[Federal Register Volume 64, Number 58 (Friday, March 26, 1999)]
[Notices]
[Pages 14776-14778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7439]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23746; 812-11524]


Todd Investment Advisors, Inc.; Notice of Application

March 22, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') 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 a new investment 
sub-advisory agreement (``New Agreement'') for a period of not more 
than 150 days beginning on the later of the date on which the 
acquisition by Fort Washington Investment Advisors, Inc. (``Fort 
Washington'') of Todd Investment Advisors, Inc. (``Todd'') is 
consummated or the date on which the requested order is issued and 
continuing through the date the New Agreement is approved or 
disapproved by the shareholders (but in no event later than September 
9, 1999)

[[Page 14777]]

(``Interim Period''). The order would also permit payment of all fees 
earned under the New Agreement during the Interim Period following 
shareholder approval.

FILING DATES: The application was filed on February 26, 1999. Applicant 
has agreed to file an amendment during the notice period, the substance 
of which is reflected in the 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 
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 April 12, 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, N.W., Washington, D.C. 
20549-0609. Applicant, 3160 National City Tower, Louisville, Kentucky 
40202.

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, N.W., Washington, D.C. 
20549-0102 (tel. no. (202) 942-8090).

Applicant's Representations

    1. Todd is an investment adviser registered under the Investment 
Advisers Act of 1940 (``Advisers Act'') and is a wholly-owned 
subsidiary of Stifel Financial Corp. (``Stifel''). Todd serves as 
investment sub-adviser to American Fidelity Dual Strategy Fund, Inc. 
(``Fund'') and other institutional and individual clients. The Fund is 
an open-end management investment company registered under the Act. 
American Fidelity Assurance Company, an investment adviser registered 
under the Advisers Act, serves as the Fund's investment adviser 
(``Adviser''). Todd manages the assets of the Fund pursuant to an 
investment sub-advisory contract between Todd and the Adviser 
(``Existing Agreement'').
    2. Fort Washington is an investment adviser registered under the 
Advisers Act, and is a wholly-owned subsidiary of The Western and 
Southern Life Insurance Company (``Western Southern''). On January 27, 
1999, Fort Washington and Stifel entered into an agreement pursuant to 
which Stifel will sell all of Todd's outstanding voting securities to 
Fort Washington (the ``Transaction''). As a result of the consummation 
of the Transaction, Todd will become a wholly-owned subsidiary of Fort 
Washington. The Transaction is expected to be consummated on or about 
April 12, 1999 (the ``Closing Date''). Todd states that the Transaction 
will result in an assignment, and thus automatic termination, of the 
Existing Agreement.
    3. Todd requests an exemption to permit (i) the implementation 
during the Interim Period, prior to obtaining shareholder approval, of 
the New Agreement between the Adviser and Todd, and (ii) Todd to 
receive from the Fund, upon approval of the Fund's shareholders, any 
and all fees payable under the New Agreement 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 
Agreement is approved or disapproved by the shareholders of the Fund 
(but in no event later than September 9, 1999). The New Agreement will 
contain terms and conditions identical to those of the Existing 
Agreement, except for the effective and termination dates.
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    \1\ Todd states that if the Closing Date precedes the issuance 
of the requested order, it will continue to serve as investment sub-
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 sub-advisory services to the Fund even though 
shareholder approval of the New Agreement has not yet been secured. 
Todd also states that the Fund may be required to pay, with respect 
to the period until the receipt of the order, no more than the 
actual out-of-pocket costs to Todd for providing sub-advisory 
services.
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    4. On February 24, 1999 the Fund's Board of Directors (``Board'') 
met to consider and evaluate the New Agreement and to determine whether 
the terms of the New Agreement are in the best interests of the Fund 
and its shareholder. The Board, including a majority of the directors 
who are not ``interested persons'' within the meaning of section 
2(a)(19) of the Act (``Independent Directors''), voted to approve the 
New Agreement and to recommend that the Fund's shareholders approve the 
New Agreement. Proxy materials for the shareholder meetings are 
expected to be mailed on or about April 5, 1999, and the shareholder 
meeting is scheduled to be held on or about June 14, 1999.
    5. Todd proposes to enter into an escrow arrangement with an 
unaffiliated financial institution. The fees earned by Todd during the 
Interim Period under the New Agreement would be paid into an interest-
bearing escrow account. The amounts in the escrow account (including 
any interest earned) will be paid (i) to Todd only if shareholders of 
the Fund approve the New Agreement, or (ii) to the Fund if the Interim 
Period has ended and shareholders have not approved the New Agreement. 
Before any such payment is made, the Fund's Board 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 
controlling block of the assignor's outstanding voting securities by a 
security holder of the assignor. Section 2(a)(9) of the Act defines 
``control'' as the power to exercise a controlling influence over the 
management or policies of a company, and beneficial ownership of more 
than 25% of the voting securities of a company is presumed under 
section 2(a)(9) to reflect control. Todd states that the Transaction 
will result in an assignment of the Existing Agreement and its 
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

