[Federal Register Volume 69, Number 124 (Tuesday, June 29, 2004)]
[Notices]
[Pages 38924-38925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-14675]



[[Page 38924]]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 26472; 812-13039]


MMA Praxis Mutual Funds, et al.; Notice of Application

June 23, 2004.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 17(b) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from section 17(a) 
of the Act.

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Summary of Application: Applicants request an order to permit certain 
entities excluded from the definition of investment company under 
section 3(c)(10) or 3(c)(11) of the Act to transfer certain classes of 
assets held in separate accounts to two series of a registered open-end 
management investment company in exchange for shares of the series.

Applicants: MMA Praxis Mutual Funds (``Trust''), The Mennonite 
Insurance Services Inc. d/b/a MMA Capital Management (``MMA'').

Filing Dates: The application was filed on November 14, 2003 and 
amended on June 21, 2004.

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 July 19, 2004, and should be accompanied by proof of service on 
the 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: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-06090; Applicants, c/o MMA Praxis Mutual Funds, 3435 Stelzer 
Roads, Columbus, OH 43219.

FOR FURTHER INFORMATION CONTACT: John Yoder, Attorney-Adviser, at (202) 
942-0544, or Mary Kay Frech, Branch Chief, at (202) 942-0564 (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 for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (telephone (202) 942-8090).

Applicant's Representations

    1. The Trust, a Delaware statutory trust, is registered under the 
act as an open-end management investment company. The Trust is 
organized as a series investment company consisting of 4 series, two of 
which are the MMA Praxis Intermediate Income Fund (``Intermediate 
Income Fund'') and MMA Praxis Core Stock Fund (``Core Stock Fund'') 
(collectively, the ``Mutual Funds''). The Intermediate Income Fund 
invests primarily in undervalued securities of medium to large 
capitalization companies. MMA, an Indiana corporation, is an investment 
adviser to the Mutual Funds pursuant to an investment advisory 
agreement with the Trust.
    2. MF, a not-for-profit corporation organized under the laws of 
Indiana, is excluded from the definition of investment company under 
the Act pursuant to section 3(c)(10) of the Act. MF's board of 
directors manages and controls the business of MF. MF's portfolio 
securities are segregated by asset class and are held in separate 
accounts. Each separate account is a sub-account of MF and is not a 
legal entity separate from MF. Two of these sub-accounts, Common Stock 
Fund and Intermediate Bond Fund, are managed by MMA.
    3. MRT, a qualified retirement plan, is excluded from the 
definition of investment company under the Act pursuant to section 
3(c)(11) of the Act. MRT's board of trustees manages its investment 
activities. MRT's portfolio securities are segregated by asset class 
and are held in separate accounts. Each separate account is a sub-
account of MRT and is not a legal entity separate from MRT. Two of 
these sub-accounts, Large Cap Blend Fund and Bond Fund, are managed by 
MMA. The directors/trustees of MRT and MF (collectively, the 
``Unregistered Funds'') also serve as directors of Mennonite Mutual 
Aid, Inc., the controlling company of MMA.
    4. Applicants seek relief to permit MRT and MF to transfer 
substantially all the assets in MRT's Bond Fund and MF's Intermediate 
Bond Fund, respectively, (the ``Assets'') to the Intermediate Income 
Fund in exchange for shares (the ``Shares'') of the Intermediate Income 
Fund. Applicants also propose that MRT and MF will transfer 
substantially all of the assets in MRT's Large Cap Blend Fund and MF's 
Common Stock Fund (included in the term, ``Assets'') to the Core Stock 
Fund in exchange for Shares of the Core Stock Fund. The Transfers are 
referred to, collectively, as the ``Exchange''.
    5. The Assets of the Unregistered Funds contemplated for transfer 
to the Mutual Funds in the Exchange will consist of individual 
securities that are substantially similar to those held as investments 
by the Mutual Funds. The Assets will be valued by each Mutual Fund at 
the time of acquisition at the independent ``current market price'' of 
the securities as defined in rule 17a-7 under the Act, the same 
valuation procedures set forth in the Mutual Funds' registration 
statements. The Shares of the Intermediate Income Fund and the Core 
Stock Fund received in the Exchange will have an aggregate net asset 
value (``NAV'') equal to the NAV of the Assets transferred by MF and 
MRT to the Intermediate Income Fund and the Core Stock Fund. The 
Unregistered Funds and the Mutual Funds will each pay their own 
expenses incurred in connection with the Exchange.
    6. After the Exchange, MF's Common Stock Fund and Intermediate Bond 
Fund will not make any investments other than investments in shares of 
the Core Stock Fund and Intermediate Income Fund, respectively. 
Similarly, after the Exchange, MRT's Bond Fund and MRT's Large Cap 
Blend Fund will not make any investments other than investments in 
shares of Intermediate Income Fund and Core Stock Fund, respectively.

