PART B
LINDNER INVESTMENTS
STATEMENT OF ADDITIONAL INFORMATION
for
INVESTOR SHARES
and
INSTITUTIONAL SHARES
of
LINDNER ASSET ALLOCATION FUND
LINDNER LARGE-CAP FUND
LINDNER SMALL-CAP FUND
LINDNER UTILITY FUND
LINDNER MARKET NEUTRAL FUND
and
INVESTOR SHARES
of
LINDNER GOVERNMENT MONEY MARKET FUND
This Statement of Additional Information ("Statement of Additional
Information" or "SAI") is not a Prospectus and should be read in conjunction
with the Lindner Investments (the "Trust") Prospectus dated July 1, 1999,
which incorporates this SAI by reference (i.e., legally makes this a part of
the Prospectus). Copies of the Prospectus may be obtained by writing or
calling Lindner Investments as shown below.
The Annual Report to Shareholders of Lindner Investments for the fiscal year
ended June 30, 1998, and the Semi-Annual Report to Shareholders for the six
months ended December 31, 1998, each of which has been distributed to
shareholders of each Fund pursuant to Section 30(d) of the Investment
Company Act of 1940, are hereby incorporated into this Statement of
Additional Information by reference. Copies of such Reports will be
provided without charge to any person to whom this Statement of Additional
Information is sent or given, except that holders of shares who have
otherwise received such Reports will only be sent additional copies upon
request to the Trust. Any such request should be made by mail to the Trust
at 7711 Carondelet, P.O. Box 11208, St. Louis, Missouri 63105, or by phone
to (800) 995-7777.
Effective June 25, 1999, the Lindner International Fund and the Lindner
High-Yield Bond Fund were closed to new investors and no sales of shares
will be accepted from investors other than from automatic purchase plans and
through the reinvestment of dividends. The Board of Trustees has authorized
the Trust to seek shareholder approval for the complete liquidation and
termination of these two Funds.
July 1, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
DEFINITIONS 3
INVESTMENT OBJECTIVES, POLICIES
AND RESTRICTIONS 3
Lindner Asset Allocation Fund 4
Lindner Large-Cap Fund 5
Lindner Small-Cap Fund 5
Lindner Utility Fund 6
Lindner Market Neutral Fund 6
Lindner Government Money Market Fund 7
Investment Policies and Restrictions 9
Common Investment Techniques and Types of Securities 10
General 16
MANAGEMENT OF THE TRUST 16
Compensation 17
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 18
INVESTMENT ADVISORY AND OTHER SERVICES 19
Controlling Persons 19
Services Provided by Adviser 19
Adviser Compensation 20
Transfer Agent 23
Distribution and Service Plan 24
Custodians and Independent Auditors 25
BROKERAGE ALLOCATION 26
PURCHASE, REDEMPTION AND PRICING OF SECURITIES 27
All Funds Other Than Government Money Market Fund 28
Government Money Market Fund 29
ADDITIONAL PERFORMANCE INFORMATION 30
All Funds Other Than Government Money Market Fund 30
Government Money Market Fund 31
FINANCIAL STATEMENTS 32
CERTAIN OTHER MATTERS 32
Liability of Trustees and Others 32
Description of Series and Shares 32
Registration Statement 34
APPENDIX--DESCRIPTION OF BOND RATINGS 35
<PAGE> 3
DEFINITIONS
For purposes of this Statement of Additional Information, the reader should
assume that the terms defined below have the meanings indicated, unless the
context requires otherwise.
"Administration Agreement" means the Administrative Service Agreement dated
as of May 20, 1996, between the Trust and the Adviser, which pertains to the
Government Money Market Fund, respectively, together with any amendments.
"Adviser" or "Lindner Management" means Lindner Asset Management, Inc., a
corporation organized and existing under the laws of the State of Michigan,
having its principal offices at 7711 Carondelet Avenue, P.O. Box 11208, St.
Louis, Missouri 63105.
"Advisory Contracts" means the Advisory and Service Contracts dated as of
September 23, 1993, December 29, 1994, and June 28, 1995, and the Advisory
Contracts dated as of May 20, 1996, and April 1, 1998, each of which is
between the Trust and the Adviser, together with any amendments.
"Agency Agreements" means the Agency Agreement, dated September 23, 1993, as
amended, and the Transfer Agency Agreements dated as of May 20, 1996, and
April 1, 1998, each of which is between the Trust and Lindner Management,
together with any amendments.
"Class" means either the class of Investor Shares or the class of
Institutional Shares of each Fund other than the Government Money Market
Fund.
"Fund" means each of Lindner Asset Allocation Fund, Lindner Large-Cap Fund,
Lindner Small-Cap Fund, Lindner Utility Fund, Lindner Market Neutral Fund
and Lindner Government Money Market Fund, each of which has been established
by the Trust a separate series.
"Prospectus" means the Prospectus of the Trust dated July 1, 1999.
"Trust" means Lindner Investments, a business trust organized and existing
under the laws of the Commonwealth of Massachusetts, having its principal
offices at 7711 Carondelet Avenue, P.O. Box 11208, St. Louis, Missouri
63105.
"1940 Act" means the federal Investment Company Act of 1940, as amended.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Each Fund is a separate series of Lindner Investments, and each is
classified as an open-end, diversified management investment company under
the 1940 Act. The investment objectives of each Fund are described below.
Differences in investment objectives and policies and practices among the
Funds, differences in the degree of acceptable risk, tax considerations and
the judgment of the portfolio manager are among the factors that can be
anticipated to affect the investment return of each Fund. As a result of
such differences, the performance results of each Fund may differ even
though more than one Fund may utilize similar investment techniques. Each
Fund's investment objective is a fundamental investment policy and may not
be changed without the approval of the holders of a majority of the
outstanding shares of each Fund, which is defined in the 1940 Act to mean
the lesser of (a) 67% of the shares of the
<PAGE> 4
Fund at a meeting at which more than 50% of the shares are present in person
or by proxy or (b) more than 50% of the outstanding shares of the Fund.
Lindner Asset Allocation Fund
The investment objective of the Asset Allocation Fund to produce current
income through investments in common stocks, convertible and non-convertible
preferred stocks, corporate bonds and securities issused or guaranteed by
the U.S. government that provide a yield higher than that paid on either the
Standard & Poor's 500 Stock Index or on passbook savings accounts. Capital
appreciation is a secondary investment objectives. To pursue this goal, the
Asset Allocation Fund may invest in any type or class of security without
regard to market capitalization size. Under normal market conditions, the
Asset Allocation Fund will invest in common stocks, fixed income securities,
securities convertible into common stocks (such as warrants and preferred
stocks) and cash equivalent securities. The Asset Allocation Fund normally
invests 45% to 60% of its total assets in common stocks and securities
convertible into common stocks, 25% to 50% of its total assets in fixed
income securities and up to 30% of its total assets in cash equivalent
securities. These securities may be sold in unregistered "private
placements" to qualified institutional buyers ("Rule 144A Securities").
The Adviser selects common stocks for the Asset Allocation Fund primarily
for the purpose of providing long-term capital growth, and invests
predominantly in those companies which are growth-oriented and have
exhibited consistent, above-average growth in revenues and earnings. The
Asset Allocation Fund will invest the fixed income portion of its
investments in a range of interest-paying debt securities, including
corporate bonds, notes, debentures and asset-backed securities, obligations
issued or guaranteed by the U.S. government or its agencies and securities
representing interests in pools of mortgages issued or guaranteed by the
U.S. government or its agencies. Up to 35% of the Asset Allocation Fund's
total assets may be invested in debt securities that are rated below
investment grade or are unrated ("junk bonds"). See "Risk Factors - High
Risk/High Yield, Low-Rated Securities." In addition to securities of U.S.
companies, the Asset Allocation Fund may invest a portion of its assets in
securities of foreign companies (including ADRs) and in securities issued by
real estate investment trusts and it may invest a portion of its assets to
purchase put options for hedging purposes.
The cash equivalent securities of the Asset Allocation Fund normally consist
of short-term obligations (with maturities of 18 months or less) consisting
of domestic and foreign commercial paper, variable rate master demand notes,
bankers' acceptances, certificates of deposit issued by domestic banks or
domestic branches of foreign banks, obligations issued by the U.S.
government or its agencies and repurchase agreements. The Asset Allocation
Fund may also invest a portion of its assets in securities issued by other
investment companies.
For temporary defensive or emergency purposes, the Asset Allocation Fund may
invest all or a portion of its assets in short-term debt securities issued
by the U.S. government or its agencies and short-term debt securities issued
by U.S. corporations that are rated in one of the four highest categories by
a nationally recognized securities rating organization. If the Fund takes a
temporary defensive position, it may not achieve its investment objective.
<PAGE> 5
Lindner Large-Cap Fund
The investment objective of the Large-Cap Fund is long-term capital
appreciation through investments in common stocks or securities convertible
into common stock. The production of current income is a secondary
investment objective. To pursue this goal, under normal circumstances the
Large-Cap Fund will invest at least 65% of its total assets in common stocks
and equity securities of large capitalization U.S. companies, which are
those that have a market capitalization in the range of the Russell 1000
Index. At March 31, 1999, this range of capitalization was from $1.45
billion to $456 billion. Equity securities also includes preferred stocks,
securities convertible into common stock and warrants to purchase common
stocks. Stock selection may reflect either a growth or value investment
approach. The Large-Cap Fund generally invests in between 50 to 400 U.S.
companies that are diversified across sectors. The Large-Cap Fund has
tended to emphasize, or overweight, certain sectors that the Adviser
believes offers greater potential for growth of capital at the time, such as
financial services, technology and energy stocks. These weightings may
change from time to time. The Large-Cap Fund may borrow money from banks to
use for investment purposes (a practice know as "leverage"), which may
increase the risk of loss to investors in declining market situations.
When selecting securities for the Large-Cap Fund, the Adviser blends
quantitative and fundamental financial analyses to identify companies with
strong cash flows, secure market franchises and revenue growth that is among
the highest for the particular industry. A strong balance sheet and strong
management are other factors that the Adviser considers. In addition to
securities of U.S. companies, the Large-Cap Fund may invest a portion of its
assets in securities of foreign companies (including ADRs), in debt
securities and it may invest a portion of its assets to purchase put options
for hedging purposes. The Large-Cap Fund also may invest a portion of its
assets in Rule 144A Securities and in equity securities issued by real
estate investment trusts.
For temporary defensive or emergency purposes, the Large-Cap Fund may invest
all or a portion of its assets in short-term debt securities issued by the
U.S. Government or its agencies and short-term debt securities issued by
U.S. corporations that are rated in one of the four highest categories by a
nationally recognized securities rating organization. If the Large-Cap Fund
takes a temporary defensive position, it may not achieve its investment
objective.
Lindner Small-Cap Fund
The investment objective of the Small-Cap Fund is capital appreciation. The
production of current income is a secondary investment objective. To pursue
this goal, under normal circumstances the Small-Cap Fund will invest at
least 65% of its total assets in common stocks and equity securities of U.S.
small capitalization companies, which are those having a market
capitalization in the range of the Russell 2000 Index. At March 31, 1999,
this range of capitalization was from $216 million to $1.44 billion. Equity
securities also includes preferred stocks, securities convertible into
common stock and warrants to purchase common stocks. Stock selection may
reflect either a growth or value investment approach.
