rate according to the terms of the instrument. Because master
demand notes are direct lending arrangements between a Fund and the issuer, they
are not normally traded. Although there may be no secondary market in the notes,
a Fund may demand payment of principal and accrued interest at any time. The
investment adviser will consider the earning power, cash flow, and other
liquidity ratios of the issuers of such notes and will continuously monitor
their financial status and ability to meet payment on demand. In determining
average weighted portfolio maturity, a variable amount master demand note will
be deemed to have a maturity equal to the longer of the period of time remaining
until the next interest rate adjustment or the period of time remaining until
the principal amount can be recovered from the issuer through demand.
VARIABLE AND FLOATING RATE NOTES. The Funds may acquire
variable and floating rate notes, subject to each Fund's investment objective,
policies and restrictions. A variable rate note is one whose terms provide for
the adjustment of its interest rate on set dates and which, upon such
adjustment, can reasonably be expected to have a market value that approximates
its par value. A floating rate note is one whose terms provide for the
adjustment of its interest rate whenever a specified interest rate changes and
which, at any time, can reasonably be expected to have a market value that
approximates its par value. Such notes are frequently not rated by credit rating
agencies; however, unrated variable and floating rate notes purchased by a Fund
will be determined by the Adviser under guidelines approved by the Company's
Board of Trustees to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under the Fund's investment policies. In
making such determinations, the Adviser will consider the earning power, cash
flow and other liquidity ratios of the issuers of such notes (such issuers
include financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by a Fund, the Fund may resell the note at any time to a third party.
The absence of an active secondary market, however, could make it difficult for
the Fund to dispose of a variable or floating rate note in the event the issuer
of the note were to default on its payment obligations, and the Fund could, as a
result or for other reasons, suffer a loss to the extent of the default.
Variable or floating rate notes may be secured by bank letters of credit.
GOVERNMENT RELATED SECURITIES. The Funds may invest in
obligations issued or guaranteed by agencies or instrumentalities of the U.S.
Government ("Government Related Securities"). Obligations of certain agencies
and instrumentalities of the U.S. Government are supported by the full faith and
credit of the U.S. Treasury; others are supported by the right of the issuer to
borrow from the Treasury; others are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others are
supported only by the credit of the instrumentality. No assurance can be given
that the U.S. Government would provide financial support to U.S.
Government-sponsored agencies or instrumentalities if it is not obligated to do
so by law.
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FOREIGN INVESTMENTS. Each of the Funds may, subject to its
investment objectives and policies, invest in certain obligations or securities
of foreign issuers. Permissible investments include, but are not limited to,
Eurobonds, which are U.S. dollar denominated debt securities issued by
corporations located in Europe, Eurodollar Certificates of Deposit, which are
U.S. dollar denominated certificates of deposit issued by branches of foreign
and domestic banks located outside the United States (primarily Europe), Yankee
Certificates of Deposit which are certificates of deposit issued by a U.S.
branch of a foreign bank denominated in U.S. dollars and held in the United
States, Eurodollar Time Deposits, which are U.S. dollar denominated deposits in
a foreign branch of a U.S. bank or a foreign bank, and Canadian Time Deposits,
which are U.S. dollar denominated certificates of deposit issued by Canadian
offices of major Canadian Banks. Investments in securities issued by foreign
branches of U.S. banks, foreign banks, or other foreign issuers, including
sponsored and unsponsored American Depositary Receipts ("ADRs") and European
Depositary Receipts ("EDRs"), and securities purchased on foreign securities
exchanges, may subject the Funds to investment risks that differ in some
respects from those related to investment in obligations of U.S. domestic
issuers or in U.S. securities markets. Such risks include future adverse
political and economic developments, possible seizure, currency blockage,
nationalization or expropriation of foreign investments, less stringent
disclosure requirements, the possible establishment of exchange controls or
taxation at the source, and the adoption of other foreign governmental
restrictions. Additional risks include currency exchange risks, less publicly
available information, the risk that companies may not be subject to the
accounting, auditing and financial reporting standards and requirements of U.S.
companies, the risk that foreign securities markets may have less volume and
therefore many securities traded in these markets may be less liquid and their
prices more volatile than U.S. securities, and the risk that custodian and
brokerage costs may be higher. Foreign issuers of securities or obligations are
often subject to accounting treatment and engage in business practices different
from those respecting domestic issuers of similar securities or obligations.
Foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements than those applicable to domestic branches of
U.S. banks.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Funds may
engage in foreign currency exchange transactions. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days ("Term") from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded directly between currency traders (usually
large commercial banks) and their customers.
The Funds will not enter into such forward contracts or
maintain a net exposure in such contracts where the Fund would be obligated to
deliver an amount of foreign currency in excess of the value of the Fund's
securities or other assets denominated in that currency. Each Fund's custodian
bank segregates cash or liquid high grade debt securities in an amount not less
than the value of the Fund's total assets committed to forward foreign currency
exchange contracts entered into for the purchase of a foreign security. If the
value of the securities segregated declines, additional cash or securities are
added so that the segregated amount is not less than the amount of the Fund's
commitments with respect to such contracts.
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FOREIGN CURRENCY OPTIONS. The Funds may engage in foreign
currency options. A foreign currency option provides a Fund, as the option
buyer, with the right to buy or sell a stated amount of foreign currency at the
exercise price at a specified date or during the option period. A call option
gives its owner the right, but not the obligation, to buy the currency, while a
put option gives its owner the right, but not the obligation, to sell the
currency. The option seller (writer) is obligated to fulfill the terms of the
option sold if it is exercised. However, either seller or buyer may close its
position during the option period in the secondary market for such options any
time prior to expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect a Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if a Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against a
decline in the value of the currency, it would not have to exercise its put.
Similarly, if a Fund has entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the currency had
depreciated in value between the date of purchase and the settlement date, such
Fund would not have to exercise its call but could acquire in the spot market
the amount of foreign currency needed for settlement.
OPTIONS TRADING. As described in the Prospectus, each Fund may
purchase put and call options listed on a securities exchange or traded
over-the-counter in an amount not exceeding 5% of its total net assets. Options
trading is a specialized activity that entails greater than ordinary investment
risks. Regardless of how much the market price of the underlying security or
index increases or decreases, the option buyer's risk is limited to the amount
of the original investment for the purchase of the option. However, options may
be more volatile than the underlying securities, and therefore, on a percentage
basis, an investment in options may be subject to greater fluctuation than an
investment in the underlying securities. A listed call option gives the
purchaser of the option the right to buy from a clearing corporation, and a
writer has the obligation to sell to the clearing corporation, the underlying
security at the stated exercise price at any time prior to the expiration of the
option, regardless of the market price of the security. The premium paid to the
writer is in consideration for undertaking the obligations under the option
contract. A listed put option gives the purchaser the right to sell to a
clearing corporation the underlying security at the stated exercise price at any
time prior to the expiration date of the option, regardless of the market price
of the security. In contrast to an option on a particular security, an option on
a stock or bond index provides the holder with the right to make or receive a
cash settlement upon the exercise of the option. The amount of this settlement
will be equal to the difference between the closing price of the index at the
time of exercise and the exercise price of the option expressed in dollars,
times a specified multiple.
A Fund's obligation to sell a security subject to a covered
call option written by it may be terminated prior to the expiration date of the
option by the execution of a closing purchase transaction, which is effected by
purchasing on an exchange an option of the same series (i.e., same underlying
security, exercise price and expiration date) as the option previously
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written. Such a purchase does not result in the ownership of an option. A
closing purchase transaction will ordinarily be effected to realize a profit on
an outstanding option, to prevent an underlying security from being called, to
permit the sale of the underlying security or to permit the writing of a new
option containing different terms on such underlying security. The cost of such
a liquidation purchase plus transaction costs may be greater than the premium
received upon the original option, in which event the Fund will have incurred a
loss in the transaction. An option position may be closed out only on an
exchange which provides a secondary market for an option of the same series.
There is no assurance that a liquid secondary market on an exchange will exist
for any particular option. A covered call option writer, unable to effect a
closing purchase transaction, would not be able to sell the underlying security
until the option expires or the underlying security is delivered upon exercise
with the result that the writer in such circumstances will be subject to the
risk of market decline in the underlying security during such period. A Fund
will write an option on a particular security only if the Adviser believes that
a liquid secondary market will exist on an exchange for options of the same
series which will permit the Fund to make a closing purchase transaction in
order to close out its position.
When a Fund writes a covered call option, an amount equal to
the net premium (the premium less the commission) received by the Fund is
included in the liability section of the Fund's statement of assets and
liabilities as a deferred credit. The amount of the deferred credit is
subsequently marked-to-market to reflect the current value of the option
written. The current value of the traded option is the last sale price or, in
the absence of a sale, the average of the closing bid and asked prices. If an
option expires on the stipulated expiration date or if the Fund enters into a
closing purchase transaction, it will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the net premium received when the option is
sold) and the deferred credit related to such option will be eliminated. Any
gain on a covered call option may be offset by a decline in the market price of
the underlying security during the option period. If a covered call option is
exercised, the Fund may deliver the underlying security held by it or purchase
the underlying security in the open market. In either event, the proceeds of the
sale will be increased by the net premium originally received, and the Fund will
realize a gain or loss. Premiums from expired options written by a Fund and net
gains from closing purchase transactions are treated as short-term capital gains
for federal income tax purposes, and losses on closing purchase transactions are
short-term capital losses.
As noted previously, there are several risks associated with
transactions in options on securities and indices. For example, there are
significant differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given
transaction not to achieve its objectives. A decision as to whether, when and
how to use options involves the exercise of skill and judgment, and even a
well-conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected events.
FUTURES CONTRACTS. As discussed in the Prospectus, the Funds
may invest in futures contracts and options thereon (stock or bond index futures
contracts or interest rate futures or options) to hedge or manage risks
associated with a Fund's securities investments. To enter into a futures
contract, an amount of cash and cash equivalents, equal to the market value of
the futures contracts, is deposited in a segregated account with the Company's
Custodian and/or
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<PAGE> 48
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
underlying futures contracts it holds. The inability to close options and
futures positions 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 the
Adviser's 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 traders 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.
WHEN-ISSUED SECURITIES. As discussed in the Prospectus, each
of the Funds may purchase securities on a when-issued basis (i.e., for delivery
beyond the normal settlement date at a stated price and yield). When a Fund
agrees to purchase securities on a when-issued basis, the Custodian will set
aside cash or liquid portfolio securities equal to the amount of the commitment
in a separate account. Normally, the Custodian will set aside portfolio
securities to satisfy the purchase commitment, and in such a case, the Fund may
be required subsequently
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<PAGE> 49
to place additional assets in the separate account in order to assure that the
value of the account remains equal to the amount of the Fund's commitment. It
may be expected that the Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. In addition, because a Fund will set aside cash or
liquid portfolio securities to satisfy its purchase commitments in the manner
described above, the Fund's liquidity and the ability of the Adviser to manage
it might be affected in the event its commitments to purchase when-issued
securities ever exceeded 25% of the value of its assets.
When a Fund engages in when issued transactions, it relies on
the seller to consummate the trade. Failure of the seller to do so may result in
the Fund incurring a loss or missing the opportunity to obtain a price
considered to be advantageous. The Funds will engage in when-issued delivery
transactions only for the purpose of acquiring portfolio securities consistent
with the Funds' investment objectives and policies, not for investment leverage.
MORTGAGE-RELATED SECURITIES. The Income Fund may, consistent
with its investment objective and policies, invest in mortgage-related
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Such Fund may, in addition, invest in mortgage-related
securities issued by nongovernmental entities; provided, however, that to the
extent that the Fund purchases mortgage-related securities from such issuers
which may, solely for purposes of Section 12 of the 1940 Act, be deemed to be
investment companies, the Fund's investment in such securities will be subject
to the limitations on investments in investment company securities set forth
below under "Investment Restrictions". Mortgage-related securities, for purposes
of the Prospectus and this Statement of Additional Information, represent pools
of mortgage loans assembled for sale to investors by various governmental
agencies such as the Government National Mortgage Association and
government-related organizations such as the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation, as well as by
nongovernmental issuers such as commercial banks, savings and loan institutions,
mortgage bankers and private mortgage insurance companies. Although certain
mortgage-related securities are guaranteed by a third party or otherwise
similarly secured, the market value of the security, which may fluctuate, is not
so secured.
There are a number of important differences among the agencies
and instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities that they issue. Mortgage-related securities
issued by the Government National Mortgage Association ("GNMA") include GNMA
Mortgage Pass- Through Certificates (also known as "Ginnie Maes") which are
guaranteed as to the timely payment of principal and interest by GNMA and such
guarantee is backed by the full faith and credit of the United States. GNMA is a
wholly-owned U.S. Government corporation within the Department of Housing and
Urban Development. GNMA certificates also are supported by the authority of GNMA
to borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-related securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States. The
FNMA is a government-sponsored organization owned entirely by private
stockholders. Fannie
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Maes are guaranteed as to the timely payment of principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation
("FHLMC") include FHLMC Mortgage Participation Certificates (also known as
"Freddie Macs" or "Pcs"). The FHLMC is a corporate instrumentality of the United
States, created pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or
by any Federal Home Loan Banks and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder
to timely payment of interest, which is guaranteed by the FHLMC. The FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When the FHLMC does not guarantee
timely payment of principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.
The Income Fund may invest in mortgage-related securities that
are collateralized mortgage obligations ("CMOs") structured on pools of mortgage
pass-through certificates or mortgage loans. The CMOs in which the Income Fund
may invest represent securities issued by a private corporation or a U.S.
Government instrumentality that are backed by a portfolio of mortgages or
mortgage-backed securities held under an indenture. The issuer's obligations to
make interest and principal payments is secured by the underlying portfolio of
mortgages or mortgage-backed securities. CMOs are issued with a number of
classes or series which have different maturities and which may represent
interests in some or all of the interest or principal on the underlying
collateral or a combination thereof. CMOs of different classes are generally
retired in sequence as the underlying mortgage loans in the mortgage pool are
repaid. In the event of sufficient early prepayments on such mortgages, the
class or series of a CMO first to mature generally will be retired prior to its
maturity. Thus, the early retirement of a particular class or series of a CMO
held by the Fund would have the same effect as the prepayment of mortgages
underlying a mortgage-backed pass-through security.
ZERO COUPON OBLIGATIONS. The Income Fund may invest in zero
coupon obligations, provided that immediately after any purchase, not more than
5% of the value of the net assets of the Fund is invested in such obligations.