Applicants' Legal Analysis

    1. Section 17(a) of the Act, in relevant part, prohibits an 
affiliated person of a registered investment company, or any affiliated 
person of such person, acting as principal, from selling to or 
purchasing from such investment company any security or other property.
    2. Section 2(a)(3) of the Act defines an ``affiliated person'' of 
another person to include (a) any person directly or indirectly 
controlling, controlled by, or under common control with the other 
person and (b) if the other person is an investment company, any 
investment adviser of that company. Applicants state that the 
Unregistered Funds and MMA may be considered to be under common control 
because a majority of the directors/trustees serving on the 
Unregistered Funds' boards of directors/trustees also serve as 
directors of MMA. Applicants also state that the Unregistered Funds and 
the Mutual Funds may be considered to be under common control and 
therefore may be considered affiliated persons of each other under 
section 2(a)(3) of the Act. Thus, applicants state that the proposed

[[Page 38925]]

 Exchange may be prohibited under Section 17(a) of the Act.
    3. Rule 17a-7 exempts certain purchase and sale transactions 
otherwise prohibited by section 17(a) of the Act if an affiliation 
exists solely by reason of having a common investment adviser, 
investment advisers that are affiliated persons of each other, common 
directors, and/or common officers, provided, among other requirements, 
that the transaction is for no consideration other than cash. 
Applicants state that the relief provided by rule 17a-7 may not be 
available for the Exchange because the Exchange will involve 
consideration other than cash (i.e., Shares of the Mutual Funds). 
Applicants also state that the Unregistered Funds may be deemed to be 
affiliated with the Mutual Funds for reasons other than those set forth 
in rule 17a-7.
    4. Rule 17a-8 exempts certain transactions (including mergers, 
consolidations or purchases or sales of substantially all of the assets 
of a company) between registered investment companies and eligible 
unregistered funds, as defined in rule 17a-8 (``Eligible Unregistered 
Fund''). Applicants state that the relief provided by rule 17a-8 is not 
available for the Exchange because the Unregistered Funds are not 
registered investment companies or Eligible Unregistered Funds, and the 
Exchange does not involve substantially all of the assets of the 
Unregistered Funds.\1\
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    \1\ Although the Exchange will involve substantially all of the 
assets of MF's Common Stock Fund and Intermediate Bond Fund and 
MRT's Bond Fund and Large Cap Blend Fund, these entities do not have 
an existence separate from the Unregistered Funds.
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    5. Section 17(b) of the Act provides that the Commission may exempt 
a transaction from the provisions of section 17(a) of the Act if the 
evidence establishes that the terms of the proposed transaction, 
including the consideration to be paid, are reasonable and fair and do 
not involve overreaching on the part of any person concerned, and that 
the proposed transaction is consistent with the policy of each 
registered investment company concerned and with the general purposes 
of the Act.
    6. Applicants submit that the terms of the Exchange satisfy the 
standards set forth in section 17(b) of the Act. Applicants state that 
the board of the Trust, including a majority of the trustees who are 
not interested persons as defined in section 2(a)(19) of the Act, found 
that participation in the Exchange is in the best interests of each 
Mutual Fund and that the interests of the existing shareholders of each 
Mutual Fund will not be diluted as a result of the Exchange. Applicants 
state that the Exchange will comply with the terms of paragraphs (a) 
(other than the cash payment requirement) through (g) of rule 17a-7 and 
the provisions of rule 17a-8 (as those provisions apply to the merger 
of an Eligible Unregistered Fund with a registered investment company). 
No brokerage commissions, fees (except for customary transfer fees, if 
any) or other remuneration will be paid by the Mutual Funds or the 
Unregistered Funds in connection with the Exchange.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    The Exchange will comply with the terms of paragraphs (a) (other 
than the cash payment requirement) through (g) of rule 17a-7 and the 
provisions of rule 17a-8 (as those provisions apply to the merger of an 
Eligible Unregistered Fund with a registered investment company).

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-14675 Filed 6-28-04; 8:45 am]
BILLING CODE 8010-01-M