SUPPLEMENT DATED OCTOBER 29, 1997 TO
PROSPECTUS DATED AUGUST 29, 1997 OF BURRIDGE FUNDS
A number of changes to the investment strategy followed by Burridge Capital
Development Fund (the "Fund"), and to its investment advisory arrangements and
fees, are expected to be effective on December 19, 1997. Effective on that date,
the Fund expects to enter into a new advisory agreement (the "Proposed
Agreement") with The Burridge Group LLC ("Burridge") that will increase the
fee paid to Burridge and authorize Burridge to engage GeoCapital, LLC
("GeoCapital") as sub-adviser to manage a portion of the Fund's assets. The
Fund's investment strategy will be modified at the same time as described below.
MANAGEMENT FEES
The Proposed Agreement will increase the management fee payable by the Fund
to Burridge. Under the current advisory agreement, the Fund pays Burridge a fee,
accrued daily and paid monthly, at the annual rates of (i) 1.00% of the first
$500 million of the Fund's average daily net assets; (ii) 0.85% of the Fund's
average daily net assets in excess of $500 million and less than $1 billion, and
(iii) 0.75% of the Fund's average daily net assets in excess of $1 billion.
Under the Proposed Agreement, the Fund will pay Burridge a fee, accrued
daily and paid monthly, at the annual rates of (i) 1.25% of the first $500
million of the Fund's average daily net assets; (ii) 1.10% of the Fund's average
daily net assets in excess of $500 million and less than $1 billion, and (iii)
1.00% of the Fund's average daily net assets in excess of $1 billion.
The following table illustrates all expenses and fees that a shareholder in
the Fund will bear after the Proposed Advisory Agreement becomes effective:
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price).................................................. none
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price).................................... none
Deferred Sales Load ................................................ none
Redemption Fees <F1> ............................................... none
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees ....................................................1.25%
12b-1 Fees ......................................................... none
Other Expenses (after expense reimbursement) <F2>................... .50%
-----
Total Operating Expenses
(after expense reimbursement) .....................................1.75%
- ------------------
<F1> The Fund does not charge a redemption fee. A wire transfer fee (currently
$12) is required to have the proceeds of a redemption paid to you by wire
transfer.
(2) Burridge has undertaken to reimburse the Fund to the extent its ordinary
operating expenses exceed 1.75% of the Fund's average net assets annually.
Without that expense limitation, Other Expenses would be estimated to be
1.44% and Total Operating Expenses would then be 2.69%.
<PAGE>
The purpose of the table is to assist you in understanding the various
costs and expenses that an investor in the Fund will bear, directly or
indirectly. The estimate of "Other Expenses" is based on the estimated
expenses the Fund expects to incur during its current fiscal year, taking into
account Burridge's voluntary expense limitation.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and expenses as shown in the "Annual Operating Expenses" table
above and (2) redemption at the end of each time period:
1 year........................ $18
3 years....................... $55
This example illustrates the effect of expenses, but is not meant to
suggest actual past or future expenses or returns, all of which may be more or
less than those shown in the example.
INVESTMENT OBJECTIVE
The following discussion reflects the changes that are expected to be made
effective December 19, 1997:
The Fund's investment objective is long-term capital appreciation. The Fund
focuses on after tax investment returns for its shareholders. The Fund employs a
growth oriented investment approach with a valuation discipline to create a
diversified portfolio of small and medium capitalization common stocks. Burridge
and GeoCapital are each responsible for managing approximately one-half of the
Fund's assets. In implementation of the investment disciplines, both Burridge
and GeoCapital analyze the tax consequences of position changes to the Fund and
its shareholders subject to Federal income tax. Both managers attempt to
maximize long term capital gains and unrealized capital gains, minimize short
term gains and ordinary income, and use losses to offset any gains.
Burridge believes that long term capital appreciation can be achieved by
purchasing stocks of companies with superior operating characteristics and
fundamentals relative to their industry group and the broad market. A valuation
discipline is used to purchase and hold companies trading at attractive
valuation levels. GeoCapital believes purchasing stocks of companies that
create, commercialize and market new technology or services and those with
undervalued or unrecognized assets or earnings can result in superior investment
returns.
Burridge is responsible for allocating assets between Burridge and
GeoCapital for management. Assets are generally allocated about equally between
them, although variations in cash flows in and out of the Fund may cause
deviations from that allocation. The Fund's portfolio generally consists of
investments in approximately 30 to 70 companies.
Under normal market conditions, the Fund expects to be substantially fully
invested in common stocks of small and medium growth companies.
INVESTMENT PROCESS
The following discussion reflects the changes in the investment process
followed in management of the Fund's portfolio that are expected to be effective
December 19, 1997:
<PAGE>
Burridge
--------
Burridge uses a disciplined investment process in managing its portion of
the Fund's portfolio. The first step is the identification of those companies
exhibiting superior operating characteristics and fundamentals which Burridge
believes are important to potential above average and sustainable earnings
growth. Among other things, Burridge looks for:
- historic long-term earnings growth of 15% or more and projected long-
term earnings growth of 15% or more;
- a focus in one business segment;
- an increasing market share versus industry competition;
- stable or increasing margins versus industry competition;
- a strong balance sheet relative to its industry group as measured by
the ratio of debt to capital; and
- a proven and effective management team.
In conducting disciplined fundamental research, the investment team focuses on
industry fundamentals, a company's products or services, its revenue growth
prospects, its costs and margins and the strategic business plan of management.
As a long-term investor, Burridge believes personal visits with senior
management are an important element of its fundamental research and security
valuation. Through this research process, Burridge projects quarterly and annual
earnings growth for those companies being considered for purchase and those held
by the Fund.
Although investing in companies with superior earnings growth is important,
Burridge applies a valuation discipline in order to eliminate those securities
that may be overvalued. The key valuation discipline used by Burridge is based
on projected long-term earnings growth and price/earnings ratios.
Investments made by Burridge are based on a "bottom-up" approach where
individual companies meet the operating characteristics outlined above and the
Fund's valuation discipline. Investments are made in sectors and industry groups
in which the greatest earnings growth is found at the most attractive prices.
Investments by Burridge are concentrated in companies with medium-sized
aggregate market capitalizations.
GeoCapital
----------
The investment discipline of GeoCapital is based on strict fundamental
research with a focus on small capitalization companies. The sub-adviser
identifies industry and sector trends, looking for evidence of new technologies
and services, or those where pressure exists to increase efficiency through
consolidation and buyouts. From there, GeoCapital uses its own independent
research, employing a bottom up approach to analyze a company's strategic,
financial and managerial strengths.
Important elements in companies GeoCapital considers for investment
include: appropriate growth potential for earnings and cash flow; modest
valuation levels relative to future prospects; management incentives, such as
inside ownership, to improving shareholder value; and high returns on various
operating categories such as assets, equity and sales.
<PAGE>
GeoCapital invests with a 3 to 5 year time horizon, believing this is an
optimal time period for companies to create substantial value. GeoCapital is a
long-term, supportive shareholder, which invests in public companies as though
committing private capital to the venture.
General
-------
The Fund is managed with a focus on after-tax returns and attempts to
maximize long-term capital gains and unrealized capital gains as components of
investment return. The Fund invests in stocks which pay below average dividends
and under normal market conditions expects its portfolio turnover rate to be
below 50%, to minimize the amount of ordinary income and short-term capital
gains created for shareholders. A decision to sell a portfolio security is based
on, among other things, a company's long-term prospects for continued earnings
and cash flow growth relative to its stock's price/earnings ratio and the tax
effect of the sale. Both Burridge and GeoCapital expect to offset realized
capital gains by selling stocks in which the Fund has a loss, to the extent
losses are available and the sale of the security would be consistent with
prudent portfolio management.
The Fund may sell short securities the Fund owns or has the right to
acquire without further consideration, a technique called selling short
"against the box." Short sales against the box may be used to lock in a profit
on a security when the Adviser does not want to sell the security. The Fund may
also invest in convertible securities, options and futures to a limited extent.
For a more complete explanation, please refer to the Statement of Additional
Information. The Fund may invest up to 10% of its total assets in American
Depository Receipts (ADRs), which are securities traded in the United States but
representing interests in foreign securities. A portion of the Fund's assets
(not ordinarily expected to exceed about 5% of the Fund's total assets) may be
held from time to time in cash or cash equivalents pending investment or to meet
cash requirements. Up to 100% of the Fund's assets may be held in cash or cash
equivalents under abnormal market or economic conditions if the portfolio
managers determine that a temporary defensive position is advisable. Because the
Fund tries to minimize ordinary income subject to income tax, cash equivalents
held by the Fund may include high-quality, short-term municipal securities
producing income exempt from federal income tax.
In managing the Fund, investment professionals from Burridge and GeoCapital
may consult with each other and discuss different investment ideas, as well as
economic and market conditions. However, the main research functions and
ultimate security selection decisions will be made separately by Burridge and
GeoCapital.
DESCRIPTION OF THE PROPOSED ADVISORY AND SUB-ADVISORY AGREEMENTS
Burridge is and will continue to be the Fund's investment adviser. The
proposed amended and restated investment advisory agreement (the "Proposed
Advisory Agreement") is identical to the existing advisory agreement except for
the increase in the fee described above, the authorization of Burridge to engage
GeoCapital as sub-adviser, and the dates of its execution, effectiveness and
termination.
The Proposed Agreement authorizes Burridge to retain a sub-adviser to
manage up to 67% of the Fund's assets. Burridge expects to engage GeoCapital
as sub-adviser pursuant to an investment sub-advisory agreement (the "Proposed
Sub-Advisory Agreement") under which GeoCapital will assume responsibility for
managing a portion of the Fund's assets, with the amount of assets allocated to
it for management being determined by Burridge. The Fund expects that Burridge
and GeoCapital will each manage approximately one-half of the Fund's portfolio.
<PAGE>
Under the Proposed Sub-Advisory Agreement, GeoCapital will manage the
investment and reinvestment of the portion of the Fund's assets allocated to it
for management by Burridge, and will provide the office space, facilities,
equipment and personnel for providing those services. For its services,
GeoCapital will receive a fee, accrued daily and paid monthly, from Burridge
(paid by Burridge out of its management fee from the Fund) at the annual rates
of 0.75% of the first $500 million of the average daily net assets allocated to
it, 0.65% of the next $500 million of the average daily net assets allocated to
it, and 0.60% of the average daily net assets allocated to it in excess of $1
billion.
In addition, Burridge has voluntarily undertaken to limit the Fund's
expenses (including the management fee but excluding extraordinary costs or
expenses not incurred in the ordinary course of the Fund's operations) to 1.75%
of the Fund's average daily net assets. If the Fund's ordinary operating
expenses would exceed this expense limitation, the fee paid by Burridge to
GeoCapital will be reduced by an amount equal to one-half of any waiver or
reimbursement of expenses by Burridge.
The Proposed Sub-Advisory Agreement provides that GeoCapital shall not be
liable for any loss suffered by the Trust, its shareholders, or Burridge as a
consequence of any act or omission in connection with investment advisory or
portfolio services under the Proposed Sub-Advisory Agreement, except by reason
of willful misfeasance, bad faith, or gross negligence on the part of GeoCapital
in the performance of its duties, or from reckless disregard by GeoCapital of
its obligations and duties under the Proposed Sub-Advisory Agreement. The
Proposed Sub-Advisory Agreement also provides that Burridge's obligations and
liabilities under the Proposed Sub-Advisory Agreement are not binding upon the
Trust or the Fund, or the officers, shareholders, employees, or other agents of
either.
The Proposed Advisory and Sub-Advisory Agreements will expire in December
of 1999, but each may be continued from year to year only so long as its
continuance is approved annually (a) by the vote of a majority of the trustees
of the Trust who are not "interested persons" of the Trust, Burridge, or
GeoCapital cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the board of trustees of the Trust or by the vote of a
majority (as defined in the 1940 Act) of the outstanding shares of the Fund.