Unlike securities with coupons attached, which generate periodic interest
payments to the holder, zero-coupon obligations pay no cash income until the
date of maturity. They are purchased at a substantial discount from their value
at their maturity date. This discount is amortized over the life of the
security. When held to maturity, their entire return comes from the difference
between their purchase price and their maturity value. Since this difference is
known at the time of purchase, the return on zero-coupon obligations held to
maturity is predictable. Since there are no periodic interest payments made to
the holder of a zero-coupon obligation, when interest rates rise, the value of
such an obligation will fall more dramatically than that of a bond paying out
interest on a current basis. When interest rates fall, however, zero-coupon
obligations rise more rapidly in value because the obligations have locked in a
specific rate of return that becomes more attractive the further interest rates
fall.
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GUARANTEED INVESTMENT CONTRACTS. The Income Fund may invest in
guaranteed investment contracts ("GICs") issued by insurance companies. Pursuant
to such contracts, the Fund makes cash contributions to a deposit fund of the
insurance company's general account. The insurance company then credits to the
deposit fund on a monthly basis guaranteed interest which is based on an index.
The GICs provide that this guaranteed interest will not be less than a certain
minimum rate. The insurance company may assess periodic charges against a GIC
for expense and service costs allocable to it, and the charges will be deducted
from the value of the deposit fund. The Income Fund will only purchase a GIC
when the Adviser has determined, under guidelines established by the Company's
Board of Trustees, that the GIC presents minimal credit risks to the Fund and is
of comparable quality to instruments that are rated high quality by an NRSRO
having the characteristics described above. Because the Fund may not receive the
principal amount of a GIC from the insurance company on seven days' notice or
less, the GIC is considered an illiquid investment, and, together with other
instruments in the Fund that are not readily marketable, will not exceed 15% of
the Fund's total assets. The term of a GIC will be one year or less. In
determining average weighted portfolio maturity, a GIC will be deemed to have a
maturity equal to the period of time remaining until the next readjustment of
the guaranteed interest rate.
INCOME PARTICIPATION LOANS. The Income Fund may acquire
participation interests in privately negotiated loans to borrowers. Frequently,
such loans have variable interest rates and may be backed by a bank letter of
credit; in other cases they may be unsecured. Such transactions may provide an
opportunity to achieve higher yields than those that may be available from other
securities offered and sold to the general public.
Privately arranged loans, however, will generally not be rated
by a credit rating agency and will normally be liquid, if at all, only through a
provision requiring repayment following demand by the lender. Such loans made by
the Income Fund may have a demand provision permitting the Fund to require
repayment within seven days. Participation in such loans, however, may not have
such a demand provision and may not be otherwise marketable. To the extent these
securities are not readily marketable, they will be subject to the Fund's 15%
limitation on investments in illiquid securities. Recovery of an investment in
any such loan that is illiquid and payable on demand will depend on the ability
of the borrower to meet an obligation for full repayment of principal and
payment of accrued interest within the demand period, normally seven days or
less (unless the Adviser determines that a particular loan issue, unlike most
such loans, has a readily available market). As it deems appropriate, the Board
of Trustees will establish procedures to monitor the credit standing of each
such borrower, including its ability to honor contractual payment obligations.
The Income Fund will purchase income participation loans only
if such instruments are, in the opinion of the Adviser, of comparable quality to
securities rated within the four highest rating groups assigned by NRSROs.
RIGHTS AND WARRANTS. The Growth Fund and the International
Fund may participate in rights offerings and purchase warrants, which are
privileges issued by corporations enabling the owners to subscribe to and
purchase a specified number of shares of the corporation
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at a specified price during a specified period of time. Subscription rights
normally have a short life span to expiration. The purchase of rights or
warrants involves the risk that the Fund could lose the purchase value of a
right or warrant if the right to subscribe to additional shares is not exercised
prior to the rights' or warrants' expiration. Also, the purchase of rights or
warrants involves the risk that the effective price paid for the right or
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security.
MEDIUM-GRADE DEBT SECURITIES. As stated in the Prospectus for
the Funds, each Fund may invest in debt securities within the fourth highest
rating group assigned by a NRSRO or, if unrated, securities determined by the
Adviser to be of comparable quality ("Medium-Grade Securities").
As with other fixed-income securities, Medium-Grade Securities
are subject to credit risk and market risk. Market risk relates to changes in a
security's value as a result of changes in interest rates. Credit risk relates
to the ability of the issuer to make payments of principal and interest.
Medium-Grade Securities are considered to have speculative characteristics.
Medium-Grade Securities are generally subject to greater
credit risk than comparable higher-rated securities because issuers are more
vulnerable to economic downturns, higher interest rates or adverse
issuer-specific developments. In addition, the prices of Medium-Grade Securities
are generally subject to greater market risk and therefore react more sharply to
changes in interest rates. The value and liquidity of Medium-Grade Securities
may be diminished by adverse publicity and investor perceptions.
Because certain Medium-Grade Securities are traded only in
markets where the number of potential purchasers and sellers, if any, is
limited, the ability of the Funds to sell such securities at their fair value
either to meet redemption requests or to respond to changes in the financial
markets may be limited.
Particular types of Medium-Grade Securities may present
special concerns. The prices of payment-in-kind or zero-coupon securities may
react more strongly to changes in interest rates than the prices of other
Medium-Grade Securities. Some Medium- Grade Securities in which the Funds may
invest may be subject to redemption or call provisions that may limit increases
in market value that might otherwise result from lower interest rates while
increasing the risk that the Funds may be required to reinvest redemption or
call proceeds during a period of relatively low interest rates.
The credit ratings issued by NRSROs are subject to various
limitations. For example, while such ratings evaluate credit risk, they
ordinarily do not evaluate the market risk of Medium-Grade Securities. In
certain circumstances, the ratings may not reflect in a timely fashion adverse
developments affecting an issuer. For these reasons, the Adviser conducts its
own independent credit analysis of Medium-Grade Securities.
LOWER RATED DEBT SECURITIES. The Intermediate Income Fund may
invest in debt securities rated within the six highest categories assigned by a
NRSRO or, if unrated, securities determined by the Adviser to be of comparable
quality ("Lower Rated Securities"). Lower Rated Securities involve special risks
as they may be considered to have some speculative characteristics. These
securities may be regarded as predominantly speculative with respect to the
issuer's continuing ability to meet principal and interest payments. Lower Rated
Securities may be more susceptible to real or perceived adverse economic and
competitive industry conditions than higher grade securities. If the issuer of a
Lower Rated Security defaults, the Fund may incur additional expenses to seek
recovery. The secondary markets on which Lower Rated Securities are traded may
be less liquid than the market for higher grade securities. Less liquidity in
the secondary trading markets could adversely affect the price of such
securities and the Fund's ability to sell securities at prices approximating the
values the Fund had placed on such securities.
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RESTRICTED SECURITIES. Rule 144A under the Securities Act of
1933 allows for a broader institutional trading market for securities otherwise
subject to restriction on resale to the general public. Rule 144A provides a
"safe harbor" from the registration requirements of the Securities Act of 1933
for resales of certain securities to qualified institutional buyers. The Adviser
believes that the market for certain restricted securities such as institutional
commercial paper may expand further as a result of this regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the NASD.
The Adviser monitors the liquidity of restricted securities in
the Funds' portfolios under the supervision of the Board of Trustees. In
reaching liquidity decisions, the Adviser may consider the following factors,
although such factors may not necessarily be determinative: (1) the unregistered
nature of a security; (2) the frequency of trades and quotes for the security;
(3) the number of dealers willing to purchase or sell the security and the
number of other potential purchasers; (4) the trading markets for the security;
(5) dealer undertakings to make a market in the security; and (6) the nature of
the security and the nature of the marketplace trades (including the time needed
to dispose of the security, methods of soliciting offers, and mechanics of
transfer).
SECURITIES OF OTHER INVESTMENT COMPANIES. To the extent
permitted by the 1940 Act and the Commission, each Fund may invest in securities
issued by other funds, including those advised by the Adviser. Each Fund
currently intends to limit its investments so that, as determined immediately
after a securities purchase is made: (a) not more than 5% of the value of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of the value of its total assets will be invested in the
aggregate in securities of investment companies as a group; and (c) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by either of the Funds. As a shareholder of another investment company, a
Fund would generally bear, along with other shareholders, its pro rata portion
of that company's expenses, including advisory fees. These expenses would be in
addition to the advisory and other expenses that the Fund bears directly in
connection with its own operations. Investment companies in which a Fund may
invest may also impose distribution or other charges in connection with the
purchase or redemption of their shares and other types of charges. Such charges
will be payable by the Funds and, therefore, will be borne directly by
Shareholders.
REPURCHASE AGREEMENTS. Securities held by each Fund may be
subject to repurchase agreements. Under the terms of a repurchase agreement, the
Fund would acquire securities from member banks of the Federal Deposit Insurance
Corporation and registered broker-dealers which the Adviser deems creditworthy
under guidelines approved by the Company's Board of Trustees, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon date
and price. The repurchase price would generally equal the price paid by the Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The seller
under a repurchase agreement would be required to maintain continually the value
of collateral held pursuant to the agreement at an amount equal to 102% of the
repurchase price (including accrued interest). The
-11-
<PAGE> 54
securities held subject to repurchase agreements may bear maturities exceeding
the maximum maturity specified for a Fund, provided each repurchase agreement
matures in one year or less. If the seller were to default on its repurchase
obligation or become insolvent, the Fund holding such obligation would suffer a
loss to the extent that the proceeds from a sale of the underlying portfolio
securities were less than the repurchase price under the agreement, or to the
extent that the disposition of such securities by the Fund were delayed pending
legal action. Additionally, there is no controlling legal precedent confirming
that a Fund would be entitled, as against a claim by such seller or its receiver
or trustee in bankruptcy, to retain the underlying securities, although the
Board of Trustees of the Company believes that, under the regular procedures
normally in effect for custody of a Fund's securities subject to repurchase
agreements and under federal laws, a court of competent jurisdiction would rule
in favor of the Company if presented with the question. Securities subject to
repurchase agreements will be held by the Custodian or another qualified
custodian. Repurchase agreements are considered to be loans by a Fund under the
1940 Act.
REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectus,
each Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with that Fund's investment restrictions.
Pursuant to such agreements, a Fund would sell portfolio securities to financial
institutions such as banks and broker-dealers, and agree to repurchase the
securities at a mutually agreed-upon date and price. Each Fund intends to enter
into reverse repurchase agreements only to avoid otherwise selling securities
during unfavorable market conditions to meet redemptions. At the time the Fund
enters into a reverse repurchase agreement, it will place in a segregated
custodial account assets such as Government Related Securities or other liquid,
high grade debt securities consistent with the Fund's investment restrictions
having a value equal to the repurchase price (including accrued interest), and
will subsequently continually monitor the account to ensure that such equivalent
value is maintained at all times. Reverse repurchase agreements involve the risk
that the market value of the securities sold by the Fund may decline below the
price at which the Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by the Fund under the 1940
Act.
SECURITIES LENDING. In order to generate additional income,
each Fund may, from time to time, subject to its investment objective 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 102% of the value of the
securities loaned. Collateral for loans of portfolio securities must consist of
cash or Government Related Securities. 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 the right to vote
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. A
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<PAGE> 55
Fund will enter into loan agreements only with broker-dealers, banks, or other
institutions that the Adviser has determined are creditworthy under guidelines
established by the Company's Board of Trustees.
Investment Restrictions
- -----------------------
The following are fundamental investment restrictions and are
in addition to the fundamental investment restrictions set forth in the
Prospectus. Under these restrictions, each Fund may not:
1. Underwrite the securities issued by other persons, except
to the extent that a Fund may be deemed to be an underwriter under certain
securities laws in the disposition of restricted securities;
2. Purchase or sell commodities or commodities contracts,
except to the extent disclosed in the current Prospectus of the Funds; or
3. Purchase or sell real estate (although investments by the
Funds in marketable securities of companies engaged in such activities are not
prohibited by this restriction).
The following additional investment restrictions are not
fundamental and may be changed with respect to a particular Fund without the
vote of a majority of the outstanding Shares of that Fund. Each Fund may not:
1. Enter into repurchase agreements with maturities in excess
of seven days if such investments, together with other instruments in that Fund
that are not readily marketable or are otherwise illiquid, exceed 15% of that
Fund's total assets;
2. Purchase securities on margin, except for use of short-term
credit necessary for clearance of purchases and sales of portfolio securities,
but it may make margin deposits in connection with transactions in options,
futures, and options on futures;
3. Engage in short sale, provided, however, that the Growth
Fund and the International Fund may engage in short sales "against the box";
4. Purchase participation or direct interests in oil, gas or
other mineral exploration or development programs including oil, gas, or mineral
leases (although investments by the Funds in marketable securities of companies
engaged in such activities are not prohibited in this restriction);
5. Purchase securities of other investment companies, except
in connection with a merger, consolidation, acquisition, reorganization, or to
the extent permitted by the 1940 Act and the Commission;
6. Invest more than 5% of total assets in puts, calls,
straddles, spreads or any combination thereof; or
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<PAGE> 56
7. Invest more than 5% of total assets in securities of
issuers which, together with any predecessors, have a record of less than three
years of continuous operation.
8. Purchase or retain the securities of any issuer if the
officers or Trustees of the Company or the officers or Directors of the Advisers
who individually own beneficially more than 1/2 of 1% of the securities of the
issuer, together own beneficially more than 5% of the securities of that issuer.
If any percentage restriction described above is satisfied at
the time of investment, a later increase or decrease in such percentage
resulting from a change in asset value will not constitute a violation of such
restriction.
Portfolio Turnover
- ------------------
The portfolio turnover rate for each of the Funds is
calculated by dividing the lesser of a Fund's purchases or sales of portfolio
securities for the year by the monthly average value of the portfolio
securities. The calculation excludes all securities whose remaining maturities
at the time of acquisition were one year or less.
For the fiscal year ended December 31, 1998, the annual
portfolio turnover rate for the Income Fund, the Growth Fund and the
International Fund were 34%, 91% and 47%, respectively. Portfolio turnover for
the Funds may vary greatly from year to year as well as within a particular
year. High turnover rates will generally result in higher transaction costs to a
Fund. Portfolio turnover will not be a limiting factor in making investment
decisions.
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each
Fund is determined and the Shares of each Fund are priced as of the Valuation
Times applicable to such Fund on each Business Day of the Company. A "Business
Day", which is defined in the Prospectus, is generally a day on which the New
York Stock Exchange is open for business (other than a day on which no Shares of
a Fund are tendered for redemption and no order to purchase any Shares is
received). The New York Stock Exchange will not open in observance of the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving, and Christmas Day.
