Document ID: SEC-2006-0363-0001
Agency: sec
Document Type: Notice
Title: Tactical Allocation Services, LLC and Agile Funds, Inc.; Notice of Application
Posted Date: 2006-03-20T05:00Z

[Federal Register: March 20, 2006 (Volume 71, Number 53)]
[Notices]               
[Page 14041-14043]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20mr06-60]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27260; 812-13055]

 
Tactical Allocation Services, LLC and Agile Funds, Inc.; Notice 
of Application

March 13, 2006.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

[[Page 14042]]

ACTION: Notice of application for an order 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: Applicants request an order that would permit 
them to enter into and materially amend subadvisory agreements without 
shareholder approval.

Applicants: Tactical Allocation Services, LLC (the ``Adviser'') and 
Agile Funds, Inc. (the ``Company'').

Filing Dates: The application was filed on December 19, 2003, and 
amended on February 27, 2006. Applicants have agreed to file a final 
amendment during the notice period, the substance of which is reflected 
in this notice.

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 April 7, 2006, 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, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090. Applicants, 4909 Pearl East Circle, 
Suite 300, Boulder, CO 80301.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 551-6879, 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 for a fee at the 
Commission's Public Reference Desk, 100 F Street, NE., Washington, DC 
20549-0102 (telephone (202) 551-5850).

Applicants' Representations

    1. The Company, a Maryland corporation, is registered under the Act 
as an open-end management investment company. The Company currently 
offers shares of one series, the Agile Multi-Strategy Fund (the 
``Multi-Strategy Fund,'' included in the term ``Fund,'' defined below), 
and may establish additional series, each consisting of separate 
investment objectives, policies, and restrictions (each, a ``Fund'' and 
collectively, the ``Funds''). The Adviser, a Colorado limited liability 
corporation, serves as the investment adviser to the Multi-Strategy 
Fund and is registered as an investment adviser under the Investment 
Advisers Act of 1940 (the ``Advisers Act'').\1\
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    \1\ The applicants request that any relief granted pursuant to 
the application apply to future series of the Company and any other 
existing or future registered open-end management investment company 
and its series that: (a) Are advised by the Adviser or any entity 
controlling, controlled by, or under common control with the 
Adviser; (b) are managed in a manner consistent with the 
application; and (c) comply with the terms and conditions in the 
application (included in the term ``Funds''). The Company is the 
only existing registered open-end management investment company that 
currently intends to rely on the order. 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 serves as investment adviser to the Multi-Strategy 
Fund pursuant to an investment advisory agreement between the Company 
and the Adviser (the ``Advisory Agreement'') that was approved by the 
Company's board of directors (``Board''), including a majority of the 
directors who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act, of the Company or the Adviser (``Independent 
Directors''), and the Multi-Strategy Fund's initial shareholders. The 
Advisory Agreement permits the Adviser to enter into investment 
advisory agreements (``Subadvisory Agreements'') with subadvisers 
(``Subadvisers'') to whom the Adviser may delegate responsibility for 
providing investment advice and making investment decisions for a Fund. 
Each Subadviser is, and any future Subadviser will be, registered under 
the Advisers Act. The Adviser monitors and evaluates the Subadvisers 
and recommends to the Board their hiring, termination, and replacement. 
The Adviser recommends Subadvisers based on a number of factors 
discussed in the application used to evaluate their skills in managing 
assets pursuant to particular investment objectives. The Adviser 
compensates the Subadvisers out of the fee paid to the Adviser by a 
Fund.
    3. Applicants request an order to permit the Adviser, subject to 
Board approval, to enter into and materially amend Subadvisory 
Agreements without obtaining shareholder approval. The requested relief 
will not extend to any 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 
(``Affiliated Subadviser''). None of the current Subadvisers is 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 under 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.
    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 provisions 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 policy 
and provisions of the Act. Applicants believe that the requested relief 
meets this standard for the reasons discussed below.
    3. Applicants state that the Funds' shareholders rely on the 
Adviser 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 each Subadvisory Agreement 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 section 15(a) of the Act and 
rule 18f-2 under the Act.
    4. Applicants note that the Commission adopted certain fund 
governance standards on July 27, 2004.\2\ Applicants agree that each 
Fund will comply with the fund governance standards set forth in rule 
0-1(a)(7)

[[Page 14043]]

under the Act by the compliance date. Applicants also note that the 
Commission has proposed rule 15a-5 under the Act and agree that the 
requested order will expire on the effective date of rule 15a-5 under 
the Act, if adopted.\3\
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    \2\ See Investment Company Act Release No. 26520 (July 27, 
2004).
    \3\ Investment Company Act Release No. 26230 (Oct. 23, 2003).
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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 requested order, 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 initial shareholder(s) before 
offering shares of that Fund to the public.
    2. Each Fund will disclose in its prospectus the existence, 
substance and effect of any order granted pursuant to the 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 the ultimate 
responsibility (subject to oversight by the Board) to oversee 
Subadvisers and recommend their hiring, termination, and replacement.
    3. Each Fund will comply with the fund governance standards set 
forth in rule 0-1(a)(7) under the Act by the compliance date for the 
rule (``Compliance Date''). Prior to the Compliance Date, a majority of 
the Board will be Independent Directors, and the nomination of new or 
additional Independent Directors will be at the discretion of the then-
existing Independent Directors.
    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 Directors, 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, shareholders 
of the affected Fund will be furnished all information about the new 
Subadviser that would be contained in a proxy statement. Each Fund will 
meet this condition by providing shareholders 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 
within 90 days of the hiring of a new Subadviser.
    7. The Adviser will provide general management services to each 
Fund, including overall supervisory responsibility for the general 
management and investment of each Fund's assets, and, subject to review 
and approval by the Board, will (a) Set the Fund's overall investment 
strategies; (b) evaluate, select, and recommend Subadvisers to manage 
all or part of the Fund's assets; (c) when appropriate, allocate and 
reallocate a Fund's assets among multiple Subadvisers; (d) monitor and 
evaluate the performance of Subadvisers; and (e) implement procedures 
reasonably designed to ensure that the Subadvisers comply with each 
Fund's investment objectives, policies and restrictions.
    8. No director or officer of the Company, or director, manager or 
officer of the Adviser, will own, directly or indirectly (other than 
through a pooled investment vehicle that is not controlled by that 
director, manager or officer), 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. E6-3958 Filed 3-17-06; 8:45 am]

BILLING CODE 8010-01-P