Document ID: SEC-2006-1479-0001
Agency: sec
Document Type: Notice
Title: Allegiant Funds, et al.; Notice of Application
Posted Date: 2006-11-17T05:00Z

[Federal Register: November 17, 2006 (Volume 71, Number 222)]
[Notices]               
[Page 66992-66993]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17no06-88]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27551; 812-13227]

 
Allegiant Funds, et al.; Notice of Application

November 13, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from section 15(a) 
of the Act and rule 18f-2 under the Act.

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    Summary of Application: The requested order would permit certain 
registered open-end management investment companies to enter into and 
materially amend subadvisory agreements without shareholder approval.
    Applicants: Allegiant Funds and Allegiant Advantage Fund (the 
``Trusts') and Allegiant Asset Management Company (the ``Adviser'').
    Filing Dates: The application was filed on August 25, 2005 and 
amended on June 28, 2006 and November 8, 2006.
    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 December 8, 2006, 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 reasons 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, 100 F Street, NE., Washington, DC 
20549-1090. Applicants, c/o Audrey C. Talley, Drinker Biddle & Reath, 
LLP, One Logan Square, 18th & Cherry Streets, Philadelphia, PA 19103.

FOR FURTHER INFORMATION CONTACT: Lewis B. Reich, Senior Counsel, at 
(202) 551-6919, or Stacy L. Fuller, 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 for a fee from 
the Commission's Public Reference Branch, 100 F Street, NE, Washington, 
DC 20549-0102 (telephone (202) 551-5850).
    Applicants' Representations:
    1. The Trusts, Massachusetts business trusts, are registered under 
the Act as open-end management investment companies. Each Trust 
currently offers one or more series (``Funds''), each of which has its 
own investment objectives, policies and restrictions.\1\
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    \1\ Applicants also request relief with respect to future series 
of each Trust and any other existing or future registered open-end 
management investment company or series thereof that: (a) is advised 
by the Adviser or a person controlling, controlled by or under 
common control with the Adviser; (b) uses the management structure 
described in the application; and (c) complies with the terms and 
conditions of the application (included in the term ``Funds''). The 
only existing registered open-end management investment companies 
that currently intend to rely on the requested order are named as 
applicants. If the name of any Fund contains the name of a 
Subadviser (as defined below), the name of the Adviser or the name 
of the entity controlling, controlled by, or under common control 
with the Adviser that serves as the primary adviser to the Fund will 
precede the name of the Subadviser.
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    2. The Adviser is registered under the Investment Advisers Act of 
1940 (the ``Advisers Act'') and serves as investment adviser to each 
Fund pursuant to an investment advisory agreement with the respective 
Trust (``Advisory Agreement'') that was approved by the board of 
trustees of the Trust (the ``Board''), including a majority of the 
trustees who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act (``Independent Trustees''), and the shareholders of 
each Fund. Under the Advisory Agreement, the Adviser receives a fee 
from each Fund payable monthly at an annual rate based on the average 
daily net assets of the Fund. Under the Advisory Agreement, the Adviser 
may delegate investment advisory responsibilities to one or more 
subadvisers (``Subadvisers'') who have discretionary authority to 
invest all or a portion of the Fund's assets pursuant to a separate 
subadvisory agreement (``Subadvisory Agreement''). The Adviser selects 
Subadvisers based on the Adviser's continuing evaluation of their 
skills in managing assets pursuant to particular investment styles. 
Each Subadviser is and will be an investment adviser registered under 
the Advisers Act. For its services to a Fund, the Adviser pays each 
Subadviser out of the investment advisory fee the Adviser receives from 
the Fund.
    3. Applicants request relief to permit the Adviser, subject to 
Board approval, to enter into and materially amend Subadvisory 
Agreements without shareholder approval. The requested relief will not 
extend to a Subadviser that is an affiliated person, as defined in 
section 2(a)(3) of the Act, of a Fund or the Adviser, other than by 
reason of serving as a Subadviser to one or more of the Funds (an 
``Affiliated Subadviser'').
    Applicants' Legal Analysis:
    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of stock in a series company affected by a matter must approve such 
matter if the Act requires shareholder approval.

[[Page 66993]]

    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provision of the Act, or 
from any rule thereunder, if and to the extent that such exemption is 
necessary or appropriate in the public interest and consistent with the 
protection of investors and the purposes fairly intended by the 
policies and provisions of the Act. Applicants believe that their 
requested relief meets this standard.
    3. Applicants state that the Funds' shareholders rely on the 
Adviser, subject to oversight by the Board, to select the Subadvisers 
best suited to achieve a Fund's investment objectives. Applicants 
assert that from the perspective of the investor, the role of the 
Subadvisers is comparable to that of individual portfolio managers 
employed by traditional investment advisory firms. Applicants contend 
that requiring shareholder approval of Subadvisory Agreements would 
impose costs and unnecessary delays on the Funds and may preclude the 
Adviser from acting promptly in a manner considered advisable by the 
Board. Applicants also note that the Advisory Agreement will remain 
subject to the shareholder approval requirements in section 15(a) of 
the Act and rule 18f-2 under the Act.
    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. Each Fund will disclose in its prospectus the existence, 
substance, and effect of any order granted pursuant to this 
application. In addition, each Fund will hold itself out to the public 
as employing the management structure described in the application. The 
prospectus will prominently disclose that the Adviser has ultimate 
responsibility, subject to oversight by the Board, to oversee the 
Subadvisers and recommend their hiring, termination and replacement.
    3. At all times, at least a majority of the Board will be 
Independent Trustees, and the nomination of new or additional 
Independent Trustees will be at the discretion of the then-existing 
Independent Trustees.
    4. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser without that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    5. When a Subadviser change is proposed for a Fund with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
Board minutes, that the change is in the best interests of the Fund and 
its shareholders and does not involve a conflict of interest from which 
the Adviser or the Affiliated Subadviser derives an inappropriate 
advantage.
    6. Within 90 days of the hiring of a new Subadviser, the Adviser 
will furnish shareholders of the affected Fund with all information 
about the new Subadviser that would be included in a proxy statement. 
The Adviser will meet this condition by providing shareholders of the 
applicable Fund with an information statement meeting the requirements 
of Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the 
Securities Exchange Act of 1934.
    7. The Adviser 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 by the Board, will (i) set the Fund's overall investment 
strategies, (ii) evaluate, select and recommend Subadvisers to manage 
all or a part of the Fund's assets, (iii) allocate and, when 
appropriate, reallocate the Fund's assets among multiple Subadvisers, 
(iv) monitor and evaluate the performance of the Subadvisers, and (v) 
implement procedures reasonably designed to ensure that the Subadvisers 
comply with each Fund's investment objective, policies and 
restrictions.
    8. No trustee or officer of the Funds, or director or officer of 
the Adviser will own directly or indirectly (other than through a 
pooled investment vehicle that is not controlled by such person) any 
interest in a Subadviser, except for (a) ownership of interests in the 
Adviser or any entity that controls, is controlled by, or is under 
common control with the Adviser, 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 Subadviser or an entity that 
controls, is controlled by or is under common control with a 
Subadviser.
    9. The requested order will expire on the effective date of rule 
15a-5 under the Act, if adopted.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Nancy M. Morris,
Secretary.
 [FR Doc. E6-19441 Filed 11-16-06; 8:45 am]

BILLING CODE 8011-01-P