Each of the proposed agreements is terminable without penalty, on 60 days'
notice, by the trustees of the Trust or by vote of a majority of the outstanding
shares of the Fund, or, on not less than 90 days' notice, by GeoCapital. Each of
the proposed agreements will automatically terminate in the event of its
assignment (as defined in the 1940 Act).
Neither the Proposed Advisory Agreement nor the Proposed Sub-Advisory
Agreement have yet been executed by the parties or authorized by the
shareholders of the Fund. The agreements will not become effective until after
the effective date of the Amendment.
ABOUT GEOCAPITAL
GeoCapital invests in small-capitalization equities, based on its own
fundamental analysis. GeoCapital believes purchasing stocks of companies that
create, commercialize and market new technology, and those with undervalued or
unrecognized assets or earnings can result in superior investment returns. As of
October 1, 1997, GeoCapital managed $2.2 billion in assets for clients.
Irwin Lieber and Barry K. Fingerhut are responsible for overseeing
implementation of GeoCapital's strategy for managing its portion of the Fund's
portfolio. Mr. Lieber is chairman and chief investment officer of GeoCapital,
and formed GeoCapital's predecessor in 1979. Mr. Fingerhut is GeoCapital's
president and joined the firm in 1981.
<PAGE>
GeoCapital is a Delaware limited liability company, the member manager of
which is GeoCapital Corporation. Currently, seven principals, including Mr.
Lieber and Mr. Fingerhut, hold member interests in GeoCapital representing an
interest in the aggregate of 40% of GeoCapital's profits, subject to reduction
under certain conditions. The remaining 60% interest in the profits of
GeoCapital is owned by GeoCapital Corporation. GeoCapital Corporation is a
wholly-owned subsidiary of Affilated Managers Group, Inc. ("AMG"). AMG also
owns a 55% interest in the profits of Burridge, and is the parent corporation of
The Burridge Group, Inc., the member-manager of Burridge.
The offices of GeoCapital are at 767 Fifth Avenue, New York, New York
10153.
xxxxx
AUGUST 29, 1997
BURRIDGE
CAPITAL
DEVELOPMENT
FUND
PROSPECTUS
(LOGO)
BURRIDGE FUNDS
<PAGE>
BURRIDGE CAPITAL DEVELOPMENT FUND
115 South LaSalle Street
Chicago, Illinois 60603
(888) BURRIDGE
(1-888-287-7434)
- -------------------------------------------------------------------------------
August 29, 1997
BURRIDGE CAPITAL DEVELOPMENT FUND (THE "FUND"), a series of
Burridge Funds (the "Trust"), invests for long-term capital
appreciation. The Fund attempts to generate long-term capital
appreciation and is managed in a tax-sensitive manner. The Fund
purchases common stocks believed to have superior earnings growth
potential and attempts to maximize long-term and unrealized capital
gains in producing investment returns.
THE FUND is a "no-load" fund. There are no sales or redemption
charges, and there are no "12b-1" fees.
This Prospectus is a concise statement of information you should
know before investing. Please retain it for future reference.
A Statement of Additional Information regarding the Fund dated the
date of this Prospectus has been filed with the Securities and Exchange
Commission and (together with any supplement to it) is incorporated in
this Prospectus by reference. The Statement of Additional Information
may be obtained without charge by calling or writing the Trust at the
telephone numbers or address shown above.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page
HIGHLIGHTS 1
EXPENSE INFORMATION 2
FINANCIAL HIGHLIGHTS 3
INVESTMENT OBJECTIVES AND POLICIES 4
INVESTMENT PROCESS 4
RISKS 5
INVESTMENT RESTRICTIONS 5
PURCHASING SHARES 5
REDEEMING SHARES 6
NET ASSET VALUE 7
SHAREHOLDER SERVICES 7
Shareholder Accounts 7
IRA Plan for Rollover Accounts 7
DIVIDENDS AND DISTRIBUTIONS 7
TAXES 8
MANAGEMENT OF THE FUND 8
The Trustees 8
The Adviser 8
Administrator, Custodian and Transfer Agent 9
Distributor 9
Portfolio Transactions 9
Performance 9
THE FUND AND ITS SHARES 10
Shares 10
Voting Rights 10
Shareholder Inquiries 10
<PAGE>
HIGHLIGHTS
- -------------------------------------------------------------------------------
Burridge Capital Development Fund (the "Fund") is a series of Burridge Funds
(the "Trust"). The Fund is a "no-load" fund. There are no sales or
redemption charges, and no 12b-1 fees.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term capital appreciation. The Fund
focuses on after-tax investment returns for its shareholders. The Fund employs a
growth-oriented investment approach to create a diversified portfolio of medium
and large capitalization common stocks. The Adviser believes that long-term
capital appreciation can be achieved by purchasing stocks of companies with
superior operating fundamentals relative to its industry group and the broad
market, at attractive levels. In managing the Fund, the Adviser analyzes the tax
consequences of position changes to the Fund and its shareholders subject to
federal income tax. The Adviser attempts to maximize long-term capital gains and
unrealized capital gains, and minimize short-term capital gains and ordinary
income, as components of the Fund's investment returns. See "Investment
Objective and Policies."
INVESTMENT RISKS
The Fund's performance and price per share will change daily based on many
factors, including general economic and market conditions and the performance of
individual stocks selected for the Fund's portfolio. The Fund is intended as a
long-term investment for investors willing to bear the volatility inherent in
any investment in common stocks. There can be no assurance that the Fund will
achieve its investment objective.
MINIMUM PURCHASE
$500,000 for initial investments and $5,000 for subsequent investments. Some
exceptions apply. See "Purchasing Shares."
DIVIDENDS AND CAPITAL GAINS
Income dividends and capital gains, if any, are distributed at least annually.
Distributions are automatically reinvested in additional shares at net asset
value unless payment in cash is requested. See "Dividends and Distributions."
REDEMPTION PRICE
Current net asset value, without charge. See "Redeeming Shares."
INVESTMENT ADVISER
The Burridge Group LLC (the "Adviser") is investment adviser to the Fund. The
Adviser managed over $1.4 billion in assets as of August 1, 1997. See
"Management of the Fund-The Adviser."
EXPENSES
The Fund pays its own operating expenses, including a management fee to the
Adviser of 1.00% of the Fund's average daily net assets. The Adviser has
undertaken to reimburse the Fund for any ordinary costs and expenses of the Fund
in excess of 1.50% of the average net assets annually. See "Management of the
Fund-The Adviser."
DISTRIBUTOR
Funds Distributor, Inc.
<PAGE>
EXPENSE INFORMATION
- -------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder in the
Fund will bear:
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------------------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) none
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) none
Deferred Sales Load none
Redemption Fees<F1> none
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- -------------------------------------------------------------------------------
Management Fees 1.00%
12b-1 Fees none
Other Expenses (after expense reimbursement)<F2> 0.50%
-----
Total Operating Expenses (after expense reimbursement) 1.50%
<F1> The Fund does not charge a redemption fee. A wire transfer fee (currently
$12) is required to have the proceeds of a redemption paid to you by wire
transfer.
<F2> The Adviser has undertaken to reimburse the Fund to the extent its ordinary
operating expenses exceed 1.50% of the Fund's average net assets annually.
Without the Adviser's expense limitation, Other Expenses would be estimated
to be 1.19% and Total Operating Expenses would then be 2.19%. See
"Management of the Fund-The Adviser" in this Prospectus for more
information.
The purpose of the table is to assist you in understanding the various costs and
expenses that an investor in the Fund will bear, directly or indirectly. The
estimate of "Other Expenses" is based on the estimated expenses the Fund
expects to incur during its current fiscal year, taking into account the
Adviser's voluntary expense limitation.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and expenses as shown in the "Annual Operating Expenses" table
above and (2) redemption at the end of each time period:
1 year $15
-------------------------
3 years $48
-------------------------
This example illustrates the effect of expenses, but is not meant to suggest
actual past or future expenses or returns, all of which may be more or less than
those shown in the example.
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The information below shows the results of an investment in the Fund throughout
the period December 27, 1996 (commencement of operations) through June 30, 1997.
This information was audited by Arthur Anderson LLP, independent accountants.
Their unqualified report is included in the Fund's annual report to
shareholders.
Dec. 27. 1996<F1>
through
June 30, 1997
-------------
Net asset value at beginning of period $10.00
Income from investment operations:
Net investment income 0.17
Net realized and unrealized (loss) on securities 0.52
-----
Total from investment operations 0.69
Less distributions:
Dividends from net investment income 0.00
Distributions from realized gains on securities 0.00
-----
Total distributions 0.00
-----
Net asset value at end of period $10.69
=====
Total return 6.90%<F2>
Ratios and supplemental data:
Net assets at end of period $360,786
Ratio of net expenses to average net assets 1.50%<F3>
Net investment income to average net assets (0.04)%<F3>
Portfolio turnover rate 0.27%<F2>
Average commission rate per share $ 0.0400
<F1> Commencement of operations.
<F2> Not annualized.
<F3> Annualized. Without expense reimbursements of
$77,648 for the period December 27, 1996 through
June 30, 1997, the annualized ratio of expenses to
average net assets would have been 59.90%, and the
annualized ratio of net investment income to average
net assets would have been (58.44%).
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- -------------------------------------------------------------------------------
The Fund's investment objective is long-term capital appreciation. The Fund
focuses on after-tax investment returns for its shareholders. The Fund employs a
growth-oriented investment approach to create a diversified portfolio of medium
and large capitalization common stocks. The Adviser believes that long-term
capital appreciation can be achieved by purchasing stocks of companies with
superior operating fundamentals relative to its industry group and the broad
market, at attractive levels. In managing the Fund, the Adviser analyzes the tax
consequences of position changes to the Fund and its shareholders subject to
federal income tax. The Adviser attempts to maximize long-term capital gains and
unrealized capital gains, and minimize short-term capital gains and ordinary
income, as components of the Fund's investment returns.
Under normal market conditions, the Fund expects to be substantially fully
invested in common stocks of medium and large growth companies generally having
a market capitalization in excess of $1 billion.
INVESTMENT PROCESS
- -------------------------------------------------------------------------------
The Adviser uses a disciplined investment process in managing the Fund's
portfolio. The first step is the identification of those companies exhibiting
superior operating characteristics and fundamentals which the Adviser believes
are important to potential above average and sustainable earnings growth. Among
other things, the Adviser looks for:
- - historic long-term earnings growth of 15% or more for medium-sized companies
and 12% or more for large-sized companies and projected long-term earnings
growth of 15% or more for all companies;
- - a focus in one business segment;
- - an increasing market share versus industry competition;
- - stable or increasing margins versus industry competition;
- - a strong balance sheet relative to its industry group as measured by the
ratio of debt to capital; and
- - a proven and effective management team.
In conducting disciplined fundamental research, the investment team focuses on
industry fundamentals, a company's products or services, its revenue growth
prospects, its costs and margins and the strategic business plan of management.
As a long-term investor, the Adviser believes personal visits with senior
management are an important element of its fundamental research and security
valuation. Through this research process, the Adviser projects quarterly and
annual earnings growth for those companies being considered for purchase and
those held by the Fund.
Although investing in companies with superior earnings growth is important, the
Adviser applies a valuation discipline in order to eliminate those securities
that may be overvalued. The key valuation discipline used by the Adviser is
based on projected long-term earnings growth and price/earnings ratios.
The Fund's portfolio generally consists of investments in approximately 20 to 50
companies, based on a "bottom-up" approach where individual companies meet the
operating characteristics outlined above and the Fund's valuation discipline. In
order to insure broad diversification and control risk in the Fund's portfolio,
the Fund maintains representation in most economic sectors. Investments are made
in sectors and industry groups in which the greatest earnings growth is found at
the most attractive prices.
The Fund is managed with a focus on after-tax returns and attempts to maximize
long-term capital gains and unrealized capital gains as components of investment
return. The Fund invests in stocks which pay below average dividends and under
normal market conditions expects its portfolio turnover rate to be below 50%, to
minimize the amount of ordinary income and short-term capital gains created for
shareholders. A decision to sell a portfolio security is based on, among other
things, a company's long-term prospects for continued earnings growth relative
to its stock's price/earnings ratio and the tax effect of the sale. The Adviser
expects to offset realized capital gains by selling stocks in which the Fund has
a loss, to the extent losses are available and the sale of the security would be
consistent with prudent portfolio management.