Valuation of the Funds
- ----------------------
Among the factors that will be considered, if they apply, in
valuing portfolio securities held by the Funds are the existence of restrictions
upon the sale of the security by the Fund, the absence of a market for the
security, the extent of any discount in acquiring the security, the estimated
time during which the security will not be freely marketable, the expenses of
registering or otherwise qualifying the security for public sale, underwriting
commissions if underwriting would be required to effect a sale, the current
yields on comparable securities for debt obligations traded independently of any
equity equivalent, changes in the financial condition
-14-
<PAGE> 57
and prospects of the issuer, and any other factors affecting fair value. In
making valuations, opinions of counsel may be relied upon as to whether or not
securities are restricted securities and as to the legal requirements for public
sale.
The Adviser may use a pricing service to value certain
portfolio securities when the prices provided are believed to reflect the fair
market value of such securities. 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. The methods used by the pricing
service and the valuations so established will be reviewed by the Adviser under
the general supervision of the Company's Board of Trustees. Several pricing
services are available, one or more of which may be used by the Adviser from
time to time.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Matters Affecting Redemption
- ----------------------------
Shares in each of the Company's Funds are sold on a continuous
basis by BISYS Fund Services, Limited Partnership ("BISYS Fund Services" or the
"Distributor"), and the Distributor has agreed to use appropriate efforts to
solicit all purchase orders. In addition to purchasing Shares directly from the
Distributor, Shares may be purchased through procedures established by the
Distributor in connection with the requirements of accounts at the Adviser or
the Adviser's affiliated entities (collectively, "Entities"). Customers
purchasing Shares of the Funds may include officers, directors, or employees of
the Adviser or the Entities.
Under the 1940 Act, a Fund may suspend the right of redemption
or postpone the date of payment upon redemption for any period during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closings, or during which trading on said Exchange is restricted, or during
which (as determined by the Commission by rule or regulation) an emergency
exists as a result of which disposal or valuation of portfolio securities is not
reasonably practicable, or for such other periods as the Commission may permit.
(A Fund may also suspend or postpone the recordation of the transfer of its
Shares upon the occurrence of any of the foregoing conditions.) Each Fund is
obligated to redeem shares solely in cash up to $250,000 or 1% of such Fund's
net asset value, whichever is less, for any one Shareholder within a 90-day
period. Any redemption beyond this amount will also be in cash unless the Board
of Trustees determines that conditions exist which make payment of redemption
proceeds wholly in cash unwise or undesirable. In such a case, a Fund may make
payment wholly or partly in securities or other property, valued in the same way
as that Fund determines net asset value. Redemption in kind is not as liquid as
a cash redemption. Shareholders who receive a redemption in kind may incur
transaction costs, if they sell such securities or property, and may receive
less than the redemption value of such securities or property upon sale,
particularly where such securities are sold prior to maturity.
-15-
<PAGE> 58
Waiver of Contingent Deferred Sales Charge
- ------------------------------------------
The otherwise applicable contingent deferred sales charge will
be waived for redemptions in connection with the disability of a shareholder. A
shareholder will be treated as disabled if he or she is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or to be of
long-continued and indefinite duration. The shareholder must furnish proof of
disability to the Administrator.
MANAGEMENT OF THE COMPANY
Trustees and Officers
- ---------------------
Overall responsibility for management of the Company rests
with its Board of Trustees, which is elected by the Shareholders of the
Company's Funds. The Trustees elect the officers of the Company to supervise
actively its day-to-day operations. As of the date of this Statement of
Additional Information, the Company's officers and Trustees, as a group, own
less than 1% of the Shares of each Fund.
The names of the Trustees and officers of the Company, their
mailing addresses, ages and their principal occupations during the past five
years are as follows:
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation During
Name, Address and Age with The Company Past 5 Years
- --------------------- ---------------- ------------
<S> <C> <C>
Howard L. Brenneman* Chairman and Trustee From December 1991 to present,
P.O. Box 483 President and CEO of Mennonite
Goshen, IN 46527 Mutual Aid; from 1986-1991,
Age: 58 business and financial
consultant, and Director of
Strategic Planning and
Development, Prairie View, Inc.
Karen Klassen Harder, Ph.D. Trustee From January 1990 to present,
Bethel College College Professor, Bethel
North Newton, KS 67117 Age: 43 College, North Newton, KS.
Richard Reimer, Ph.D. Trustee Retired. From 1962 to 1996,
The College of Wooster Professor of Economics, The
Wooster, Ohio 44691 College of Wooster, Wooster,
Age: 67 Ohio.
</TABLE>
-16-
<PAGE> 59
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation During
Name, Address and Age with The Company Past 5 Years
- --------------------- ---------------- ------------
<S> <C> <C>
Donald E. Showalter, Esq. Trustee From June 1965 to present,
100 South Mason Street attorney with the law firm of
Harrisonburg, VA 22801 Wharton, Aldhizer & Weaver,
Age: 58 Harrisonburg, VA.
Allen Yoder, Jr. Trustee From May 1985 until retirement
P.O. Box 460 in September1993, President,
Middlebury, IN 46540 Jayco, Inc., manufacturer of
Age: 71 recreational vehicles.
From1985 to present,
President, Deutsch Kase Haus,
cheese manufacturer
Wilfred E. Nolen Trustee From 1983 to present,
1505 Dundee Avenue President of Church of the
Elgin, IL 60120 Brethren Benefit Trust and
Age: 58 Church of the Brethren Benefit
Trust, Inc.; from1990 to
present, President of Brethren
Foundation, Inc.
Beryl Mae Hartzler Brubaker* Trustee From 1970 to present, Vice
Eastern Mennonite University President for Enrollment
1200 Park Road Management, Eastern Mennonite
Harrisonburg, VA 22801 University.
Age: 56
John L. Liechty President From October 1976 to present,
P.O. Box 483 employee of Mennonite Mutual
Goshen, IN 46527 Aid serving in various
Age: 44 executive management
positions; from June 1997 to
present, Vice President of
Financial Services; from August
1997 to present, President, MMA
Praxis Mutual Funds.
</TABLE>
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<PAGE> 60
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation During
Name, Address and Age with The Company Past 5 Years
- --------------------- ---------------- ------------
<S> <C> <C>
Marlo J. Kauffman Vice President From January 1981 to present,
P.O. Box 483 employee of Mennonite Mutual
Goshen, IN 46527 Aid, Inc., with current
Age: 42 position as Financial Services
Operations Manager.
Walter B. Grimm Vice President From June 1992 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, OH 43219 Services.
Age: 53
George R. Landreth Vice President From December 1992 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, OH 43219 Services.
Age: 56
Paul T. Kane Treasurer From December 1997 to present,
3435 Stelzer Road Vice President of BISYS Fund
Columbus, OH 43219 Services; prior thereto,
Age: 41 employee of Fidelity Accounting
and Custody Services.
George L. Stevens Secretary From September 1996 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, OH 43219 Services; from September 1995
Age: 47 to August 1996, consultant on
bank investment products and
activities; from June 1980 to
September 1995, employee of
AmSouth Bank.
Robert L. Tuch Assistant Secretary From June 1991 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, OH 43219 Services.
Age: 47
Alaina V. Metz Assistant Secretary From 1995 to present, employee
3435 Stelzer Road of BISYS Fund Services; from
Columbus, OH 43219 May 1989 to June 1995,
Age: 31 employee of Alliance Capital
</TABLE>
- ----------------
* Indicates an "interested person" of the Company as defined in the 1940 Act.
-18-
<PAGE> 61
Trustees of the Company not affiliated with the Distributor
receive from the Company a fee of $750 for each Board of Trustees meeting
attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Trustees who are affiliated with the Distributor do
not receive compensation from the Company.
For the fiscal year ended December 31, 1998, the Trustees
received the following compensation from the Company and from certain other
investment companies (if applicable) that have the same investment adviser as
the Funds or an investment adviser that is an affiliated person of the Company's
investment adviser:
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits From Registrant and
Compensation from Accrued As Part Est. Annual Benefits Fund Complex
Name of Trustee the Company of Fund Expenses Upon Retirement Paid to Trustees
--------------- ----------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Howard L. Brenneman $_____ $0 $0 $_____
Karen Klassen Harder $_____ $0 $0 $_____
Richard Reimer $_____ $0 $0 $_____
Donald E. Showalter $_____ $0 $0 $_____
Allen Yoder, Jr. $_____ $0 $0 $_____
Wilfred E. Nolen $_____ $0 $0 $_____
Beryl Mae Brubaker $_____ $0 $0 $_____
</TABLE>
The officers of the Company receive no compensation directly
from the Company for performing the duties of their offices. The Distributor
receives fees from the Company for acting as Administrator. BISYS Fund Services
Ohio, Inc. receives fees from the Company for acting as transfer agent and for
providing fund accounting services. Messrs. Grimm, Barker, Landreth, Line and
Tuch are employees of the Distributor, as is Ms. Metz. Messrs. Liechty and
Kauffman are employees of the Adviser.
Investment Adviser
- ------------------
Investment advisory services are provided to the Funds by
Menno Insurance Service, Inc., d\b\a MMA Capital Management (the "Adviser"),
pursuant to an Investment Advisory Agreement dated as of January 1, 1994 (the
"Investment Advisory Agreement"). Under the Investment Advisory Agreement, the
Adviser has agreed to provide investment advisory services as described in the
Prospectus of the Funds. For the services provided and expenses assumed pursuant
to the Investment Advisory Agreement, each of the Funds pays the Adviser a fee
computed daily and paid monthly, at an annual rate, calculated as a percentage
of the average daily net assets of that Fund, of fifty one-hundredths of one
percent (.50%) for the Income Fund, of seventy-four one-hundredths of one
percent (.74%) for the Growth Fund and of ninety one-hundredths of one percent
(.90%) for the International Fund. The Adviser may periodically waive all or a
portion of its advisory fee with respect to any Fund to increase the net income
of the Fund available for distribution as dividends.
The total investment advisory fees paid to the Adviser for the
last three fiscal years is as follows:
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<PAGE> 62
Income Fund - for the fiscal year ended December 31, 1996, the
Adviser earned investment advisory fees of $127,336 and the Adviser waived or
assumed advisory fees in the amount of $103,179; and for the fiscal year ended
December 31, 1997, the Adviser earned investment advisory fees of $151,224 and
the Adviser waived or assumed advisory fees in the amount of $97,536; and for
the fiscal year ended December 31, 1998, the Adviser earned investment advisory
fees of $_______ and the Adviser waived or assumed advisory fees in the amount
of $_______.
Growth Fund - for the fiscal year ended December 31, 1996, the
Adviser earned investment advisory fees of $334,230 and the Adviser waived or
assumed advisory fees in the amount of $565; for the fiscal year ended December
31, 1997, the Adviser earned investment advisory fees of $610,039; and for the
fiscal year ended December 31, 1998, the Adviser earned investment advisory fees
of $_______.
International Fund - for the period from April 1, 1997
(commencement of operations) through December 31, 1997, the Adviser earned
investment advisory fees of $81,639 and the Adviser waived or assumed advisory
fees in the amount of $36,203; for the fiscal year ended December 31, 1997, the
Adviser earned investment advisory fees of $610,039; and for the fiscal year
ended December 31, 1998, the Adviser earned investment advisory fees of
$________.
Unless sooner terminated, the Investment Advisory Agreement
will continue in effect as to each Fund from year to year if such continuance is
approved at least annually by the Company's Board of Trustees or by vote of a
majority of the outstanding Shares of the relevant Fund (as defined under
"GENERAL INFORMATION Miscellaneous" in the Prospectus), and a majority of the
Trustees who are not parties to the Investment Advisory Agreement or interested
persons (as defined in the 1940 Act) of any party to the Investment Advisory
Agreement by votes cast in person at a meeting called for such purpose. The
Investment Advisory Agreement is terminable as to a Fund at any time on 60-days'
written notice without penalty by the Trustees, by vote of a majority of the
outstanding Shares of that Fund, or by the Adviser. The Investment Advisory
Agreement also terminates automatically in the event of any assignment, pursuant
to the 1940 Act.
The Investment Advisory Agreement provides that the Adviser
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by a Fund in connection with the performance of the Investment Advisory
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of the Adviser in the
performance of its duties, or from reckless disregard by the Adviser of its
duties and obligations thereunder.
Oechsle International Advisors, LLC, Boston, Massachusetts
(the "Sub-Adviser") provides sub-investment advisory services to the
International Fund pursuant to a Sub-Advisory Agreement dated as of August 17,
1998 (the "Sub-Advisory Agreement"). The terms and conditions of the
Sub-Advisory Agreement are substantially identical to those of the Investment
Advisory Agreement. For the services provided pursuant to the Sub-Advisory
Agreement, the Adviser pays the Sub-Adviser a fee computed daily and paid
monthly, at an annual rate of .50%
-20-
<PAGE> 63
of the International Fund's average daily net assets. For the period from April
1, 1997 (commencement of operations) through December 31, 1997, Oechsle
International Advisors, L.P., the Sub-Adviser's predecessor entity ("Oechsle,
L.P."), earned sub-advisory fees of $45,436. For the period from January 1, 1998
through August 17, 1998, Oechsle, L.P. earned sub-advisory fees of $______. For
the period from August 18, 1998 through December 31, 1998, the Sub-Adviser
earned sub-advisory fees of $______.
Portfolio Transactions
- ----------------------
Pursuant to the Investment Advisory Agreement, the Adviser
determines, subject to the general supervision of the Board of Trustees of the
Company and in accordance with each Fund's investment objective and
restrictions, which securities are to be purchased and sold by a Fund, and which
brokers are to be eligible to execute such Fund's portfolio transactions.
Purchases and sales of portfolio securities with respect to the Funds usually
are principal transactions in which portfolio securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters of portfolio securities generally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers may include the spread between
the bid and asked price. Transactions on stock exchanges involve the payment of
negotiated brokerage commissions. Transactions in the over-the-counter market
are generally principal transactions with dealers. With respect to the
over-the-counter market, the Adviser, where possible, will deal directly with
dealers who make a market in the securities involved except in those
circumstances where better price and execution are available elsewhere.
