
[Federal Register Volume 77, Number 82 (Friday, April 27, 2012)]
[Notices]
[Pages 25212-25214]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-10180]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30042; 812-13627]


Praxis Mutual Funds and Everence Community Investments, Inc.; 
Notice of Application

April 23, 2012.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of an application to amend a prior order pursuant to: 
(i) Sections 6(c) and 17(b) of the Investment Company Act of 1940 
(``Act'') granting an exemption from section 17(a) of the Act and (ii) 
section 17(d) of the Act and rule 17d-1 under the Act to permit certain 
transactions.

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Applicants: Praxis Mutual Funds (``Trust'') and Everence Community 
Investments, Inc. (``ECI'').


Summary of Application: Applicants request an order (``Requested 
Order'') to amend a prior order permitting the Trust and its series to 
invest in certain securities issued by ECI (``Prior Order'').\1\ 
Applicants seek to amend the Prior Order to permit the Trust to 
continue to invest in securities issued

[[Page 25213]]

by ECI following the implementation of certain changes in ECI's 
community development investment program.
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    \1\ MMA Praxis Mutual Funds, et al., Investment Company Act 
Release Nos. 25263 (Nov. 14, 2001) (notice) and 25315 (Dec. 11, 
2001) (order).

Filing Dates: The application was filed on January 27, 2009 and amended 
on June 29, 2009, September 14, 2010, August 5, 2011, March 19, 2012, 
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and April 20, 2012.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on May 18, 2012, and should be accompanied by proof of service on 
applicants, in the form of an affidavit or, for lawyers, a certificate 
of service. Hearing requests should state the nature of the writer's 
interest, the reason for the request, and the issues contested. Persons 
who wish to be notified of a hearing may request notification by 
writing to the Commission's Secretary.

ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants, 
Praxis Mutual Funds, 3435 Stelzer Road, Columbus, Ohio 43219 and 
Everence Community Investments, Inc., 1110 North Main Street, Goshen, 
Indiana 46528.