The Fund may sell short securities the Fund owns or has the right to acquire
without further consideration, a technique called selling short "against the
box.' Short sales against the box may be used to lock in a profit on a security
when, for tax reasons or otherwise, the Adviser does not want to sell the
security. The Fund may also invest in convertible securities, options and
futures to a limited extent. For a more complete explanation, please refer to
the Statement of Additional Information. The Fund may invest up to 10% of its
total assets in American Depository Receipts (ADRs), which are securities traded
in the United States but representing interests in foreign securities. A portion
of the Fund's assets (not ordinarily expected to exceed about 5% of the Fund's
total assets) may be held from time to time in cash or cash equivalents pending
investment or to meet cash requirements. Up to 100% of the fund's assets may be
held in cash or cash equivalents under abnormal market or economic conditions if
the Adviser determines that a temporary defensive position is advisable. Because
the Fund tries to minimize ordinary income subject to income tax, cash
equivalents held by the Fund may include high-quality, short-term municipal
securities producing income exempt from federal income tax.
<PAGE>
RISKS
- -------------------------------------------------------------------------------
The Fund's performance and price per share will change daily based on many
factors, including general economic and market conditions and the performance of
individual stocks selected for the Fund's portfolio. The Fund is intended as a
long-term investment for investors willing to bear the volatility inherent in
any investment in common stocks. The Fund's intention is to maximize after-tax
returns for investors subject to income tax. An investor not subject to federal
income tax may invest in the Fund, but should consider whether an investment as
sensitive to tax consequences as the Fund is appropriate. There can be no
assurance that the Fund will achieve its investment objective.
Stocks of medium-sized companies tend to be more volatile and less liquid than
stocks of larger companies. Medium-sized companies, as compared to larger
companies, may have a shorter history of operations, may have a less diversified
product line making them susceptible to market pressure, and may have a smaller
public market for their securities.
Investment in ADRs representing foreign securities may represent a greater
degree of risk (including risk related to exchange rate fluctuations, tax
provisions, exchange and currency controls, and expropriation of assets) than
investment in securities of domestic issuers. Other risks of investing in ADRs
include less complete financial information on issuers of the underlying
securities, less developed and regulated markets, and greater political
instability.
The Fund's investment objective and policies may be changed by the Trust's board
of trustees without shareholder approval. However, shareholder approval is
required for changes in the Fund's fundamental investment restrictions. Any
change in the investment objective of the Fund might result in the Fund having
an investment objective that differs from the investment objective a shareholder
considered appropriate when investing.
INVESTMENT RESTRICTIONS
- -------------------------------------------------------------------------------
The Fund has adopted the following investment restrictions, among others, that
may be changed only with the approval of a majority of the outstanding shares of
the Fund as defined in the Investment Company Act of 1940. The Fund may not: (1)
with respect to 75% of its total assets, invest more than 5% of its total assets
(taken at market value at the time of a particular purchase) in the securities
of any single issuer, except for securities issued or guaranteed by the
Government of the U.S. or any of its agencies or instrumentalities or repurchase
agreements for such securities; (2) acquire more than 10% (taken at the time of
a particular purchase) of the outstanding voting securities of any one issuer;
or (3) invest in a security if 25% or more of its total assets (taken at market
value at the time of a particular purchase) would be invested in the securities
of issuers in a single industry, except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. All of the investment restrictions of the Fund are stated in
the Statement of Additional Information.
PURCHASING SHARES
- -------------------------------------------------------------------------------
Shares of the Fund may be purchased by completing a share purchase application
and forwarding it, together with a check for the investment, directly to the
Fund c/o Firstar Trust Company, P.O. Box 701, Milwaukee, WI 53201. The transfer
agent is unable to accept third party checks both on initial and subsequent
share purchases.
DO NOT mail letters by overnight courier to the Post Office Box address.
Correspondence mailed by overnight courier should be sent to Firstar Trust
Company, Third Floor, 615 East Michigan Street, Milwaukee, Wisconsin 53202.
To establish a new account by wire please first call Firstar at 1-888-287-7434
to advise it of the investment and dollar amount. This will ensure proper and
accurate handling of your investment. A completed share purchase application
form must also be sent to Firstar at the address above immediately after your
investment is made so that the necessary remaining information can be recorded
to your account. Your purchase request should be wired through the Federal
Reserve Bank as follows:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
ABA Number 075000022
For credit to Firstar Trust M.F.S.
Account Number 112-952-137
For further credit to Burridge Capital Development Fund
(Your account name and account number)
If you have authorized telephone transaction privileges in your application, you
may also make purchases by calling toll free 1-888-287-7434. By using a
telephone purchase option you may move money from your bank account to your Fund
account at your request. Only bank accounts held at domestic financial
institutions that are Automated Clearing House (ACH) members may be used for
telephone transactions. To have shares of the Fund purchased at the net asset
value determined as of the close of regular trading on a given date, Firstar
must receive both the purchase order and payment by Electronic Funds Transfer
through the ACH system before the close of regular trading on such date. Most
transfers are completed within three business days. You may not use telephonic
<PAGE>
PURCHASING SHARES (continued)
- -------------------------------------------------------------------------------
transactions for initial purchases. The minimum amount that can be transferred
by telephone is $10,000.
The purchase price of shares in the Fund is the net asset value per share next
computed after receipt by Firstar, as agent for the Fund, of an order completed
in accordance with the instructions on the account application. Your order must
be received by Firstar before the close of regular session trading on the New
York Stock Exchange ("NYSE") (currently 3:00 p.m., Central time) to receive
the net asset value calculated on that day. See "Net Asset Value." All
purchases must be made in U.S. dollars and checks must be drawn on U.S. banks.
The minimum initial investment to open an account is $500,000, and subsequent
investments must be at least $5,000. Exceptions to the minimum investment
requirements may be made at the discretion of the Adviser including, without
limitation, for employees of the Adviser or investors who are, or are related
to, clients of the Adviser.
You may also purchase (or redeem) shares through investment dealers or other
institutions. Certain institutions that have entered into agreements with the
Fund or its Distributor may enter confirmed purchase orders or redemption
requests on behalf of customers on an expedited basis, including orders by
phone, with payment to follow no later than the time when the fund is priced on
the following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses. These
institutions may impose charges for their services, and those charges could
constitute a significant portion of a smaller account. There are no charges or
limitations imposed by the Fund (other than nominal charges for returned checks,
and similar items, as described in this Prospectus) if shares are purchased (or
redeemed) by mailing your purchase application and payment for shares directly
to Firstar as described in this prospectus.
The Fund reserves the right to reject purchase orders under circumstances or in
amounts considered disadvantageous to existing shareholders. The Fund believes
that frequent purchases and redemptions of Fund shares by investors utilizing
market-timing strategies would adversely affect the Fund. The Fund therefore
intends to reject purchase orders from investors identified by the Fund as
market-timers. Should an order to purchase shares of the Fund be canceled
because a shareholder's check does not clear, the shareholder will be
responsible for any resulting loss incurred by the Fund. A charge (currently
$20) will be assessed for any returned check.
The Fund does not issue share certificates.
REDEEMING SHARES
- -------------------------------------------------------------------------------
You may redeem your Fund's shares at the net asset value next determined after
the request is received by Firstar, as agent for the Fund, in writing or by
telephone. Telephone redemptions are limited to $50,000. Your redemption request
in proper form must be received by Firstar before the close of regular session
trading on the New York Stock Exchange ("NYSE") (currently 3:00 p.m., Central
time) to receive the net asset value calculated on that day. See "Net Asset
Value."
To redeem shares in writing, a written request must be received by Firstar. A
written request for redemption must be signed by all persons in whose names the
shares are registered. Redemption requests received by facsimile transmission or
other electronic means will not be accepted. Signatures must conform exactly to
the account registration.
DO NOT mail letters by overnight courier to the Post Office Box address.
Correspondence mailed by overnight courier should be sent to Firstar Trust
Company, Third Floor, 615 East Michigan Street, Milwaukee, Wisconsin 53202.
A signature guarantee is required on the written redemption request if (i) the
redemption proceeds are to be sent to a bank or brokerage account not previously
authorized by the shareholder in accordance with the instructions on the account
application, (ii) the proceeds of the requested redemption would be more than
$50,000, or (iii) THE ADDRESS OF RECORD HAS CHANGED WITHIN THE LAST 60 DAYS. The
guarantor must be a bank, member firm of a national securities exchange, savings
and loan association, credit union or other entity authorized by state law to
guarantee signatures. A NOTARY PUBLIC IS NOT AN ACCEPTABLE GUARANTOR. Additional
documentary evidence of authority is required in the event redemption is
requested by a corporation, partnership, trust, fiduciary, executor, or
administrator. CHECKS TO THIRD PARTIES OTHER THAN A BANK OR BROKERAGE ACCOUNT AS
AUTHORIZED ABOVE ARE NOT PERMITTED. Redemption checks will not be forwarded if
the redeeming shareholder moves. The redemption request should also indicate the
change of address and include a signature guarantee.
Telephone redemptions of not more than $50,000 can be authorized on the account
application. If telephone redemptions are authorized, the Fund will honor
requests by telephone at (888) BURRIDGE (1-888-287-7434). Reasonable procedures
are used to confirm that instructions received by telephone are genuine, such as
requesting personal identification information that appears on the purchase
application and recording the conversation. You bear the risk of any loss that
might result from a fraudulent instruction, although the Fund may bear such risk
if reasonable procedures were not used. To reduce the risk of a fraudulent
instruction, proceeds of telephone redemptions may be sent only to your address
of record or to a bank or brokerage account you designated, in writing, on the
purchase application or in a letter with the signature(s) guaranteed. The Fund
reserves the right to record all telephone redemption requests.
<PAGE>
REDEEMING SHARES (continued)
- -------------------------------------------------------------------------------
The redemption price per share is the net asset value next determined after
receipt of the redemption request, which may be more or less than your cost
depending upon the value of the Fund's investment securities at the time of
redemption. See "Net Asset Value."
Payment for shares redeemed is made by check or wire. Payment by check normally
is mailed within seven days after receipt of the redemption request in proper
form. If specified in the account application, the check will be payable and
sent to a designated financial institution. A wire will be sent only to your
bank or brokerage account as shown on the account application. Wire requests
generally are paid the next business day, after deduction of the cost of the
wire transfer (currently $12). That charge and any similar service fee may be
changed without prior notice to shareholders. Wires to third parties are not
permitted.
The Fund may suspend or postpone the right of redemption at times when trading
on the NYSE is restricted or as otherwise permitted by the Securities and
Exchange Commission. If you attempt to redeem shares within 15 days after they
have been purchased by check, the Fund may delay payment of the redemption
proceeds until it can verify that payment for the purchase of the shares has
been (or will be) received which may take up to 15 days from purchase.
The Fund reserves the right to redeem shares in any account with a balance of
less than 80% of the applicable minimum initial investment ($400,000) in share
value. Prior to any such redemption, the Fund will give the shareholder 30 days'
written notice during which time you may increase your investment to avoid
having your shares redeemed. The minimum balance will be waived if the account
balance drops below the applicable minimum due to market activity.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The price per share for a purchase order or redemption request is the net asset
value next determined after receipt of the order or request.
The net asset value of a share of the Fund is determined as of the close of
regular session trading on the NYSE (currently 3:00 p.m., Central time) each day
the NYSE is open for trading. The net asset value per share is determined by
dividing the difference between the values of the Fund's assets and liabilities
by the number of shares outstanding. Each security traded on a national stock
exchange or on the Nasdaq National Market is valued at the last sale price or,
if there have been no sales on the valuation day, at the mean between the most
recent bid and asked prices. Other securities traded over the counter are valued
at the mean between the last reported bid and asked prices. Other assets and
securities are valued by methods the Fund's board of trustees believes will
determine a fair value.
SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------
Shareholder Accounts. You will receive an annual account statement showing
transactions in Fund shares with a balance denominated in Fund shares. In
addition, confirmations are sent to you upon purchase, redemption, dividend
reinvestment, and change of shareholder address. For a fee, you may obtain a
historical transcript of your account by requesting one in writing from Firstar
Trust Company.
IRA Plan for Rollover Account. The Fund has a prototype Individual Retirement
Account ("IRA") plan for your rollover IRA. The minimum investment in an IRA
account is $500,000. Call (888) BURRIDGE (1-888-287-7434) for an IRA booklet and
application. Because the Fund's intention is to maximize after-tax returns for
investors subject to federal income tax, an IRA investor should consider whether
an investment in the Fund is appropriate.
DIVIDENDS AND DISTRIBUTIONS
- -------------------------------------------------------------------------------
You may receive two kinds of distributions from the Fund: dividends and capital
gains distributions. All dividends and capital gains distributions are paid in
the form of additional shares credited to your account at net asset value per
share unless you have requested on the account application or in writing that
distributions be paid in cash. The Fund expects to declare and pay net
investment income dividends and distributions of net realized short- and long-
term capital gains, if any, at least annually.
<PAGE>
TAXES
- -------------------------------------------------------------------------------
Your distributions will be taxable to you, under income tax law, whether
received in cash or reinvested in additional shares. For federal income tax
purposes, any distribution that is paid in January but was declared in the prior
calendar year is deemed paid in the prior calendar year.
You will be subject to federal income tax at ordinary rates on income dividends
and distributions of net short-term capital gain. Distributions of net long-term
capital gain will be taxable to you as long-term capital gain regardless of the
length of time you have held your shares.
You will be advised annually as to the source of distributions for tax purposes.
If you are not subject to tax on your income, you will not be required to pay
tax on these amounts.
If you realize a loss on the sale of Fund shares held for six months or less,
your short-term loss is recharacterized as long-term to the extent of any long-
term capital gain distributions you have received with respect to those shares.
The Taxpayer Relief Act of 1997 reduced from 28% to 20% the maximum tax rate on
Long-term capital gains. This reduced rate generally applies to securities held
more than 18 months and sold after July 28, 1997, and securities held for more
than one year and sold after May 6, 1997 and before July 29, 1997.
This discussion of taxation is not intended to be a full discussion of income
tax laws and their effect on shareholders. You may wish to consult your own tax
advisor. The foregoing information applies to U.S. shareholders. Foreign
shareholders should consult their tax advisors as to the tax consequences of
ownership of Fund shares.
The Fund may be required to withhold federal income tax ("backup withholding")
from certain payments to you, generally redemption proceeds. Backup withholding
may be required if:
- - You fail to furnish your properly certified social security or other tax
identification number;
- - You fail to certify that your tax identification number is correct or that
you are not subject to backup withholding due to the underreporting of
certain income;
- - The Internal Revenue Service informs the Trust that your tax identification
number is incorrect.
These certifications are contained in the Application that you should complete
and return when you open an account. The Fund must promptly pay to the IRS all
amounts withheld. Therefore, it is usually not possible for the Fund to
reimburse you for amounts withheld. You may, however, claim the amount withheld
as a credit on your federal income tax return.
MANAGEMENT OF THE FUND
- -------------------------------------------------------------------------------
The Trustees. The board of trustees has overall responsibility for the conduct
of the Trust's affairs. The trustees serve indefinite terms of unlimited
duration provided that a majority of trustees always has been elected by the
shareholders. The trustees appoint their own successors, provided that at least
two-thirds of the trustees, after such appointment, have been elected by the
shareholders. Shareholders may remove a trustee, with or without cause, upon the
declaration in writing or vote, at a meeting called for that purpose, of two-
thirds of the Fund's outstanding shares. A trustee may be removed with or
without cause upon the written declaration of a majority of the trustees.
The Adviser. The Fund's investment adviser is The Burridge Group LLC. The
Adviser employs a growth oriented investment approach in creating a diversified
portfolio of equities for corporate, public, and Taft-Hartley pension plans,
endowments, foundations and private investors. As of August 1, 1997, it managed
over $1.4 billion in assets for clients, including over $400 million for taxable
accounts.
The Adviser manages the investment and reinvestment of the assets of the Fund.
In addition the Adviser provides office space, facilities, equipment, and
personnel for managing the assets and administering the Fund's day-to-day
operations, and provides shareholder and investor services.
For its services, the Fund pays the Adviser a fee, accrued daily and paid
monthly, based on its average daily net asset value at the annual rates of 1.00%
of the first $500 million, 0.85% of average daily net assets in excess of $500
million, and 0.75% of average daily net assets in excess of $1 billion. The
anticipated overall expense ratio is shown in the "Expense Information" table
in this Prospectus.
In addition, the Adviser has voluntarily undertaken to limit the Fund's expenses
(including the advisory fee but excluding extraordinary costs or expenses not
incurred in the ordinary course of the Fund's operations) to 1.50% of the Fund's
average daily net assets.
The Adviser employs a team of investment professionals who participate in
investment strategy formulation and security selection. The individual
responsible for overseeing the implementation of the Adviser's strategy for the
Fund is Richard M. Burridge.
Mr. Burridge is chairman and chief investment officer of the Adviser. He has
been engaged in the investment management business since 1974 and, with Kenneth
M. Arenberg, founded the Adviser's predecessor in 1986. Mr. Burridge holds a
B.S. from the University of Colorado and is a Chartered Financial Analyst.
The Adviser is a Delaware limited liability company, the Member Manager of which
is The Burridge Group Inc., an Illinois corporation ("Burridge Inc.").
Presently, seven principals, including Richard M. Burridge and Kenneth M.
Arenberg, hold member interests in the Adviser representing an interest in the
aggregate of 45% of the Adviser's profits,
<PAGE>
subject to reduction under certain
conditions. The remaining interest in the profits of the Adviser is owned by
Affiliated Managers Group, Inc. ("AMG"). Burridge Inc. is a wholly owned
subsidiary of AMG.
MANAGEMENT OF THE FUND (continued)
- -------------------------------------------------------------------------------
AMG is a Delaware corporation which has its offices at Two International Place,
Boston, MA 02110. AMG may be deemed to have as its ultimate parent TA
Associates, Inc., a Delaware corporation. The address of TA Associates, Inc. is
High Street Tower, Suite 2500, 125 High Street, Boston, MA 02110.
The offices of the Adviser are located at 115 South LaSalle Street, Chicago,
Illinois 60603.
Administrator, Custodian and Transfer Agent. Firstar Trust Company, P.O. Box
701, Milwaukee, Wisconsin 53201, is the Fund's Administrator and generally
assists the Fund in all aspects of its administration and operation. Firstar is
also the Fund's custodian and transfer agent. Firstar is responsible for
maintaining many of the Fund's books and records, handling compliance and
regulatory issues, processing purchase and redemption requests, shareholder
services and safekeeping of the Fund's securities.
Distributor. Funds Distributor, Inc. (the "Distributor"), 60 State Street,
Suite 1300, Boston, Massachusetts 02109, is the distributor of shares of the
Fund. Fees for the Distributor's services are paid by the Adviser from its own
resources. See the Statement of Additional Information for more information.
Portfolio Transactions. Decisions as to the purchase and sale of securities for
the Fund and the execution of these transactions, including the negotiation of
brokerage commissions on such transactions, are the responsibility of the
Adviser. In general, the Adviser seeks to obtain prompt and reliable execution
of purchase and sale orders at the most favorable net prices or yields. In
determining the best net price and execution, the Adviser may take into account
a broker's or dealer's operational and financial capabilities and the type of
transaction involved.
The Adviser may consider research services provided by the broker or dealer,
some of which may be useful to the Adviser in its other business functions. To
the extent such research services are taken into account, the execution price
paid may be higher, but only in reasonable relation to the benefit of such
research services as determined in good faith by the Adviser. The Adviser is
authorized to place portfolio transactions with brokers or dealers participating
in the distribution of shares of the Fund, but only if the Adviser reasonably
believes that the execution and commission are comparable to those available
from other qualified firms.
The Fund's portfolio turnover rate will vary from year to year, but is expected
to be below 50% under normal market conditions.
Performance. From time to time, in advertisements and sales literature, the Fund
may present information regarding the total return on a hypothetical investment
in the Fund for various periods of performance and may make comparisons of such
total return to various stock indexes (groups of unmanaged common stocks), to
the Consumer Price Index, or to groups of comparable mutual funds.
Total return for a period is the percentage change in value during the period of
an investment in the Fund shares, including the value of shares acquired through
reinvestment of all dividends and capital gains distributions. The average
annual total return for a given period may be calculated by finding the average
annual compounded rate of return that would equate a hypothetical $1,000
investment to the value of that investment that could be redeemed at the end of
the period, assuming reinvestment of all distributions. All of the calculations
described above will assume the reinvestment of dividends and distributions in
additional shares of the Fund. Income taxes will not be taken into account.
In addition to the figures described above, the Fund might use rankings or
ratings determined by Lipper Analytical Services, Inc., Morningstar, Inc., or
another service to compare the performance of the Fund with the performance of
(i) other funds of similar size and investment objective or (ii) broader groups
of funds. The Fund may also provide information about, or compare its
performance to, the historical returns on various types of financial assets.
Performance of the Fund will vary from time to time, and past results are not
indicative of likely future performance. Performance information supplied by the
Fund may not provide a basis of comparison with other investments using
different reinvestment assumptions or time periods.
Information about the Fund's performance is included in its annual report to
shareholders, a copy of which may be obtained without charge by calling the Fund
at (888) BURRIDGE (1-888-287-7434).
<PAGE>
THE FUND AND ITS SHARES
- -------------------------------------------------------------------------------
The Fund was organized as a Massachusetts business trust on August 30, 1996 and
is an open-end, diversified management investment company.
Shares. Under the terms of the Agreement and Declaration of Trust, the Fund may
issue an unlimited number of shares of beneficial interest without par value for
each series of shares authorized by the trustees. Burridge Capital Development
Fund is currently the only series authorized and outstanding. All shares issued
will be fully paid and non-assessable and will have no preemptive or conversion
rights. Each share of a series is entitled to participate pro rata in any
dividends and other distributions declared by the Fund's board of trustees on
shares of that series. All shares of a series have equal rights in the event of
liquidation of that series.
Under Massachusetts law, the shareholders of the Fund may, under certain
circumstances believed to be remote, be held personally liable for the Fund's
obligations. However, the Trust's Agreement and Declaration of Trust disclaims
liability of shareholders, the Trust's trustees, or the Fund's officers for acts
or obligations of the Trust or the Fund and requires that notice of such
disclaimer be given in each agreement, obligation, or contract entered into or
executed by the Trust or the board of trustees. The Trust's Agreement and
Declaration of Trust provides for indemnification out of the assets of the Fund
of all losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is remote, since it is limited to
circumstances in which the disclaimer is inoperative and the Fund itself is
unable to meet its obligations.
At August 1, 1997, the following persons owned more than 25% of the Fund's
outstanding shares: Kenneth M. Arenberg - 5,000.00 shares (14.81%); Richard M.
Burridge - 5,000.00 shares (14.81%); and J. Thomas Hurvis - 23,764.26 shares
(70.38%). Messrs. Arenberg and Hurvis are members of the board of trustees; Mr.
Burridge is the Fund's portfolio manager.
Voting Rights. Each share has one vote and fractional shares have fractional
votes. The Fund does not intend to hold annual meetings of shareholders. A
special meeting of Shareholders may be called by the board of trustees, chairman
or president, or, under certain conditions, by the holders of at least 10% of
the Trust's outstanding shares.
Shareholder Inquiries. Inquiries should be addressed to Burridge Funds, c/o
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201. Telephone
inquiries may be made at (888) BURRIDGE (1-888-287-7434).
<PAGE>
SHAREHOLDER SERVICES:
Burridge Funds
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201-9388
(888) BURRIDGE
(1-888-287-7434)
INVESTMENT ADVISER:
The Burridge Group LLC
Chicago, IL
DISTRIBUTOR:
Funds Distributor Inc.
