[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