Allocation of transactions, including their frequency, to
various brokers and dealers is determined by the Adviser in its best judgment
and in a manner deemed fair and reasonable to Shareholders. The primary
consideration is prompt execution of orders in an effective manner at the most
favorable price. Subject to this consideration, brokers and dealers who provide
supplemental investment research to the Adviser may receive orders for
transactions on behalf of the Funds. Information so received is in addition to
and not in lieu of services required to be performed by the Adviser and does not
reduce the advisory fees payable to the Adviser by the Funds. Such information
may be useful to the Adviser in serving both the Company and other clients and,
conversely, supplemental information obtained by the placement of business of
other clients may be useful to the Adviser in carrying out its obligations to
the Funds.
While the Adviser generally seeks competitive commissions, the
Company may not necessarily pay the lowest commission available on each
brokerage transaction, for the reasons discussed above.
Except as permitted by applicable laws, rules and regulations,
the Adviser will not, on behalf of the Funds, execute portfolio transactions
through, acquire portfolio securities issued by, or enter into repurchase or
reverse repurchase agreements with the Adviser, the Distributor, or their
affiliates, and will not give preference to the Adviser's affiliates with
respect to such transactions, securities, repurchase agreements, and reverse
repurchase agreements.
-21-
<PAGE> 64
Investment decisions for each Fund are made independently from
those for the other Fund or any other investment company or account managed by
the Adviser. Any such other fund, investment company or account may also invest
in the same securities as either of the Funds. When a purchase or sale of the
same security is made at substantially the same time on behalf of a Fund and
either the other Fund of the Company or another investment company or account,
the transaction will be averaged as to price, and available investments will be
allocated as to amount in a manner which the Adviser believes to be equitable to
the Fund(s) and such other fund, investment company or account. In some
instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained by a Fund. To the extent
permitted by law, the Adviser may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for the other Fund or
for other investment companies or accounts in order to obtain best execution. As
provided by the Investment Advisory Agreement, in making investment
recommendations for the Funds, the Adviser will not inquire or take into
consideration whether an issuer of securities proposed for purchase or sale by
the Funds is a customer of the Adviser, its parent or its subsidiaries or
affiliates and, in dealing with its customers, the Adviser, its parent,
subsidiaries, and affiliates will not inquire or take into consideration whether
securities of such customers are held by the Funds.
For the fiscal years ended December 31, 1996, 1997 and 1998
the Growth Fund paid brokerage commissions of $76,256, $176,677 and $________,
respectively. For the period from April 1, 1997 (commencement of operations)
through December 31, 1997, the International Fund paid brokerage commissions in
the amount of $68,100 and for the fiscal year ended December 31, 1998, the
International Fund paid brokerae commissions in the amount of $_______. No
commissions were paid to any affiliate of the Funds or the Adviser.
Administrator
- -------------
BISYS Fund Services serves as administrator (the
"Administrator") to the Funds pursuant to a Management and Administration
Agreement dated January 1, 1994 (the "Administration Agreement"). The
Administrator assists in supervising all operations of each Fund (other than
those performed by the Adviser under the Investment Advisory Agreement, by the
Sub-Adviser under the Sub-Advisory Agreement, by the Custodian under the
Custodian Agreement and by BISYS Fund Services Ohio, Inc. under the Transfer
Agency Agreement and Fund Accounting Agreement). The Administrator is a
broker-dealer registered with the Commission, and is a member of the National
Association of Securities Dealers, Inc.
Under the Administration Agreement, the Administrator has
agreed to maintain office facilities; furnish statistical and research data,
clerical support, certain bookkeeping services and stationery and office
supplies; prepare the periodic reports to the Commission on Form N-SAR or any
replacement forms therefor; compile data for, prepare for execution by the Funds
and file all of the Funds' federal and state tax returns and required tax
filings other than those required to be made by the Funds' Custodian and
Transfer Agent; prepare compliance filings pursuant to state securities laws
with the advice of the Company's counsel; assist to the extent requested by the
Company with the Company's preparation of its Annual and Semi-
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<PAGE> 65
Annual Reports to Shareholders and its Registration Statement (on Form N-1A or
any replacement therefor); compile data for, prepare and file timely Notices to
the Commission required pursuant to Rule 24f-2 under the 1940 Act; keep and
maintain the financial accounts and records of each Fund, including calculation
of daily expense accruals; and generally assist in all aspects of the Funds'
operations other than those performed by the Adviser under the Investment
Advisory Agreement, by the Sub-Adviser under the Sub-Advisory Agreement, the
Custodian under the Custodian Agreement and BISYS Fund Services Ohio, Inc. under
the Transfer Agency Agreement and the Fund Accounting Agreement. Under the
Administration Agreement, the Administrator may delegate all or any part of its
responsibilities thereunder.
The Administrator receives a fee from each Fund for its
services as Administrator and expenses assumed pursuant to the Administration
Agreement calculated daily and paid periodically, at an annual rate equal to
fifteen one-hundredths of one percent (.15%) of a Fund's average daily net
assets, with an annual minimum of $50,000 until the Fund's net assets reach $50
million. Upon reaching $50 million, the fee will be calculated at an annual rate
of ten one-hundredths of one percent (.10%) of the Fund's average daily net
assets. The Administrator may periodically waive all or a portion of its fee
with respect to either Fund in order to increase the net income of a Fund
available for distribution as dividends.
The total administrative fees paid to the Administrator for
the last three fiscal years is as follows:
Income Fund - for the fiscal year ended December 31, 1996, the
Administrator earned administrative fees of $50,000; for the fiscal year ended
December 31, 1997, the Administrator earned administrative fees of $50,000; and
for the fiscal year ended December 31, 1998, the Administrator earned
administrative fees of $_______.
Growth Fund - for the fiscal year ended December 31, 1996, the
Administrator earned administrative fees of $67,749 and the Administrator waived
or assumed administrative fees in the amount of $7,899; for the fiscal year
ended December 31, 1997, the Administrator earned administrative fees of
$83,371; and for the fiscal year ended December 31, 1998, the Administrator
earned administrative fees of $________.
International Fund - for the period from April 1, 1997
(commencement of operations) through December 31, 1997, the Administrator earned
administrative fees of $37,672; and for the fiscal year ended December 31, 1998,
the Administrator earned administrative fees of $________.
Unless sooner terminated as provided therein, the
Administration Agreement will continue in effect until January 1, 2004. The
Administration Agreement thereafter shall be renewed automatically for
successive five-year terms, unless written notice not to renew is given by the
non-renewing party to the other party at least 60 days prior to the expiration
of the then-current term. The Administration Agreement is terminable with
respect to a particular Fund through a failure to renew the agreement, upon
mutual agreement of the parties to the Administration Agreement and for cause
(as defined in the Administration Agreement) by the
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party alleging cause, on not less than 60 days' notice by the Company's Board of
Trustees or by the Administrator.
The Administration Agreement provides that the Administrator
shall not be liable for any error of judgment or mistake of law or any loss
suffered by either of the Funds in connection with the matters to which the
Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
from the reckless disregard by the Administrator of its obligations and duties
thereunder.
Distributor
- -----------
BISYS Fund Services serves as distributor for the Funds
pursuant to the Distribution Agreement dated January 1, 1994, with respect to
the Funds (the "Distribution Agreement"). Unless otherwise terminated, the
Distribution Agreement will continue in effect as to each Fund for successive
one-year periods if approved at least annually (i) by the Company's Board of
Trustees or by the vote of a majority of the outstanding Shares of the Company,
and (ii) by the vote of a majority of the Trustees of the Company who are not
parties to the Distribution Agreement or interested persons (as defined in the
1940 Act) of any party to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement terminates automatically in the event of any assignment pursuant to
the 1940 Act.
For the fiscal year ended December 31, 1996, BISYS Fund
Services received $6,821 in deferred sales charges in connection with the Income
Fund, of which it retained $0; for the fiscal year ended December 31, 1997,
BISYS Fund Services received $117,509 in deferred sales charges in connection
with the Income Fund, of which it retained $61. For the fiscal year ended
December 31, 1998, BISYS Fund Services received $_____ in deferred sales charges
in connection with the Income Fund, of which it retained $___; for the fiscal
year ended December 31, 1995, BISYS Fund Services received $9,392 in deferred
sales charges in connection with the Growth Fund, of which it retained $0; for
the fiscal year ended December 31, 1996, BISYS Fund Services received $16,383 in
deferred sales charges in connection with the Growth Fund, of which it retained
$0; and for the fiscal year ended December 31, 1997, BISYS Fund Services
received $697,541 in deferred sales charges in connection with the Growth Fund,
of which it retained $389. With respect to the International Fund, for the
period from April 1, 1997 (commencement of operations) through December 31,
1997, BISYS Fund Services received $122,908 in deferred sales charges, of which
it retained $122.
As described in the Prospectus, the Company has adopted a
Distribution Services Plan (the "Plan") pursuant to Rule 12b-1 under the 1940
Act under which each Fund may pay a periodic amount calculated at an annual rate
not to exceed 1% of the average daily net assets of a Fund for activities
primarily intended to result in the sale of a Fund's shares. These amounts may
include the payment of a service fee of up to 0.25% of the average daily net
assets of a Fund for activities or expenses related to account maintenance or
personal service to existing shareholders. For the fiscal year ended December
31, 1998, the Income Fund paid or reimbursed the Distributor pursuant to the
Plan in the following amounts and for the following purposes;
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<PAGE> 67
$15,019 was paid to sales personnel in connection with shareholder services; for
the Growth Fund, $247,418 was paid to sales personnel in connection with
shareholder services.
Custodian
- ---------
Fifth Third Bank, Cincinnati, Ohio, serves as custodian (the
"Custodian") to the Funds pursuant to the Custodian Agreement dated as of
January 1, 1994 between the Company and the Custodian (the "Custodian
Agreement"). The Custodian's responsibilities include safeguarding and
controlling each Fund's cash and securities, handling the receipt and delivery
of securities, and collecting income on each Fund's investments. In
consideration of such services, each of the Funds pays the Custodian an annual
fee plus fixed fees charged for certain portfolio transactions and out-of-pocket
expenses.
Unless sooner terminated, the Custodian Agreement will
continue in effect until terminated by either party upon 60-days advance written
notice to the other party.
Boston Safe Deposit and Trust Company, Boston, Massachusetts
(the "Sub- Custodian"), serves as sub-custodian for the International Fund
pursuant to an agreement dated as of April 1, 1997 (the "Sub-Custodian
Agreement"). In consideration of its services, the Sub-Custodian receives a fee
based upon the value of assets maintained by it plus certain out-of-pocket
expenses. Unless sooner terminated, the Sub-Custodian Agreement will continue in
effect until terminated by either party upon 60 days advance written notice to
the other party.
Transfer Agency, Shareholder Servicing and Fund Accounting Services
- -------------------------------------------------------------------
BISYS Fund Services Ohio, Inc. ("BISYS Fund Services Ohio,
Inc." or the "Transfer Agent") serves as transfer agent and dividend disbursing
agent for the Funds pursuant to the Transfer Agency Agreement dated January 1,
1994. Pursuant to such Agreement, the Transfer Agent, among other things,
performs the following services in connection with each Fund's Shareholders of
record: maintenance of shareholder records; processing Shareholder purchase,
exchange and redemption orders; processing transfers and exchanges of Shares of
the Company on the shareholder files and records; processing dividend payments
and reinvestments; and assistance in the mailing of shareholder reports and
proxy solicitation materials. For such services, the Transfer Agent receives a
fee based on the number of Shareholders of record and is reimbursed for
out-of-pocket expenses.
In addition, BISYS Fund Services Ohio, Inc. provides certain
fund accounting services to the Funds pursuant to a Fund Accounting Agreement
dated January 1, 1994. BISYS Fund Services Ohio, Inc. receives a fee from each
Fund for such services based upon the total assets in that Fund. Under such
Agreement, BISYS Fund Services Ohio, Inc. maintains the accounting books and
records for each Fund, including journals containing an itemized daily record of
all purchases and sales of portfolio securities, all receipts and disbursements
of cash and all other debits and credits, general and auxiliary ledgers
reflecting all asset, liability, reserve, capital, income and expense accounts,
including interest accrued and interest received, and other required separate
ledger accounts; maintains a monthly trial balance of all ledger accounts;
performs certain accounting services for the Fund, including calculation of the
net asset
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<PAGE> 68
value per share, calculation of the dividend and capital gain distributions, if
any, and of yield, reconciliation of cash movements with the Custodian,
affirmation to the Custodian of all portfolio trades and cash settlements,
verification and reconciliation with the Custodian of all daily trade activity;
provides certain reports; obtains dealer quotations, prices from a pricing
service or matrix prices on all portfolio securities in order to mark the
portfolio to the market; and prepares an interim balance sheet, statement of
income and expense, and statement of changes in net assets for each Fund.
Pursuant to a Shareholder Servicing Agreement, BISYS Fund
Services provides administrative services to shareholders. Such services include
changing dividend options, account designations, and addresses; administering
shareholder records; transmitting and receiving funds in connection with
shareholder orders; and providing other account administration services. The
maximum aggregate fee for such services shall not exceed on an annual basis
0.25% of a Fund's average daily net assets.
Auditors
- --------
PricewaterhouseCoopers LLP, 100 East Broad Street, Columbus,
Ohio 43215, serves as the independent accountants for the Company.
Legal Counsel
- -------------
Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington,
D.C. 20006, serves as counsel to the Company.
ADDITIONAL INFORMATION
Description of Shares
- ---------------------
The Company was organized on September 30, 1993 as a Delaware
business trust. The Company's Agreement and Declaration of Trust authorizes the
Board of Trustees to issue an unlimited number of Shares, which are shares of
beneficial interest, with a par value of $.01 per share. The Company presently
has three separate investment portfolios (or series) of Shares. The Company's
Agreement and Declaration of Trust authorizes the Board of Trustees to divide or
redivide any unissued Shares of the Company into one or more additional
investment portfolios (or series) by setting or changing in any one or more
respects their respective preferences, conversion or other rights, voting power,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectus and this
Statement of Additional Information, the Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Company,
Shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective
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<PAGE> 69
Funds, of any general assets not belonging to any particular Fund that are
available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
an investment company such as the Company shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding Shares of each Fund affected by the matter. For purposes of
determining whether the approval of a majority of the outstanding Shares of a
Fund will be required in connection with a matter, a Fund will be deemed to be
affected by a matter unless it is clear that the interests of each Fund in the
matter are identical, or that the matter does not affect any interest of the
Fund. Under Rule 18f-2, the approval of an investment advisory agreement or any
change in investment policy would be effectively acted upon with respect to a
Fund only if approved by a majority of the outstanding Shares of such Fund.