When choosing stocks, the Adviser uses both fundamental and quantitative
financial analyses to identify companies with outstanding management,
substantial cash flows, potential for revenue growth in both existing and
new markets and a potential for some catalyst or factor to cause the stock's
price to rise. The Fund generally invests in between 25 and 100 companies
that are diversified across many industries, and it may invest substantially
in certain selected sectors which the Adviser believes will offer better
<PAGE> 6
opportunities for capital growth at the time. The Fund is diversified
across sectors. In addition to securities of U.S. companies, the Small-Cap
Fund may invest a portion of its assets in securities of foreign companies
(including ADRs) and in debt securities (including up to 20% of its assets
in junk bonds), in Rule 144A Securities, in equity securities issued by real
estate investment trusts and it may invest a portion of its assets to
purchase put options for hedging purposes.
For temporary defensive or emergency purposes, the Small-Cap Fund may invest
all or a portion of its assets in short-term debt securities issued by the
U.S. Government or its agencies and short-term debt securities issued by
U.S. corporations that are rated in one of the four highest categories by a
nationally recognized securities rating organization. If the Small-Cap Fund
takes a temporary defensive position, it may not achieve its investment
objective.
Lindner Utility Fund
The Utility Fund's investment objective is to produce a current income
through investments in securities of domestic and foreign public utility
companies. Capital appreciation is a secondary investment objective. To
pursue this goal, under normal circumstances the Utility Fund will invest at
least 65% of its total assets in common stocks, securities convertible into
common stocks, and nonconvertible preferred stocks and bonds issued by
domestic and foreign regulated public utility companies, including gas,
electric, telecommunications, cable television, water and energy companies
("Utilities"), and in companies that are in businesses related to such
Utilities, such as suppliers of raw materials. Some of these securities may
be Rule 144A Securities and up to 35% of the Utility Fund's total assets may
be invested in junk bonds.
The Utility Fund may invest in securities not currently paying dividends or
interest if the Adviser believes that the company will begin or resume
paying dividends or interest in the foreseeable future. The Adviser looks
for Utilities that it believes are undervalued for identifiable reasons not
considered to be fundamental, and Utilities that are believed to have long-
term growth prospects substantially better than the economy as a whole. In
addition to securities of Utilities, the Utility Fund may invest a portion
of its assets to purchase put options for hedging purposes.
For temporary defensive or emergency purposes, the Utility Fund may invest
all or a portion of its assets in short-term debt securities issued by the
U.S. Government or its agencies and short-term debt securities issued by
U.S. corporations that are rated in one of the four highest categories by a
nationally recognized securities rating organization. If the Utility Fund
takes a temporary defensive position, it may not achieve its investment
objective.
Lindner Market Neutral Fund
The investment objective of the Market Neutral Fund is long-term capital
appreciation in both bull and bear markets while maintaining minimal
exposure to general equity market risk by always having both long and short
positions in equity securities issued by U.S. companies. Long positions
will be held in those securities that the Adviser has identified as
undervalued and short positions will be held in equity securities that the
Adviser has identified as overvalued. To pursue this goal, the Market
Neutral Fund will invest substantially all of its assets in common stocks,
securities convertible into common stocks without regard to quality or
rating, short positions in common stocks and securities convertible into
common stocks, and, to a limited degree, non-convertible preferred stocks
and debt securities without
<PAGE> 7
regard to quality or rating. Some of these securities may be Rule 144A
Securities. The Market Neutral Fund may borrow money from banks to use for
investment purposes (a practice know as "leverage"), which may increase the
risk of loss to investors in declining market situations.
By taking long and short positions in different securities with similar
characteristics, the Market Neutral Fund attempts to cancel out the effect
of the general stock market movements on the Fund's performance. The
Adviser will determine the size of each long and short position in analyzing
the tradeoff between the attractiveness of each position and its impact on
the risk of the overall portfolio. The Market Neutral Fund seeks to
construct a diversified portfolio that has minimal net exposure to the U.S.
equity market generally and certain other risk factors.
The Market Neutral Fund's performance objective is to achieve a total return
in excess of the total return on the 3-month U.S. Treasury Bill. Its
performance is not expected to correlate with the direction of any major
U.S. stock market or any general stock market index. However, the Market
Neutral Fund is different from an investment in 3-month U.S. Treasury Bills
because U.S. Treasury Bills are backed by the full faith and credit of the
U.S. Government, have a fixed rate of return and a short duration and have
no risk of losing capital. In addition, the short selling activities of the
Market Neutral Fund will accelerate the recognition of gains for federal
income tax purposes because any gains on short sales are short-term capital
gains for tax purposes, taxable at ordinary income tax rates. This may
increase the income taxes paid by shareholders of the Market Neutral Fund.
For temporary defensive or emergency purposes, the Market Neutral Fund may
invest all or a portion of its assets in short-term debt securities issued
by the U.S. Government or its agencies and short-term debt securities issued
by U.S. corporations that are rated in one of the four highest categories by
a nationally recognized securities rating organization. If the Market
Neutral Fund takes a temporary defensive position, it may not achieve its
investment objective.
Lindner Government Money Market Fund
The investment objective of the Government Money Market Fund is to produce
current income consistent with preservation of capital and liquidity. To
pursue this goal, the Government Money Market Fund will invest exclusively
in United States dollar-denominated obligations. The dollar-weighted
average maturity of the Government Money Market Fund will not exceed 90
days, and all securities purchased will have a maturity of 397 days or less
at the time of acquisition (except for securities underlying certain
repurchase agreements and certain variable rate and floating rate
instruments). Normally, the Government Money Market Fund will hold
securities to maturity but may dispose of any instrument if the Adviser
deems the action appropriate because of redemption requirements, reduction
in credit quality, a reduction in the instrument's rating, or other reasons.
Even though most securities are expected to be held to maturity, the fact
that they will have maturities of 397 days or less will result in high
portfolio turnover. The Government Money Market Fund seeks to maintain a
constant $1.00 per share net asset value, although this cannot be assured.
The Government Money Market Fund will invest in short-term securities issued
or guaranteed by the United States Government, its agencies and
instrumentalities and in repurchase agreements secured by such securities.
These include issues of the United States Treasury, such as bills, notes and
bonds, and issues of agencies and instrumentalities of the U.S. Government
which are established under the authority of an Act of Congress. Issues of
such agencies and instrumentalities may include, for example,
<PAGE> 8
securities issued by the Government National Mortgage Association, the
Tennessee Valley Authority, the Farmers Home Administration, Federal Home
Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks, Federal
Housing Administration, the Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation and the Student Loan Marketing
Association. Some of these securities, such as U.S. Treasury bills, notes
and bonds, are supported by the full faith and credit of the U.S. Treasury;
others, such as obligations of the Federal National Mortgage Association,
are not full faith and credit obligations of the U.S. Treasury but are
supported to a limited extent by the discretionary authority of the U.S.
Treasury to make loans to the issuer; and others, such as securities issued
by the Federal Home Loan Banks, are sponsored by the U.S. Government but are
supported only by the credit of the instrumentality itself. No assurance
can be given that the U.S. Government would provide financial support to its
sponsored instrumentalities if it is not obligated to do so by law. The
Government Money Market Fund will invest in the securities of such an
instrumentality only when it is satisfied that the credit risk with respect
to such instrumentality is minimal. The Government Money Market Fund does
not invest in obligations insured by the Federal Deposit Insurance
Corporation.
The Government Money Market Fund may also engage in repurchase agreement
transactions, and its investment portfolio may from time to time consist
entirely of securities subject to repurchase agreements. Under the terms of
a typical repurchase agreement, the Fund will acquire an underlying debt
obligation for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase, and the fund to
resell, the obligation at an agreed-upon price and time, thereby determining
the yield during the holding period. This arrangement results in a fixed
rate of return that is not subject to market fluctuations during the holding
period. Repurchase agreements are considered loans collateralized by the
underlying securities. The Government Money Market Fund may enter into
repurchase agreements with respect to its portfolio securities with brokers,
dealers, and commercial banks, and will engage in such transactions only
with institutions included on the Federal Reserve System's list of
institutions, commonly referred to as "primary dealers", with whom the
Federal Reserve open market desk will do business. The Government Money
Market Fund will not invest more than 20% of its net assets in repurchase
agreements with any one primary dealer. Under each repurchase agreement the
selling institution will be required to maintain the value of the securities
subject to the repurchase agreement at not less than 102% of their
repurchase price. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays
or restrictions upon the Government Money Market Fund's ability to dispose
of the underlying securities. The Adviser, acting under the supervision of
the Trustees, reviews the credit-worthiness of institutions with whom the
Government Money Market Fund enters into repurchase agreements to evaluate
these risks, and also monitors the status of repurchase agreements to insure
that the value of the collateral equals or exceeds 102% of the amount of the
repurchase obligation and in the event of a shortfall takes such action as
it deems appropriate (which may include a demand for additional collateral
from the selling institution and will include such a demand if the value of
the collateral has fallen below 100% of the amount of the repurchase
obligation). This fund may also lend its portfolio securities to brokers,
dealers, and financial institutions provided that cash or cash equivalent
collateral, or letters of credit to the extent permitted by law, equal to at
least 100% of the market value of the securities loaned, is maintained by
the borrower. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the
Trust's Board of Trustees.
<PAGE> 9
Investment Policies and Restrictions
Fundamental Investment Policies and Restrictions
The following investment policies and restrictions are matters of
fundamental policy and may not be changed without the approval of the
holders of the lesser of (a) 67% of the shares of the Fund at a meeting at
which more than 50% of the shares are present in person or by proxy or (b)
more than 50% of the outstanding shares of the Fund.
1. Each Fund may borrow money from banks of up to 5% of net assets for
temporary or emergency purposes, and not for investment leveraging. Each
Fund, other than the Government Money Market Fund, may also borrow money or
issue senior securities and use such borrowings for investment purposes in
amounts up to 33-1/3% of its total assets at the time of a borrowing
(including the amounts borrowed), and pledge its assets to the extent
required by any lender or holder of senior securities (including purchases
of securities on margin). However, as a non-fundamental operating policy,
the Board of Trustees has imposed a restriction on such borrowings of not
more than 5% of a Fund's total assets. This operating restriction may be
changed by the Board of Trustees without approval or action by the
shareholders of the affected Fund or Funds.
2. The Funds will not underwrite securities of other issuers, except when a
Fund may be deemed to be an underwriter as defined in the Securities Act of
1933 in connection with the disposition of a restricted security or a Rule
144A security.
3. None of the Funds will invest more than 25% of its total assets in
securities issued by companies in the same industry, except that the Utility
Fund under normal circumstances will invest at least 65% of its total assets
in securities issued by Utilities.
4. None of the Funds will purchase or sell commodities or commodity
contracts.
