[Federal Register Volume 64, Number 227 (Friday, November 26, 1999)]
[Notices]
[Pages 66520-66522]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30709]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 24144; 812-11854]
OLDE Asset Management, Inc.; Notice of Application
November 18, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application under section 6(c) of the Investment
Company Act of 1940 (the ``Act'') for and exemption from section 15(a)
of the Act.
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Summary of Application: The requested order would permit the
implementation, without prior shareholder approval, of new investment
advisory agreements (``New Agreements'') for a period of not more than
150 days beginning on the later of the date on which the acquisition by
H&R Block, Inc. ``H&R Block'') of OLDE Asset Management, Inc. (``OLDE
Management'') is consummated or the date on which the requested order
is issued and continuing through the date the New Agreements are
approved or disapproved by the shareholders (but in no event later than
April 15, 2000) (``Interim Period''). The order would also permit
payment of all fees earned under the New Agreements during the
[[Page 66521]]
Interim Period following shareholder approval.
Filing Date: The application was filed on November 12, 1999.
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 applicant with a copy of the request, personally or by mail.
Hearing requests should be received by the SEC by 5:30 p.m. on December
10, 1999, and should be accompanied by proof of service on applicant 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
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, NW, Washington, DC 20549-
0609. Applicant, 751 Griswold Street, Detroit, Michigan 48226.
FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Staff Attorney, at
(202) 942-0634, or Nadya B. Roytblat, Assistant Director, 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 Fifth Street, NW, Washington, DC
20549-0102 (tel. No. 202-942-8090).
Applicant's Representations
1. OLDE Management is an investment adviser registered under the
Investment Advisers Act of 1940 (``Advisers Act'') and is a wholly-
owned subsidiary of OLDE Financial Corporation (``OLDE Financial''), a
holding company. OLDE Management serves as investment adviser to OLDE
Custodian Fund (``Trust''). The Trust is an open-end management
investment company registered under the Act and consists of three
series (each a ``Fund,'' and collectively, the ``Funds''). OLDE
Management manages the assets of the Funds pursuant to investment
advisory contracts between OLDE Management and the Trust (``Existing
Agreements'').
2. On August 31, 1999, H&R Block and OLDE Financial entered a stock
purchase agreement pursuant to which H&R Block will acquire OLDE
Financial (the ``Transaction''). The Transaction is expected to be
consummated on or about November 30, 1999 (the ``Closing Date''). OLDE
Management states that the Transaction will result in an assignment,
and thus automatic termination, of the Existing Agreements.
3. OLDE Management requests an exemption to permit (i) the
implementation during the Interim Period, prior to obtaining
shareholding approval, of the New Agreements between the Trust and OLDE
Management, and (ii) OLDE Management to receive from each Fund, upon
approval of the respective Fund's shareholders, any and all fees
payable under the New Agreements during the Interim Period. The
requested exemption would cover the Interim Period of not more than 150
days beginning on the later of the Closing Date or the date the
requested order is issued \1\ and continuing through the date the New
Agreements are approved or disapproved by the shareholders of the Funds
(but in no event later than April 15, 2000). The New Agreements will
contain terms and conditions identical to those of the Existing
Agreements, except for the effective and termination dates.
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\1\ OLDE Management states that if the Closing Date precedes the
issuance of the requested order, it will continue to serve as
investment adviser after the Closing Date (and prior to the issuance
of the order) in a manner consistent with its fiduciary duty to
continue to provide investment advisory services to the Funds even
though shareholder approval of the New Agreements from the
respective Fund has not yet been secured. OLDE Management also
states that it will be entitled to receive from the Funds, with
respect to the period from the Closing Date until the issuance of
the order, no more than the actual out-of-pocket costs to OLDE
Management for providing investment advisory services to the Funds.
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4. On October 13, 1999, the Trust's Board of Trustees (``Board'')
met to consider and evaluate the New Agreements and to determine
whether the terms of the New Agreements are in the best interests of
the Funds and their shareholders. The Board, including a majority of
the directors who are not ``interested person'' within the meaning of
section 2(a)(19) of the Act (``Independent Trustees''), voted to
approve the New Agreements and to recommend that each Fund's
shareholders approve the respective New Agreement. Proxy materials for
the shareholder meetings are expected to be mailed on or about December
6, 1999, and the shareholder meeting is scheduled to be held on or
about January 18, 2000.
