[Federal Register Volume 66, Number 58 (Monday, March 26, 2001)]
[Notices]
[Pages 16509-16511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-7374]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24895; 812-2440]


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

March 20, 2001.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under sections 6(c), 
12(d)(1)(J), and 17(b) of the Investment Company Act of 1940 (the 
``Act'') for exemption from sections 12(d)(1)(A) and (B) and 17(a) of 
the Act, and under section 17(d) of the Act and rule 17d-1 under the 
Act to permit certain joint transactions.

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SUMMARY OF THE APPLICATION: The requested order would permit certain 
registered management investment companies to invest uninvested cash in 
an affiliated money market fund in excess of the limits in sections 
12(d)(1)(A) and (B) of the Act.

Applicants: Lindner Investments (``Trust'') and Linder Asset 
Management, Inc. (``Adviser'').

Filing Dates: The application was filed on February 7, 2001 and amended 
on March 9, 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 applicant 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 16, 2001, and should be accompanied by proof of service 
on 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, Commission, 450 Fifth Street, N.W., Washington, 
D.C. 20549-0609. Applicants, 7711 Carondelet, Suite 700, St. Louis, MO 
63105.

FOR FURTHER INFORMATION CONTACT: Nadya, B. Roytblat, Assistant 
Director, at (202) 942-0693 (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 
Commission's Public Reference Branch, 450 Fifth Street, N.W., 
Washington, D.C. 20549-0102 (tel. 202-942-8090).

Applicant's Representations

    1. The Trust is a Massachusetts business trust registered under the 
Act as an open-end management investment company. The Trust currently 
offers six portfolios (together with any registered open-end management 
investment company or series thereof that is advised by the Adviser, 
the ``Funds''), including the Lindner Government Money Market Fund 
(together with any future Fund that is a money market fund and complies 
with rule 2a-7 under the

[[Page 16510]]

Act, the ``Money Market Fund'').\1\ The Money Market Fund complies with 
rule 2a-7 under the Act. The Adviser is registered as an investment 
adviser under the Investment Advisers Act of 1940.\2\ The Adviser serve 
as the investment adviser for the Funds.
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    \1\ Any future Fund that may rely on the order in the future 
will do so only in accordance with the terms and conditions of the 
application.
    \2\ For purposes of this application, the term ``Adviser'' 
includes, in addition to Lindner Asset Management, Inc., any other 
person controlling, controlled by or under common control with 
Lindner Asset Management, Inc. that acts in the future as an 
investment adviser to a Fund.
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    2. Applicants state that each Participating Fund (as defined below) 
has, or may be expected to have, cash that has not been invested in 
portfolio securities (``Uninvested Cash''). Uninvested Cash may result 
from a variety of sources, including dividends or interest received on 
portfolio securities, unsettled securities transactions, strategic 
reserves, matured investments, proceeds from liquidation of investment 
securities, dividend payments, or money received from investors. A Fund 
that purchases shares of the Money Market Fund is referred to as a 
Participating Fund.
    3. Applicants request an order to permit each of the Participating 
Funds to invest their Uninvested Cash in the Money Market Fund, and to 
permit the Money Market Fund to sell shares to, and redeem shares from, 
the Participating Funds. Investments of Uninvested Cash in shares of 
the Money Market Fund will be made only to the extent that such 
investment is consistent with each Participating Fund's investment 
restrictions and policies as set forth in the Participating Fund's 
prospectus and statement of additional information. Applicants state 
that the proposed transactions may reduce transaction costs, create 
more liquidity, increase returns, and diversify holdings.