[[Page 14778]]

receives money or other benefit'' in connection with the assignment. 
Todd states that it may not rely on rule 15a-4 because of the benefits 
arising to Stifel, Todd's parent, 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 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.
    4. Todd states that the requested relief satisfies this standard. 
Todd asserts that the structure and timing of the Transaction were 
determined by Fort Washington and Stifel in response to a number of 
factors beyond the scope of the Act and substantially unrelated to the 
Fund and that the parties wish to consummate the Transaction as 
expeditiously as possible to permit Fort Washington and Todd to take 
advantage of new business opportunities and to implement other business 
plans unrelated to the Fund.
    5. Todd represents that under the New Agreement, during the Interim 
Period, the scope and quality of services provided to the Fund will be 
at least equivalent to the scope and quality of the services it 
previously provided. Todd states that if any material change in its 
personnel occurs during the Interim Period, Todd will apprise and 
consult with the Board to ensure that the Board, including a majority 
of the Independent Directors, are satisfied that the scope and quality 
of the sub-advisory services provided to the Fund will not be 
diminished. Todd also states that the compensation payable to it under 
the New Agreement will be no greater than the compensation that would 
have been paid to Todd under the Existing Agreement.

Applicant's Conditions

    Todd agrees as conditions to the issuance of the exemptive order 
requested by the application that:
    1. The New Agreement that is in effect during the Interim Period 
will have the same terms and conditions as the Existing Agreement with 
the exception of its effective and termination dates.
    2. Fees payable to Todd by the Fund during the Interim Period will 
be maintained in an interest bearing escrow account with an 
unaffiliated financial institution. The amount in the escrow account, 
including any interest earned, will be paid to (i) Todd only if the 
shareholders of the Fund approve the New Agreement by the end of the 
Interim Period; or (ii) the Fund if the shareholders of the Fund do not 
approve the New Agreement by the end of the Interim Period. Before any 
such payment is made, the Fund's Board will be notified.
    3. The Fund will convene a meeting of the shareholders to vote on 
approval of the New Agreement on or before the 150th day following the 
termination of the Existing Agreement (but in no event later than 
September 9, 1999).
    4. Todd, Stifel, Fort Washington and Western Southern will bear the 
costs of preparing and filing this application and the costs relating 
to the solicitation of shareholder approval of the Fund's shareholders 
necessitated by the Transaction.
    5. Todd will take all appropriate actions to ensure that the scope 
and quality of the sub-advisory services provided to the Fund during 
the Interim Period will be at least equivalent, in the judgment of the 
Board, including a majority of the Independent Directors, to the scope 
and quality of service previously provided. If any material change in 
Todd's personnel occurs during the Interim Period, Todd will apprise 
and consult with the Board to ensure that the Board, including a 
majority of the Independent Directors, are satisfied that the scope and 
quality of the sub-advisory services provided to the Fund will not be 
diminished.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-7439 Filed 3-25-99; 8:45 am]
BILLING CODE 8010-01-M