FOR FURTHER INFORMATION CONTACT: Jill Ehrlich, Senior Counsel, at (202) 
551-6819, or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Division 
of Investment Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Trust is registered under the Act as an open-end management 
investment company. The Trust currently consists of several separate 
investment portfolios and may organize additional investment portfolios 
in the future (``Praxis Funds''). Everence Capital Management, Inc. 
(``Everence Capital''), an investment adviser registered under the 
Investment Advisers Act of 1940, serves as the investment adviser to 
the Trust.\2\ ECI is a not-for-profit corporation that is exempt from 
registration as an investment company under section 3(c)(10)(A) of the 
Act. Everence Capital and ECI are operated under the auspices of MMA 
Stewardship Agency, the financial services arm of the Mennonite Church.
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    \2\ Applicants also request relief with respect to future 
portfolios of the Trust and any other registered investment 
companies that, in the future, are advised by Everence Capital or 
entities controlling, controlled by or under common control with 
Everence Capital. All existing investment companies that currently 
intend to rely on the Requested Order have been named as applicants, 
and any other existing or future investment companies that 
subsequently rely on the Requested Order will do so only in 
accordance with the terms and conditions set forth in the 
application. Applicants represent that, except as requested or 
expressly updated in the application, the representations set forth 
in the application relating to, and the terms and provisions of, the 
Prior Order remain unchanged.
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    2. In carrying out its investment program, each of the Praxis Funds 
seeks to promote human well-being, peace and justice by using the tools 
of socially responsible investing. As part of this commitment, and 
consistent with more specific investment criteria set forth in the 
prospectus relating to each of the Praxis Funds, the Trust's board of 
trustees (the ``Praxis Board'') has authorized each of the Praxis Funds 
to invest a limited portion of its assets in securities that offer a 
rate of return below the then prevailing market rate but present 
attractive opportunities for furthering social and economic well-being 
of disadvantaged individuals and their communities.
    3. The Prior Order permits the Praxis Funds to invest a limited 
portion of their assets in variable rate notes issued in connection 
with ECI's community development investment program (the ``Program''), 
which is designed to seek out and channel resources to experienced 
domestic and international community development organizations (each, a 
``Participating Borrower'').\3\ Such variable rate notes, when issued 
by an ECI Pool (as defined below) and made available to the Praxis 
Funds, are referred to as ``Program Notes.'' \4\ Holders of Program 
Notes issued by an ECI Pool are referred to as ``Noteholders.'' 
Participating Borrowers, in turn, re-lend money to individuals or 
specific projects in local communities.
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    \3\ ECI states that it seeks additional funding from 
institutional investors, as well as charitable foundations and other 
sources. Possible arrangements include ``loan loss reserves'' or a 
``first loss'' program funded by investors (including charitable 
foundations or other organizations) (each, a ``Sustaining 
Investor'') willing to subordinate their interests in the Existing 
Pools (as defined below) or to invest on terms that are less 
advantageous than those available to the Praxis Funds or other 
investors. The Trust will not be permitted to become a Sustaining 
Investor.
    \4\ Program Notes include New Notes (as defined below).
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    4. In accordance with the Prior Order, each of the Praxis Funds has 
acquired Program Notes (``Original Notes'') issued by two investment 
pools (``Existing Pools'') organized and currently maintained by 
ECI.\5\ The ``below market pool'' issued notes with maturities of 
between one and five years and anticipated average returns of 60% of 
the rate then available on U.S. Treasury instruments of similar 
maturities (``Treasury Rate''). The ``near market pool'' issued notes 
with maturities ranging between three and five years and expected 
average returns of 90% of the Treasury Rate. Interest rates payable on 
the notes are adjusted semi-annually to reflect changes in the Treasury 
Rate.
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    \5\ ECI may establish similar pools in the future (``Future 
Pools'' and, together with Existing Pools, ``ECI Pools'') and may 
make notes issued by such Future Pools available to the Praxis 
Funds. Except for maturities and returns, any Future Pool, interests 
in which are made available to the Praxis Funds, would have the same 
characteristics as the Existing Pools and notes issued by such 
Future Pools would have the same characteristics as the notes then 
issued by the Existing Pools. To the extent that notes issued by 
Future Pools are made available to any Praxis Fund, applicants 
request that relief granted pursuant to the application with respect 
to investments in the Existing Pools also apply with respect to 
investments in Future Pools.
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    5. Until 2004, payments received from Participating Borrowers were 
fully adequate to meet ECI's obligations to the holders of Original 
Notes (including the Trust) and to continue to fund further loans to 
the community of high social impact organizations ECI seeks to serve. 
In 2004, however, prevailing interest rates increased. This resulted in 
an increase in the interest payments required to be made to Noteholders 
and a ``mismatch'' between the payments ECI was receiving from 
Participating Borrowers and the payments to which Noteholders were 
entitled. During the ``mismatch'' period, ECI continued to honor 
outstanding notes in accordance with their terms. To avoid jeopardizing 
the overall Program, however, the Existing Pools effectively ceased 
issuing notes. Applicants state that ECI determined that certain 
changes in the Program would be appropriate, including making available 
to the Praxis Funds notes that include terms that differ from those of 
the Original Notes (``New Notes''). The increased flexibility of the 
New Notes is intended to reduce the potential for any such ``mismatch'' 
in the future.
    6. Applicants propose the following changes in the Program:
    (a) Applicants state that New Notes will be subject to a change in 
the manner in which applicable interest

[[Page 25214]]

rates are computed. Applicants represent that the interest rate paid on 
the New Notes will be set with reference to the average Treasury Rate 
over the preceding three year period (``Average Treasury Rate'') rather 
than the Treasury Rate in effect as of the date on which the interest 
rate is set or reset. Applicants further represent that the applicable 
rate for the near market pool will be reduced from 90% of the Treasury 
Rate to not less than 80% of the Average Treasury Rate, and the 
applicable rate for the below market pool will be reduced from 60% of 
the Treasury Rate to 50% of the Average Treasury Rate. Applicants also 
state that New Notes may be subject to the implementation of an 
interest rate floor and cap. ECI expects that the proposed cap will be 
3% for the below market pool and 4.5% for the near market pool, with a 
recommended floor of between 1% and 1.5% for both pools. Applicants 
represent that further changes in the future with respect to 
computation of interest rates and such floors/caps will be subject to 
specified notice rights and the right to tender notes back to the 
issuer at face value (including accrued interest) without penalty.
    (b) Applicants acknowledge that each Praxis Fund might be deemed to 
be participating in a joint transaction with Everence-related 
Organizations (as defined below) other than ECI (``Co-investors'') 
through its investment in Program Notes. Therefore, applicants seek to 
clarify that the Co-investors may make loans to Participating Borrowers 
or purchase Program Notes, provided that any loans made to 
Participating Borrowers by Co-investors do not disadvantage the Praxis 
Funds and the terms of the Program Notes acquired by the Praxis Funds 
are not less advantageous than the terms of the Program Notes acquired 
by any Co-investor.
    (c) Applicants seek to clarify that ECI may participate in certain 
resource sharing arrangements (``Resource Sharing Arrangements'') 
established by ECI and several other organizations operated under the 
auspices of MMA Stewardship Agency (``Everence-related 
Organizations''),\6\ provided that such participation does not affect 
the value of, or interest paid under the terms of, any Program Notes 
issued in reliance on the Requested Order.\7\
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    \6\ Neither the Trust, nor the Praxis Funds, which are operated 
under the supervision of the Praxis Board, are considered Everence-
related Organizations for purposes of the application.
    \7\ The various Everence-related Organizations, including ECI, 
use arrangements similar to the type of ``intercompany expense 
arrangements'' often used by corporations and their subsidiary 
companies. Expenses that are appropriate for inclusion in such 
intercompany expense accounting arrangements are expenses that are 
related to the proper share of, for example, salaries and related 
employee expenses, office space, equipment, and ordinary office 
services, such as telephones and utilities. The Resource Sharing 
Arrangements have been reviewed and approved by the ECI's board of 
directors.
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    7. Applicants seek to amend the Prior Order to permit the Praxis 
Funds to continue to invest in Program Notes following the 
implementation of these changes in the Program.