However, Rule 18f-2 also provides that the ratification of independent public
accountants, the approval of principal underwriting contracts, and the election
of Trustees may be effectively acted upon by Shareholders of the Company voting
without regard to Fund.
Vote of a Majority of the Outstanding Shares
- --------------------------------------------
As used in the Prospectus and this Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of a Fund means
the affirmative vote, at a meeting of Shareholders duly called, of the lesser of
(a) 67% or more of the votes of Shareholders of that Fund present at a meeting
at which the holders of more than 50% of the votes attributable to Shareholders
of record of that Fund are represented in person or by proxy, or (b) the holders
of more than 50% of the outstanding votes of Shareholders of that Fund.
Additional Tax Information
- --------------------------
TAXATION OF THE FUNDS. Each Fund intends to qualify annually
and to elect to be treated as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code").
To qualify as a regulated investment company, each Fund must,
among other things, (a) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stock, securities or foreign
currencies or other income derived with respect to its business of investing in
such stock, securities or currencies; (b) diversify its holdings so that, at the
end of each quarter of the taxable year, (i) at least 50% of the market value of
the Fund's assets is represented by cash and cash items (including receivables),
U.S. Government securities, the securities of other regulated investment
companies and other securities, with such other securities of any one issuer
limited for the purposes of this calculation to an amount not greater than 5% of
the value of the Fund's total assets and not greater than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies); and (c) distribute at least 90% of its investment company taxable
income (which
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<PAGE> 70
includes, among other items, dividends, interest and net short-term capital
gains in excess of net long-term capital losses) and its net tax-exempt interest
income each taxable year.
As a regulated investment company, each Fund will not be
subject to U.S. federal income tax on its investment company taxable income and
net capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, that it distributes to Shareholders. Each Fund intends
to distribute to its Shareholders, at least annually, substantially all of its
investment company taxable income and net capital gains. Amounts, other than
tax-exempt interest, not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of the excise tax, each Fund must distribute during
each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, (2) at least 98% of its capital gains in excess of its capital
losses (adjusted for certain ordinary losses, as prescribed by the Code) for the
one-year period ending on October 31 of the calendar year, and (3) any ordinary
income and capital gains for previous years that were not distributed during
those years. A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by a Fund in October, November or
December with a record date in such a month and paid by the Fund during January
of the following calendar year. Such distributions will be taxable to
Shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received. To
prevent application of the excise tax, each Fund intends to make its
distributions in accordance with the calendar year distribution requirement.
DISTRIBUTIONS. Dividends paid out of a Fund's investment
company taxable income will be taxable to a U.S. Shareholder as ordinary income.
A portion of either the Growth Fund's or the International Fund's income may
consist of dividends paid by U.S. corporations and, accordingly, a portion of
the dividends paid by these Funds may be eligible for the corporate
dividends-received deduction. It is also possible that a portion of the income
earned by the Income Fund may be in the form of dividends from fixed income
preferred stock investments. Therefore, a portion of that Fund's income may also
be eligible for the corporate dividends-received deduction.
Shareholders will be notified annually as to the U.S. federal
tax status of
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<PAGE> 71
distributions, and Shareholders receiving distributions in the form of
additional Shares will receive a report as to the net asset value of those
Shares.
ORIGINAL ISSUE DISCOUNT SECURITIES. Investments by a Fund in
securities that are issued at a discount will result in income to the Fund equal
to a portion of the excess of the face value of the securities over their issue
price (the "original issue discount") each year that the securities are held,
even though the Fund receives no cash interest payments. This income is included
in determining the amount of income which the Fund must distribute to maintain
its status as a regulated investment company and to avoid the payment of federal
income tax and the 4% excise tax.
OPTIONS AND HEDGING TRANSACTIONS. The taxation of equity
options and over-the-counter options on debt securities is governed by Code
section 1234. Pursuant to Code section 1234, the premium received by a Fund for
selling a put or call option is not included in income at the time of receipt.
If the option expires, the premium is short-term capital gain to the Fund. If
the Fund enters into a closing transaction, the difference between the amount
paid to close out its position and the premium received is short-term capital
gain or loss. If a call option written by a Fund is exercised, thereby requiring
the Fund to sell the underlying security, the premium will increase the amount
realized upon the sale of such security and any resulting gain or loss will be a
capital gain or loss, and will be long-term or short-term depending upon the
holding period of the security. With respect to a put or call option that is
purchased by a Fund, if the option is sold, any resulting gain or loss will be a
capital gain or loss, and will be long-term or short-term, depending upon the
holding period of the option. If the option expires, the resulting loss is a
capital loss and is long-term or short-term, depending upon the holding period
of the option. If the option is exercised, the cost of the option, in the case
of a call option, is added to the basis of the purchased security and, in the
case of a put option, reduces the amount realized on the underlying security in
determining gain or loss.
Certain options in which a Fund may invest are "section 1256
contracts". Gains or losses on section 1256 contracts generally are considered
60% long-term and 40% short-term capital gains or losses ("60/40"). Also,
section 1256 contracts held by a Fund at the end of each taxable year (and,
generally, for purposes of the 4% excise tax, on October 31 of each year) are
"marked-to-market" (that is, treated as sold at fair market value), resulting in
unrealized gains or losses being treated as though they were realized.
Generally, the hedging transactions undertaken by a Fund may
result in "straddles" for U.S. federal income tax purposes. The straddle rules
may affect the character of gains (or losses) realized by a Fund. In addition,
losses realized by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which the losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences to the Funds of engaging in hedging
transactions are not entirely clear. Hedging transactions may increase the
amount of short-term capital gain realized by the Funds which is taxed as
ordinary income when distributed to Shareholders.
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<PAGE> 72
Each Fund may make one or more of the elections available
under the Code which are applicable to straddles. If a Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to the election(s) made. The rules applicable under certain of
the elections may operate to accelerate the recognition of gains or losses from
the affected straddle positions.
Because the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which may be distributed to
Shareholders, and which will be taxed to them as ordinary income or long-term
capital gain, may be increased or decreased as compared to a fund that did not
engage in such hedging transactions.
The diversification requirements applicable to each Fund's
assets may limit the extent to which each Fund will be able to engage in
transactions in options.
CONSTRUCTIVE SALES. Recently enacted rules may affect the
timing and character of gain if a Fund engages in transactions that reduce or
eliminate its risk of loss with respect to appreciated financial positions. If a
Fund enters into certain transactions in property while holding substantially
identical property, the Fund would be treated as if it had sold and immediately
repurchased the property and would be taxed on any gain (but not loss) from the
constructive sale. The character of gain from a constructive sale would depend
upon the Fund's holding period in the property. Loss from a constructive sale
would be recognized when the property was subsequently disposed of, and its
character would depend on the Fund's holding period and the application of
various loss deferral provisions of the Code.
MUNICIPAL OBLIGATIONS. If a Fund invests in tax-exempt
municipal obligations from which it earns tax-exempt interest income, such
income will not be tax-exempt in the hands of Shareholders. In order to avoid
the payment of federal income and excise tax, the Fund may be required to
distribute such income to Shareholders, to whom it will be taxable.
OTHER INVESTMENT COMPANIES. It is possible that by investing
in other investment companies, the Fund may not be able to meet the calendar
year distribution requirement and may be subject to federal income and excise
tax. The diversification and distribution requirements applicable to each Fund
may limit the extent to which each Fund will be able to invest in other
investment companies.
FOREIGN CURRENCY GAINS OR LOSSES. Under the Code, gains or
losses attributable to fluctuations in exchange rates which occur between the
time a Fund accrues income or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time that Fund actually
collects such receivables or pays such liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt securities
and certain other instruments denominated in a foreign currency, gains or losses
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security and the date of disposition also are treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"section 988" gains or losses, may increase or decrease the
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<PAGE> 73
amount of a Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.
PASSIVE FOREIGN INVESTMENT COMPANIES. If a Fund invests in
stock of certain foreign investment companies, the Fund may be subject to U.S.
federal income taxation on a portion of any "excess distribution" with respect
to, or gain from the disposition of, such stock. The tax would be determined by
allocating such distribution or gain ratably to each day of the Fund's holding
period for the stock. The distribution or gain so allocated to any taxable year
of the Fund, other than the taxable year of the excess distribution or
disposition, would be taxed to the Fund at the highest ordinary income rate in
effect for such year, and the tax would be further increased by an interest
charge to reflect the value of the tax deferral deemed to have resulted from the
ownership of the foreign company's stock. Any amount of distribution or gain
allocated to the taxable year of the distribution or disposition would be
included in the Fund's investment company taxable income and, accordingly, would
not be taxable to the Fund to the extent distributed by the Fund as a dividend
to its Shareholders.
A Fund may be able to make an election, in lieu of being
taxable in the manner described above, to include annually in income its pro
rata share of the ordinary earnings and net capital gain of the foreign
investment company, regardless of whether it actually received any distributions
from the foreign company. These amounts would be included in the Fund's
investment company taxable income and net capital gain which, to the extent
distributed by the Fund as ordinary or capital gain dividends, as the case may
be, would not be taxable to the Fund. In order to make this election, the Fund
would be required to obtain certain annual information from the foreign
investment companies in which it invests, which in many cases may be difficult
to obtain. A Fund may make an election with respect to those foreign investment
companies which provide the Fund with the required information. Alternatively,
another election would involve marking to market a Fund's PFIC shares at the end
of each taxable year, with the result that unrealized gains would be treated as
though they were realized and reported as ordinary income. Any market-to-market
losses and any loss from an actual disposition of PFIC shares would be
deductible as ordinary losses to the extent of any net mark-to-market gains
included in income in prior years.
SALE OF SHARES. Upon the sale or other disposition of Shares
of a Fund, or upon receipt of a distribution in complete liquidation of a Fund,
a Shareholder generally will realize a capital gain or loss which will be
long-term or short-term, depending upon the Shareholder's holding period for the
Shares. Any loss realized on a sale or exchange will be disallowed to the extent
the Shares disposed of are replaced (including Shares acquired pursuant to a
dividend reinvestment plan) within a period of 61 days beginning 30 days before
and ending 30 days after disposition of the Shares. In such a case, the basis of
the Shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a Shareholder on a disposition of Fund Shares held by the
Shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
Shareholder with respect to such Shares.
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<PAGE> 74
'
FOREIGN WITHHOLDING TAXES. Income received by a Fund from
sources within foreign countries may be subject to withholding and other taxes
imposed by such countries.
BACKUP WITHHOLDING. Each Fund may be required to withhold U.S.
federal income tax at the rate of 31% of all taxable distributions payable to
Shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Corporate
Shareholders and certain other Shareholders specified in the Code generally are
exempt from such backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against the Shareholder's U.S. federal
income tax liability.
FOREIGN SHAREHOLDERS. The tax consequences to a foreign
Shareholder of an investment in a Fund may be different from those described
herein. Foreign Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund.
OTHER TAXATION. The Company is organized as a Delaware
business trust and, under current law, neither the Company nor any Fund is
liable for any income or franchise tax in the State of Delaware, provided that
each Fund continues to qualify as a regulated investment company under
Subchapter M of the Code.
Fund Shareholders may be subject to state and local taxes on
their Fund distributions. In certain states, Fund distributions that are derived
from interest on obligations of that state or any municipality or political
subdivision thereof may be exempt from taxation. Also, in many states, Fund
distributions which are derived from interest on certain U.S. Government
obligations may be exempt from taxation.
Calculation of Performance Data
- -------------------------------
YIELD CALCULATIONS. As summarized in the Prospectus of the
Funds under the heading "PERFORMANCE INFORMATION", yields of each of the Funds
will be computed by dividing the net investment income per share (as described
below) earned by the Fund during a 30-day (or one month) period by the maximum
offering price per share on the last day of the period and annualizing the
result on a semi-annual basis by adding one to the quotient, raising the sum to
the power of six, subtracting one from the result and then doubling the
difference. A Fund's net investment income per share earned during the period is
based on the average daily number of Shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements. This
calculation can be expressed as follows:
a-b 6
Yield = 2 [( --- + 1) -1]
cd
Where: a = dividends and interest earned during the
period.
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<PAGE> 75
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of Shares
outstanding during the period that were
entitled to receive dividends.
d = maximum offering price per share on the last
day of the period.
For the purpose of determining net investment income earned
during the period (variable "a" in the formula), dividend income on equity
securities held by a Fund is recognized by accruing 1/360 of the stated dividend
rate of the security each day that the security is in that Fund. Interest earned
on any debt obligations held by a Fund is calculated by computing the yield to
maturity of each obligation held by the Fund based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last Business Day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and dividing
the result by 360 and multiplying the quotient by the market value of the
obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is held by that Fund. For purposes of this calculation, it is assumed
that each month contains 30 days. The maturity of an obligation with a call
provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market values of such debt
obligations.
Undeclared earned income will be subtracted from the net asset
value per share (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the base period, has not been
declared as a dividend, but is reasonably expected to be and is declared as a
dividend shortly thereafter.
For the 30-day period ended December 31, 1998, the yield for
the Income Fund was ____%.
During any given 30-day period, the Adviser or the
Administrator may voluntarily waive all or a portion of their fees with respect
to a Fund. Such waiver would cause the yield of that Fund to be higher than it
would otherwise be in the absence of such a waiver.
TOTAL RETURN CALCULATIONS. As summarized in the Prospectus of
the Funds under the heading "PERFORMANCE INFORMATION," average annual total
return is a measure of the change in value of an investment in a Fund over the
period covered, which assumes any dividends or capital gains distributions are
reinvested in the Fund immediately rather than paid to the investor in cash. The
Funds compute their average annual total returns by determining the average
annual compounded rates of return during specified periods that equate the
initial amount invested to the ending redeemable value of such investment. This
is done by dividing the ending redeemable value of a hypothetical $1,000 initial
payment by $1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion
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thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
ERV
Average Annual Total Return = [(---)to the 1/nth power-1]
P
Where: ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed
in terms of years.
The Funds compute their aggregate total returns by determining
the aggregate compounded rates of return during specified periods that likewise
equate the initial amount invested to the ending redeemable value of such
investment. The formula for calculating aggregate total return is as follows:
ERV
Average Total Return = [(---)-1]
P
Where: ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period. The ending redeemable
value (variable "ERV" in each formula) is determined by assuming complete
redemption of the hypothetical investment and the deduction of all nonrecurring
charges at the end of the period covered by the computations.
