[Federal Register Volume 67, Number 94 (Wednesday, May 15, 2002)]
[Notices]
[Pages 34742-34743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-12114]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25572; 812-12438]


The Willamette Funds and Willamette Asset Managers, Inc.; Notice 
of Application

May 9, 2002.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of an 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 the Application:
    The Willamette Funds (the ``Fund'') and Willamette Asset Managers, 
Inc. (the ``Manager'') (together, ``Applicants'') request an order that 
would permit them to enter into and materially amend subadvisory 
agreements without shareholder approval.

Filing Dates: The application was filed on February 2, 2001, and 
amended on December 19, 2001. Applicants have agreed to file an 
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 SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
Applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on June 3, 2002, 
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 may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 5th Street, NW, Washington, DC 20549-
0609. Applicants, One Pacific Square, 220 NW 2nd, Suite 950, Portland, 
OR 97209.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 942-0581, 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 
SEC's Public Reference Branch, 450 5th Street, NW, Washington, DC 
20549-0102 (telephone (202-942-8090).

Applicants' Representations

    1. The Fund, a Delaware business trust, is registered under the Act 
as an open-end management investment company. The Fund currently is 
comprised of four series (each a ``Portfolio,'' collectively, the 
``Portfolios''), each with its own investment objectives and 
policies.\1\
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    \1\ Applicants also request relief with respect to future series 
of the Fund and any other registered open-end management investment 
companies and their series that in the future (a) are advised by the 
Manager or any entity controling, controlled by, or under common 
control with the Manager; (b) use the manager of managers structure 
described in the application; and (c) comply with the terms and 
conditions in the application (``Future Portfolios,'' included in 
the term ``Portfolios''). The Fund is the only existing registered 
open-end management investment company that currently intends to 
rely on the requested order. If the name of any Portfolio contains 
the name of a Sub-Adviser (as defined below), the name of the 
Manager will precede the name of the Sub-Adviser.
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    2. The Manager, registered under the Investment Advisers Act of 
1940 (the ``Advisers Act''), serves as the investment adviser to the 
Portfolios pursuant to an investment advisory agreement with the Fund 
(``Management Agreement'') that was approved by the board of trustees 
of the Fund (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 by each Portfolio's initial 
shareholder. Under the terms of the Management Agreement, the Manager 
provides investment management services for each Portfolio and may hire 
one or more subadvisers (``Sub-Advisers'') to exercise day-to-day 
investment discretion over the assets of the Portfolio pursuant to 
separate investment sub-advisory agreements (``Sub-Advisory 
Agreements''). All current and future Sub-Advisers will be registered 
under the Advisers Act or exempt from registration. Sub-Advisers are 
recommended to the Board by the Manager and selected and approved by 
the Board, including a majority of the Independent Trustees. The 
Manager compensates each Sub-Adviser out of the fees paid to the 
Manager by the applicable Portfolio.

[[Page 34743]]

    3. Subject to Board review, the Manager selects Sub-Advisers for 
the Portfolios, monitors and evaluates Sub-Adviser performance, and 
oversees Sub-Adviser compliance with the Portfolios' investment 
objectives, policies, and restrictions. The Manager recommends Sub-
Advisers based upon a number of factors used to evaluate their skills 
in managing assets pursuant to particular investment objectives. The 
Manager also recommends to the Board whether a Sub-Adviser's Sub-
Advisory Agreement should be renewed, modified or terminated.
    4. Applicants request relief to permit the Manager, subject to 
Board approval, to enter into and materially amend Sub-Advisory 
Agreements without shareholder approval. The requested relief will not 
extend to a Sub-Adviser that is an affiliated person, as defined in 
section 2(a)(3) of the Act, of the Fund or the Manager, other than by 
reason of serving as a Sub-Adviser to one or more of the Portfolios (an 
``Affiliated Sub-Adviser'').

