[Federal Register Volume 77, Number 82 (Friday, April 27, 2012)]
[Notices]
[Pages 25212-25214]
[FR Doc No: 2012-10180]

-----------------------------------------------------------------------

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

by ECI following the implementation of certain changes in ECI's
community development investment program.
---------------------------------------------------------------------------

    \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,
---------------------------------------------------------------------------
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<PHONE_NUMBER> (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<PHONE_NUMBER>.

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\ 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\ 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.
---------------------------------------------------------------------------

    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

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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


[Federal Register: August 24, 2009 (Volume 74, Number 162)]
[Notices]
[Page 42716-42717]
[DOCID:fr24au09-116]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60510; File No. SR-FICC-2009-08]

Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing and Order Granting Accelerated Approval on a Temporary
Basis of Proposed Rule Change To Modify the Rules of the Government
Securities Division Regarding the Calculation of Clearing Fund Deposits
Relating to Inter-Dealer Broker Positions

August 17, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that
on August 10, 2009, the Fixed Income Clearing Corporation (``FICC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change described in Items I, II, and III below, which
items have been prepared primarily by FICC. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested parties and is granting accelerated approval of the
proposal through August 20, 2010.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The proposed rule change seeks to modify the rules of FICC's
Government Securities Division (``GSD'') regarding the calculation of
clearing fund deposits relating to inter-dealer broker positions.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FICC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FICC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\3\
---------------------------------------------------------------------------

    \3\ The Commission has modified the text of the summaries
prepared by FICC.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    The GSD maintains a clearing fund comprised of member deposits of
cash and eligible securities to provide liquidity and to enable FICC to
satisfy any losses that might otherwise be incurred as a result of a
member's default and the subsequent close-out of its positions. GSD
uses a Value-at-Risk (``VaR'') methodology to calculate clearing fund
requirements.\4\ The clearing fund methodology used by GSD analyzes
risk by reference to three factors: (i) End-of-day VaR charge to assess
market volatility for observed open positions at the end-of-day after
giving effect to offsetting positions within the portfolio; (ii) margin
requirement differential (``MRD'') to address intraday risk; and (iii)
coverage component (``CC'') to adjust the calculation if necessary to
reach a given confidence level. The margin calculation is predicated
upon an assumption that the open positions of a defaulting member would
be liquidated at the end of a three-day period.
---------------------------------------------------------------------------

    \4\ VaR is defined as the maximum amount of money that may be
lost on a given portfolio over a given period of time within a given
level of confidence.
---------------------------------------------------------------------------

    Inter-dealer brokers (``IDBs'') function as intermediaries trading
with multiple counterparties and with respect to government securities
trades, provide anonymity and liquidity for trading partners. IDBs
operate on small spreads, handle large transactions, and perform a
critical function in the government securities market in the absence of
a centralized trading exchange.
    IDBs submit affirmed trades from their systems to GSD, each trade
already matched to the counterparty that will ultimately deliver or
receive the securities. Although IDBs generally do not maintain
positions, they may have positions versus GSD when their counterparties
are not GSD members. Because these trades are matched by the IDB to a
counterparty prior to submission to the GSD, the risk to FICC in the
case of an IDB's default is different from that presented when a dealer
member submits a trade that may not have been already matched to a
counterparty.
    The clearing fund requirement applicable to IDBs has increased
significantly because of recent market volatility to the point where
FICC believes it is disproportionate to the risk that IDB activity
presents to GSD. Given the importance of IDB transactions in the
government securities marketplace, unsustainable margin requirements on
GSD IDB activity may be harmful and may introduce systemic risk in the
event members are motivated to avoid imposition of disproportionate
changes by netting outside of GSD or by delaying trade submission until
later in the day.\5\
---------------------------------------------------------------------------

    \5\ Accordingly, GSD invoked its emergency power to adjust CC to
IDB transactions in November 2008 and conducted a review of the
current margin methodology as applied to IDB activity. As a result,
CC currently is not calculated with respect to inter-dealer broker
repo transactions, and GSD has recently adjusted the CC charge with
respect to certain cash IDB transactions on a temporary basis.
---------------------------------------------------------------------------

    To alleviate this situation, FICC is proposing to use a one-day
liquidation assumption when calculating margin applicable to IDB
activity.\6\ The assumption of a three-day liquidation period will
continue to apply to non-IDB activity. Since IDB trades are matched
prior to submission, FICC believes that the one-day liquidation period
is a reasonable assumption. FICC will continue to monitor the IDB
activity of its members and will periodically reassess whether the one-
day liquidation period provides adequate coverage. In this regard, FICC
will provide the Commission with data to allow the Commission to track
the magnitudes and behaviors of the VaR for a one-day liquidation
horizon and for a three-day liquidation horizon, and with such other
information that the Commission may request. FICC further notes its
ability to impose special charges in response to market circumstances
or other risk factors with respect to a particular member.
---------------------------------------------------------------------------

    \6\ Margin calculated for all other activity is based on a
three-day liquidation horizon.
---------------------------------------------------------------------------

    FICC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \7\ and the rules and
regulations thereunder because the proposed change will modify the
calculation of clearing fund deposits of IDB positions so that the
clearing fund contribution is

correlated more closely with the level of risk associated with IDB
positions.
---------------------------------------------------------------------------

    \7\ U.S.C. 78q-1.
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    FICC does not believe that the proposed rule change will have any
impact or impose any burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others

    Written comments relating to the proposed rule change have not yet
been solicited or received. FICC will notify the Commission of any
written comments received by FICC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder and particularly with the requirements of Section
17A(b)(3)(F).\8\ Section 17A(b)(3)(F) requires that the rules of a
clearing agency remove impediments to and perfect the mechanism of a
national system for the prompt and accurate clearance and settlement of
securities transactions and protect investors and the public interest.
The Commission finds that the approval of FICC's rule change is
consistent with this section because it will allow FICC to modify its
rules regarding the calculation of clearing fund deposits on inter-
dealer broker positions to correlate more closely those deposits with
the level of risk associated with such positions.
---------------------------------------------------------------------------

    \8\ U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    FICC has requested that the Commission approve the proposed rule
prior to the thirtieth day after publication of the notice of the
amended filing. The Commission finds good cause for approving the
proposed rule change prior to the thirtieth day after the publication
of notice because such approval will allow FICC to better correlate
inter-dealer broker clearing fund deposits with the level of risk
associated with their positions immediately.
    The Commission is approving the proposed rule filing on a temporary
basis through August 20, 2010, so that FICC will have time to evaluate
the modified calculation of clearing fund deposits on inter-dealer
broker positions and to report its findings to the Commission before
the Commission decides on permanent approval.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml) or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-FICC-2009-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FICC-2009-08. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Section, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filings also will be available for
inspection and copying at the principal office of FICC and on FICC's
Web site at http://www.dtcc.com/downloads/legal/rule_filings/2009/
ficc/2009-08.pdf. All comments received will be posted without change;
the Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
FICC-2009-08 and should be submitted on or before September 14, 2009.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (File No. SR-FICC-2009-08) be and
hereby is approved on an accelerated basis through August 20, 2010.\10\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(2).
    \10\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-20197 Filed 8-21-09; 8:45 am]

BILLING CODE 8010-01-P