The average annual total return for the Growth Fund for the
one year period ended December 31, 1998, was _____% assuming the deduction of
the maximum contingent deferred sales charge of 4% at the end of the period, and
was _____% assuming that the maximum contingent deferred sales charge had not
been deducted. The average annual total return for the Income Fund for the one
year period ended December 31, 1998, was ____% assuming the deduction of the
maximum contingent deferred sales charge of 4% at the end of the period, and was
____% assuming that the maximum contingent deferred sales charge had not been
deducted.
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With respect to the Growth Fund and the Income Fund, based
upon the period beginning with each Fund's commencement of operations (January
4, 1994) through December 31, 1998, the average annual total return for the
Growth Fund was ____% and for the Income Fund was ____%, assuming that the
applicable contingent deferred sales charge had been deducted upon redemption at
the end of the period indicated. Assuming that the applicable contingent
deferred sales charge had not been deducted upon redemption at the end of the
period indicated, the average annual total return for the Growth Fund for this
period was ____% and for the Income Fund was ____%.
With respect to the International Fund, the total return for
the Fund for the one year period ended December 31, 1998 was ____% assuming the
deduction of the maximum contingent sales charge of 4% at the end of the period,
and it was ____% assuming that the maximum contingent deferred sales charge has
not been deducted.
With respect to the Growth Fund and the Income Fund, based
upon the period beginning with each Fund's commencement of operations (January
4, 1994) through December 31, 1998, the aggregate total return for the Growth
Fund was ____% and for the Income Fund was ____%, assuming that the applicable
contingent deferred sales charge had been deducted upon redemption at the end of
the period indicated. Assuming that the applicable contingent deferred sales
charge had not been deducted upon redemption at the end of the period indicated,
the aggregate total return for the Growth Fund was ____% and for the Income Fund
was ____%.
Since performance will fluctuate, performance data for the
Funds should not be used to compare an investment in the Funds' Shares with bank
deposits, savings accounts and similar investment alternatives which often
provide an agreed or guaranteed fixed yield for a stated period of time.
Shareholders should remember that performance is generally a function of the
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses and market conditions.
DISTRIBUTION RATES. Each of the Funds may from time to time
advertise current distribution rates in supplemental sales literature. Such
rates are calculated in accordance with the method disclosed in the Prospectus.
Performance Comparisons
- -----------------------
Investors may judge the performance of the Funds by comparing
them to the performance of other mutual funds or mutual fund portfolios with
comparable investment objectives and policies. Such comparisons may be made by
referring to market indices such as those prepared by Dow Jones & Co., Inc. and
Standard & Poor's Corporation. Such comparisons may also be made by referring to
data prepared by Lipper Analytical Services, Inc., (a widely recognized
independent service which monitors the performance of mutual funds). Comparisons
may be made to the Domini Social Index, an index representing 400 companies that
meet standards for corporate social responsibility as determined by Kinder,
Lyndenberg, Domini & Company Inc., a firm specializing in providing research on
corporations' social responsibility profiles. Comparisons may also be made to
indices or data published in the following national financial publications:
IBC/Donoghue's Money Fund Report, Ibottson Associates of Chicago,
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<PAGE> 78
Morningstar, CDA/Wiesenberger, Money Magazine, Forbes, Barron's, The Wall Street
Journal, The New York Times, Business Week, American Banker, Fortune,
Institutional Investor, U.S.A. Today and local newspapers. In addition to
performance information, general information about the Funds that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to Shareholders.
From time to time, the Funds may include general comparative
information, such as statistical data regarding inflation, securities indices or
the features or performance of alternative investments, in advertisements, sales
literature and reports to shareholders. The Funds may also include calculations,
such as hypothetical compounding examples, which describe hypothetical
investment results in such communications. Such performance examples will be
based on an express set of assumptions and are not indicative of the performance
of any Fund. The Funds may also include in advertisements and reports to
Shareholders information comparing the performance of the Adviser or its
predecessors to other investment advisers; such comparisons may be published by
or included in Nelsons Directory of Investment Managers, Roger's, Casey/PIPER
Manager Database or CDA/Cadence.
From time to time, advertisements, supplemental sales
literature and information furnished to present or prospective shareholders of
the Funds may include descriptions of the investment adviser including, but not
limited to, (i) descriptions of the adviser's operations, (ii) descriptions of
certain personnel and their functions; and (iii) statistics and rankings related
to the adviser's operations.
From time to time, the Funds may include the following types
of information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principles (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (2) discussions of general economic trends; (3)
presentations of statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for one or more of the
Funds within the Trust; (5) descriptions of investment strategies for one or
more of such Funds; (6) descriptions or comparisons of various savings and
investment products (including but not limited to insured bank products,
annuities, qualified retirement plans and individual stocks and bonds) which may
or may not include the Funds; (7) comparisons of investment products (including
the Funds) with relevant market or industry indices or other appropriate
benchmarks; and (8) discussions of fund rankings or ratings by recognized rating
organizations.
Current yields or total returns will fluctuate from time to
time and are not necessarily representative of future results. Accordingly, a
Fund's yield or total return may not provide for comparison with bank deposits
or other investments that pay a fixed return for a stated period of time. A
Fund's performance is a function of its quality, composition and maturity, as
well as expenses allocated to the Fund.
Principal Shareholders
- ----------------------
As of ___________, 1999, no persons or entities owned
beneficially or of record 5% or more of any Funds' outstanding shares, except:
(1) Mennonite Mutual Aid Association,
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P.O. Box 483, Goshen, Indiana 46527, which owned of record ____% of the Income
Fund and ____% of the International Fund; (2) The Mennonite Foundation, Inc.,
P.O. Box 483, Goshen, Indiana 46527, which owned of record ____% of the Income
Fund and _____% of the International Fund, and (3) the Mennonite Retirement
Trust, P.O. Box 483, Goshen, Indiana 46527, which owned of record _____% of the
International Fund.
Miscellaneous
- -------------
The Funds may include information in their Annual Reports and
Semi-Annual Reports to Shareholders that (1) describes general economic trends,
(2) describes general trends within the financial services industry or the
mutual fund industry, (3) describes past or anticipated portfolio holdings for a
Fund within the Company or (4) describes investment management strategies for
such Funds. Such information is provided to inform Shareholders of the
activities of the Funds for the most recent fiscal year or half-year and to
provide the views of the Adviser and/or Company officers regarding expected
trends and strategies.
Individual Trustees are elected by the Shareholders and,
subject to removal by the vote of two-thirds of the Board of Trustees, serve for
a term lasting until the next meeting of Shareholders at which Trustees are
elected. Such meetings are not required to be held at any specific intervals.
The Trustees will call a special meeting for the purpose of considering the
removal of one or more Trustees upon written request from shareholders owning
not less than 10% of the outstanding votes of the Company entitled to vote. At
such a meeting, a vote of two-thirds of the outstanding shares of the Company
has the power to remove one or more Trustees.
The Company is registered with the Commission as a management
investment company. Such registration does not involve supervision by the
Commission of the management or policies of the Company.
The Prospectus and this Statement of Additional Information
omit certain information contained in the Registration Statement filed with the
Commission. Copies of such information may be obtained from the Commission upon
payment of the prescribed fee.
The Prospectus and this Statement of Additional Information
are not an offering of the securities herein described in any state in which
such offering may not lawfully be made. No salesman, dealer, or other person is
authorized to give any information or make any representation other than those
contained in the Prospectus and this Statement of Additional Information.
FINANCIAL STATEMENTS
Financial Statements for the Funds, including notes thereto,
and the report of PricewaterhouseCoopers LLP thereon, dated ___________, 1999,
are included in the Funds' Annual Report to Shareholders and incorporated by
reference into this Statement of Additional Information. Copies of the Annual
Report may be obtained upon request and without charge
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<PAGE> 80
from the Funds at the address and telephone number provided on the cover of this
Statement of Additional Information.
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<PAGE> 81
APPENDIX
Commercial Paper Ratings
- ------------------------
A Standard & Poor's Corporation ("S&P") commercial paper
rating is a current assessment of the likelihood of timely payment of debt
having an original maturity of no more than 365 days. The following summarizes
the rating categories used by S&P for commercial paper.
"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determined to posses extremely strong safety
characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
"A-1."
"A-3" - Issue has an adequate capacity for timely payment. It
is, however, somewhat more vulnerable to the adverse effects of changes and
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely
payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's Investors Service, Inc. ("Moody's") commercial paper
ratings are opinions of the ability of issuers to repay punctually promissory
obligations not having an original maturity in excess of 9 months. The following
summarizes the rating categories used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are
considered to have a superior capacity for repayment of short-term promissory
obligations. Principal repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well established
industries; high rates of return on funds employed; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and
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market composition may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt protection measurements
and the requirement for relatively high financial leverage. Adequate alternate
liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps Credit Rating Co.
("Duff & Phelps") for investment grade commercial paper are "Duff 1," "Duff 2"
and "Duff 3." Duff & Phelps employs three designations, "Duff 1+," "Duff 1" and
"Duff 1-," within the highest rating category. The following summarizes the
rating categories used by Duff & Phelps for commercial paper.
"Duff 1+" - Debt possesses highest certainty of timely
payment. Short-term liquidity, including internal operating factors and/or
access to alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"Duff 1" - Debt possesses very high certainty of timely
payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor.
"Duff 1-" - Debt possesses high certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
"Duff-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
"Duff 3" - Debt possesses satisfactory liquidity, and other
protection factors qualify issue as investment grade. Risk factors are larger
and subject to more variation. Nevertheless, timely payment is expected.
"Duff 4" - Debt possesses speculative investment
characteristics.
"Duff 5" - Issuer has failed to meet scheduled principal
and/or interest payments.
Fitch Investors Service, Inc. ("Fitch") short-term ratings
apply to debt obligations that are payable on demand or have original maturities
of up to three years. The following summarizes the rating categories used by
Fitch for short-term obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issuers assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
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"F-2" - Securities possess good credit quality. Issues
carrying this rating have a satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as the "F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes in
financial and economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term
ratings to indicate that the rating is based upon a letter of credit issued by a
commercial bank.
Thomson BankWatch commercial paper ratings assess the
likelihood of an untimely payment of principal or interest of debt having a
maturity of one year or less which is issued by United States commercial banks,
thrifts and non-banks; non United States banks; and broker-dealers. The
following summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's
highest rating category and indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of
safety regarding timely payment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment
grade category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded
as non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations are supported by the highest capacity for
timely repayment.
"A1" - Obligations are supported by a strong capacity for
timely repayment.
"A2" - Obligations are supported by a satisfactory capacity
for timely repayment, although such capacity may be susceptible to adverse
changes in business, economic, or financial conditions.
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"A3" - Obligations are supported by an adequate capacity for
timely repayment. Such capacity is more susceptible to adverse changes in
business, economic, or financial conditions than for obligations in higher
categories.
"B" - Obligations capacity for timely repayment is susceptible
changes in business, economic, or financial conditions.
"C" - Obligations have an inadequate capacity to ensure timely
repayment.
"D" - Obligations have a high risk of default or are currently
in default.
Corporate and Municipal Long-Term Debt Ratings
- ----------------------------------------------
The following summarizes the ratings used by S&P for corporate
and municipal debt:
"AAA" - This designation represents the highest rating
assigned by S&P to a debt obligation and indicates an extremely strong capacity
to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to
pay interest and repay principal and differs from AAA issues only in small
degree.
"A" - Debt is considered to have a strong capacity to pay
interest and repay principal although such issues are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than
debt in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC," and "C" - Debt that possesses one of
these ratings is regarded, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance with the terms of
the obligation. "BB" indicates the lowest degree of speculation and "C" the
highest degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
"CI" - This rating is reserved for income bonds on which no
interest is being paid.
"D" - Debt is in default, and payment of interest and/or
repayment of principal is in arrears.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC"
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
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The following summarizes the ratings used by Moody's for
corporate and municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing, "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in
default.
Con. (--) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some conditions are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks at the lower end of its generic rating category.
The following summarizes the ratings used by Duff & Phelps for
corporate and municipal long-term debt:
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"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when due.
Debt rated "B" possesses the risk that obligations will not be met when due.
Debt rated "CCC" is well below investment grade and has considerable uncertainty
as to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with divided arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by
Fitch for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
"AA" - Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1+."
"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
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"BB," "B," "CCC," "C," "DDD," "DD," and "D" - Bonds that
possess one of these ratings are considered by Fitch to be speculative
investments. The ratings "BB" to "C" represent Fitch's assessment of the
likelihood of timely payment of principal and interest in accordance with the
terms of obligation for bond issues not in default. For defaulted bonds, the
rating "DDD" to "D" is an assessment of the ultimate recovery value through
reorganization or liquidation.
To provide more detailed indications of credit quality, the
Fitch ratings from and including "AA" to "C" may be modified by the addition of
a plus (+) or minus (-) sign to show relative standing within these major rating
categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
"AA" - Obligations for which there is a very low expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment risk than
for obligations in higher categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one
of these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree of
speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating
to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; nonUnited States banks;
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and broker-dealers. The following summarizes the rating categories used by
Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is very high.
"AA" - This designation indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk versus
issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC" - These obligations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
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PART C
OTHER INFORMATION
Item 23 EXHIBITS
- ------- --------
(a) (1) Amended and Restated Agreement
and Declaration of Trust (2)
(2) Certificate of Trust (1)
(b) By-Laws (2)
(c) Certificates for Shares are not issued.
Articles III and V of the Registrant's
Declaration of Trust define rights of
holders of Shares.
(d) (1) Investment Advisory Agreement
(with respect to MMA Praxis
Intermediate Income Fund and MMA
Praxis Growth Fund) (3)
(2) Investment Advisory Agreement
(with respect to MMA Praxis
International Fund) (5)
- -------------------
1 Filed in Registrant's initial Registration Statement on September 30,
1993, and incorporated by reference herein.
2 Filed in Pre-Effective Amendment No. 1 to the Registration Statement on
December 13, 1993, and incorporated by reference herein.
3 Filed in Pre-Effective Amendment No. 2 to the Registration Statement on
December 28, 1993, and incorporated by reference herein.
4 Filed in Post-Effective Amendment No. 1 to the Registration Statement
on June 30, 1994, and incorporated by reference herein.
5 Filed in Post-Effective Amendment No. 5 to the Registration Statement
on April 1, 1997 and incorporated by reference herein.