Boston, MA
CUSTODIAN AND TRANSFER AGENT:
Firstar Trust Company
Milwaukee, WI
INDEPENDENT AUDITORS:
Arthur Andersen LLP
Chicago, IL
LEGAL COUNSEL:
Bell, Boyd & Lloyd
Chicago, IL
<PAGE>
xxxxx
SUPPLEMENT DATED OCTOBER 29, 1997 TO
STATEMENT OF ADDITIONAL INFORMATION DATED AUGUST 29, 1997 OF BURRIDGE FUNDS
A number of changes to the investment strategy followed by Burridge Capital
Development Fund (the "Fund"), and to its investment advisory arrangements and
fees, are expected to be effective on December 19, 1997 (the "Effective
Date"). Effective on that date, the Fund expects to enter into an amended and
restated investment advisory agreement (the "Proposed Agreement") with The
Burridge Group LLC ("Burridge") that will increase the fee paid to Burridge
and authorize Burridge to engage GeoCapital, LLC ("GeoCapital") as sub-adviser
to manage a portion of the Fund's assets. The Fund's investment strategy will be
modified at the same time as described below.
INVESTMENT OBJECTIVES AND POLICIES
After the Effective Date, the Fund's investment objective of long-term
capital appreciation will not change, but its focus will shift from medium to
large capitalization companies to those with small to medium capitalizations.
Burridge believes that long-term capital appreciation can be achieved by
purchasing stocks of companies with superior operating fundamentals relative to
their industry group and the broad market. A valuation discipline is used to
purchase and hold companies trading at attractive valuation levels. GeoCapital
believes purchasing stocks of companies that create, commercialize, and market
new technology or services and those with undervalued or unrecognized earnings
or assets can result in superior investment returns. In managing the Fund's
assets, investment professionals from Burridge and GeoCapital may consult with
each other and discuss investment ideas as well as economic and market
conditions, but the primary research functions and ultimate security selection
decisions will be made separately by Burridge and GeoCapital.
INVESTMENT ADVISORY SERVICES
On or after the Effective Date, the Fund expects to enter into the Proposed
Agreement with Burridge. At the same time, Burridge expects to enter into the
Proposed Sub-Advisory Agreement with GeoCapital.
THE PROPOSED AGREEMENT
Under the Proposed Agreement, Burridge will be authorized to engage
GeoCapital as sub-adviser to manage up to 67% of the Fund's assets, with the
amount of assets allocated to it for management to be determined by Burridge.
Each of Burridge and GeoCapital is expected to manage approximately one-half of
the Fund's portfolio, although variations in cash flows in and out of the Fund
may cause deviations from that allocation.
The Proposed Agreement will increase the management fee payable by the Fund
to Burridge. Under the current advisory agreement, the Fund pays Burridge a fee,
accrued daily and paid monthly, at the annual rates of (i) 1.00% of the first
$500 million of the Fund's average
<PAGE>
daily net assets; (ii) 0.85% of the Fund's average daily net assets in excess
of $500 million and less than $1 billion, and (iii) 0.75% of the Fund's average
daily net assets in excess of $1 billion.
Under the Proposed Agreement, the Fund will pay Burridge a fee, accrued
daily and paid monthly, at the annual rates of (i) 1.25% of the first $500
million of the Fund's average daily net assets; (ii) 1.10% of the Fund's average
daily net assets in excess of $500 million and less than $1 billion, and (iii)
1.00% of the Fund's average daily net assets in excess of $1 billion.
The Proposed Agreement is identical to the existing advisory agreement
except for the increase in the fee described above, the authorization of
Burridge to engage GeoCapital as sub-adviser, and the dates of its execution,
effectiveness and termination.
THE PROPOSED SUB-ADVISORY AGREEMENT
In addition, as stated above, the Proposed Agreement authorizes Burridge to
engage GeoCapital as sub-adviser to the Fund. Burridge and GeoCapital expect to
enter into an investment sub-advisory agreement (the "Proposed Sub-Advisory
Agreement") which is expected to become effective simultaneously with the other
changes discussed herein.
In return for its services, under the Proposed Sub-Advisory Agreement,
GeoCapital will be paid a monthly fee from Burridge based on the average daily
net assets allocated to it by Burridge for management. Burridge will pay
GeoCapital a fee, accrued daily and paid monthly, at the annual rates of 0.75%
of the first $500 million of the average daily net assets allocated to it, 0.65%
of the next $500 million of the average daily net assets allocated to it, and
0.60% of the average daily net assets allocated to it in excess of $1 billion.
The Proposed Sub-Advisory Agreement provides that GeoCapital shall not be
liable for any loss suffered by the Fund, its shareholders, or Burridge as a
consequence of any act or omission in connection with investment advisory or
portfolio services, except by reason of willful misfeasance, bad faith, or gross
negligence on the part of GeoCapital in the performance of its duties, or from
reckless disregard by GeoCapital of its obligations and duties as sub-adviser.
The Proposed Sub-Advisory Agreement also provides that Burridge's obligations
and liabilities under the Proposed Sub-Advisory Agreement are not binding upon
the Trust or the Fund, or the officers, shareholders, employees, or other agents
of either.
The Proposed Sub-Advisory Agreement will expire in December of 1999, but
may be continued from year to year only so long as its continuance is approved
annually (a) by the vote of a majority of the trustees of the Trust who are not
"interested persons" of the Trust, Burridge, or GeoCapital cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the board
of trustees of the Trust or by the vote of a majority (as defined in the 1940
Act) of the outstanding shares of the Fund. The Sub-Advisory Agreement is
terminable without penalty, on 60 days' notice, by the trustees of the Trust or
by vote of a majority of the outstanding shares of the Fund, or, on not less
than 90 days' notice, by GeoCapital. The Sub-Advisory Agreement automatically
terminates in the event of its assignment (as defined in the 1940 Act).
ABOUT GEOCAPITAL
GeoCapital invests in small-capitalization equities in emerging technology
and service industries, based on its own fundamental analysis of the companies
and industries. As of October 1, 1997, GeoCapital managed $2.2 billion in assets
for clients.
Irwin Lieber and Barry K. Fingerhut are responsible for overseeing the
implementation of GeoCapital's strategy for managing its portion of the Fund's
portfolio. Mr. Lieber is chairman and chief investment officer of GeoCapital,
and formed GeoCapital's predecessor in 1979. Mr. Fingerhut is GeoCapital's
president and joined the firm in 1981.
GeoCapital is a Delaware limited liability company, the member manager of
which is GeoCapital Corporation. Currently, seven principals, including Mr.
Lieber and Mr. Fingerhut, hold member interests in GeoCapital representing an
interest in the aggregate of 40% of GeoCapital's profits, subject to reduction
under certain conditions. The remaining 60% interest in the profits of
GeoCapital is owned by GeoCapital Corporation. GeoCapital Corporation is a
wholly-owned subsidiary of Affilated Managers Group, Inc. ("AMG"). AMG also
owns a 55% interest in the profits of Burridge, and is the parent corporation of
The Burridge Group, Inc., the member-manager of Burridge.
The offices of GeoCapital are located at 767 Fifth Avenue, New York, New
York 10153.
xxxxx
BURRIDGE FUNDS
115 South LaSalle Street
Chicago, Illinois 60603
(888) BURRIDGE
(1-888-287-7434)
STATEMENT OF ADDITIONAL INFORMATION
August 29, 1997
Burridge Capital Development Fund (the "Fund") is a series of Burridge
Funds (the "Trust"). The Fund represents shares of beneficial interest in a
separate portfolio of securities and other assets, with its own investment
objective and policies. This Statement of Additional Information is not a
prospectus. It should be read in conjunction with the Fund's Prospectus dated
August 29, 1997, and any supplement to that Prospectus. That Prospectus can be
obtained without charge by calling or writing to the Trust.
Investment Objective and Policies................................ 2
Investment Techniques and Risk................................... 2
Investment Restrictions.......................................... 10
Performance Information.......................................... 12
Management of the Fund........................................... 15
Investment Advisory Services..................................... 17
Portfolio Transactions and Brokerage............................. 18
Purchase and Redemption of Shares................................ 20
Taxes............................................................ 21
General Information.............................................. 21
Financial Statements............................................. 22
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term capital appreciation.
The Fund attempts to generate long-term capital appreciation. The Fund
focuses on after-tax investment returns for its shareholders. The Fund employs
a growth-oriented investment approach to create a diversified portfolio of
medium and large capitalization common stocks. The Adviser believes that long-
term capital appreciation can be achieved by purchasing stocks of companies with
superior operating fundamentals relative to its industry group and the broad
market, at attractive levels. In managing the Fund, the Adviser analyzes the
tax consequences of position changes to the Fund and its shareholders subject to
federal income tax. The Adviser attempts to maximize long-term capital gains
and unrealized capital gains, and minimize short-term capital gains and ordinary
income, as components of the Fund's investment returns. See "Investment
Objective and Policies."
Under normal market conditions, the Fund is expected to be substantially
fully invested in common stocks of medium and large companies generally having a
market capitalization in excess of $1 billion.
INVESTMENT TECHNIQUES AND RISKS
Foreign Securities
The Fund may invest up to 10% of its total assets in foreign securities
(including American Depository Receipts ("ADRs")), which may entail a greater
degree of risk (including risks relating to exchange rate fluctuations, tax
provisions, or expropriation of assets) than does investment in securities of
domestic issuers. ADRs are receipts typically issued by an American bank or
trust company evidencing ownership of the underlying securities. The Fund may
invest in sponsored or unsponsored ADRs. In the case of an unsponsored ADR, the
Fund is likely to bear its proportionate share of the expenses of the depository
and it may have greater difficulty in receiving shareholder communications than
it would have with a sponsored ADR. The Fund does not intend to invest more
than 5% of its net assets in unsponsored ADRs.
Short-Term Investments
The Fund intends to be substantially fully invested in common stocks in
ordinary circumstances, although the Fund may invest without limitation in high-
quality fixed-income securities or hold assets in cash or cash equivalents
pending investment, to meet anticipated cash requirements, or if the Adviser
determines that a temporary defensive position is advisable. Because the Fund
tries to minimize its ordinary income subject to income tax, the Fund's short-
term investments may include short-term, high quality securities producing
income exempt from federal income tax.
<PAGE>
Convertible Securities
Convertible securities include any corporate debt security or preferred
stock that may be converted into underlying shares of common stock. The common
stock underlying convertible securities may be issued by a different entity than
the issuer of the convertible securities. Convertible securities entitle the
holder to receive interest payments paid on corporate debt securities or the
dividend preference on a preferred stock until such time as the convertible
security matures or is redeemed or until the holder elects to exercise the
conversion privilege.
The value of convertible securities is influenced by both the yield of non-
convertible securities of comparable issuers and by the value of a convertible
security viewed without regard to its conversion feature (i.e., strictly on the
basis of its yield) is sometimes referred to as its "investment value.' The
investment value of the convertible security will typically fluctuate inversely
with changes in prevailing interest rates. However, at the same time, the
convertible security will be influenced by its "conversion value,' which is the
market value of the underlying common stock that would be obtained if the
convertible security were converted. Conversion value fluctuates directly with
the price of the underlying common stock.
By investing in convertible securities, the Fund obtains the right to
benefit from the capital appreciation potential in the underlying stock upon
exercise of the conversion right, while earning higher current income than would
be available if the stock were purchased directly. In determining whether to
purchase a convertible security, the Adviser will consider the same criteria
that would be considered in purchasing the underlying stock. Although
convertible securities purchased by the Fund are frequently rated investment
grade, the Fund also may purchase unrated securities or securities rated below
investment grade if the securities meet the Adviser's other investment criteria.
Convertible securities rated below investment grade (a) tend to be more
sensitive to interest rate and economic changes, (b) may be obligations of
issuers who are less creditworthy than issuers of higher quality convertible
securities, and (c) may be more thinly traded due to such securities being less
well known to investors than either common stock or conventional debt
securities. As a result, the Adviser's own investment research and analysis
tends to be more important in the purchase of such securities than other
factors. The Fund will not invest more than 5% of its net assets in convertible
securities rated below investment grade, or considered by the Adviser to be of
comparable credit quality.
