[Federal Register Volume 68, Number 59 (Thursday, March 27, 2003)]
[Notices]
[Pages 15013-15015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7343]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25968; 812-12866]


SAFECO Common Stock Trust and SAFECO Asset Management Co.; Notice 
of Application

March 21, 2003.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

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: The requested order would permit certain 
registered open-end management investment companies to enter into and 
materially amend subadvisory agreements without shareholder approval.
    Applicants: SAFECO Common Stock Trust (the ``Trust'') and SAFECO 
Asset Management Co. (the ``Adviser'').
    Filing Dates: The application was filed on August 9, 2002, and 
amended on March 3, 2003.
    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 15, 2003, 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, SEC, 450 5th Street NW., Washington, DC 20549-
0609. Applicants, 4854 154th PL. NE., Redmond, WA 98052.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 942-0634 or Annette Capretta, 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 Trust, a Delaware business trust, is registered under the 
Act as an open-end management investment company. The Trust is 
organized as a series investment company and has multiple series (each 
series, a ``Fund,'' collectively the ``Funds''), each with its own 
investment objectives, policies, and restrictions. The Adviser, a 
Washington corporation, serves as the investment adviser to the Funds 
and is registered as an investment adviser under the Investment 
Advisers Act of 1940 (``Advisers Act'').\1\
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    \1\ The applicants also request that any relief granted pursuant 
to the application apply to future series of the Trust and any other 
registered open-end management investment companies and their 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 (``Future Funds,'' 
included in the term ``Funds''). The Trust is the only existing 
investment company that currently intends to rely on the requested 
order. If the name of any Fund contains the name of a Sub-adviser 
(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 Sub-adviser.

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[[Page 15014]]

    2. The Adviser serves as investment adviser to the Funds pursuant 
to an investment advisory agreement between the Trust, on behalf of 
each Fund, and the Adviser (``Advisory Agreement'') that was approved 
by the Trust's board of trustees (``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 each Fund's 
shareholder(s). Each Advisory Agreement permits the Adviser to enter 
into separate investment advisory agreements (``Sub-advisory 
Agreements'') with sub-advisers (``Sub-advisers'') to whom the Adviser 
may delegate responsibility for providing investment advice and making 
investment decisions for a Fund. Each Sub-adviser is or will be 
registered under the Advisers Act. The Adviser monitors and evaluates 
the Sub-advisers and recommends to the Board their hiring, termination, 
and replacement. The Adviser recommends Sub-advisers 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 Sub-advisers 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 Sub-advisory 
Agreements without obtaining shareholder approval. The requested relief 
will not extend to any Sub-adviser 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 Sub-adviser to one or more of the Funds 
(``Affiliated Sub-adviser''). None of the current Sub-advisers is 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 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 Sub-advisers best suited to achieve a Fund's 
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 each 
Sub-advisory 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 each 
Advisory Agreement will remain subject to 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 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 purchased 
shares on the basis of a prospectus containing 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 relying on the requested order will hold itself 
out to the public as employing the management structure described in 
the application. The prospectus with respect to each Fund will 
prominently disclose that the Adviser has the ultimate responsibility 
(subject to oversight by the Board) to oversee Sub-advisers and 
recommend their hiring, termination, and replacement.
    3. At all times, 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 Sub-advisory Agreement with 
any Affiliated Sub-adviser without that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    5. When a Sub-adviser change is proposed for a Fund with an 
Affiliated Sub-adviser, 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 Sub-adviser derives an inappropriate 
advantage.
    6. Within 90 days of the hiring of any new Sub-adviser, 
shareholders will be furnished all information about the new Sub-
adviser that would be included 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 any new Sub-adviser.
    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 Sub-advisers to manage 
all or part of the Fund's assets; (c) when appropriate, allocate and 
reallocate a Fund's assets among multiple Sub-advisers; (d) monitor and 
evaluate the performance of the Sub-advisers; and (e) ensure that the 
Sub-advisers comply with each Fund's investment objectives, policies 
and restrictions by, among other things, implementing procedures 
reasonably designed to ensure compliance.
    8. No trustee or officer of the Trust, 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 Sub-adviser, 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 Sub-adviser or an entity that 
controls, is controlled by, or is under common control with a Sub-
adviser.


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    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-7343 Filed 3-26-03; 8:45 am]
BILLING CODE 8010-01-P