25212 Federal Register / Vol. 77, No. 82 / Friday, April 27, 2012 / Notices 

1MMA Praxis Mutual Funds, et al., Investment 

Company Act Release Nos. 25263 (Nov. 14, 2001) 

(notice) and 25315 (Dec. 11, 2001) (order). 

the Multi-manager Information 

Statement available on the Web site 

identified in the Multi-manager Notice 

no later than when the Multi-manager 

Notice (or Multi-manager Notice and 

Multi-manager Information Statement) 

is first sent to shareholders, and will 

maintain it on that Web site for at least 

90 days. In the circumstances described 

in the application, a proxy solicitation 

to approve the appointment of new 

Subadvisors provides no more 

meaningful information to shareholders 

than the proposed Multi-manager 

Information Statement. Moreover, as 

indicated above, the applicable Board 

would comply with the requirements of 

sections 15(a) and 15(c) of the 1940 Act 

before entering into or amending 

Subadvisory Agreements. 

8. Applicants assert that the requested 

disclosure relief would benefit 

shareholders of the Funds because it 

would improve the Advisor’s ability to 

negotiate the fees paid to Subadvisors. 

Applicants state that the Advisor may 

be able to negotiate rates that are below 

a Subadvisor’s ‘‘posted’’ amounts if the 

Advisor is not required to disclose the 

Subadvisors’ fees to the public. 

Applicants submit that the requested 

relief will also encourage Subadvisors to 

negotiate lower advisory fees with the 

Advisor if the lower fees are not 

required to be made public. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. Before a Fund may rely on the 

order requested in the application, the 

operation of the Fund in the manner 

described in the application will be 

approved by a majority of the Fund’s 

outstanding voting securities, as defined 

in the Act, or, in the case of a Fund 

whose public shareholders purchase 

shares on the basis of a prospectus 

containing the disclosure contemplated 

by condition 2 below, by the sole initial 

shareholder before offering the Fund’s 

shares to the public. 

2. The prospectus for each Fund will 

disclose the existence, substance, and 

effect of any order granted pursuant to 

the application. Each Fund will hold 

itself out to the public as employing the 

manager of managers structure 

described in the application. The 

prospectus will prominently disclose 

that the Advisor has ultimate 

responsibility (subject to oversight by 

the Board) to oversee the Subadvisors 

and recommend their hiring, 

termination, and replacement. 

3. Funds will inform shareholders of 

the hiring of a new Subadvisor within 

90 days after the hiring of the new 

Subadvisor pursuant to the Modified 

Notice and Access Procedures. 

4. The Advisor will not enter into a 

Subadvisory Agreement with any 

Affiliated Subadvisor without that 

agreement, including the compensation 

to be paid thereunder, being approved 

by the shareholders of the applicable 

Fund. 

5. At all times, at least a majority of 

the Board will be Independent Trustees, 

and the nomination and selection of 

new or additional Independent Trustees 

will be placed within the discretion of 

the then-existing Independent Trustees. 

6. When a Subadvisor change is 

proposed for a Fund with an Affiliated 

Subadvisor, the Board, including a 

majority of the Independent Trustees, 

will make a separate finding, reflected 

in the applicable Board minutes, that 

such change is in the best interests of 

the Fund and its shareholders and does 

not involve a conflict of interest from 

which the Advisor or the Affiliated 

Subadvisor derives an inappropriate 

advantage. 

7. Independent legal counsel, as 

defined in rule 0–1(a)(6) under the Act, 

will be engaged to represent the 

Independent Trustees. The selection of 

such counsel will be within the 

discretion of the then existing 

Independent Trustees. 

8. The Advisor will provide the 

Board, no less frequently than quarterly, 

with information about the profitability 

of the Advisor on a per-Fund basis. The 

information will reflect the impact on 

profitability of the hiring or termination 

of any Subadvisor during the applicable 

quarter. 

9. Whenever a Subadvisor is hired or 

terminated, the Advisor will provide the 

Board with information showing the 

expected impact on the profitability of 

the Advisor. 

10. The Advisor will provide general 

management services to each Fund, 

including overall supervisory 

responsibility for the general 

management and investment of the 

Fund’s assets and, subject to review and 

approval of the Board, will (i) Set each 

Fund’s overall investment strategies; (ii) 

evaluate, select and recommend 

Subadvisors to manage all or part of a 

Fund’s assets; (iii) when appropriate, 

allocate and reallocate a Fund’s assets 

among multiple Subadvisors; (iv) 

monitor and evaluate the performance 

of Subadvisors; and (v) implement 

procedures reasonably designed to 

ensure that the Subadvisors comply 

with each Fund’s investment objective, 

policies and restrictions. 

11. No director or officer of the Trust, 

or of a Fund, or director or officer of the 

Advisor, will own directly or indirectly 

(other than through a pooled investment 

vehicle that is not controlled by such 

person) any interest in a Subadvisor, 

except for (a) ownership of interests in 

the Advisor or any entity that controls, 

is controlled by, or is under common 

control with the Advisor; or (b) 

ownership of less than 1% of the 

outstanding securities of any class of 

equity or debt of a publicly traded 

company that is either a Subadvisor or 

an entity that controls, is controlled by, 

or is under common control with a 

Subadvisor. 

12. Each Fund will disclose in its 

registration statement the Aggregate Fee 

Disclosure. 

13. In the event the Commission 

adopts a rule under the Act providing 

substantially similar relief to that in the 

order requested in the application, the 

requested order will expire on the 

effective date of that rule. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Kevin O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–10157 Filed 4–26–12; 8:45 am] 

BILLING CODE 8011–01–P 

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. 

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 

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Federal Register / Vol. 77, No. 82 / Friday, April 27, 2012 / Notices 25213 

2Applicants 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. 

3ECI 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. 

4Program Notes include New Notes (as defined 

below). 

5ECI 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. 

by ECI following the implementation of 

certain changes in ECI’s community 

development investment program. 

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, 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. 

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 wellbeing 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. 

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. 

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 

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25214 Federal Register / Vol. 77, No. 82 / Friday, April 27, 2012 / Notices 

6Neither 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. 

7The 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. 

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 (‘‘Coinvestors’’) 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 Coinvestor. 

(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

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 Coinvestor. 

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 

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