Options on Securities and Indexes. The Fund may purchase and sell put
options and call options on securities, indexes or foreign currencies in
standardized contracts traded on recognized securities exchanges, boards of
trade, or similar entities, or quoted on NASDAQ. The Fund may purchase
agreements, sometimes called cash puts, that may accompany the purchase of a new
issue of bonds from a dealer. The Fund will limit its use of options and
futures so that not more than 5% of the Fund's total assets will be at risk.
An option on a security (or index) is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call) or
sell to (put) the seller (writer) of the option the security underlying the
option (or the cash value of the index) at a specified exercise price at any
time during the term of the option (normally not exceeding nine months).
<PAGE>
The writer of an option on an individual security or on a foreign currency has
the obligation upon exercise of the option to deliver the underlying security or
foreign currency upon payment of the exercise price or to pay the exercise price
upon delivery of the underlying security or foreign currency. Upon exercise,
the writer of an option on an index is obligated to pay the difference between
the cash value of the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect specified
facets of a particular financial or securities market, a specific group of
financial instruments or securities, or certain economic indicators.)
The Fund will write call options and put options only if they are
"covered." For example, in the case of a call option on a security, the
option is "covered" if the Fund owns the security underlying the call or has
an absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, assets of
equivalent value are held in a segregated account by its custodian) upon
conversion or exchange of other securities held in its portfolio.
If an option written by the Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by the Fund expires, the Fund realizes a capital loss equal to the
premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price, and expiration). There
can be no assurance, however, that a closing purchase or sale transaction can be
effected when the Fund desires.
The Fund will realize a capital gain from a closing purchase transaction if
the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the
market value of a put or a call option include supply and demand, interest
rates, the current market price of the underlying security or index in relation
to the exercise price of the option, the volatility of the underlying security
or index, and the time remaining until the expiration date.
A put or call option purchased by the Fund is an asset of the Fund, valued
initially at the premium paid for the option. The premium received for an option
written by the Fund is recorded as a deferred credit. The value of an option
purchased or written is marked-to-market daily and is valued at the closing
price on the exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid and asked
prices.
Risks Associated with Options on Securities and Indexes. There are several
risks associated with transactions in options. For example, there are
significant differences between the securities markets, the currency markets,
and the options markets that could result in an imperfect correlation between
these markets, causing a given transaction not to achieve its objectives. A
decision as to whether, when and how to use options involves the exercise of
skill
<PAGE>
and judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or expected events.
There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. If the Fund were unable to close out an
option that it had purchased on a security, it would have to exercise the option
in order to realize any profit or the option would expire and become worthless.
If the Fund were unable to close out a covered call option that it had written
on a security, it would not be able to sell the underlying security until the
option expired. As the writer of a covered call option on a security, the Fund
foregoes, during the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above the sum of the
premium and the exercise price of the call.
If trading were suspended in an option purchased or written by the Fund,
the Fund would not be able to close out the option. If restrictions on exercise
were imposed, the Fund might be unable to exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts. The Fund may use
interest rate futures contracts, index futures contracts, and foreign currency
futures contracts. An interest rate, index or foreign currency futures contract
provides for the future sale by one party and purchase by another party of a
specified quantity of a financial instrument or the cash value of an index<F1>
at a specified price and time. A public market exists in futures contracts
covering a number of indexes (including, but not limited to: the Standard &
Poor's 500 Index, the Value Line Composite Index, and the New York Stock
Exchange Composite Index) as well as financial instruments (including, but not
limited to: U.S. Treasury bonds, U.S. Treasury notes, Eurodollar certificates
of deposit, and foreign currencies). Other index and financial instrument
futures contracts are available and it is expected that additional futures
contracts will be developed and traded.
The Fund may purchase and write call and put futures options. Futures
options possess many of the same characteristics as options on securities,
indexes and foreign currencies (discussed above). A futures option gives the
holder the right, in return for the premium paid, to assume a long position
(call) or short position (put) in a futures contract at a specified exercise
price at any time during the period of the option. Upon exercise of a call
option, the holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a put option,
the opposite is true. The Fund might, for example, use futures contracts to
hedge against or gain exposure to fluctuations in the general level of stock
prices, anticipated changes in interest rates or currency fluctuations that
might adversely affect either the value of the Fund's securities or the price of
the securities that the Fund intends to
- -----------------
<F1> All futures contract on an index is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading day
of the contract and the price at which the index contract was originally
written. Although the value of a securities index is a function of the value of
certain specified securities, no physical delivery of those securities is made.
<PAGE>
purchase. Although other techniques could be used to reduce or increase the
Fund's exposure to stock price, interest rate and currency fluctuations, the
Fund may be able to achieve its exposure more effectively and perhaps at a lower
cost by using futures contracts and futures options.
The Fund will only enter into futures contracts and futures options that
are standardized and traded on an exchange, board of trade, or similar entity,
or quoted on an automated quotation system.
The success of any futures transaction depends on the Adviser correctly
predicting changes in the level and direction of stock prices, interest rates,
currency exchange rates and other factors. Should those predictions be
incorrect, the Fund's return might have been better had the transaction not been
attempted; however, in the absence of the ability to use futures contracts, the
Adviser might have taken portfolio actions in anticipation of the same market
movements with similar investment results but, presumably, at greater
transaction costs.
When a purchase or sale of a futures contract is made by the Fund, the Fund
is required to deposit with its custodian (or broker, if legally permitted) a
specified amount of cash or U.S. Government securities or other securities
acceptable to the broker ("initial margin"). The margin required for a
futures contract is set by the exchange on which the contract is traded and may
be modified during the term of the contract. The initial margin is in the
nature of a performance bond or good faith deposit on the futures contract,
which is returned to the Fund upon termination of the contract, assuming all
contractual obligations have been satisfied. The Fund expects to earn interest
income on its initial margin deposits. A futures contract held by the Fund is
valued daily at the official settlement price of the exchange on which it is
traded. Each day the Fund pays or receives cash, called "variation margin,"
equal to the daily change in value of the futures contract. This process is
known as "marking-to-market." Variation margin paid or received by the Fund
does not represent a borrowing or loan by the Fund but is instead settlement
between the Fund and the broker of the amount one would owe the other if the
futures contract had expired at the close of the previous day. In computing
daily net asset value, the Fund will mark-to-market its open futures positions.
The Fund is also required to deposit and maintain margin with respect to
put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of the
underlying securities, usually these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the Fund engaging in the
transaction realizes a capital gain, or if it is more, the Fund realizes a
capital loss. Conversely, if an offsetting sale price is more than the original
purchase price, the Fund engaging in the transaction realizes a capital gain, or
if it is less, the Fund realizes a capital loss. The transaction costs must
also be included in these calculations.
<PAGE>
Risks Associated with Futures. There are several risks associated with the
use of futures contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in the futures
contract. In trying to increase or reduce market exposure, there can be no
guarantee that there will be a correlation between price movements in the
futures contract and in the portfolio exposure sought. In addition, there are
significant differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a given
transaction not to achieve its objectives. The degree of imperfection of
correlation depends on circumstances such as: variations in speculative market
demand for futures, futures options and the related securities, including
technical influences in futures and futures options trading and differences
between the securities market and the securities underlying the standard
contracts available for trading. For example, in the case of index futures
contracts, the composition of the index, including the issuers and the weighting
of each issue, may differ from the composition of the Fund's portfolio, and, in
the case of interest rate futures contracts, the interest rate levels,
maturities, and creditworthiness of the issues underlying the futures contract
may differ from the financial instruments held in the Fund's portfolio. A
decision as to whether, when and how to use futures contracts involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected stock price
or interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses. Stock index futures contracts are not normally subject to
such daily price change limitations.
There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures or futures option position. The Fund
would be exposed to possible loss on the position during the interval of
inability to close, and would continue to be required to meet margin
requirements until the position is closed. In addition, many of the contracts
discussed above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
will develop or continue to exist.
Limitations on Options and Futures. If other options, futures contracts,
or futures options of types other than those described herein are traded in the
future, the Fund also may use those investment vehicles, provided the board of
directors determines that their use is consistent with the Fund's investment
objective. The Fund will limit its use of options and futures so that not more
than 5% of the Fund's net assets will be at risk.
<PAGE>
The Fund will not enter into a futures contract or purchase an option
thereon if, immediately thereafter, the initial margin deposits for futures
contracts held by the Fund plus premiums paid by it for open futures option
positions, less the amount by which any such positions are "in-the-money,"<F2>
would exceed 5% of the Fund's net assets. When purchasing a futures contract or
writing a put option on a futures contract, the Fund must maintain with its
custodian (or broker, if legally permitted) cash or cash equivalents (including
any margin) equal to the market value of such contract. When writing a call
option on a futures contract, the Fund similarly will maintain with its
custodian cash or cash equivalents (including any margin) equal to the amount by
which such option is in-the-money until the option expires or is closed out by
the Fund.
The Fund may not maintain open short positions in futures contracts, call
options written on futures contracts or call options written on indexes if, in
the aggregate, the market value of all such open positions exceeds the current
value of the securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative volatility of
the relationship between the portfolio and the positions. For this purpose, to
the extent the Fund has written call options on specific securities in its
portfolio, the value of those securities will be deducted from the current
market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission Regulation 4.5
and thereby avoid being deemed a "commodity pool operator," the Fund will use
commodity futures or commodity options contracts solely for bona fide hedging
purposes within the meaning and intent of Regulation 1.3(z), or, with respect to
positions in commodity futures and commodity options contracts that do not come
within the meaning and intent of Regulation 1.3(z), the aggregate initial margin
and premiums required to establish such positions will not exceed 5% of the fair
market value of the assets of the Fund, after taking into account unrealized
profits and unrealized losses on any such contracts it has entered into (in the
case of an option that is in-the-money at the time of purchase, the in the-money
amount (as defined in Section 190.01(x) of the Commission Regulations) may be
excluded in computing such 5%).
Taxation of Options and Futures. If the Fund exercises a call or put
option that it holds, the premium paid for the option is added to the cost basis
of the security purchased (call) or deducted from the proceeds of the security
sold (put). For cash settlement options and futures options exercised by the
Fund, the difference between the cash received at exercise and the premium paid
is a capital gain or loss.
If a call or put option written by the Fund is exercised, the premium is
included in the proceeds of the sale of the underlying security (call) or
reduces the cost basis of the security purchased (put). For cash settlement
options and futures options written by the Fund, the difference between the cash
paid at exercise and the premium received is a capital gain or loss.
- -------------------
<F2> A call optoin is "in-the-money" if the value of the futures contract that
is the subject of the option exceeds the exercise price. A put option is "in-
the-money' if the exercise price exceeds the value of the futures contract that
is the subject of the option.
<PAGE>
Entry into a closing purchase transaction will result in capital gain or
loss. If an option written by the Fund is in-the-money at the time it was
written and the security covering the option was held for more than the long-
term holding period prior to the writing of the option, any loss realized as a
result of a closing purchase transaction will be long-term. The holding period
of the securities covering an in-the-money option will not include the period of
time the option is outstanding.
If the Fund writes an equity call option<F3> other than a "qualified
covered call option,' as defined in the Internal Revenue Code, any loss on such
option transaction, to the extent it does not exceed the unrealized gains on the
securities covering the option, may be subject to deferral until the securities
covering the option have been sold.
A futures contract held until delivery results in capital gain or loss
equal to the difference between the price at which the futures contract was
entered into and the settlement price on the earlier of delivery notice date or
expiration date. If the Fund delivers securities under a futures contract, the
Fund also realizes a capital gain or loss on those securities.
For Federal income tax purposes, the Fund generally is required to
recognize for each taxable year its net unrealized gains and losses as of the
end of the year on futures, futures options and non-equity options positions
("year-end mark-to-market"). Generally, any gain or loss recognized with
respect to such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and 40% short-term,
without regard to the holding periods of the contracts. However, in the case of
positions classified as part of a "mixed straddle," the recognition of losses
on certain positions (including options, futures and futures options positions,
the related securities and certain successor positions thereto) may be deferred
to a later taxable year. Sale of futures contracts or writing of call options
(or futures call options) or buying put options (or futures put options) that
are intended to hedge against a change in the value of securities held by the
Fund may affect the holding period of the hedged securities.