Applicants' Legal Analysis

    1. Section 12(d)(1)(A) of the Act provides, in pertinent part, that 
no registered investment company may acquire securities of another 
investment company if such securities represent more than 3% of the 
acquired company's outstanding voting stock, more than 5% of the 
acquiring company's total assets, or if such securities, together with 
the securities of other acquired investment companies, represent more 
than 10% of the acquiring company's total assets. Section 12(d)(1)(B) 
of the Act, in pertinent part, provides that no registered open-end 
investment company may sell its securities to another investment 
company if the sale will cause the acquiring company to own more than 
3% of the acquired company's voting stock, or if the sale will cause 
more than 10% of the acquired company's voting stock to be owned by 
investment companies.
    2. Section 12(d)(1)(J) of the Act provides that the Commission may 
exempt any person, security, transaction from any provision of section 
12(d)(1) if, and to the extent that, such exemption is consistent with 
the public interest and the protection of investors. Applicants request 
relief under section 12(d)(1)(J) from the limitations of sections 
12(d)(1)(A) and (B) to permit the Participating Funds to invest 
Uninvested Cash in the Money Market Fund.
    3. Applicants state that the proposed arrangement would not result 
in the abuses that sections 12(d)(1)(A) and (B) were intended to 
prevent. Applicants state that because the Money Market Fund will 
maintain a highly liquid portfolio, a Participating Fund will not be in 
a position to gain undue influence over the Money Market Fund. 
Applicants represent that the proposed arrangement will not result in 
an inappropriate layering of fees because shares of the Money Market 
Fund sold to the Participating Funds will not be subject to a sales 
load, redemption fee, distribution fee under a plan adopted in 
accordance with rule 12b-1 under the Act, or service fee (as defined in 
rule 2830(b)(9) of the National Association of Securities Dealers' 
(``NASD'') Conduct Rules). Applicants represent in excess of the 
limitations contained in section 12(d)(1)(A) of the Act.
    4. Section 17(a) of the Act makes it unlawful for any affiliated 
person of a registered investment company, or an affiliated person of 
such person, acting as principal, to sell or purchase any security to 
or from the company. Section 2(a)(3) of the Act defines an ``affiliated 
person'' of an investment company to include, among others, any person 
directly or indirectly controlling, controlled by, or under common 
control with the investment company and any investment adviser to the 
investment company. Applicants state that, because the Funds share a 
common board of directors, each Fund may be deemed to be under common 
control with each of the other Funds, and thus an affiliated person of 
each of the other Funds. As a result, section 17(a) would prohibit the 
sale of the shares of the Money Market Fund to the Participating Funds, 
and the redemption of the shares by the Money Market Fund.
    5. Section 17(b) of the Act authorizes the Commission to exempt a 
transaction from section 17(a) if the terms of the proposed 
transaction, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, the proposed transaction is consistent with the 
policy of each investment company concerned, and the proposed 
transaction is consistent with the general purposes of the Act. Section 
6(c) of the Act permits the Commission to exempt persons or 
transactions from any provision of the Act if the 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.
    6. Applicants submit that their request for relief to permit the 
purchase and redemption of shares of the Money Market Fund by the 
Participating Funds satisfies the standards in sections 6(c) and 17(b) 
of the Act. Applicants note that shares of the Money Market Fund will 
be purchased and redeemed at their net asset value, the same 
consideration paid and received for these shares by any other 
shareholder. Applicants state that the Participating Funds will retain 
their ability to invest their Uninvested Cash directly in money market 
instruments as authorized by their respective investment objectives and 
policies if they believe they can obtain a higher rate of return, or 
for any other reason. Applicants also state that the Money Market Fund 
has the right to discontinue selling shares to any of the Participating 
Funds if the Money Market Fund's board of directors determines that 
such sale would adversely affect its portfolio management or 
operations.
    7. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company, acting as 
principal, from participating in or effecting any company participates. 
Applicants state that each Participating Fund, by purchasing shares of 
the Money Market Fund, the Adviser, by managing the assets of the 
Participating Funds investing in the Money Market Fund, and the Money 
Market Fund, by selling shares to the Participating Funds, could be 
deemed to be participants in a joint enterprise or arrangement within 
the meaning of section 17(d) of the Act and rule 17d-1 under the Act.
    8. Rule 17d-1 permits the Commission to approve a proposed joint 
transaction covered by the terms of section 17(d) of the Act. In 
determining whether to approve a transaction, the Commission is to 
consider whether the

[[Page 16511]]

proposed transaction is consistent with the provisions, policies, and 
purposes of the Act, and the extent to which the participation is on a 
basis different from or less advantageous than that of other 
participants. Applicants submit that the investment by the 
Participating Funds in shares of the Money Market Fund would be 
indistinguishable from any other shareholder account maintained by the 
Money Market Fund and that the transactions will be consistent with the 
Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Shares of the Money Market Fund sold to and redeemed by the 
Participating Funds will not be subject to a sales load, redemption 
fee, distribution fee under a plan adopted in accordance with rule 12b-
1 under the Act or a service fee (as defined in rule 2830(b)(9) of the 
NASD Conduct Rules).
    2. Before the next meeting of the board of directors of the 
Participating Funds (``Board'') is held for purposes of voting on an 
advisory contract under section 15 of the Act, the Adviser will provide 
the Board with specific information regarding the approximate cost to 
the Adviser of, or portion of the advisory fee under the existing 
advisory contract attributable to, managing the Uninvested Cash of the 
participating Fund that can be expected to be invested in the Money 
Market Fund. Before approving any advisory contract for a Participating 
Fund, the Board of the Participating Fund, including a majority of the 
directors who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act, shall consider to what extent, if any, the 
advisory fees charged to the Participating Fund by the Adviser should 
be reduced to account for reduced services provided to the Fund by the 
Adviser as a result of Uninvested Cash being invested in the Money 
Market Fund. The minute books of the Participating Fund will record 
fully the Board's consideration in approving the advisory contract, 
including the considerations referred to above.
    3. Each of the Participating Funds will invest Uninvested Cash in, 
and hold shares of, the Money Market Fund only to the extent that the 
Participating Fund's aggregate investment in the Money Market Fund does 
not exceed 25 percent of the Participating Fund's total assets. For 
purposes of this limitation, each Participating Fund or series thereof 
will be treated as a separate investment company.
    4. Investment in shares of the Money Market Fund will be in 
accordance with each Participating Fund's respective investment 
restrictions, if any, and will be consistent with each Participating 
Fund's policies as set forth in the prospectus and statement of 
additional information.
    5. Each Participation Fund and the Money Market Fund that may rely 
on the order will be advised by the Adviser.
    6. The Money Market Fund will not acquire securities of any other 
investment company in excess of the limits contained in section 
12(d)(1)(A) of the Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-7374 Filed 3-23-01; 8:45 am]
BILLING CODE 8010-01-M