5. None of the Funds will purchase or sell interests in real estate
(including limited partnership interests) or interests in real estate
mortgage loans, except that each Fund other than the Utility Fund and the
Government Money Market Fund may invest up to 15% of its total assets in
securities representing interests in real estate investment trusts ("REITs")
whose shares are listed for trading on a national securities exchange or
eligible to be quoted in the Nasdaq Stock Market.
6. The Funds will not make loans to other persons, other than loans of
portfolio securities. For purposes of this restriction, the purchase of
notes, bonds or other evidence of indebtedness, or the entry into repurchase
agreements are not considered loans.
7. None of the Funds will purchase illiquid securities in excess of 15% of
net assets (10% of net assets in the case of the Government Money Market
Fund) at the time of purchase, or securities whose sale would not be
permitted without registration under the Securities Act of 1933 (the "1933
Act"), other than securities qualifying as Rule 144A Securities under the
1933 Act. For purposes of this restriction, illiquid securities include
indebtedness of companies originally incurred in connection with a loan from
a bank,
<PAGE> 10
insurance company or other financial institution, mortgage derivative
Interest Only securities and repurchase agreements with maturities of more
than seven days.
8. The Asset Allocation Fund, Large-Cap Fund, Small-Cap Fund, Utility Fund
and Market Neutral Fund may not invest more than 25% of their total assets
in Rule 144A Securities. The Government Money Market Fund will not invest
in Rule 144A Securities.
9. None of the Funds will purchase securities of any issuer if immediately
thereafter more than 5% of its total assets at market would be invested in
the securities of any one issuer, other than the U.S. Government, its
agencies or instrumentalities.
Operating (Non-Fundamental) Investment Policies and Restrictions
The following investment policies and restrictions have been approved by the
Board of Trustees as operating policies, which mean that the Board of
Trustees may change any or all of these policies without a vote or approval
by the shareholders of the Fund or Funds affected by the policy or
restriction:
1. None of the Funds other than the Market Neutral Fund will make short
sales of securities unless at the time of such short sale the Fund owns or
has the right to acquire, as the result of the ownership of convertible or
exchangeable securities or a pending merger or acquisition (and without
payment of additional consideration) an approximately equal amount of such
securities that it will retain so long as the Fund is in a short position.
If such a pending merger or acquisition does not occur, or if a Fund
disposes of such convertible or exchangeable securities, the Fund will cover
the short position at the soonest possible time consistent with prudence.
The Market Neutral Fund intends to make short sales even if it does not own
or have the right to acquire the underlying security.
2. The Asset Allocation Fund, Large-Cap Fund, Small-Cap Fund, Utility Fund
and Market Neutral Fund may invest up to 5% of total assets in the purchase
of put options for hedging purposes only, not for speculative purposes.
None of the Funds may sell put nor may they purchase or write ("sell") call
options or any combination of put and call options.
Common Investment Techniques and Types of Securities
High-Risk, High-Yield, Lower-Rated Debt Securities ("junk bonds"). All of
the Funds other than the Government Money Market Fund anticipate that a
portion of their assets will be invested in lower-rated,
high-yield/high-risk securities rated BB or lower by S&P or Ba or lower by
Moody's that have poor protection of payment of principal and interest .
See the Appendix to this Statement of Additional Information for a
description of these ratings. These securities often are considered to be
speculative and to involve greater risk of default or price changes due to
changes in the issuer's credit-worthiness. Market prices of these
securities may fluctuate more than higher-rated debt securities and may
decline significantly in periods of general economic difficulty which may
follow periods of rising rates. While the market for junk bonds has been in
existence for many years and has weathered previous economic downturns, the
market has experienced an increase in the large-scale use of such securities
to fund highly leveraged corporate acquisitions and restructurings.
Accordingly, past experience may not provide an
<PAGE> 11
accurate indication of future performance of the junk bond market,
especially during periods of economic recession. These junk bonds are
subject to certain risks that may not be present with investments in higher
grade securities, including the following:
--Youth and Growth of High Yield Bond Market. Recently, many
issuers have been affected by adverse economic and market conditions. It
should be recognized that an economic downturn is likely to have a negative
effect on the junk bond market and on the value of junk bonds held by the
Funds, as well as on the ability of the issuers to repay principal and
interest on their borrowings.
--Sensitivity to Interest Rate and Economic Changes. Although
prices of junk bonds may be less sensitive to interest rate changes than
higher-rated investments, junk bonds are generally more sensitive to adverse
economic changes or individual corporate developments. During a strong
economic downturn or a substantial period of rising interest rates, highly
leveraged issuers may experience financial stress that would adversely
affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. Accordingly, there could be a higher incidence of default. This
would adversely affect the value of junk bonds and a Fund's net asset value.
In addition, if the issuer of a security defaulted, the Funds might incur
additional expenses to seek recovery. Periods of economic uncertainty also
increase volatility of market prices of junk bonds and a Fund's resulting
net asset value.
--Payment Expectations. Generally, when interest rates rise, the
value of bonds, including junk bonds, tends to decrease; when interest rates
fall, the value of bonds tends to increase. If an issuer of a high-yield
security containing a redemption or call provision exercises either
provision in a declining interest rate market, the Funds would have to
replace the security, which could result in a decreased return for holders
of shares in the Funds. Conversely, if a Fund were to experience unexpected
net redemptions in a rising interest rate market, they might be forced to
sell certain securities, regardless of investment merit. This could result
in decreasing the assets to which a Fund's expenses could be allocated and a
reduced rate of return for the Fund.
--Liquidity and Valuation. Junk bonds are typically traded among a
smaller number of broker-dealers rather than in a broad secondary market.
Purchasers of junk bonds tend to be institutions, rather than individual
investors, a factor that further limits the secondary market. To the extent
that no established retail secondary market exists, many junk bonds may not
be as liquid as higher-grade bonds. The ability of a Fund to value or sell
junk bonds will be adversely affected to the extent that such securities are
thinly traded or illiquid. During such periods, there may be less reliable
objective information available and, therefore, the responsibility of the
Trust's Board of Trustees to value junk bonds becomes more difficult, with
judgment playing a greater role.
Since the risk of default is higher for junk bonds, the Adviser's research
and credit analysis are an integral part of managing securities of this type
that are held by the Funds. In considering investments for the Funds, the
Adviser attempts to identify those issuers of junk bonds whose financial
condition is adequate to meet future obligations, has improved, or is
expected to improve in the future.
<PAGE> 12
The Adviser's analysis focuses on relative values based on such factors as
interest or dividend coverage, asset coverage, earnings prospects, and the
experience and managerial strength of the issuer. In addition, the Funds
may chose, at their expense or in conjunction with others, to pursue
litigation or otherwise exercise their rights as holders of debt securities
if they determine this course of action to be in the best interest of their
shareholders.
Foreign Investments. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies, and of dividends and
interest from such securities, can change significantly when foreign
currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity
than U.S. markets, and prices on some foreign markets can be highly
volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be
more difficult to obtain reliable information regarding an issuer's
financial condition and operations. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions, and custodial
costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer,
and may involve substantial delays. It also may be difficult to enforce
legal rights in foreign countries.
Foreign investing also involves political and economic risks. Foreign
investments may be adversely affected by actions of foreign governments,
including exploration or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency in to U.S. dollars, or other government intervention.
There may be a greater possibility of default by foreign governments or
foreign government-sponsored enterprises. Investments in foreign countries
also involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. No assurance
can be given that the Adviser will be able to anticipate or counter these
potential events.
These risks generally are magnified by investments in developing countries.
Developing countries may have relatively unstable governments, economies
based only a few industries, and securities markets that trade a small
number of securities. The Funds may invest in foreign securities that
impose restrictions on transfer within the U.S. or to U.S. persons.
Although securities subject to transfer restrictions may be marketable
abroad, they may be less liquid than foreign securities of the same class
that are not subject to such restrictions. American Depository Receipts and
European Depository Receipts ("ADRs" and "EDRs") are certificates evidencing
ownership of shares of a foreign-based issuer held in trust by a banker or
similar financial institution. Designed for use in U.S. and European
securities markets, respectively, ADRs and EDRs are alternatives to the
purchase of the underlying securities in their national markets and
currencies.
For the Utility Fund, holdings in foreign securities will be limited to 35%
of total assets, including a limit of 10% of total assets in securities
primarily traded in the markets of any one country. As operating policies,
the Large-Cap Fund and the Small-Cap Fund may invest up to 25% of total
assets in foreign securities; however, these limitations are not fundamental
policies and may be changed without the consent of the holders of the
majority of the Fund's outstanding voting securities.
<PAGE> 13
Securities Lending. Each of the Funds, other than the Utility Fund and the
Government Money Market Fund, may lend securities to parties such as
broker-dealers, banks, or institutional investors. The Funds will retain
ownership of the securities loaned and, at the same time will earn
additional income. Because there may be delays in the recovery of
securities loaned, or even a loss of rights in collateral supplied should
the borrower fail financially, loans will be made only to parties whose
credit-worthiness is deemed satisfactory by the Adviser. In addition,
securities loans will only be made if, in the judgment the Adviser, the
consideration to be earned from such loans would justify the risk. The
Utility Fund and the Government Money Market Fund may not lend portfolio
securities to others.
The Adviser understands that it is the current view of the SEC staff that
the Funds may engage in securities loan transactions only under the
following conditions: (1) the Funds must receive 100% collateral in the
form of cash, cash equivalents (e.g., U.S. Treasury bills or notes) or other
high grade liquid debt instruments from the borrower; (2) the borrower must
increase the collateral whenever the market value of the securities loaned
(determined on a daily basis) exceeds the value of the collateral; (3) after
giving notice, the Funds must be able to terminate the loans at any time;
(4) the Funds must receive reasonable interest on the loans or flat fees
from the borrower, as well as amounts equivalent to any dividends, interest,
or other distributions on the securities loans and to any increase in market
value; (5) the Funds may pay only reasonable custodian fees in connection
with the loans; and (6) the Board of Trustees must be able to vote proxies
on the securities loaned, either by terminating the loans or by entering
into alternative arrangements with the borrower. Cash received through loan
transactions may be invested in any security in which the Funds are
authorized to invest. Investing this cash subjects that investment, as well
as the security loaned, to market risks.
Leverage. As described above, each Fund other than the Government Money
Market Fund has the ability to borrow money and use the borrowings for
investment purposes ("leverage"). Leveraging creates an opportunity for
increased net income and capital appreciation but, at the same time, creates
special risk considerations. For example, leveraging may exaggerate changes
in the net asset value of a Fund's shares and in the yield on a Fund's
portfolio. Although the principal of such borrowings will be fixed, a
Fund's assets may change in value during the time the borrowing is
outstanding. Leveraging will create interest expense for the Fund which can
exceed the income from the assets retained. To the extent the income
derived from securities purchased with borrowed funds exceeds the interest a
Fund will have to pay, the Fund's net income will be greater than if
leveraging were not used. Conversely, if the income from the assets
retained with borrowed monies is not sufficient to cover the cost of
leveraging, the net income of the Fund will be less than if leveraging were
not used, and therefore the amount available for distribution to
stockholders as dividends will be reduced.