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 the 
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 provision of the Act, or 
from any rule thereunder, if 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. The investment structure of the Portfolios is different from 
that of traditional investment companies. Applicants assert that 
investors are relying on the Manager's experience to select one or more 
Sub-Advisers best suited to achieve a Portfolio's desired investment 
objectives. Applicants assert that, from the perspective of the 
investor, the role of the Sub-Advisers is comparable to that of 
individual portfolio managers employed by other investment advisory 
firms. Applicants contend that requiring shareholder approval of the 
Sub-Advisory Agreements would impose unnecessary costs and delays on 
the Portfolios, and may preclude the Manager from acting promptly in a 
manner considered advisable by the Board. Applicants note that the 
Management Agreement will remain subject to the shareholder approval 
requirements of 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 Portfolio may rely on the requested order, the 
operation of the Portfolio in the manner described in the application 
will be approved by a majority of the Portfolio's outstanding voting 
securities, as defined in the Act, or, in the case of a Portfolio 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 the shares of the Portfolio are offered 
to the public.
    2. The prospectus of each Portfolio relying on the requested relief 
will disclose the existence, substance and effect of any order granted 
pursuant to the application. In addition, each Portfolio relying on the 
requested relief will hold itself out to the public as employing the 
manager of managers structure described in the application. A 
Portfolio's prospectus will prominently disclose that the Manager has 
ultimate responsibility to oversee the Sub-Advisers and recommend their 
hiring, termination and replacement.
    3. The Manager will provide general management services to each of 
the Portfolios, including overall supervisory responsibility for the 
general management and investment of each Portfolio's assets, and, 
subject to the review and approval by the Board will: (i) Set each 
Portfolio's overall investment strategies; (ii) evaluate, select, and 
recommend Sub-Advisers to manage all or part of a Portfolio's assets; 
(iii) when appropriate, allocate and reallocate a Portfolio's assets 
among multiple Sub-Advisers; (iv) monitor and evaluate the investment 
performance of Sub-Advisers; and (v) implement procedures reasonably 
designed to ensure that the Sub-Advisers comply with the relevant 
Portfolio's investment objectives, policies, and restrictions.
    4. At all times, a majority of the Board will be persons who are 
Independent Trustees, and the nomination of new or additional 
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
    5. The Manager will not enter into a Sub-Advisory Agreement on 
behalf of a Portfolio with any Affiliated Sub-Adviser, unless such 
agreement, including the compensation to be paid thereunder, has been 
approved by the shareholders of the applicable Portfolio.
    6. When a Sub-Adviser change is proposed for a Portfolio with an 
Affiliated Sub-Adviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
minutes of the meeting of the Board, that such change is in the best 
interests of the applicable Portfolio and its shareholders and does not 
involve a conflict of interest from which the Manager or the Affiliated 
Sub-Adviser derives an inappropriate advantage.
    7. No trustee or officer of the Fund or director or officer of the 
Manager will own directly or indirectly (other than through a pooled 
investment vehicle that is not controlled by that director, trustee, or 
officer) any interest in a Sub-Adviser except for: (i) ownership of 
interests in the Manager or any entity that controls, is controlled by, 
or is under common control with the Manager; or (ii) 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 Sub-Adviser or an entity 
that controls, is controlled by, or is under common control with a Sub-
Adviser.
    8. Within 90 days of the hiring of any new Sub-Adviser, the Manager 
will furnish the shareholders of the applicable Portfolio all the 
information about the new Sub-Adviser that would be included in a proxy 
statement. This information will include any changes in such disclosure 
caused by the addition of a new Sub-Adviser. To meet this obligation, 
the Manager will provide the shareholders of the applicable Portfolio 
with an information statement meeting the requirements of Regulation 
14C and Schedule 14C under the Securities Exchange Act of 1934 (``the 
1934 Act''), as well as the requirements of Item 22 of Schedule 14A 
under the 1934 Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-12114 Filed 5-14-02; 8:45 am]
BILLING CODE 8010-01-P