If the Fund were to enter into a short index future, short index futures
option or short index option position and the Fund's portfolio were deemed to
"mimic" the performance of the index underlying such contract, the option or
futures contract position and the Fund's stock positions may be deemed to be
positions in a mixed straddle, subject to the above-mentioned loss deferral
rules.
In order for the Fund to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities,
- --------------------
<F3> An equity option is defined to mean any option to buy or sell stock, and
any other option the value of which is determined by reference to an index of
stocks of the type that is ineligible to be traded on a commodity futures
exchange (e.g., an option contract on a sub-index based on the price of nine
hotel-casino stocks). The definition of equity option excludes options on broad-
based stock indexes (such as the Standard & Poor's 500 index).
<PAGE>
and gains from the sale of securities or foreign currencies, or other income
(including but not limited to gains from options, futures, or forward
contracts). In addition, gains realized on the sale or other disposition of
securities held for less than three months must be limited to less than 30% of
the Fund's annual gross income. Any net gain realized from futures (or futures
options) contracts will be considered gain from the sale of securities and
therefore be qualifying income for purposes of the 90% requirement. In order to
avoid realizing excessive gains on securities held less than three months, the
Fund may be required to defer the closing out of certain positions beyond the
time when it would otherwise be advantageous to do so.
The Fund intends to distribute to shareholders annually any capital gains
that have been recognized for Federal income tax purposes (including year-end
mark-to-market gains) on options and futures transactions, together with gains
on other Fund investments, to the extent such gains exceed recognized capital
losses and any net capital loss carryovers of the Fund. Shareholders will be
advised of the nature of such capital gain distributions.
Portfolio Turnover
Under normal market conditions, the Fund's portfolio turnover rate will
vary from year to year, but is expected to be below 50%. Portfolio turnover can
occur for a number of reasons such as general conditions in the securities
markets, more favorable investment opportunities in other securities, or other
factors relating to the desirability of holding or changing a portfolio
investment. Because of the Fund's emphasis on minimizing the recognition of
ordinary income, the Fund intends to keep portfolio turnover low. A high rate
of portfolio turnover in the Fund, if it should occur, would result in increased
transaction expense, which must be borne by the Fund. High portfolio turnover
also may result in the realization of capital gains or losses and, to the extent
net short-term capital gains are realized, any distributions resulting from such
gains will be considered ordinary income for Federal income tax purposes. See
"Taxes" in the prospectus, and "Additional Tax Information" in this statement
of additional information.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions (which may not
be changed without the approval of a majority of the Fund's outstanding shares),
under which the Fund may not:
1. with respect to 75% of its total assets, invest more than 5% of its
total assets, taken at market value at the time of a particular purchase, in the
securities of a single issuer, except for securities issued or guaranteed by the
Government of the U.S. or any of its agencies or instrumentalities or repurchase
agreements for such securities;
2. acquire more than 10%, taken at the time of a particular purchase, of
the outstanding voting securities of any one issuer;
3. act as an underwriter of securities, except insofar as it may be
deemed an underwriter for purposes of the Securities Act of 1933 on disposition
of securities acquired subject to legal or contractual restrictions on resale;
<PAGE>
4. purchase or sell real estate (although it may purchase securities
secured by real estate or interests therein, or securities issued by companies
which invest in real estate or interests therein), commodities, or commodity
contracts, except that it may enter into (a) futures and options on futures and
(b) forward contracts;
5. make loans, but this restriction shall not prevent the Fund from (a)
investing in debt securities, (b) investing in repurchase agreements, or (c)
lending portfolio securities, provided that it may not lend securities if, as a
result, the aggregate value of all securities loaned would exceed 33 1/3% of its
total assets (taken at market value at the time of such loan);<F4>
6. borrow (including entering into reverse repurchase agreements), except
that it may (a) borrow up to 33 1/3% of its total assets, taken at market value
at the time of such borrowing, as a temporary measure for extraordinary or
emergency purposes, but not to increase portfolio income and (b) enter into
transactions in options, futures, and options on futures;<F5>
7. invest in a security if more than 25% of its total assets (taken at
market value at the time of a particular purchase) would be invested in the
securities of issuers in any particular industry, except that this restriction
does not apply to securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities; or
8. issue any senior security except to the extent permitted under the
Investment Company Act of 1940.
The Fund's investment objective is not a fundamental restriction and,
therefore, a change in the objective is not subject to shareholder approval.
However, investors in the Fund will receive written notification at least 30
days' prior to any change in the Fund's investment objective.
Non-Fundamental Restrictions
- ----------------------------
The Fund also is subject to the following non-fundamental restrictions and
policies, which may be changed by the board of trustees, without shareholder
approval.
The Fund may not:
a. invest in companies for the purpose of exercising control or
management;
b. invest more than 10% of its total assets (valued at time of purchase)
in securities of foreign issuers;
- -------------------
<F4> The Fund has no present intention of investing in repurchase agreements or
lending portfolio securities.
<F5> The Fund will not purchase securities when total borrowings by the Fund are
greater than 5% of its net asset value.
<PAGE>
c. purchase securities on margin (except for use of short-term credits as
are necessary for the clearance of transactions), or sell securities short
unless (i) the Fund owns or has the right to obtain securities equivalent in
kind and amount to those sold short at no added cost or (ii) the securities sold
are "when issued" or "when distributed" securities which the Fund expects to
receive in recapitalization, reorganization, or other exchange for securities
the Fund contemporaneously owns or has the right to obtain and provided that
transactions in options, futures, and options on futures are not treated as
short sales; or
d. invest more than 15% of its net assets (taken at market value at the
time of each purchase) in illiquid securities, including repurchase agreements
maturing in more than seven days.
In addition, the Investment Company Act of 1940 requires that the Fund not
(i) purchase more than 3% of the stock of another investment company or (ii)
purchase stock of other investment companies equal to more than 5% of the Fund's
total assets (valued at time of purchase) in the case of any one other
investment company or (iii) purchase stock of other investment companies equal
to more than 10% of the Fund's total assets (valued at time of purchase) in the
case of all other investment companies in the aggregate.
PERFORMANCE INFORMATION
From time to time the Fund may quote total return figures. Total return
for a period is the percentage change in value during the period of an
investment in shares of a fund, including the value of shares acquired through
reinvestment of all dividends and capital gains distributions. An average
annual total return for a given period may be computed by finding the average
annual compounded rate that would equate a hypothetical initial amount invested
of $1,000 to the value of that investment that could be redeemed at the end of
the period, assuming reinvestment of all distributions. Average annual total
return is computed as follows:
n
ERV = P(l+T)
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the period, at
the end of the period (or fractional portion thereof)
The Fund's Total Return for the period December 27, 1996 (commencement of
operations) through June 30, 1997 was 6.9%. The Fund will not quote Average
Annual Return until it has been in operation more than 12 months.
The Fund imposes no sales charges and pays no distribution expenses.
Income taxes are not taken into account. Performance figures quoted by the Fund
are not necessarily indicative of future results. The Fund's performance is a
function of conditions in the securities markets,
<PAGE>
portfolio management and operating expenses. Although information about past
performance is useful in reviewing the Fund's performance and in providing some
basis for comparison with other investment alternatives, it should not be used
for comparison with other investments using different reimbursement assumptions
or time periods.
In advertising and sales literature, the performance of the Fund may be
compared with that of other mutual funds, indexes or averages of other mutual
funds, indexes of related financial assets or data, other accounts, limited
liability investment companies or partnerships managed or advised by the
Adviser, and other competing investment and deposit products available from or
through other financial institutions. The composition of these indexes,
averages or accounts differs from that of the Fund. The comparison of the Fund
to an alternative investment should consider differences in features and
expected performance.
All of the indexes and averages noted below will be obtained from the
indicated sources or reporting services, which the Fund generally believes to be
accurate. The Fund also may note (or provide reprints of articles or charts
containing) its mention (including performance or other comparative rankings) in
newspapers, magazines, or other media from time to time. However, the Fund
assumes no responsibility for the accuracy of such data. Newspapers and
magazines which might mention the Fund include, but are not limited to, the
following:
Business Week Money
Changing Times The Mutual Fund Letter
Chicago Mutual Fund Values (Morningstar)
Chicago Tribune Newsweek
Chicago Sun-Times The New York Times
Crain's Chicago Business Pensions and Investments
Consumer Reports Personal Investor
Consumer Digest Smart Money
Financial World Stanger Reports
FA Advisor Time
Forbes USA Today
Fortune U.S. News and World Report
Institutional Investor The Wall Street Journal
Investor's Daily Worth
Los Angeles Times
When a newspaper, magazine, or other publication mentions the Fund, such
mention may include: (i) listings of some or all of the Fund's holdings; (ii)
descriptions of characteristics of some or all of the securities held by the
Fund, including price-earnings ratios, earnings, growth rates and other
statistical information, and comparisons of that information to similar
statistics for the securities comprising any of the indexes or averages listed
below; and (iii) descriptions of the Fund's or a portfolio manager's economic
and market outlook, generally and for the Fund.
The Fund may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation.
<PAGE>
The performance of the Fund may be compared to stock market indexes or
averages, including the following widely recognized indicators of general U.S.
stock market results:
Russell Mid-Cap Stock Index
Russell Mid-Cap Growth Index
Russell 1,000 Index
Russell 1,000 Growth Index
Standard & Poor's 500 Stock Index
Standard & Poor's Mid-Cap 400 Index
S&P/Barra Mid-Cap Growth Index
The Fund's performance may also be compared to mutual fund industry indexes
or averages, including the following: Value Line Index; Lipper Capital
Appreciation Fund Average; Lipper Growth Funds Average; Lipper General Equity
Funds Average; Lipper Equity Funds Average; Lipper Mid-Cap Average; Morningstar
Growth Average; Morningstar Aggressive Growth Average; Morningstar U.S.
Diversified Average; Morningstar Equity Fund Average; Morningstar Hybrid Fund
Average; Morningstar All Equity Funds Average; and Morningstar General Equity
Average; Morningstar MidCap/Value Average.
The Lipper and Morningstar averages are unweighted averages of total return
performance of mutual funds as classified, calculated, and published by Lipper
and by Morningstar, Inc. ("Morningstar"), respectively. The Fund may also use
comparative performance as computed in a ranking by Lipper or category averages
and rankings provided by another independent service. Should Lipper or another
service reclassify the Fund to a different category or develop (and place the
Fund into) a new category, the Fund may compare its performance or ranking
against other funds in the newly assigned category, as published by the service.
Moreover, the Fund may compare its performance or ranking against all funds
tracked by Lipper or another independent service, and may cite its rating,
recognition or other mention by Morningstar or any other entity. Morningstar's
rating system is based on risk-adjusted total return performance and is
expressed in a star-rating format. The risk-adjusted number is computed by
subtracting the Fund's risk score (which is a function of the Fund's monthly
returns less the 3-month Treasury bill return) from the Fund's load-adjusted
total return score. This numerical score is then translated into rating
categories, with the top 10% labeled five star, the next 22.5% labeled four
star, the next 35% labeled three star, the next 22.5% labeled two star and the
bottom 10% one star. A high rating reflects either above-average returns or
below-average risk, or both.
To illustrate the historical returns on various types of financial assets,
the Fund may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or
obtains) very long-term (since 1926) total return data (including, for example,
total return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types: common
stocks, small company stocks, long-term corporate bonds, long-term government
bonds, intermediate-term government bonds and U.S. Treasury bills. Similarly,
the Fund may use Ibbotson's historical data regarding the Consumer Price Index.
The Fund may also use historical data compiled by
<PAGE>
sources believed by the Fund
to be accurate, illustrating the past performance of small-capitalization
stocks, large-capitalization stocks, common stocks, equity securities, growth
stocks (small-capitalization, large-capitalization, or both) and value stocks
(small-capitalization, large-capitalization, or both).