Borrowing may not exceed the limits established from time to time by the
Board of Trustees. If, due to market fluctuations or other reasons, a Fund
must sell securities to repay borrowings, the Fund may have to do so at a
time when it is disadvantageous.
Illiquid Investments. Each Fund other than the Government Money Market Fund
may invest a portion of assets in illiquid investments. Illiquid
investments are investments that cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued. Under the supervision of the Board of Trustees, the Adviser
determines the liquidity of investments and, through reports from the
Adviser, the Board monitors trading activity in illiquid investments. In
determining the liquidity of investments, the Adviser may consider various
factors, including (i) the frequency of trades and quotations, (ii) the
number of dealers and prospective purchasers in the marketplace, (iii)
dealer
<PAGE> 14
undertakings to make a market, (iv) the nature of the security (including
any demand or tender features), and (v) the nature of the marketplace for
trades (including the ability to assign or offset a Fund's rights and
obligations relating to the investment). Investments currently considered
to be illiquid include over-the-counter options, non-government stripped
fixed-rate mortgage-backed securities, Interest Only mortgage derivative
securities and any other restricted or foreign securities determined by the
Adviser to be illiquid. In the absence of market quotations, illiquid
investments are priced at fair value as determined in good faith by the
Board of Trustees. If through a change in values, net assets, or other
circumstances, a Fund were in a position where more than the permitted
percentage of its net assets were invested in illiquid securities, it would
seek to take appropriate steps to protect liquidity.
Repurchase Agreements. The Funds may invest in repurchase agreements. A
repurchase agreement involves the purchase of a security by a Fund and a
simultaneous agreement (generally by a bank or dealer) to repurchase that
security back from the fund at a specified price and date or upon demand.
This technique offers a method of earning income on idle cash. The
repurchase agreement is effectively secured by the value of the underlying
security. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause the Fund
to suffer a loss if the market value of such securities declines before they
can be liquidated on the open market. In the event of bankruptcy or
insolvency of the seller, a Fund may encounter delays and incur costs in
liquidating the underlying security. As an operating policy, the Funds will
not invest in repurchase agreements maturing in more than seven days.
Short Sales The Market Neutral Fund will seek to neutralize the exposure of
its long equity positions to general equity market risk and to realize
additional gains through shorts sales. Short sales are transactions in
which the Market Neutral Fund sells a security it does not own in
anticipation of a decline in the value of that security relative to the long
positions held by the Market Neutral Fund. To complete such a transaction,
the Market Neutral Fund must borrow the security to make delivery to the
buyer. The Market Neutral Fund then is obligated to replace the security
borrowed by purchasing it at the market price at or prior to the time of
replacement. The price at such time may be more or less than the price at
which the security was sold by the Market Neutral Fund. Until the security
is replaced, the Market Neutral Fund is required to repay the lender any
dividends or interest that accrue during the period of the loan. To borrow
the security, the Market Neutral Fund also may be required to pay a premium,
which would increase the cost of the security sold. The net proceeds of the
short sale will be retained by the broker (or by the Market Neutral Fund's
custodian in a special custody account), to the extent necessary to meet
margin requirements, until the short position is closed out. The Market
Neutral Fund also will incur transaction costs in effecting short sales.
Short sales have certain special risks associated with them. For example,
the Market Neutral Fund will incur a loss as a result of the short sale if
the price of the security increases between the date of the short sale and
the date on which the Market Neutral Fund replaces the borrowed security.
There can be no assurance that the Market Neutral Fund will be able to close
out the position at any particular time or at an acceptable price. The
Market Neutral Fund will realize a gain if the security declines in price
between those dates. The amount of any gain will be decreased, and the
amount of any loss increased, by the amount of the premium, dividends,
interest or expenses the Market Neutral Fund may be required to pay in
connection with a short sale. Although the Fund's gain is limited to the
amount at which it sold a security short, less the price of the borrowed
security, the Fund's loss is potentially unlimited, since the price of a
security sold short could theoretically rise indefinitely.
<PAGE> 15
Until the Market Neutral Fund replaces a borrowed security in connection
with short sales, the Market Neutral Fund will: (a) maintain daily a
segregated account containing cash or U.S. Government securities, at such a
level that (i) the amount deposited in the account plus the amount deposited
with the broker as collateral will equal the current value of the security
sold short and (ii) the amount deposited in the segregated account plus the
amount deposited with the broker as collateral will not be less than the
market value of the security at the time it was sold short; or (b) otherwise
cover its short position.
In addition, the Asset Allocation Fund, Large-Cap Fund, Small-Cap Fund,
Utility Fund and Market Neutral Fund also may make short sales "against the
box," which occurs when a security identical to one owned by the Fund is
borrowed and sold short. If a Fund enters into a short sale against the
box, it is required to segregate securities equivalent in kind and amount to
the securities sold short (or securities convertible or exchangeable into
such securities) and is required to hold such securities while the short
sale is outstanding. A Fund will incur transaction costs, including
interest, in connection with opening, maintaining, and closing short sales
against the box.
Purchasing Put Options. By purchasing a put option, a Fund obtains the
right (but not the obligation) to sell the option's underlying security at a
fixed strike price. In return for this right, the Fund pays the current
market price for the option (known as the option premium). The Board of
Trustees has approved investments by the Funds only in put options on
specific securities or on indices of securities prices. The Fund may
terminate its position in a put option it has purchased by allowing it to
expire or by exercising the option. If the option is allowed to expire, the
Fund will lose the entire premium it paid. If the Fund exercises the
option, it completes the sale of the underlying instrument at the strike
price, which may be higher or lower than the current market price. The Fund
also may terminate a put option position by closing it out in the secondary
market at its current price, if a liquid secondary market exists. A Fund
that buys a put option can expect to realize a gain if price of the
underlying security fall substantially. However, if the underlying
security's price does not fall enough to offset the cost of purchasing the
option, the Fund can expect to suffer a loss (limited to the amount of the
premium paid, plus related transaction costs.)
Liquidity of Options. No assurance can be given that a liquid secondary
market will exist for any particular options at any particular time.
Options may have relatively low trading volume and liquidity if their strike
prices are not close to the underlying security's current price. In
addition, exchanges may establish daily price fluctuation limits for
options, and may halt trading if an option's price moves upward or downward
more than the limit in a given day. On volatile trading days when the price
fluctuation limit is reached or a trading halt is imposed, it may be
impossible for a Fund to enter into new positions or close out existing
positions. If the secondary market for an option is not liquid because of
price fluctuation limits or otherwise, it could prevent prompt liquidation
of unfavorable positions, and potentially could require a Fund to continue
to hold a position until expiration regardless of changes in its value. As
a result, a Fund's access to other assets held to cover its options also
could be impaired.
OTC Options. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (i.e., options not
traded on exchanges) ("OTC options"), generally are established through
negotiation with the other party to the option contract. While this type of
arrangement allows a Fund greater flexibility to tailor an option to its
needs, OTC options generally involve greater credit risk than
exchange-traded options, which are guaranteed by the clearing organization
of the exchanges where they are traded. The
<PAGE> 16
risk of illiquidity also is greater with OTC options, since these options
generally can be closed out only by negotiation with the other party to the
option.
Asset Coverage for Options Positions. A Fund must comply with guidelines
established by the Securities and Exchange Commission with respect to
coverage of options by mutual funds, and if the guidelines so require will
segregate cash and appropriate high-grade liquid debt assets in the amount
prescribed. Segregated securities cannot be sold while the futures or
option strategy is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that segregation of a large
percentage of a Fund's assets could impede portfolio management or a Fund's
ability to meet redemption requests or other current obligations.
General
There is no assurance that a Fund will meet its investment objective or that
there will not be substantial losses in any given investment. Also, at
anytime, the value of a Fund's shares may be more or less than an investor's
cost. Under normal circumstances, each Fund's portfolio turnover rate is
anticipated to be less than 75% per year.
MANAGEMENT OF THE TRUST
The Officers and Trustees of the Trust are listed below, together with
information regarding their principal business occupations during at least
the past five years and their ages. Each of the Trustees of the Trust was
elected as a trustee at the inception of the Trust in 1993 and has served
continuously since that date. Trustees who are "interested persons" of the
Trust, as defined in Section 2(a)(19) of the 1940 Act, are indicated with an
asterisk.
Position(s)
Held With Principal Occupation(s)
Name, Age and Address The Trust During Past Five Years
- --------------------- --------- ----------------------
Doug T. Valassis*, 47 Chairman of the Chairman and Trustee of the
520 Lake Cook Road Board and Trust. Chairman, a Director
Suite 380 Trustee and Treasurer of the Adviser
Deerfield, IL 60015 since 1993. President of
Franklin Enterprises, Inc., a
private investment firm, for more
than five years.
Eric E. Ryback*, 47 President President and Trustee of the
7711 Carondelet Ave. and Trustee Trust. President and a Director
Suite 700 of the Adviser since 1993.
St. Louis, MO 63105
Brian L. Blomquist, 40 Admin. Vice Executive Vice President of the
7711 Carondelet Ave. President, Adviser since 1995 and Assistant
Suite 700 Secretary and Secretary of the Adviser since
St. Louis, MO 63105 Treasurer since 1993. Vice President of the
Adviser from 1993 to 1995.
<PAGE> 17
Kenneth E. Puzder, 33 Vice Financial operations principal and
7711 Carondelet Ave. President accounting manager of the Adviser
St. Louis, MO 63105 since 1998; Audit manager with
KPMG from 1997 to 1998; Controller
of Mills Group, Inc. from 1990 to
1997; Financial operations
principal of The B. Mills
Corporation from 1993 to 1997.
Robert L. Byman, 53 Trustee Partner in the law firm of Jenner
Jenner & Block & Block, Chicago, Illinois, for
One IBM Place more than five years.
Chicago, IL 60611
Terrence P. Fitzgerald, 44 Vice President, Development
2407 Stryker Avenue Trustee Director, The Mills Corporation,
Vienna, VA 22181 since 1996. Senior counsel, The
May Department Stores from 1993
until 1995.
Marc P. Hartstein, 46 Trustee Director--Industry Development of
3 Middlebrook Lane Anheuser-Busch, Inc. Also owns
St. Louis, MO 63141 Hart Communications, a research,
strategic planning and image
development firm.
Peter S. Horos, 50 Trustee Investment Manager, Allstate Life
Allstate Insurance Company, Northbrook, IL
3075 Sanders Road for more than five years
Northbrook, IL 60062
Donald J. Murphy, 55 Trustee President of Murcom Financial Ltd.
141 Jackson Blvd. a private investment firm, for
Chicago, IL 60604 more than five years.