Applicants' Legal Analysis

    Applicants state that, because both Everence Capital and ECI are 
operated under the auspices of MMA Stewardship Agency, they may be 
considered to be affiliated persons within the meaning of the Act, and 
ECI could be deemed an affiliated person of an affiliated person of the 
Trust, for purposes of section 17 of the Act. Applicants submit that 
amending the Prior Order as requested would be consistent with the 
standards of sections 6(c), 17(b), and 17(d) of the Act and rule 17d-1 
under the Act.

Applicants' Conditions

    Applicants agree that the Requested Order will be subject to the 
following conditions:
    1. The Praxis Board will be responsible for reviewing the Program 
not less frequently than annually. The Praxis Funds may continue to 
participate in the Program through investment in Program Notes only if, 
at the time of such review, the Praxis Board concludes that (i) 
continued participation in the Program by the Praxis Funds remains 
consistent with the investment objectives and policies of each Praxis 
Fund; (ii) such participation is not on a basis that is less 
advantageous than that of other Noteholders of the same class including 
Co-investors; (iii) loans, if any, made to Participating Borrowers by 
Co-investors do not disadvantage the Praxis Funds; and (iv) the terms 
of Program Notes acquired by the Praxis Funds are not less advantageous 
than the terms of Program Notes acquired by any Co-investor.
    2. Each of the Praxis Funds may commit no more than 3% of its total 
assets to community development investments (including the acquisition 
of Program Notes), provided that the Praxis Funds will not be permitted 
to acquire Program Notes to an extent greater than that which is 
permitted under the terms of their prospectus and limits approved by 
those members of the Praxis Board who are not ``interested persons'' as 
defined by section 2(a)(19) of the Act.
    3. Neither Everence Capital or any other Everence-related 
Organization will receive any compensation for Praxis Funds' investment 
in Program Notes or for services provided to ECI in connection with the 
Praxis Funds' investment in Program Notes, provided that: (i) The 
market value of Program Notes in which the Praxis Funds may, from time 
to time, invest will be included in the calculation of any investment 
advisory fee payable by any Praxis Fund to any Everence-related 
Organization pursuant to the terms of an investment advisory contract 
that satisfies the requirements of section 15(a) of the Act and subject 
to section 36 of the Act, where such fee is calculated based on a 
percentage of the average daily net assets of any such Praxis Fund; and 
(ii) ECI may participate in the Resource Sharing Arrangements, provided 
that ECI's participation in the Resource Sharing Arrangements does not 
affect the value of, or interest paid under the terms of, any variable 
rate note issued in reliance on the Requested Order.
    4. All Noteholders will participate in the income (losses) 
generated by the assets underlying Program Notes in proportion to their 
respective investments provided that a Sustaining Investor may agree to 
absorb more than its proportionate share of any losses and further 
provided that the Praxis Funds will not be permitted to become 
Sustaining Investors.
    5. With respect to New Notes issued by either the near market pool 
or below market pool, ECI may adjust: (i) The percentage of the Average 
Treasury Rate with reference to which the applicable interest rate is 
computed and/or (ii) the applicable interest rate floor and cap no more 
than once each year as described in the application, provided that: (a) 
ECI notifies the holders of any New Notes affected by such change at 
least 30 days in advance of such change; and (b) each such holder is 
subsequently entitled to tender the New Notes to which the change is to 
be applied to ECI at face value (including accrued interest) without 
penalty or discount.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-10180 Filed 4-26-12; 8:45 am]
BILLING CODE 8011-01-P


