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Lindner Investments and Lindner Asset Management, Inc.; Notice of Application

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Start Preamble November 6, 2001.


Securities and Exchange Commission (“Commission”).


Notice of application 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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The requested order would permit applicants to enter into and materially amend subadvisory agreements without shareholder approval.


Lindner Investments (“Trust”) and Lindner Asset Management, Inc. (“Adviser”).


The application was filed on April 11, 2001 and amended on November 6, 2001.

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 November 29, 2001, 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.


Secretary, Commission, 450 Fifth Street, NW., Washington, DC 20549-0609; Applicants, 520 Lake Cook Road, Suite 381, Deerfield, IL 60015.

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Stacy L. Fuller, Senior Counsel, at (202) 942-0553, or Nadya B. Roytblat, Assistant Director, at (202) 942-0564, Division of Investment Management, Office of Investment Company Regulation.

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The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 450 Fifth Street, NW., Washington, DC 20549-0102, telephone (202) 942-8090.

Applicant's Representations

1. The Trust, a Massachusetts business trust, is registered under the Act as an open-end management investment company of the “series” type. The Trust currently has six separate series (“Funds”), each with its own distinct investment objectives, policies and restrictions.[1] The Adviser is registered as an investment adviser registered under the Investment Advisers Act of 1940.

2. The Adviser serves as investment adviser to the Funds pursuant to an investment advisory agreement between the Trust and the Adviser that has been 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)(1) of the Act (“Disinterested Trustees”), and by a majority of each Fund's shareholders (“Master Management Agreement”). The Master Management Agreement permits the Adviser to enter into investment advisory agreements (“Subadvisory Agreements”) with subadvisers (“Subadvisers”) and delegate to the Subadvisers the responsibility for providing investment advice and making investment decisions for a Fund. Under the Master Management Agreement, the Adviser, among other things, set each Fund's overall investment strategy, monitors and evaluates the Subadvisers' performance, and recommends their hiring, termination and replacement. The Adviser compensates the subadvisers out of the fees paid to the Adviser by the Fund.

3. Applicants requests relief to permit the Adviser to enter into and materially amend Subadvisory Agreements without obtaining shareholder approval. The requested relief will not extend to any Subadvisers that is an affiliated person, as defined in section 2(a)(3) of the Act, of the Trust or the Adviser, other than by reason of serving as a Subadviser to one or more of the Funds (“Affiliated Subadviser”).

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 a majority of the investment 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 approved the matter if the Act requires shareholder approval.

2. Section 6(c) of the Act authorizes the Commission to exempt persons or transactions from the provisions of the Act 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. Applicants state that the requested relief meets this standard for the reasons discussed below.

3. Applicants assert that each Fund's shareholders have determined to rely on the Adviser to select, monitor and replace Subadvisers. Applicants assert that, in this regard, the role of the Subadvisers is comparable to that of individual portfolio managers employed by traditional investment management organizations, and that shareholder approval should not be required for changes to Subadvisers or Subadvisory Agreements any more than it should be required for changes (in traditional investment companies) of individual portfolio managers or portfolio managers' contracts. Applicants state that the Master Management Agreement will remain fully subject to sections 15(a) and 15(c) of the Act and rule 18f-2 under the Act. Applicants further submit that requiring shareholder approval of each Subadvisory Agreement would impose unnecessary costs and delays on the Funds, and may preclude the Adviser from acting promptly in a manner considered advisable by the Board.

Applicant's Conditions

Applicants agree that the 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 as described in the application will be approved by the vote of 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 the disclosure contemplated by condition 2 below, by the initial shareholders before offering shares of that Fund to the public.

2. Each Fund relying on the requested order will disclose in its prospectus the existence, substance, and effect of any order granted pursuant to the application. In addition, each Fund will hold itself out to the public as employing the management structure described in the application. The prospectus will prominently disclose that the Adviser has the ultimate responsibility (subject to oversight by the Board) to monitor and evaluate Subadvisers and recommend their hiring, termination and replacement.

3. At all times, a majority of the Board will be Disinterested Trustees, and the nomination of new or additional Disinterested Trustees will be placed Start Printed Page 56869within the discretion of the then existing Disinterested Trustees.

4. Neither the Trust nor the Adviser will enter into a Subadvisory Agreement for a Fund with any Affiliated Subadviser without such agreement, including the compensation to be paid thereunder, being approved by the shareholders of the applicable Fund.

5. When a change of Subadviser is proposed for a Fund with an Affiliated Subadviser, the Board, including a majority of the Disinterested 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 Fund and its shareholders and does not involve a conflict of interest from which the Adviser or the Affiliated Subadviser derives an inappropriate advantage.

6. Within 90 days of the hiring of any new Subadviser, the Adviser will furnish shareholders of the Fund with all information about the new Subadviser that would be contained in a proxy statement; including any change in such disclosure caused by the addition of the new Subadviser. The Adviser 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.

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: (i) Set the Funds' overall investment strategies, (ii) evaluate, select and recommend Subadvisers to manage all or a part of a Fund's assets, (iii) when appropriate, allocate and reallocate a Fund's assets among multiple Subadvisers, (iv) monitor and evaluate the performance of the Subadvisers, and (v) ensure that the Subadvisers 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 Subadviser, except for (i) ownership of interests in the Adviser or any entity that controls, is controlled by or is under common control with the Adviser; 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 Subadviser or an entity that controls, is controlled by or is under common control with a Subadviser.

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For the Commission, by the Division of Investment Management, pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

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1.  Applicants request that any relief granted pursuant to the application also apply to future series of the Trust and toany other registered open-end management investment company and its series that (a) are advised by the Adviser or any entity controlling, controlled by or under common control with the Adviser; (b) use the multi-manager structure described in the application; and (c) comply with the terms and conditions in the application (“Future Funds,” included in the term “Funds”). No Fund will have in its name the name of a Subadviser, as defined below.

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[FR Doc. 01-28354 Filed 11-9-01; 8:45 am]