Dennis P. Nash, 47 Trustee Vice President, Nellis Feed
Nellis Feed Company Company, a feed ingredient
899 Skokie Blvd broker, for more than five years.
Northbrook, IL 60062
Compensation
During the fiscal year ended June 30, 1998, Trustees of Lindner
Investments received the following compensation from the Trust, which is the
only group of mutual funds managed by the Adviser:
Aggregate Remuneration
Name and Capacity in which Received from the Trust
Remuneration was Received With Respect to All Funds
-------------------------- -------------------------
Robert L. Byman, Trustee $12,125
Terrence P. Fitzgerald, Trustee 10,900
Marc P. Hartstein, Trustee 12,125
Peter S. Horos, Trustee 12,125
Donald J. Murphy, Trustee 12,125
<PAGE> 18
Dennis P. Nash, Trustee 12,125
Eric E. Ryback, Trustee and President 0
Doug T. Valassis, Trustee and Chairman 0
There are no pension or retirement benefit plans or programs in effect for
Trustees of the Trust. No officers of the Trust receive any remuneration
from the Trust.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Shareholders of each Fund will vote by series except as otherwise required
by the 1940 Act. Matters affecting an individual series include, but are
not limited to, the investment objectives, policies and restrictions of that
series. Shares have no subscription, preemptive or conversion rights.
Shares do not have cumulative voting rights when voting on the election of
Trustees. Therefore, the holders of more than 50% of the aggregate number
of shares of all series of the Trust may elect all the Trustees. The shares
of each Fund other than the Government Money Market Fund are divided into
two Classes. Each share has one vote and shareholders will vote in the
aggregate and not by Class, except as to any matter that affects only one
Class of shares or as otherwise required by law. Only holders of
Institutional Shares will be entitled to vote on matters relating to the
Trust's Distribution Plan.
At May 31, 1999, no person beneficially owned, either directly or
indirectly, more than 25% of the voting securities of the Trust or any Fund,
nor had the Trust or any Fund or any other person acknowledged or asserted
the existence of control over the Trust or any Fund, nor had there been any
adjudication under the 1940 Act that control over the Trust or any Fund
exists. In addition, at March 31, 1999, no person owned of record or was
known by the Trust to own of record or beneficially 5% or more of any series
of the Trust.
At May 31, 1999, the officers and Trustees of the Trust, as a group, owned
the following amounts of shares in each Fund:
No. of
Name of Fund Shares % of Total
- ------------ ------ ---------
Lindner Asset Allocation Fund--
Investor Shares 106,699 shs 0.32%
Institutional Shares 0 shs 0.0%
Lindner Large-Cap Fund--
Investor Shares 146,176 shs 0.53%
Institutional Shares 0 shs. 0.0%
Lindner Small-Cap Fund
Investor Shares 117,598 shs 2.91%
Institutional Shares 0 shs. 0.0%
Lindner Utility Fund
Investor Shares 12,712 shs. 0.72%
Institutional Shares 0 shs. 0.0%
Lindner Market Neutral Fund
Investor Shares 28,645 shs. 0.87%
Institutional Shares 0 shs. 0.0%
Lindner Government Money Market Fund
Investor Shares 474,177 shs. 1.01%
<PAGE> 19
INVESTMENT ADVISORY AND OTHER SERVICES
Controlling Persons
The Funds' Adviser, Lindner Asset Management, Inc., is controlled by The
George F. Valassis Stock Trust and other trusts established for the benefit
of Mr. Valassis's family members (collectively, the "Valassis Trusts"),
which as of May 31, 1999, held 52% of the voting securities of the Adviser.
Doug T. Valassis is a co-Trustee of the Valassis Trusts and serves as the
Chairman of the Board of Directors of the Trust and the Adviser. The other
co-Trustees of the Valassis Trusts are Edward W. Elliott, Jr., and D. Craig
Valassis, the brother of Doug T. Valassis. Mr. Doug Valassis and Mr. Elliot
each also individually own 6.5% of the common stock of the Adviser. Certain
officers of the Trusts also serve as officers of the Adviser. See
"Management of the Trust".
Services Provided by Adviser
Under the Advisory Contracts and the Administration Agreements, the Adviser
provides each Fund with investment advisory services, office space, and
personnel, and pays the salaries and fees of the Trust's officers and
Trustees who are "interested persons" of the Trust and all personnel
rendering clerical services relating to the investments of each Fund. The
Adviser also pays all promotional expenses of the Trust, including the
printing and mailing of the prospectus to people who are not current
shareholders. The Trust pays all other costs and expenses including
interest, taxes, fees of Trustees who are not "interested persons" of the
Trust, other fees and commissions, expenses directly related to the issuance
and redemption of shares (including expenses of registering or qualifying
shares for sale in each state), charges of custodians, transfer agents, and
registrars, the costs of printing and mailing reports and notices to
shareholders, auditing services and legal services, and other expenses not
expressly assumed by the Adviser.
Investment Committee
Since February 1999, portfolio invesments for all of the Lindner funds other
than the Government Money Market Fund are being managed by an Investment
Committee established by the Lindner Management Board of Directors. No one
person is primarily responsible for making investment recommendations to
this Investment Committee. The present members of the Invesment Committee
are Doug T. Valassis, Eric E. Ryback and Mark T. Finn. Mr. Valassis has
been the Chairman and a Trustee of the Trust since its inception in 1992, a
director and the Treasurer of the Adviser since its inception in 1993, and
President of Franklin Enterprises, Inc., a private investment firm, for more
than five years. Mr. Ryback has been President and a Trustee of the Trust
since its inception in 1992 and President and a Director of the Adviser
since its inception in 1993. Mr. Finn has been the Vice Chairman and Chief
Operating Officer of the Adviser since March 1999 and has also been the
Chairman of Vantage Consulting Group, Inc., an investment consulting firm
and a registered investment adviser, for more than five years.t advise., He
also serves as a Trustee for CitiFunds, a family of mutual funds sponsored
by Citibank, N.A.
<PAGE> 20
Adviser Compensation
Asset Allocation Fund
The Advisory Contract for the Asset Allocation Fund requires payment of a
quarterly fee to the Adviser at the annualized rate of 7/10 of 1% of the
average net assets of the Asset Allocation Fund not in excess of $50
million, 6/10 of 1% of the Asset Allocation Fund's average net assets in
excess of $50 million and up to $200 million and 5/10 of 1% of the Asset
Allocation Fund's average net assets in excess of $200 million. For
purposes of computing the quarterly fee, the Asset Allocation Fund's average
net assets are calculated by dividing the sum of the Asset Allocation Fund's
net assets at the beginning and end of each month in the fiscal quarter by
six.
Large-Cap Fund
The Advisory Contract for the Large-Cap Fund requires payment of a basic fee
to the Adviser of 0.7% per annum of the first $50 million of average net
assets of the Large-Cap Fund, plus 0.6% of the next $350 million and 0.5% of
the excess over $400 million, subject to increase or decrease (performance
bonus or penalty) depending on the Large-Cap Fund's investment performance
compared with the investment record of the Russell 2000 Index. Investment
performance of the Large-Cap Fund means the sum of the change in its net
asset value during the fiscal year and the value of dividends and capital
gains distributions per share accumulated to the end of the fiscal year,
expressed as a percentage of net asset value per share at the beginning of
the fiscal year. In computing the investment performance of the Large-Cap
Fund and the investment record of the Index, distributions of realized
capital gains by the Large-Cap Fund, dividends paid by the Large-Cap Fund
out of its investment income, and all cash distributions of the Companies
whose stocks comprise the Russell 2000 Index, are treated as reinvested.
Fee Schedule for Large-Cap Fund
If the Large-Cap Fund's First $50 Next $350 Excess Over
performance exceeds the Million Million $400 Million
Index by: of Assets of Assets of Assets
- --------- --------- --------- ---------
more than 12% 0.9% 0.8% 0.7%
more than 6% but less than 12% 0.8% 0.7% 0.6%
less than 6% 0.7% 0.6% 0.5%
If the Large-Cap Fund's
performance falls below
the Index by:
less that 6% 0.7% 0.6% 0.5%
more than 6% but less that 12% 0.6% 0.5% 0.4%
more than 12% 0.5% 0.4% 0.3%
The maximum fee possible, assuming maximum performance, is 0.9% of the first
$50 million of average net assets, 0.8% of the next $350 million, and 0.7%
of the excess over $400 million. The smallest fee possible, assuming
poorest performance, is 0.5% of the first $50 million of average net assets,
0.4% of the next $350 million, and 0.3% of the excess over $400 million.
The basic fee may be increased or decreased, in accordance with the
foregoing formula, during a particular year despite the fact that (1) there
may be no change in the Index, if there is an increase or decrease in the
net asset value per share of
<PAGE> 21
the Large-Cap Fund of at least 6%, or (2) there may be no change in the net
asset value per share of the Large-Cap Fund, if there is an increase or
decrease in the Index of at least 6%. The Large-Cap Fund's average net
assets is the sum of the net assets exclusive of any accrued performance
bonus or penalty at the beginning and end of each month of the fiscal year,
divided by twenty-four. In partial payment of amounts so accrued, the
Adviser is entitled to receive quarterly installments of 1/10 of 1% of
average net assets toward the annual fee, subject to the foregoing expense
limitation applied on a quarterly basis; the excess, if any, of the annual
fee over the quarterly installments is payable annually, within thirty days
after receipt of the Accountant's Report for the Large-Cap Fund's fiscal
year.
For both the Asset Allocation Fund and the Large-Cap Fund, the Adviser is
required to reimburse the Fund for any excess of annual operating and
management expenses, exclusive of taxes and interest but including the
Adviser's compensation, over 1-1/2% of the first $30,000,000 of the Fund's
average net assets plus 1% of average net assets in excess of $30,000,000
for any fiscal year. Any excess over the expense limitation is paid by the
Adviser monthly.
Small-Cap and Utility Funds
The Advisory Contract for the Small-Cap Fund and the Utility Fund requires
payment of a monthly fee to the Adviser equal to 1/12th of the sum of the
products obtained by multiplying (i) the average daily net assets of each
Fund not in excess of $50,000,000 by 0.7%; the average daily net assets of
the applicable Fund in excess of $50,000,00 but not in excess of
$200,000,000 by 0.6%; and the average daily net assets of the applicable
Fund in excess of $200,000,000 by 0.5%. For purposes of these calculations,
daily net assets of each Fund are averaged for each calendar month.
Market Neutral Fund
The Advisory Contract for the Market Neutral Fund requires payment of a fee
to the Adviser at the annual rate of 1.0% of the average daily net assets of
this Fund, calculated and paid on a monthly basis.
Government Money Market Fund
The Advisory Contract for the Government Money Market Fund requires payment
of a fee to the Adviser that is computed daily and payable monthly at the
annual rate of 0.15% of the Government Money Market Fund's average daily net
assets.
Under each Advisory Contract for the Small-Cap, Utility, Market Neutral and
Government Money Market Funds, the Adviser is required to reimburse each
Fund for any excess of annual operating and management expenses relating to
each Fund, exclusive of taxes and interest but including the Adviser's
compensation, over the most stringent expense limitation imposed by state
law or regulation for any fiscal year. Any excess over the expense
limitation is paid by the Adviser monthly.
The following table summarizes the advisory fees paid by the Funds during
the fiscal years ended June 30, 1998, 1997 and 1996. No expense
reimbursement has been required of the Adviser for these years for the Funds
shown.