6. To be filed by amendment.
<PAGE> 90
(3) Sub-Advisory Agreement with Oechsle
International Advisors (with respect to MMA
Praxis International Fund) (5)
(e) Distribution Agreement between Registrant and BISYS
Fund Services (3)
(f) Not Applicable
(g) (1) Custody Agreement between Registrant and
Fifth Third Bank (3)
(2) Custody Agreement between Registrant and
Boston Safe Deposit and Trust Company (with
respect to MMA Praxis International Fund)
(5)
(h) (1) Management and Administration Agreement
between the Registrant and BISYS Fund
Services (3)
(2) Fund Accounting Agreement between the
Registrant and BISYS Fund Services Ohio,
Inc. (3)
(3) Transfer Agency Agreement between the
Registrant and BISYS Fund Services Ohio,
Inc. (3)
(i) Opinion and Consent of Counsel (3)
(j) Consent of Independent Accountants (6)
(k) Not Applicable
(l) Letters concerning Initial Capital (3)
(m) (1) Distribution Services Plan -- Class A Shares
(2) Distribution Services Plan -- Class B Shares
(n) Financial Data Schedules
(o) Rule 18f-3 Plan
Item 24 Persons Controlled by or Under Common Control with Registrant
- ------- -------------------------------------------------------------
Not applicable.
<PAGE> 91
Item 25 Indemnification
- ------- ---------------
Reference is made to Article VII of the Registrant's
Declaration of Trust (Exhibit (a)(1) and Article VI of the
Registrant's By-Laws (Exhibit (b), which are incorporated by
reference herein.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Fund's Declaration of Trust, its By-Laws or
otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and, therefore,
is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
trustees, officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or
proceeding) is asserted by such trustees, officers or
controlling persons in connection with shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issues.
Item 26 Business and Other Connections of Investment Adviser and its
- ------- ------------------------------------------------------------
Officers and Directors
----------------------
The business of the Adviser is summarized under "MANAGEMENT OF
THE COMPANY Investment Adviser" in the Prospectus constituting
Part A of this Registration Statement, which summary is
incorporated herein by reference. The business or other
connections of each director and officer of the Advisor is
currently listed in the Adviser's investment adviser
registration on Form ADV (File No. 801-36323) and is hereby
incorporated herein by reference thereto.
Item 27 Principal Underwriter
- ------- ---------------------
(a) BISYS Fund Services, Limited Partnership ("BISYS Fund
Services") acts as distributor and administrator for
Registrant. BISYS Fund Services also distributes the
securities of Alpine Equity Trust, American Performance Funds,
the AmSouth Mutual Funds, The ARCH Fund, Inc., The BB&T Mutual
Funds Group, The Coventry Group, ESC Strategic Funds, Inc.,
The Eureka Funds, Governor Funds, Gradison Custodian Trust,
Gradison Growth Trust, Gradison-McDonald Cash Reserves Trust,
Gradison-McDonald Municipal Custodian Trust, Fifth Third
Funds, Hirtle Callaghan Trust, HSBC Funds Trust, HSBC Mutual
Funds Trust, INTRUST Funds Trust, The Infinity Mutual Funds,
Inc., The Kent Funds, Magna Funds, Meyers Investment Trust,
M.S.D.&T Funds, Pacific Capital Funds, The Parkstone Advantage
Fund, Pegasus Funds, Puget Sound
<PAGE> 92
Alternative Investment Series Trust, The Republic Funds Trust,
The Republic Advisors Funds Trust, Sefton Funds Trust, The
Sessions Group, SSgA International Liquidity Fund, Summit
Investment Trust, Variable Insurance Funds, The Victory
Portfolios, The Victory Variable Insurance Funds and the
Vintage Mutual Funds, Inc.
(b) Partners of BISYS Fund Services, as of May 1, 1999, were
as follows:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and
Business Address with BISYS Fund Services Offices with Registrant
---------------- ------------------------ -----------------------
<S> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, New Jersey 07424
</TABLE>
(c) Not Applicable.
Item 28 Location of Accounts and Records
- ------- --------------------------------
The accounts, books, and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promulgated
thereunder are in the possession of MMA Capital Management,
1110 North Main Street, Goshen, Indiana 46527 (records
relating to its function as adviser for MMA Praxis
Intermediate Income Fund, MMA Praxis Growth Fund and MMA
Praxis International Fund), Oechsle International Advisors,
One International Place, Boston, Massachusetts 02110 (records
relating to its function as investment sub- adviser to MMA
Praxis International Fund), BISYS Fund Services, 3435 Stelzer
Road, Columbus, Ohio 43219 (records relating to its functions
as general manager, administrator and distributor), and BISYS
Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio
43219 (records relating to its functions as transfer agent).
<PAGE> 93
Item 29 Management Services
- ------- -------------------
Not Applicable.
Item 30 Undertakings
- ------- ------------
(a) Not Applicable.
(b) Registrant undertakes to furnish each person to whom a
prospectus is delivered a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge, in the event that the information called for by Item 5
of Form N-1A has been presented in the Registrant's latest
annual report to shareholders.
(c) Registrant undertakes to call a meeting of Shareholders
for the purpose of voting upon the question of removal of a
Trustee or Trustees when requested to do so by the holders of
at least 10% of the Registrant's outstanding shares of
beneficial interest and in connection with such meeting to
comply with the shareholders communications provisions of
Section 16(c) of the Investment Company Act of 1940.
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has caused this
Post-Effective Amendment No. 8 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Washington
and the District of Columbia, on the 1st day of March, 1999.
MMA PRAXIS MUTUAL FUNDS
------------------------------
John L. Liechty, President****
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 8 to the Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
________________________ President March 1, 1999
John L. Liechty****
________________________ Treasurer (Principal Financial March 1, 1999
Paul T. Kane***** and Accounting Officer)
________________________ Chairman and Trustee March 1, 1999
Howard L. Breneman*
________________________ Trustee March 1, 1999
Richard Reimer*
________________________ Trustee March 1, 1999
Karen Klassen Harder*
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
________________________ Trustee March 1, 1999
Donald E. Showalter*
________________________ Trustee March 1, 1999
Allen Yoder, Jr.*
________________________ Trustee March 1, 1999
Wilfred E. Nolen**
________________________ Trustee March 1, 1999
Beryl Mae Hartzler Brubaker***
</TABLE>
*By: _________________________
Jeffrey L. Steele
Attorney-in-fact
* Pursuant to Powers of Attorney filed with Pre-Effective Amendment No. 1
filed on December 13, 1993.
** Pursuant to Power of Attorney filed with Post-Effective Amendment No. 3
filed on April 30, 1996.
*** Pursuant to Power of Attorney filed with Post-Effective Amendment No. 4
filed on January 16, 1997.
**** Pursuant to Power of Attorney filed with Post-Effective Amendment No. 6
filed on September 30, 1997.
***** Pursuant to Power of Attorney filed herewith.
<PAGE> 96
POWER OF ATTORNEY
Paul T. Kane whose signature appears below, does hereby constitute and
appoint Jeffrey L. Steele, Patrick W.D. Turley, Robert L. Tuch and David J.
Harris each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
MMA Praxis Mutual Funds (the "Group"), to comply with the Investment Company Act
of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and
any rules regulations or requirements of the Securities and Exchange Commission
in respect thereof, in connection with the filing and effectiveness of any and
all amendments to the Group's Registration Statement on Form N-1A pursuant to
said Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned, Paul T. Kane, as Treasurer of the Group, any and all such
amendments filed with the Securities and Exchange Commission under said Acts,
and any other instruments or documents related thereto, and the undersigned does
hereby ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue thereof.
Date: February 26, 1999 /s/ Paul T. Kane
--------------------
Paul T. Kane
<PAGE> 1
EXHIBIT (M)(1)
Dated: As of May 1, 1999
SCHEDULE C
TO THE DISTRIBUTION AGREEMENT
BETWEEN
MMA PRAXIS MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
d/b/a BISYS FUND SERVICES
DISTRIBUTION SERVICES PLAN - CLASS A SHARES
-------------------------------------------
This Plan (the "Plan") constitutes the distribution services plan of the Class A
Shares of the MMA Praxis Mutual Funds, a Delaware business trust (the "Trust"),
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). The Plan relates to the Class A Shares of those investment
portfolios ("Funds") identified on Schedule B of the Trust's Distribution
Agreement, as amended from time to time (the "Distribution Plan Funds").
Section 1. Subject to the limitations on the payment of asset-based sales
charges set forth in Section 2830 of the Conduct Rules of the National
Association of Securities Dealers, each Distribution Plan Fund shall pay to
BISYS Fund Services, the distributor (the "Distributor") of the Trust's units of
beneficial interest (the "Shares"), or to third parties in accordance with
Section 2, an aggregate fee in an amount not to exceed on an annual basis 0.50%
of the average daily net asset value of such Fund's Class A Shares (the
"Distribution Fee") for distribution related activities; provided, however, that
not more than 0.25% of the average daily net asset value of such Fund may be
used for general distribution purposes (including but not limited to commission
payments to broker-dealers, advertising, sales literature and other forms of
marketing activities, functions and expenses) and up to .25% of the average
daily net asset value of such Fund may be used as a service fee as defined by
Section 2830 of the Conduct Rules. Payments may be made under this Plan to
finance or to reimburse marketing expenses, including sales commissions,
advertising seminars and other marketing activities. Payments under the Plan may
be made in the form of a service fee to financial institutions and
broker/dealers (a "Servicing Organization") for Shareholder services pursuant to
an agreement between the Distributor and the Servicing Organization. For
purposes of the Plan, a Servicing Organization may include the Distributor or
any of its affiliates or subsidiaries.
Section 2. The Distribution Fee shall be paid by the Distribution Plan Funds to
the Distributor, or directly to third parties at the direction of the
Distributor, to compensate or to reimburse the Distributor or the third party
for expenses incurred pursuant to Section 1.
Section 3. The Plan shall not take effect with respect to a Distribution Plan
Fund until it has been approved by a vote of at least a majority of the
outstanding voting securities of such Fund.
Section 4. The Plan shall not take effect until it has been approved, together
with any related agreements, by votes of the majority (or whatever greater
percentage may, from time to time, be
C-1
<PAGE> 2
required by Section 12(b) of the 1940 Act or the rules and regulations
thereunder) or both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on the Plan or such agreement.
Section 5. The Plan shall continue in effect for a period of more than one year
after it takes effect only so long as such continuance is specifically approved
at least annually in the manner provided for the approval of the Plan in Section
4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Distribution Plan Funds pursuant to the Plan or any related
agreement shall provide to the Trustees of the Trust, and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
Section 7. The Plan may be terminated at any time by vote of a majority of the
Independent Trustees, or by vote of a majority of a Distribution Plan Fund's
outstanding voting securities.
Section 8. All agreements with any person relating to implementation of the Plan
shall be in writing, and any agreement related to the Plan shall provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the
Independent Trustees or by vote of a majority of the
outstanding voting securities of the Distribution Plan Fund,
on not more than 60 days' written notice to any other party to
the agreement; and
(b) That such agreement shall terminate automatically in the event
of its assignment.
Section 9. The Plan may not be amended to increase materially the amount of
distribution expenses permitted pursuant to Section 1 hereof without approval in
the manner provided in Section 3 hereof, and all material amendments to the Plan
shall be approved in the manner provided for approval of the Plan in Section 4.
Section 10. As used in the Plan, (a) the term "Independent Trustees" shall mean
those Trustees of the Trust who are not interested persons of the Trust, and
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it, and (b) the terms "assignment," "interested
person" and "majority of the outstanding voting securities" shall have the
respective meanings specified in the 1940 Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities
Exchange Commission.
C-2
<PAGE> 1
EXHIBIT (M)(2)
Dated: As of May 1, 1999
SCHEDULE C
TO THE DISTRIBUTION AGREEMENT
BETWEEN
MMA PRAXIS MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
d/b/a BISYS FUND SERVICES
DISTRIBUTION SERVICES PLAN - CLASS B SHARES
-------------------------------------------
This Plan (the "Plan") constitutes the distribution services plan of the Class B
Shares of the MMA Praxis Mutual Funds, a Delaware business trust (the "Trust"),
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). The Plan relates to the Class B Shares of those investment
portfolios ("Funds") identified on Schedule B of the Trust's Distribution
Agreement, as amended from time to time (the "Distribution Plan Funds").
Section 1. Subject to the limitations on the payment of asset-based sales
charges set forth in Section 2830 of the Conduct Rules of the National
Association of Securities Dealers, each Distribution Plan Fund shall pay to
BISYS Fund Services, the distributor (the "Distributor") of the Trust's units of
beneficial interest (the "Shares"), or to third parties in accordance with
Section 2, an aggregate fee in an amount not to exceed on an annual basis 1% of
the average daily net asset value of such Fund's Class B Shares (the
"Distribution Fee") for distribution related activities; provided, however, that
not more than .75% of the average daily net asset value of such Fund may be used
for general distribution purposes (including but not limited to commission
payments to broker-dealers, advertising, sales literature and other forms of
marketing activities, functions and expenses) and up to .25% of the average
daily net asset value of such Fund may be used as a service fee as defined by
Section 2830 of the Conduct Rules. Payments may be made under this Plan to
finance or to reimburse marketing expenses, including sales commissions,
advertising seminars and other marketing activities. Payments under the Plan may
be made in the form of a service fee to financial institutions and
broker/dealers (a "Servicing Organization") for Shareholder services pursuant to
an agreement between the Distributor and the Servicing Organization. For
purposes of the Plan, a Servicing Organization may include the Distributor or
any of its affiliates or subsidiaries.
Section 2. The Distribution Fee shall be paid by the Distribution Plan Funds to
the Distributor, or directly to third parties at the direction of the
Distributor, to compensate or to reimburse the Distributor or the third party
for expenses incurred pursuant to Section 1.
Section 3. The Plan shall not take effect with respect to a Distribution Plan
Fund until it has been approved by a vote of at least a majority of the
outstanding voting securities of such Fund.
Section 4. The Plan shall not take effect until it has been approved, together
with any related agreements, by votes of the majority (or whatever greater
percentage may, from time to time, be
C-1
<PAGE> 2
required by Section 12(b) of the 1940 Act or the rules and regulations
thereunder) or both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on the Plan or such agreement.
Section 5. The Plan shall continue in effect for a period of more than one year
after it takes effect only so long as such continuance is specifically approved
at least annually in the manner provided for the approval of the Plan in Section
4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Distribution Plan Funds pursuant to the Plan or any related
agreement shall provide to the Trustees of the Trust, and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
Section 7. The Plan may be terminated at any time by vote of a majority of the
Independent Trustees, or by vote of a majority of a Distribution Plan Fund's
outstanding voting securities.