5. OLDE Management proposes to enter into an escrow arrangement
with an unaffiliated financial institution (``Escrow Agent''). The fees
earned by OLDE Management during the Interim Period under the New
Agreements would be paid into an interest-bearing escrow account
maintained by the Escrow Agent. The amounts in the escrow account
(including any interest earned will be paid (i) to OLDE Management only
if shareholders of the respective Fund approve the New Agreement, or
(ii) to the respective Fund if the Interim Period has ended and
shareholders have not approved the applicable New Agreement. The Escrow
Agent will release the moneys as provided only upon a receipt of a
certificate from the officers of the applicable Fund that action is
appropriate based on shareholder votes. Before any such certificate is
sent, the Independent Trustees will be notified.
Applicant's Legal Analysis
1. Section 15(a) of the Act provides, in pertinent part, that it
shall be unlawful for any person to serve or act as investment adviser
of a registered investment company, except pursuant to a written
contract that has been approved by the vote of a majority of the
outstanding voting securities of the investment company. Section 15(a)
further requires that the written contract provide for automatic
termination in the event of its assignment. Section 2(a)(4) of the Act
defines ``assignment'' to include any direct or indirect transfer of a
contract by the assignor, or of a controlling block of the assignor's
outstanding voting securities by a security holder of the assignor.
OLDE Management states that the Transaction will result in an
assignment of the Existing Agreements and their automatic termination.
2. Rule 15a-4 under the Act provides, in pertinent part, that if an
investment advisory contract with an investment company is terminated,
the adviser may continue to serve for up to 120 days under a written
contract that has not been approved by the investment company's
shareholders, provided that: (i) the new contract is approved by the
company's board of directors (including a majority of the non-
interested directors); (ii) the compensation to be paid under the new
contract does not exceed the compensation which would have been paid
under the contract most recently approved by company's shareholders;
and (iii) neither the adviser nor any controlling person of the adviser
``directly or indirectly receives money or other benefit'' in
connection with the assignment. OLDE Management states that it may not
rely on rule 15a-4 because of the benefits arising to OLDE Financial in
connection with the Transaction.
3. Section 6(c) provides that the SEC may exempt any person,
security, or transaction from any provision of the Act, if and to the
extent that the
[[Page 66522]]
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. OLDE Management
states that the requested relief satisfies this standard.
4. OLDE Management asserts that the Transaction arose out of
business considerations unrelated to the Trust and OLDE Management.
OLDE Management states that there is insufficient time to obtain
shareholder approval of the New Agreements prior to the Closing Date.
5. OLDE Management represents that under the New Agreements, during
the Interim Period, the scope and quality of services provided to the
Funds will be at least equivalent to the scope and quality of the
services it previously provided under the Existing Agreements. OLDE
Management states that if any material change in its personnel occurs
during the Interim Period, OLDE Management will apprise and consult
with the Board to ensure that the Board, including a majority of the
Independent Trustees, are satisfied that the scope and quality of the
advisory services provided to the Funds will not be diminished. OLDE
Management also states that the compensation payable to it under the
New Agreements will be no greater than the compensation that would have
been paid to OLDE Management under the Existing Agreements.
Applicant's Conditions
OLDE Management agrees as conditions to the issuance of the
exemptive order requested by the application that:
1. The New Agreements will have the same terms and conditions as
the Existing Agreements except for the dates of execution and
termination.
2. Fees earned by OLDE Management in respect of the New Agreements
during the Interim Period will be maintained in an interest-bearing
escrow account, and amounts in the account (including interest earned
on such fees) will be paid to (i) OLDE Management in accordance with
the New Agreements, after the requisite shareholder approvals are
obtained, or (ii) the respective Fund, in absence of such shareholder
approval.
3. The Trust will convene a meeting of shareholders of each Fund to
vote on approval of the respective New Agreements during the Interim
Period (but in no event later than April 15, 2000).
4. OLDE Management or an affiliate, not the Funds, will bear the
costs of preparing and filing the application and the costs relating to
the solicitation of shareholder approval of the Funds necessitated by
the Transaction.
5. OLDE Management will take all appropriate steps so that the
scope and quality of advisory and other services provided to the Funds
during the Interim Period will be at least equivalent, in the judgment
of the Trust's Board, including a majority of the Independent Trustees,
to the scope and quality of services previously provided under the
Existing Agreements. If personnel providing material services during
the Interim Period change materially, OLDE Management will apprise and
consult with the Board to assure that the trustees, including a
majority of the Independent Trustees, of the Trust are satisfied that
the services provided will not be diminished in scope or quality.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-30709 Filed 11-24-99; 8:45 am]
BILLING CODE 8010-01-M