<PAGE> 22
Fiscal Year Ended June 30,
-------------------------------------
Fund Name 1998 1997 1996
- --------- ---- ---- ----
Lindner Asset Allocation Fund $9,220,306 $11,332,992 $10,705,343
Lindner Large-Cap Fund <F1> 4,500,581 4,861,169 7,577,725
Lindner Small-Cap Fund 315,917 110,953 54,714
Lindner Utility Fund 313,257 271,898 162,566
Lindner Market Neutral Fund 443,278 805,475 441,232
Lindner Government Money Market Fund 61,946 54,669<F2> n/a
________
<F1> For the fiscal years ended June 30, 1998, 1997 and 1996, the
performance index used to calculate the advisory fee payable to the Adviser
by the Large-Cap Fund was the Standard & Poor's 500 Stock Composite Index.
Also, during fiscal years 1998 and 1997, the Adviser's fee was reduced by a
performance penalty of $2,700,692 and $2,939,360, respectively.
<F2> July 6, 1996 to June 30, 1997.
Subadviser (Government Money Market Fund)
The Adviser has entered into a Subadvisory Agreement with Firstar Bank, N.A.
(the "Subadviser"), a national banking association. Under the Subadvisory
Agreement, it is the responsibility of the Subadviser to make investment
decisions for the Government Money Market Fund and to place the purchase and
sale orders for the portfolio transactions of that fund, subject to the
supervision of the Adviser and the Board of Trustees of the Trust. As
compensation for these services, the Adviser pays a fee to the Subadviser
that is computed daily and payable monthly, at an annual rate of 0.10% of
the first $250,000,000 of the Fund's average net assets and at an annual
rate of 0.08% of the Government Money Market Fund's assets in excess of
$250,000,000. The Subadviser was founded in 1853 and is the largest bank and
trust organization of Firstar Corporation. Firstar Bank's expertise in
trust administration, investments and estate planning makes it one of the
leading trust institutions in Ohio. Firstar Bank has managed common trust
funds since 1957. As of March 31, 1999, Firstar Bank also managed 20 mutual
funds having a market value in excess of $2.7 billion. As a part of its
regular banking operations, Firstar Bank may make loans to public companies.
Thus, it may be possible from time to time for the Fund to hold or acquire
securities of companies that are also borrowing clients of Firstar Bank.
Both the Adviser and the Subadviser believe that any such relationship will
not be a factor in the selection of portfolio securities for the Government
Money Market Fund. The Subadviser's business address is 425 Walnut Street,
Cincinnati, Ohio 45202.
Effect of Banking Laws. The Glass-Steagall Act and other banking laws and
regulations presently prohibit a bank holding company registered under the
federal Bank Holding Company Act of 1956, as amended, or any affiliate of
such a bank holding company, from sponsoring, organizing or controlling a
registered open-end investment company continuously engaged in the issuance
of its shares, and from issuing, underwriting, selling or distributing
securities in general. Such laws and regulations do not prohibit such a
bank holding company or its affiliates from acting as an investment adviser,
transfer agent or custodian to such an investment company or from purchasing
shares of such an investment company as agent for and upon the order of
their customers. The Subadviser is subject to such laws and regulations.
The Subadviser believes that it may perform subadvisory services for the
Government Money Market Fund without violating the Glass-Steagall Act or
other applicable banking laws or regulations. Changes in either federal or
state laws and regulations relating to the permissible activities of banks
and their
<PAGE> 23
subsidiaries or affiliates, as well as further judicial or administrative
decisions or interpretations of laws and regulations, could prevent the
Subadviser from continuing to perform all or a part of these services. In
such event, changes in the operations of the Government Money Market Fund
may occur, and the Board of Trustees of the Trust would then consider
alternative arrangements with another subadviser and other means of
continuing available investment services.
Transfer Agent
Pursuant to the Agency Agreements, Lindner Management maintains shareholder
records and keeps such accounts, books, records, or other documents as the
Funds are required to keep under federal or state laws. Lindner Management
also acts as stock registrar and dividend disbursing agent, issues and
redeems the Funds' shares, mails the Funds' prospectuses and proxy
statements to the Funds' shareholders, and disburses dividend payments.
Effective December 1, 1998, as compensation for these services, Lindner
Management is paid a fee of $11.00 per shareholder account per year for each
Fund other than the Government Money Market Fund, and is paid a fee of
$10.00 per shareholder account per year in the case of the Government Money
Market Fund. These agreements permit Lindner Management to engage the
services of sub-agents that may be required to facilitate the distribution
of shares and record keeping for shareholder accounts maintained in "street
name" with brokers, and Lindner Management has entered into a sub-transfer
agency agreement with State Street Bank and Trust Company for such services.
The fees and expenses of State Street Bank and Trust Company are paid by the
Trust.
The Agency Agreements may be terminated by the Funds or Lindner Management
upon 60 days' notice. The Agency Agreements are also automatically
terminated if either of them (1) is not approved by a majority of the
Trust's trustees and a majority of the Trust's disinterested trustees upon
the annual renewal date of the Agreement, or (2) is assigned in whole or in
part by Lindner Management. If either Agency Agreement is terminated for
either of the foregoing reasons, the Trust's trustees will cause the Funds
to enter into a stock transfer and dividend disbursing agency agreement with
an unrelated party upon such terms and conditions as can be obtained at that
time.
The following table summarizes the fees paid by the Funds under the Agency
Agreement during the fiscal years ended June 30, 1998, 1997 and 1996, except
as noted:
Fiscal Year Ended June 30,
-------------------------------
Fund Name 1998 1997 1996
- --------- ---- ---- ----
Lindner Asset Allocation Fund $534,860 $680,117 $706,160
Lindner Large-Cap Fund 398,720 468,020 510,148
Lindner Small-Cap Fund 19,377 7,159 4,628
Lindner Utility Fund 20,962 20,099 14,267
Lindner Market Neutral Fund 18,668 23,692 16,103
Lindner Government Money Market Fund 11,899 9,217<F1> n/a
__________
<F1> July 6, 1996 to June 30, 1997.
<PAGE> 24
Administrator
Lindner Management is the administrator of the Government Money Market Fund
and as such it administers that fund's corporate affairs. The
Administrative Services Agreement between for this Fund provides for
compensation to Lindner Management equal to 0.20% per year of the Fund's
average daily net assets. The following table summarizes the administrative
fees paid by the Government Money Market Fund to Lindner Management during
the fiscal years ended June 30, 1998 and 1997. No fees were paid during the
fiscal year ended June 30, 1996:
Fiscal Year Ended June 30,
--------------------------
Fund Name 1998 1997
- --------- ---- ----
Lindner Government Money Market Fund $76,421 $72,892<F1>
_________
<F1> July 6, 1996 to June 30, 1997.
Distribution and Service Plan
This section relates only to the Institutional Shares of each Fund other
than the Government Money Market Fund. On behalf of the Institutional
Shares of each Fund, the Trust has adopted a Distribution and Service Plan
(the "Distribution Plan") pursuant to Rule 12b-1 under the 1940 Act, which
regulates circumstances under which an investment company may bear expenses
associated with the distribution of its shares. The Distribution Plan
provides that Institutional Shares of a Fund may incur certain expenses that
may not exceed a maximum amount equal to 0.25% of the average daily net
asset value of the Institutional Shares for any fiscal year occurring after
the adoption of the Distribution Plan. The Distribution Plan further
provides that a Fund may pay such amount to Lindner Management on behalf of
Institutional Shares distributed by or through broker-dealers, financial
institutions and other organizations which have entered into written
agreements with the Trust or Lindner Management in order to enable Lindner
Management to pay to such other organizations a maintenance, service or
other fee, at such intervals as Lindner Management may determine. Such
payments will be made to such other organizations for continuing services to
their clients or to the beneficial owners of Institutional Shares based on
the average daily net asset value of Institutional Shares held in such
accounts remaining outstanding on the books of a Fund for specified periods.
The disposition of monies pursuant to the Distribution Plan will be reviewed
by the Board of Trustees of the Trust on a quarterly basis, to assure that
the amounts paid and the purposes for which they are paid, comply with the
provisions of the Distribution Plan and Rule 12b-1.
The services under the Distribution Plan may include assistance in
advertising and marketing of Institutional Shares, aggregating and
processing purchase, exchange and redemption requests for Institutional
Shares, maintaining account records, issuing confirmations of transactions
and providing sub-accounting and sub-transfer agent services with respect to
Institutional Shares.
While the Distribution Plan is in effect, the selection and nomination of
Trustees of the Trust who are not "interested persons" of the Trust, as
defined in the 1940 Act (the "Independent Trustees") is committed to the
discretion of the Independent Trustees then in office.
The Distribution Plan was approved by the Board of Trustees (and by the
Independent Trustees), and by the shareholder owning all of the
Institutional Shares of each Fund in January and February 1996. The
<PAGE> 25
Distribution Plan may be continued annually if approved by majority vote of
the Trustees, and by majority vote of the Independent Trustees, cast in
person at a meeting held for such purpose. The most recent approval of the
continuation of the Distribution Plan was in March 1998. The Distribution
Plan may not be amended to increase materially the amount of distribution
fees permitted to be paid thereunder without being first approved by a
majority vote of the holders of all Institutional Shares of each Fund. The
Distribution Plan may be terminated with respect to any or all Funds at any
time by a majority vote of the Independent Trustees or by a majority vote of
the holders of Institutional Shares of the affected Fund.
The following table summarizes the fees paid by Institutional Shares of each
Fund under the Distribution Plan during the fiscal years ended June 30, 1997
and 1998. The Distribution Plan became effective during the fiscal year
ended June 30, 1997, and no payments were made prior to that fiscal year.
Fiscal Year Ended June 30,
--------------------------
Fund Name 1998 1997
- --------- ---- ----
Lindner Asset Allocation Fund $6,211 $2,158
Lindner Large-Cap Fund 1,741 0
Lindner Small-Cap Fund 469 0
Lindner Utility Fund 82 117
Lindner Market Neutral Fund 400 3,276
Custodians and Independent Auditors
Firstar Bank, N.A. ("Firstar Bank"), 425 Walnut Street, Cincinnati, Ohio
45202, acts as custodian of all cash and domestic securities of the Funds.
Firstar Bank receives a monthly fee based on monthly average net assets of
all Funds, which fee is allocated among the Funds on the basis of their net
asset values. The Trust has an arrangement whereby custodian expenses are
reduced by maintaining compensating balances with Firstar Bank. For the
fiscal year ended June 30, 1998, custodial fees for each Fund were reduced
by the following amounts due to this arrangement: Lindner Asset Allocation
Fund--$58,793; Lindner Large-Cap Fund--$42,198; Lindner Small-Cap Fund--
$1,619; Lindner Utility Fund--$1,406; Lindner Market Neutral Fund--$1,188;
and Lindner Government Money Market Fund--$1,148.