Section 8. All agreements with any person relating to implementation of the Plan
shall be in writing, and any agreement related to the Plan shall provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the
Independent Trustees or by vote of a majority of the
outstanding voting securities of the Distribution Plan Fund,
on not more than 60 days' written notice to any other party to
the agreement; and
(b) That such agreement shall terminate automatically in the event
of its assignment.
Section 9. The Plan may not be amended to increase materially the amount of
distribution expenses permitted pursuant to Section 1 hereof without approval in
the manner provided in Section 3 hereof, and all material amendments to the Plan
shall be approved in the manner provided for approval of the Plan in Section 4.
Section 10. As used in the Plan, (a) the term "Independent Trustees" shall mean
those Trustees of the Trust who are not interested persons of the Trust, and
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it, and (b) the terms "assignment," "interested
person" and "majority of the outstanding voting securities" shall have the
respective meanings specified in the 1940 Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities
Exchange Commission.
C-2
<PAGE> 1
EXHIBIT (O)
MMA PRAXIS GROWTH FUND
MMA PRAXIS INTERMEDIATE INCOME FUND
MMA PRAXIS INTERNATIONAL FUND
(THE "FUNDS")
THE MMA PRAXIS MUTUAL FUNDS
(THE "TRUST")
PLAN PURSUANT TO RULE 18F-3
UNDER THE
INVESTMENT COMPANY ACT OF 1940
I. Introduction
------------
As required by Rule 18f-3 under the Investment Company Act of 1940, as
amended ("1940 Act"), this Plan describes the multi-class system for the Funds,
including the separate class arrangements for shareholder services and/or
distribution of shares, as applicable, the method for allocating expenses to
classes and related exchange privileges applicable to the classes.
Upon the effective date of this Plan, the Trust, on behalf of the
Funds, elects to offer multiple classes of shares of the Funds, as described
herein, pursuant to Rule 18f-3 and this Plan.
II. The Multi-Class System
----------------------
The Funds shall offer two classes of shares, Class A and Class B.
Shares of each class of the Funds shall represent an equal pro rata interest in
each respective Fund and, generally, shall have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (a) each class shall have
a different designation; (b) each class of shares shall bear any Class Expenses,
as defined in Section C, below; (c) each class shall have exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution arrangement; and (d) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. In addition, Class A and Class B
shares shall have the features described in Sections A, B, C and D, below.
A. Sales Charge Structure
----------------------
1. Class A Shares. Class A shares of the Funds shall be
offered at the then-current net asset value plus a front-end sales charge in
such amount as is disclosed in the current prospectus for the Funds, including
any prospectus supplements, and shall be subject to such reductions and waivers
as are determined or approved by the Trust's Board of Trustees. Class A
1
<PAGE> 2
shares shall generally not be subject to a contingent deferred sales charge
provided, however, that such a charge may be imposed in such cases as the Board
may approve and as disclosed in a future prospectus or prospectus supplement for
the Funds. Class A shares shall be distinguished from Class B shares by the
relative rates and timing of sales charges and the relative rates of fees under
the distribution plan (see below) applicable to each class.
2. Class B Shares. Class B shares of the Funds shall be
offered at the then-current net asset value plus a contingent deferred sales
charge in such amount as is disclosed in the current prospectus for the Funds,
including any prospectus supplements, and shall be subject to such reductions
and waivers as are determined or approved by the Trust's Board of Trustees.
Class B shares shall generally not be subject to a front-end sales charge
provided, however, that such a charge may be imposed in such cases as the Board
may approve and as disclosed in a future prospectus or prospectus supplement for
the Funds. Class B shares shall be distinguished from Class A shares by the
relative rates and timing of sales charges and the relative rates of fees under
the distribution plan (see below) applicable to each class.
B. Distribution Plan
-----------------
The Trust has adopted a distribution plan pursuant to Rule 12b-1 with
respect to the Funds and each class of shares, containing the following terms:
1. Class A Shares. Class A shares of the Funds shall reimburse
the Distributor for costs and expenses incurred in connection with distribution
and marketing of shares of the Funds, as provided in the distribution plan,
subject to an annual limit of 0.50% of the average daily net assets of each
respective Fund attributable to its Class A shares, provided that up to 0.25% of
such average daily net assets may be designated out of such reimbursements as a
"service fee," as defined in rules and policy statements of the National
Association of Securities Dealers.
2. Class B Shares. Class B shares of the Funds shall reimburse
the Distributor for costs and expenses incurred in connection with distribution
and marketing of shares of the Funds, as provided in the distribution plan,
subject to an annual limit of 1.00% of the average daily net assets of each
respective Fund attributable to its Class B shares, provided that up to 0.25% of
such average daily net assets may be designated out of such reimbursements as a
"service fee," as defined in rules and policy statements of the National
Association of Securities Dealers.
C. Allocation of Income and Expenses
---------------------------------
1. General
The gross income, realized and unrealized capital gains and
losses and expenses (other than Class Expenses, as defined below) of each Fund
shall be allocated to each
2
<PAGE> 3
class on the basis of its net asset value relative to the net asset value of the
Fund unless the Trustees determine to use another method that (a) is
specifically permitted by Rule 18f-3 or (b) is appropriate and is determined by
the Trustees, including a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust ("Independent Trustees"), to
be fair to the shareholders of each class and to provide an annualized rate of
return for each class that generally differs from that of any other class only
by the expense differentials among the classes. Expenses to be so allocated also
include expenses of the Trust that are allocated to a Fund and are not
attributable to another fund in the Trust ("Trust Expenses") and expenses of a
Fund that are not attributable to a particular class of the Fund ("Fund
Expenses"). Trust Expenses include, but are not limited to, certain Trustees'
fees, insurance costs and certain legal fees incurred generally on behalf of the
Trust. Fund Expenses include, but are not limited to, certain registration and
notice filing fees, advisory fees, custodial fees, and other expenses relating
to the management of each Fund's assets.
2. Class Expenses
Expenses attributable to a particular class ("Class Expenses")
shall be limited to: (a) payments pursuant to the distribution plan by that
class; (b) transfer agent fees attributable to that class; (c) printing and
postage expenses related to preparing and distributing material such as
shareholder reports, prospectuses and proxy materials to current shareholders of
that class; (d) registration and notice filing fees for shares of that class;
(e) the expense of administrative personnel and services as required to support
the shareholders of that class; (f) litigation or other legal expenses relating
solely to that class; and (g) Trustees' fees incurred as a result of issues
relating to that class. Expenses described in (a) of this paragraph must be
allocated to the class for which they are incurred. All other expenses described
in this paragraph may be allocated as Class Expenses only if they are actually
incurred in a different amount by a class, or if a class receives services of a
different kind or to a different degree than another class. It is intended that
expenses will be allocated as Class Expenses only to the extent consistent with
applicable legal principles under the 1940 Act and the Internal Revenue Code of
1986, as amended.
In the event a particular expense is no longer reasonably or
legally allocable by class or to a particular class, it shall be treated as a
Trust Expense, or Fund Expense, and in the event a Trust Expense or Fund Expense
becomes allocable at a different level, including as a Class Expense, it shall
be so allocated, subject to compliance with Rule 18f-3 and to approval or
ratification by the Board of Trustees.
The initial determination of expenses that will be allocated
as Class Expenses and any subsequent changes thereto shall be reviewed by the
Board of Trustees and approved by such Board and by a majority of the Trustees
who are not "interested persons" of the Funds, as defined in the 1940 Act.
3
<PAGE> 4
3. Waivers or Reimbursements of Expenses
Expenses may be waived or reimbursed by the Adviser, the
Sub-Adviser, the Distributor or any other provider of services to the Trust or
the Funds without the prior approval of the Board of Trustees.
D. Exchange Privileges
-------------------
Shareholders of the Funds may exchange shares of a particular
class for shares of the same class in such other Fund at relative net asset
value, provided the shares to be acquired in the exchange are permitted to be
sold in the shareholder's state of residence and subject to the applicable
requirements as to minimum amount.
E. Board Review
------------
1. Initial Approval
The Board of Trustees, including a majority of the Independent
Trustees, at a meeting held February 17, 1999, initially approved the Plan based
on a determination that the Plan, including the expense allocation, is in the
best interests of each class and the Funds. Their determination was based on
their review of information furnished to them which they deemed reasonably
necessary and sufficient to evaluate the Plan.
2. Approval of Amendments
The Plan may not be amended materially unless the Board of
Trustees, including a majority of the Independent Trustees, have found that the
proposed amendment, including any proposed related expense allocation, is in the
best interests of each class and the Funds. Such finding shall be based on
information requested by the Board and furnished to them which the Board deems
reasonably necessary to evaluate the proposed amendment.
3. Periodic Review
The Board shall review reports of expense allocations and such
other information as they request at such times, or pursuant to such schedule,
as they may determine consistent with applicable legal requirements.
F. Contracts
---------
Any agreement related to this multi-class system shall require the
parties thereto to furnish to the Board of Trustees, upon their request, such
information as is reasonably necessary to permit the Trustees to evaluate the
Plan or any proposed amendment.
4
<PAGE> 5
G. Effective Date
--------------
The Plan, having been reviewed and approved by the Board of Trustees
and by a majority of the Independent Trustees as indicated in Section E1 of the
Plan, shall take effect as of May 1, 1999.
H. Amendments
----------
The Plan may not be amended to modify materially its terms unless such
amendment has been approved in the manner specified in Section E2 of the Plan.
5
<PAGE> 1
[ARTICLE] 6
[CIK] 0000912900
[NAME] MMA PRAXIS MUTUAL FUNDS
[SERIES]
[NUMBER] 01
[NAME] INTERMEDIATE INCOME FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-1-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 41331487
[INVESTMENTS-AT-VALUE] 42470985
[RECEIVABLES] 595852
[ASSETS-OTHER] 11042
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 43077879
[PAYABLE-FOR-SECURITIES] 502422
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 187822
[TOTAL-LIABILITIES] 690244
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 41220219
[SHARES-COMMON-STOCK] 4167686
[SHARES-COMMON-PRIOR] 3330133
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 848
[ACCUMULATED-NET-GAINS] 28766
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 1139498
[NET-ASSETS] 42387635
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 2439983
[OTHER-INCOME] 0
[EXPENSES-NET] 413654
[NET-INVESTMENT-INCOME] 2026329
[REALIZED-GAINS-CURRENT] 363895
[APPREC-INCREASE-CURRENT] 243295
[NET-CHANGE-FROM-OPS] 2633519
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2027200
[DISTRIBUTIONS-OF-GAINS] 50583
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 976210
[NUMBER-OF-SHARES-REDEEMED] 243888
[SHARES-REINVESTED] 105231
[NET-CHANGE-IN-ASSETS] 9048259
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 568
[OVERDIST-NET-GAINS-PRIOR] 283955
[GROSS-ADVISORY-FEES] 188733
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 895895
[AVERAGE-NET-ASSETS] 37746564
[PER-SHARE-NAV-BEGIN] 10.01
[PER-SHARE-NII] .54
[PER-SHARE-GAIN-APPREC] .17
[PER-SHARE-DIVIDEND] .54
[PER-SHARE-DISTRIBUTIONS] .01
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.17
[EXPENSE-RATIO] 1.10
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000912900
[NAME] MMA PRAXIS MUTUAL FUNDS
[SERIES]
[NUMBER] 02
[NAME] GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-1-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 123652350
[INVESTMENTS-AT-VALUE] 136898394
[RECEIVABLES] 170140
[ASSETS-OTHER] 38410
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 137165544
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 189418
[TOTAL-LIABILITIES] 189418
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 120791876
[SHARES-COMMON-STOCK] 8957043
[SHARES-COMMON-PRIOR] 6637356
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 331
[ACCUMULATED-NET-GAINS] 2938537
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 13246044
[NET-ASSETS] 136976126
[DIVIDEND-INCOME] 1526785
[INTEREST-INCOME] 511306
[OTHER-INCOME] 0
[EXPENSES-NET] 2062957
[NET-INVESTMENT-INCOME] (24866)
[REALIZED-GAINS-CURRENT] 11456000
[APPREC-INCREASE-CURRENT] (5004409)
[NET-CHANGE-FROM-OPS] 6426725
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 5594
[DISTRIBUTIONS-OF-GAINS] 10523193
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2319601
[NUMBER-OF-SHARES-REDEEMED] 687305
[SHARES-REINVESTED] 687391
[NET-CHANGE-IN-ASSETS] 32666629
[ACCUMULATED-NII-PRIOR] 5536
[ACCUMULATED-GAINS-PRIOR] 2030323
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 902315
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 3082543
[AVERAGE-NET-ASSETS] 122023901
[PER-SHARE-NAV-BEGIN] 15.72
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] .84
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 1.27
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 15.29
[EXPENSE-RATIO] 1.69
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000912900
[NAME] MMA PRAXIS FUNDS
[SERIES]
[NUMBER] 03
[NAME] INTERNATIONAL FUNDS
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-1-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 25338694
[INVESTMENTS-AT-VALUE] 31242290
[RECEIVABLES] 97764
[ASSETS-OTHER] 64324
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 31404378
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 241385
[TOTAL-LIABILITIES] 241385
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 27061686
[SHARES-COMMON-STOCK] 2387910
[SHARES-COMMON-PRIOR] 1623792
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 338564
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 1337585
[ACCUM-APPREC-OR-DEPREC] 5777456
[NET-ASSETS] 31162993
[DIVIDEND-INCOME] 382887
[INTEREST-INCOME] 39392
[OTHER-INCOME] (14827)
[EXPENSES-NET] 486054
[NET-INVESTMENT-INCOME] (78602)
[REALIZED-GAINS-CURRENT] (1089659)
[APPREC-INCREASE-CURRENT] 5880223
[NET-CHANGE-FROM-OPS] 4711962
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 229547
[DISTRIBUTIONS-OF-GAINS] 18574
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 860904
[NUMBER-OF-SHARES-REDEEMED] 105160
[SHARES-REINVESTED] 8374
[NET-CHANGE-IN-ASSETS] 13917559
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 63556
[OVERDIST-NET-GAINS-PRIOR] 196211
[GROSS-ADVISORY-FEES] 220117
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 778662
[AVERAGE-NET-ASSETS] 24457390
[PER-SHARE-NAV-BEGIN] 10.62
[PER-SHARE-NII] (.02)
[PER-SHARE-GAIN-APPREC] 2.56
[PER-SHARE-DIVIDEND] .10
[PER-SHARE-DISTRIBUTIONS] .01
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.05
[EXPENSE-RATIO] 1.99
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