The Chase Manhattan Bank ("Chase"), 4 Chase MetroTech, 18th Floor, Brooklyn,
NY 11245, serves as the Funds' custodian of foreign securities and precious
metals. Chase charges custodian fees on a sliding scale depending on the
countries in which each Fund is invested. The fees include transaction
charges ranging from $30 to $125 plus safekeeping fees ranging from 10/100
of 1% to 42/100 of 1% per annum, based upon the portfolio market value of
foreign securities in each country as of the close of business on the last
business day of each quarter. Precious metal safekeeping charges are based
on the amount being stored, while charges for options and futures contracts
are made on a per transaction basis.
Deloitte & Touche LLP, independent auditors, One City Centre, St. Louis,
Missouri 63101, audits the Funds' annual financial statements.
<PAGE> 26
BROKERAGE ALLOCATION
Placement of the Funds' orders to buy and sell portfolio securities are the
responsibility of the Adviser. Such decisions are made for the Adviser by
its Vice President-Research and its trading department. In the allocation of
such orders and the resulting commissions, the following factors are
considered:
--The Adviser's past experience, in dealing with various brokers, of
attaining the Funds' objectives of good execution at the most favorable
price;
--The services furnished by the broker in providing price
quotations;
--The allocation to the Funds of desired underwritten securities;
--The part, if any, played by the broker or dealer in bringing the
security involved to the Adviser's attention and providing information,
research and analysis with respect thereto;
--Assistance in the sale of Fund shares, provided that execution of
orders is satisfactory and that commission rates are competitive with those
available from other brokers; and
--Commission rates (see discussion below).
It is the policy of each Fund to secure, consistent with good execution, the
highest possible price on sales and the lowest possible price on purchases
of securities. Since brokers are compensated through commissions for
services described above and since commissions may be paid at varying rates,
sales even at the highest possible price may not yield the maximum possible
net proceeds and purchases even at the lowest possible price may not be made
at the lowest possible overall cost.
As permitted by section 28(e) of the Securities Exchange Act of 1934,
commissions paid to brokers for effecting securities transactions may exceed
the commission which another broker would have charged for effecting such
transactions, if the Adviser has determined in good faith that such charges
are reasonable in view of quotation or research services provided by such
broker. Research services that may be provided to the Funds by a broker
include calling attention to a stock and providing information about the
operations of companies over and above that published in investment manuals.
The receipt of quotation services from a broker relieves the Adviser of
certain expenses which it would otherwise incur. Any information and
analysis received from brokers supplements the Adviser's activities and
facilities, but does not reduce its expenses.
The Funds and their Adviser do not consider their facilities to be adequate
for the conduct of over-the-counter trading and believe that better
execution can usually be obtained through utilization of brokers rather than
direct dealing with primary market makers. Thus, except for those instances
in which the Funds deal directly with a primary market maker, the Funds pay
both the dealer's mark-up or mark-down and the broker's commission. This
practice has resulted and will continue to result in greater costs to the
Funds.
During the fiscal year ended June 30, 1998, the total brokerage commissions
paid by the Funds to brokers and dealers because of research services
provided are summarized below:
<PAGE> 27
Commissions
Fund Name Paid Transactions
- --------- ----------- ------------
Lindner Asset Allocation Fund $3,273,605 $1,364,135,238
Lindner Large-Cap Fund 3,305,765 960,594,949
Lindner Small-Cap Fund 93,125 24,104,728
Lindner Utility Fund 160,053 54,570,144
Lindner Market Neutral Fund 257,743 62,428,224
Lindner Government Money Market Fund 0 n/a
The following table lists the total amount of brokerage commissions paid by
each Fund during each of the last three fiscal years ended June 30, 1998:
Fiscal Year Ended June 30,
------------------------------------
Fund Name 1998 1997 1996
- --------- ---- ---- ----
Lindner Asset Allocation Fund $3,300,117 $2,846,295 $2,132,456
Lindner Large-Cap Fund 3,505,598 2,651,802 2,862,576
Lindner Small-Cap Fund 93,125 58,600 56,208
Lindner Utility Fund 160,053 126,671 130,944
Lindner Market Neutral Fund 270,049 934,411 429,663
Lindner Government Money Market Fund 0 0 n/a
Under normal circumstances, each Fund's portfolio turnover rate is less than
75% per year. To the extent short-term trading results in the realization
of short-term capital gains, shareholders will be taxed on such gains at
ordinary income tax rates. Increased portfolio turnover necessarily results
in correspondingly higher costs including brokerage commissions, dealer
mark-ups and other transaction costs on the sale of securities and
reinvestment in other securities, and may result in the acceleration of
taxable gains.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES
As stated in the Prospectus, the Adviser determines the current net asset
value of each Fund at the close of trading on each business day on which at
least one of the following markets is open: New York Stock Exchange,
American Stock Exchange, or the Nasdaq Stock Market. The per share net
asset value of each Class of shares of each Fund is calculated by dividing
the value of each Fund's securities, plus any cash and other assets
(including dividends and interest accrued but not collected) less all
liabilities, including accrued expenses allocable to that Class (including
accrued distribution and service fees payable by the Institutional Shares)
by the total number of shares of the particular Class outstanding.
Set forth below is a specimen price make-up sheet showing, as of June 30,
1998, the computation of total offering price per share of Investor Shares
and Institutional Shares of each Fund, using the basis set forth in the
Prospectus for valuation of such Fund's portfolio securities and other
assets.
<PAGE> 28
SPECIMEN PRICE MAKE-UP SHEET
June 30, 1998
<TABLE>
<CAPTION>
Asset Allocation Large-Cap Small-Cap
Fund Fund Fund
-------------- -------------- -----------
<S> <C> <C> <C>
Securities at market $1,609,511,184 $1,008,099,453 $53,389,369
Cash and other assets, including accrued income 28,526,563 10,714,007 1,069,276
------------- ------------- ----------
Total assets 1,638,037,747 1,018,813,460 54,458,645
Liabilities, including accrued expenses 18,830,552 15,368,844 128,361
------------- ------------- ----------
Net assets $1,619,207,195 $1,003,444,616 $54,330,284
============= ============= ==========
Net asset value--
Investor shares:
Net assets $1,616,429,733 $1,003,075,526 $54,176,777
Number of shares outstanding 58,591,554 45,042,937 6,377,682
Per share $27.59 $22.27 $8.49
Institutional shares:
Net assets $2,777,462 $369,090 $153,507
Number of shares outstanding 100,895 16,623 18,102
Per share $27.53 $22.20 $8.48
<CAPTION>
Government
Utility Market Neutral Money Market
Fund Fund Fund
-------------- -------------- ------------
<S> <C> <C> <C>
Securities at market $42,459,722 $19,041,906 $42,297,167
Cash and other assets, including accrued income 826,961 19,901,414 999,786
---------- ---------- ----------
Total assets 43,286,683 38,943,320 43,296,953
Liabilities, including accrued expenses 385,589 10,678,431 334,520
---------- ---------- ----------
Net assets $42,901,094 $28,264,889 $42,962,433
========== ========== ==========
Net asset value--
Investor shares:
Net assets $42,892,606 $28,264,781 $42,962,433
Number of shares outstanding 2,556,194 5,002,615 42,962,433
Per share $16.78 $5.65 $1.00
Institutional shares:
Net assets $8,488 $108 n/a
Number of shares outstanding 504 18 n/a
Per share $16.84 $6.02 n/a
</TABLE>
All Funds Other Than Government Money Market Fund
Investments in securities traded on a national securities exchange or quoted
on the Nasdaq National Market System are valued at the last reported sales
price as of the close of the New York Stock Exchange. Securities traded in
the over-the-counter market and listed securities for which no sale was
reported on that date are valued at the mean between the last reported bid
and asked prices. Securities which are traded both in the over-the-counter
market and on a stock exchange are valued according to the broadest and most
representative market. Securities and assets for which quotations are not
readily available
<PAGE> 29
are valued at fair value as determined in good faith by or pursuant to
procedures established by the Trustees. The value of foreign securities is
converted into U.S. dollars at the rate of exchange prevailing on the
valuation date. Purchases and sales of foreign securities as well as income
and expenses related to such securities are converted at the prevailing rate
of exchange on the respective dates of such transactions.
Each Fund may, to the extent permitted by its investment restrictions, have
positions in portfolio securities for which market quotations are not
readily available. It may be difficult to determine precisely the fair
market value for such investments and there may be a range of values which
are reasonable at any particular time. Fair value in such instances will be
determined in good faith by the Adviser in accordance with procedures and
policies approved by the Board of Trustees of Lindner Investments, based
upon such factors as are deemed relevant by the Adviser under the
circumstances, including the financial condition and operating results of
the issuer, recent third party transactions (actual or proposed) relating to
such securities and, in extreme cases, the liquidation value of the issuer.
Shares are offered to the public at the price set forth in the Prospectus,
pursuant to written application as specified in the Prospectus (see
"Purchase of Shares and Shareholder Inquiries"). In the event that the
Funds issue their shares in exchange for other securities, such other
securities will meet the applicable Fund's investment objectives and
policies, will be acquired for investment and will be liquid securities
(i.e., not restricted as to transfer by law or liquidity of market) that
have a readily ascertainable market value.
Government Money Market Fund
The Government Money Market Fund values its investment securities based upon
their amortized cost in accordance with Rule 2a-7 of the Securities and
Exchange Commission under the 1940 Act. This involves valuing a security at
its cost and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates
on the market value of the security. While this method provides certainty
in valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if
it sold the securities. As discussed below, it is the intention of the Fund
to maintain a net asset value per share of $1.00 for the Fund.
Pursuant to Rule 2a-7, the Fund is required to maintain a dollar-weighted
average Fund maturity of 90 days or less, to purchase securities having
remaining maturities of 397 days or less only, to invest only in securities
determined by the Trustees to present minimal credit risks and to invest
only in securities which are "eligible securities" as defined in Rule 2a-7.
Because the Government Money Market Fund utilizes the procedures specified
in Rule 2a-7 to determine the maturity of its investments, further revision
of Rule 2a-7 or pronouncements clarifying or interpreting the scope of its
application may affect this fund's method for determining maturity of its
investments.
The Trustees have established procedures designated to stabilize, to the
extent reasonably possible, the Government Money Market Fund's price per
share, as computed for the purpose of sales and redemptions, at $1.00.
These procedures include review of the investment holdings by the Trustees,
at such intervals as they may deem appropriate, to determine whether the
Fund's net asset value calculated by using available market quotations
deviates from $1.00 per share based on amortized cost. The extent of any
deviation will be examined by the Trustees. If the deviation exceeds 1/2 of
1%, the Trustees will
<PAGE> 30
promptly consider what action, if any, will be initiated. In the event the
Trustees determine that a deviation exists which may result in material
dilution or other unfair results to investors or existing shareholders, they
have agreed to take such corrective actions as are necessary and
appropriate. These actions may include selling investment securities prior
to maturity to realize capital gains or losses or to shorten the average
maturity, withholding dividends, splitting, combining, or otherwise
recapitalizing outstanding shares or establishing a net asset value per
share by using available market quotations.
ADDITIONAL PERFORMANCE INFORMATION
All Funds Other Than Government Money Market Fund
The Funds may from time to time include their "average annual total return"
in communications to present or prospective investors. "Average annual total
return" is the annual percentage change in an investment in the applicable
Fund over a stated period of time. Each Fund will compute average annual
total return using the following formula:
n
P (1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (as a power)
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of
the 1, 5 or 10 year period at the end of
the 1, 5 or 10 year period.
In making the above-described computation, each Fund will assume that all
dividends and capital gains distributions by the Fund are reinvested at the
Fund's net asset value per share on the reinvestment date. The Funds do not
have sales loads payable by all shareholders that could affect their
calculations of average annual total return.
The total return for Investor Shares and Institutional Shares of each Fund
(or its predecessor), other than the Government Money Market Fund, is
provided in the table below, computed for the periods shown:
INVESTOR SHARES
Average Annual Total Return--
Fiscal Year Ended June 30, 1998
Since
Fund Name 1 year 5 years 10 years Inception
- --------- ------ ------- -------- --------
Lindner Asset Allocation Fund 14.75% 10.46% 12.14% n/a
Lindner Large-Cap Fund 0.31% 10.64% 10.88% n/a
Lindner Small-Cap Fund 15.24% n/a n/a 16.69%
Lindner Utility Fund 15.53% n/a n/a 15.98%
Lindner Market Neutral Fund -10.08% n/a n/a -1.72%
<PAGE> 31
INSTITUTIONAL SHARES
Average Annual Total Return--
Fiscal Year Ended June 30, 1998
Since
Fund Name 1 year 5 years 10 years Inception
- --------- ------ ------- -------- ---------
Lindner Asset Allocation Fund 14.49% n/a n/a 12.30%
Lindner Large-Cap Fund 0.08% n/a n/a 7.57%
Lindner Small-Cap Fund 15.02% n/a n/a 22.16%
Lindner Utility Fund 15.23% n/a n/a 18.15%
Lindner Market Neutral Fund -9.75% n/a n/a -14.51%
Average annual total return is an historical measure of performance and is
not necessarily indicative of a Fund's future performance. Such measurement
will vary from time to time depending upon numerous factors, including
without limitation market conditions, the composition of each Fund's
portfolio and operating expenses. These factors should be considered when
evaluating each Fund's performance.
Government Money Market Fund
The Government Money Market Fund's yield is based on historical earnings and
will fluctuate and should not be considered as representative of future
performance. Since yields fluctuate, yield data cannot necessarily be used
to compare an investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed
or guaranteed fixed yield for a stated period of time. Performance and
yield are generally functions of kind and quality of the instruments held in
the Fund, maturity of its investments, operating expenses, and market
conditions. The fees which may be imposed by institutions or other
financial intermediaries on their customers for cash management and other
services are not reflected in the Government Money Market Fund's
calculations of yield.
The Government Money Market Fund's standard yield quotations as they appear
in advertising and sales materials, and as disclosed in the Prospectus, are
calculated by a standard method prescribed by rules of the Securities and
Exchange Commission. Under that method, the yield quotation is based on a
recent seven-day period and computed as follows: average daily net
investment income per share during the seven-day period is divided by the
average daily price per share (expected to remain constant at $1.00) during
the period. The result is then multiplied by 365 with the resulting
annualized yield figure carried to the nearest one-hundredth of one percent.
"Effective Yield" is computed in the same manner except that when
annualized, the income earned is assumed to be reinvested, thus resulting in
a higher return because of the compounding effect. The Government Money
Market Fund's average daily net investment income for this purpose consists
of accrued income on investment securities, plus or minus amortized purchase
discount or premium, less accrued expenses. Realized capital gains or losses
and unrealized appreciation or depreciation of the Fund's investment
securities are not included in the calculation. Any fee charged to all
shareholder accounts, such as a fixed monthly shareholder service fee, will
be included in the accrued expenses of the Government Money Market Fund (the
Fund does not currently expect to charge such fees), and the average price
per share of the Government Money Market Fund will include any changes in
net asset value during the seven-day period.
<PAGE> 32
Because the Government Money Market Fund values its investments on an
amortized cost basis, it does not believe that there is likely to be any
material difference between net income for dividend and standardized yield
quotation purposes. The yield on the Government Money Market Fund will
fluctuate daily as the income earned on its investments changes at certain
times. Accordingly, there is no assurance that the yield quoted on any
given occasion will remain in effect for any period of time. The yield
should not be compared to other open-end investment companies, or to bank
time deposits and other debt securities which provide for a fixed yield for
a given period of time and which may have a different method of computation.
The yield on the Government Money Market Fund based on the seven days ended
on December 31, 1998 was 4.50%, while the effective yield during the same
period was 4.61%.
FINANCIAL STATEMENTS
The report of Deloitte & Touche LLP, independent auditors, and the audited
financial statements of each series of Lindner Investments, which are
contained in the Lindner Investments Annual Report to Shareholders for the
period ended June 30, 1998, previously sent to shareholders of each Fund and
filed with the Securities and Exchange Commission, are hereby incorporated
by reference into this Statement of Additional Information. The unaudited
financial statements of each series of Lindner Investments, which are
contained in the Lindner Investments Semi-Annual Report to Shareholders for
the six-months ended December 31, 1998, previously sent to shareholders of
each Fund and filed with the Securities and Exchange Commission, are also
hereby incorporated by reference into this Statement of Additional
Information. The financial statements and other data contained in the Semi-
Annual Report to Shareholders are unaudited but, in the opinion of
management, reflect all adjustments necessary to a fair statement of the
results of operations for the six-months ended December 31, 1998. Lindner
Investments will furnish copies of such Annual and Semi-Annual Reports to
Shareholders, without charge, upon request made to the Secretary of Lindner
Investments, 7711 Carondelet Avenue, Suite 700, St. Louis, Missouri 63105
(telephone: 800-995-7777).
CERTAIN OTHER MATTERS
Liability of Trustees and Others
The Declaration of Trust provides that the Trustees, officers, employees,
and agents of the Trust will not be liable to the Trust, to any Fund or to a
shareholder, nor will any such person be liable to any third party in
connection with the affairs of the Trust, except as such liability may arise
from his or its own bad faith, willful misfeasance, gross negligence, or
reckless disregard of duties. It also provides that all third parties shall
look solely to the Trust property for satisfaction of claims arising in
connection with the affairs of the Trust. With the exceptions stated, the
Declaration of Trust provides that a Trustee, officer, employee, or agent is
entitled to be indemnified against all liability in connection with the
affairs of the Trust.
Description of Series and Shares
The Trust was organized under Massacusetts law on July 20, 1993. pursuant to
a Declaration of Trust that permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest and to
create an unlimited number of series of shares and an unlimited number of
classes of
<PAGE> 33
shares within any particular series of shares. The proceeds from the sale
of each series of shares will be invested in a separate portfolio of
securities.
All shares have equal voting rights, except that only shares of a particular
series are entitled to vote on matters concerning only that series. Each
issued and outstanding share is entitled to one vote, to participate equally
in dividends and distributions declared by the respective series, and, upon
liquidation or dissolution, to share in the net assets of such series
remaining after satisfaction of outstanding liabilities. In the event a
series should be unable to meet its obligations, the remaining series would
assume the unsatisfied obligations of that series. All shares issued and
outstanding are fully paid and nonassessable by the Trust. The Trust is not
required to issue share certificates.
The shares of each series have no preference, preemptive, conversion or
similar rights. In the event the Trustees create one or more additional
series, shareholders may be given the right to exchange shares of one fund
for shares of such other series.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of that Act or applicable state law, or
otherwise, to the holders of the outstanding voting securities of an
investment company shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding shares of
each class affected by the matter. Rule 18f-2 further provides that a class
shall be deemed to be affected by a matter unless it is clear that the
interests of each class in the matter are identical or that the matter does
not affect any interest of the class. Under the Rule, the approval of an
investment advisory agreement or any change in investment policy would be
effectively acted upon with respect to a class of shares only if approved by
a majority of the outstanding voting securities of such class. However, the
Rule also provides that the ratification of independent public accountants,
the approval of principal underwriting contracts, and the election of
Trustees are not subject to the separate voting requirements and may be
effectively acted upon by shareholders of the investment company voting
without regard to class.
As permitted by Massachusetts law, the Trustees may determine not to hold
shareholders meetings for the election of Trustees, subject, however, to the
requirement that a special meeting of shareholders be called for the purpose
of electing Trustees within 60 days if at any time less than a majority of
the current Trustees have been elected by shareholders of the Trust.
Because shares do not have cumulative voting rights, 50% of the voting
shares can, if they choose, elect all Trustees being selected while the
holders of the remaining shares would be unable to elect any Trustees. The
Trustees will call a special meeting of shareholders for the purpose of
voting on the question of removal of a Trustee or Trustees if shareholders
of record of 10% or more of the Trust's outstanding shares make a written
request so to do. Any ten or more shareholders who have been shareholders
for more than six months and who hold in the aggregate the lesser of 1% of
the outstanding shares or shares with a net asset value of $25,000 may
advise the Trustees that they wish to communicate with other shareholders
for the purpose of obtaining signatures requesting Trustees to call such a
meeting. The Trustees must thereupon afford access to the list of Fund
shareholders or offer to mail such solicitations at the shareholder's cost.
If a majority of the Trustees object to the contents of the solicitation,
the Trustees may request a determination of the Securities and Exchange
Commission as to the obligation to mail such material.
Any change in the Declaration of Trust, the Advisory Agreement, the
Administrative Services Agreement, the Agency Agreement or the Transfer
Agency Agreement, if it has the effect of increasing costs, or in the
fundamental investment restrictions of a Fund must be approved by a majority
of the
<PAGE> 34
shareholders of that Fund before it can become effective. A "majority"
means the vote of the lesser of (1) 67% of the shares of the applicable
Fund present at a meeting if the holders of more than 50% of the outstanding
shares are present in person or by proxy, or (2) more than 50% of the
outstanding shares of a Fund.
Registration Statement
The Prospectus and this Statement of Additional Information omit certain
information contained in the Registration Statement filed with the
Securities and Exchange Commission. Copies of the Registration Statement,
including such omitted items, may be obtained from the Commission by paying
the charges prescribed under its rules and regulations. In addition, the
SEC maintains an Internet Web site that contains reports, proxy and
information statements that are filed electronically with the SEC, including
the Trust's Registration Statement and such omitted items. The address of
this site is http://www.sec.gov.
Statements contained in the Prospectus and herein as to the contents of any
contact or other document referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement of which the
Prospectus and this Statement of Additional Information form a part, each
such statement being qualified in all respects by such reference.
<PAGE> 35
APPENDIX--DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("S&P")
Bond Rating Definitions
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for debt in higher rated
categories.
BB, B, CCC, CC and C - Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt may have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating will also be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Note: The ratings from AA to CCC may be modified by the addition of a plus
or minus sign to show the relative standing within the major categories.
Moody's Investors Service, Inc.
Corporate Bond Rating Definitions
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective
<PAGE> 36
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment attributes and
are to be considered as an upper medium grade obligation. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the security over any long period for time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aaa through B in its corporate bond rating system. The
modifier 1 indicates that the bond being rated ranks in the higher end of
its generic rating; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the bond ranks in the lower end of its generic
rating category.