MANAGEMENT OF THE FUND
Trustees and officers of the Trust, and their principal business
occupations during at least the last five (5) years, are shown below. Trustees
deemed to be "interested persons" of the Trust for purposes of the Investment
Company Act of 1940 are indicated with an asterisk.
Positions Held Principal Occupations
Name and Age with Registrant During Past 5 Years
- ------------ --------------- ---------------------
Richard M. Burridge Chairman Chairman, The Burridge
(68) Group LLC, since September
1996, and president prior thereto.
Kenneth M. Arenberg* Trustee, President Vice Chairman, The Burridge
(67) and Treasurer Group LLC, since September 1996,
and executive vice president prior
thereto.
J. Thomas Hurvis Trustee Chairman, Old World Industries, Inc.
(59)
Angelo L. Spoto Trustee Private investor, 1990 to present;
(68) Senior Vice President - Investments,
Blunt, Ellis & Loewi, Inc., prior
thereto.
Robert L. Underwood Trustee Executive Vice President, North
(52) American Business Development
Companies, LLC.
John H. Streur, Jr. Senior Vice President, The Burridge Group LLC
(37) President and since September 1996, and vice
Secretary president and director of marketing
prior thereto.
Robert L. Worthington Vice President Senior Vice President, The Burridge
(37) Group LLC since September 1996,
and vice president, September 1993 to
September 1996; Vice
President-Corporate Finance,
Westpac Banking Corporation
September 1990 to August 1993.
<PAGE>
Positions Held Principal Occupations
Name and Age with Registrant During Past 5 Years
- ------------ --------------- ----------------------
Bradley P. Schluter Vice President Vice President, The Burridge
(39) Group LLC, November 1995 to
present; Vice President-Marketing,
Nicholas Applegate Capital
Management, February 1991 to
November 1995
References in the preceding table to The Burridge Group LLC include its
predecessor, The Burridge Group Inc., for periods prior to January 1, 1997.
The only compensation paid to trustees and officers of the Trust for their
services as such consists of a fee of $500 per meeting of the board or any
committee thereof attended, paid to trustees who are not interested persons of
the Trust or the Adviser. The Trust has no retirement or pension plans.
The following table sets forth compensation by the Trust during the fiscal
year ending June 30, 1997 to each of the trustees of the Trust. The Trust is
not part of a complex of mutual funds.
AGGREGATE
COMPENSATION
NAME OF TRUSTEE FROM TRUST
--------------- ------------
Kenneth M. Arenberg $ 0
J. Thomas Hurvis $ 500
Angelo L. Spoto $1,000
Robert L. Underwood $1,000
At August 1, 1997, the following persons owned 5% or more of the Fund's
outstanding shares:
Name and Address Shares % Outstanding
---------------- ------ --------------
Kenneth M. Arenberg 5,000 14.81%
The Burridge Group LLC
115 S. LaSalle Street
Chicago, IL 60603
<PAGE>
Name and Address Shares % Outstanding
---------------- ------ -------------
Richard M. Burridge 5,000 14.81%
The Burridge Group LLC
115 S. LaSalle Street
Chicago, IL 60603
J. Thomas Hurvis 23,764.26 70.38%
Old World Industries, Inc.
4065 Commercial Avenue
Northbrook, IL 60062
INVESTMENT ADVISORY SERVICES
The Burridge Group LLC (the "Adviser") provides investment advisory
services to the Fund pursuant to an Investment Advisory Agreement dated December
31, 1996 (the "Advisory Agreement"). The Adviser employs a growth oriented
investment approach in creating a diversified portfolio of equities for
corporate, public and Taft-Hartley pension plans, endowments, foundations and
private investors. As of August 1, 1997 it managed over $1.4 billion in assets
for clients, including over $400 million for taxable accounts.
In return for its services the Adviser is paid a monthly fee from the Fund
based on the Fund's average daily net assets. Under the Advisory Agreement, the
Fund pays the Adviser a fee, accrued daily and paid monthly, at the annual rates
of 1.00% of the first $500 million of its average daily net assets, 0.85% of the
next $500 million, and 0.75% of average daily net assets in excess of $1
billion.
The advisory fees accrued by the Fund to the Adviser during the period
December 27, 1996 (commencement of operations) through June 30, 1997 aggregated
$1,330. During the same period, the Adviser reimbursed the Fund for operating
expenses in excess of the Adviser's expense limitation in the aggregate amount
of $77,648.
The Agreement provides that the Adviser shall not be liable for any loss
suffered by the Trust or its shareholders as a consequence of any act or
omission in connection with investment advisory or portfolio services under the
Advisory Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence on the part of the Adviser in the performance of its duties or from
reckless disregard by the Adviser of its obligations and duties under the
Advisory Agreement.
The Advisory Agreement expires in December 1998, but may be continued from
year to year only so long as the continuance of each is approved annually (a) by
the vote of a majority of the trustees of the Trust who are not "interested
persons' of the Trust or the Adviser cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the board of
<PAGE>
trustees of the Trust or by the vote of a majority (as defined in the 1940 Act)
of the outstanding shares of the Fund. The Advisory Agreement is terminable
without penalty, on 60 days' notice, by the trustees of the Trust or by vote of
a majority of the outstanding shares of the Fund, or, on not less than 90 days'
notice, by the Adviser. The Advisory Agreement automatically terminates in the
event of its assignment (as defined in the 1940 Act).
The Adviser employs a team of investment professionals who participate in
investment strategy formulation and issue selection. The individual responsible
for overseeing the implementation of the Adviser's strategy for the Fund is
Richard M. Burridge.
Mr. Burridge is chairman and chief investment officer of the Adviser. He
has been engaged in the investment management business since 1974 and, with
Kenneth M. Arenberg, founded the Adviser's predecessor in 1986. Mr. Burridge
holds a B.S. from the University of Colorado and is a Chartered Financial
Analyst.
The Adviser is a Delaware limited liability company the Member Manager of
which is The Burridge Group Inc., an Illinois corporation ("Burridge Inc.").
Presently, seven principals, including Richard M. Burridge and Kenneth M.
Arenberg, hold member interests in the Adviser representing an interest in the
aggregate of 45% of the Adviser's profits, subject to reduction under certain
conditions. The remaining interest in the profits of the Adviser is owned by
Affiliated Managers Group, Inc. ("AMG"). AMG is a Boston-based private
holding company that makes equity investments in investment management firms in
which management personnel retain a significant interest in the future of the
business. Burridge Inc. is a wholly owned subsidiary of AMG.
AMG is a Delaware corporation which has its offices at Two International
Place, Boston, MA 02110. AMG may be deemed to have as its parent, Advent VII,
L.P., a Delaware limited partnership, because Advent VII, L.P. owns greater than
fifty percent of the voting stock of AMG. Advent VII, L.P. may be deemed to
have, as its parent, its sole general partner - TA Associates VII, L.P., which
is a Delaware limited partnership, and which in turn may be deemed to have, as
its parent, its sole general partner - TA Associates, Inc., a Delaware
corporation. The address of each of Advent VII, L.P., TA Associated VII, L.P.
and TA Associates, Inc., is c/o TA Associates, Inc., High Street Tower, Suite
2500, 125 High Street, Boston, MA 02110. AMG has advised the Trust that TA
Associates, Inc., which was founded in 1968, has invested directly or indirectly
in over 200 enterprises prior to its investment in AMG.
The offices of the Adviser are located at 115 South LaSalle Street,
Chicago, Illinois 60603.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Portfolio transactions are placed with those securities brokers and dealers
that the Adviser believes will provide the best value in transaction and
research services either in a particular transaction or over a period of time.
Although some transactions involve only brokerage services, many involve
research services as well.
<PAGE>
In valuing brokerage services, the Adviser makes a judgment as to which
brokers are capable of providing the most favorable net price (not necessarily
the lowest commission considered alone) and the best execution in a particular
transaction. Best execution connotes not only general competence and
reliability of a broker, but specific expertise and effort of a broker in
overcoming the anticipated difficulties in fulfilling the requirements of
particular transactions, because the problems of execution and the required
skills and effort vary greatly among transactions.
In valuing research services, the Adviser makes a judgment of the
usefulness of the research information provided by a broker to the Adviser in
managing the Fund. Although the information, e.g., data or recommendations
concerning particular securities, sometimes relates to the specific transaction
placed with the broker, the research predominately consists of a wide variety of
information concerning companies, industries, investment strategy, and economic,
financial and political conditions and prospects useful to the Adviser in
advising the Fund and other accounts.
The reasonableness of brokerage commissions paid in relation to transaction
and research services received is evaluated by the staff of the Adviser on an
ongoing basis. The general level of brokerage charges and other aspects of the
portfolio transactions for the Fund are reviewed periodically by Trust's board
of trustees.
The Adviser is the principal source of information and advice to the Fund
and is responsible for making and initiating the execution of investment
decisions. However, the board of trustees recognizes that it is important for
the Adviser, in performing its responsibilities to the Fund, to continue to
receive and evaluate the broad spectrum of economic and financial information
which many securities brokers have customarily furnished in connection with
brokerage transactions, and that in compensating brokers for their services, it
is in the interest of the Fund to take into account the value of the information
received for use in advising the Fund. Consequently, the Adviser is authorized
to allocate the orders placed by it on behalf of the Trust to brokers and
dealers who provide research services to the Trust or the Adviser and the
commission paid to a broker providing research services may be greater than the
amount of commission another broker would charge for the same transaction. The
extent, if any, to which receipt of such information may reduce the expenses of
the Adviser in providing management services to the Fund is not determinable.
In addition, the board of trustees understands that other clients of the Adviser
also may benefit from the information obtained for the Fund, in the same manner
that the Fund also may benefit from information obtained by the Adviser in
performing services for others.
Transactions of the Fund in the over-the-counter market and the third
market are executed with primary market makers acting as principals except where
it is believed that better prices and execution may be obtained from others.
Consistent with the National Association of Securities Dealers, Inc.
Conduct Rules and subject to the policy of seeking the best price and execution
as stated above, sales of shares of the
<PAGE>
Fund by a broker-dealer may be considered by the Adviser in the selection of
broker-dealers to execute portfolio transactions for the Fund.
Although investment decisions for the Fund are made independently from
those for other investment advisory clients of the Adviser, the same investment
decision may be made for both the Fund and one or more other advisory clients.
If both the Fund and other clients purchase or sell the same class of securities
on the same day, the transactions will be allocated as to amount and price in a
manner considered equitable to each.
The Adviser may place brokerage transactions with brokers affiliated with
the distributor, Funds Distributor, Inc. Commissions paid to such brokers on
any transaction will not exceed those paid by the Fund in similar transactions
to other brokers.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions are discussed in the prospectus under the
headings "Purchasing Shares," "Redeeming Shares," "Shareholder Services,"
and "Net Asset Value." All of that information is incorporated herein by
reference.
You may purchase (or redeem) shares of the Fund through investment dealers,
banks, or other institutions. However, these institutions may charge for their
services or place limitations on the extent to which you may use the services
offered by the Fund. The Fund imposes no charges other than those described in
the Prospectus and this Statement of Additional Information if shares are
purchased (or redeemed) directly from the Fund.
NET ASSET VALUE. The net asset value of the shares of the Fund is
determined as of the close of regular session trading on the New York Stock
Exchange ("NYSE") (currently 3:00 p.m., Central time) each day the NYSE is
open for trading. The net asset value per share of the Fund is determined by
dividing the value of all its securities and other assets, less its liabilities,
by the number of shares of the Fund outstanding.
Investments are stated at current value. Securities listed or admitted to
trading on a national securities exchange or the Nasdaq National Market are
valued at the last sales price or, if there has been no sale that day, at the
mean between the most recent bid and asked prices. Other securities traded
over-the-counter are valued at the mean between the last reported bid and asked
prices. Money market instruments with sixty days or less remaining from the
valuation date until maturity are valued on an amortized cost basis. Securities
or other assets for which market quotations are not readily available will be
valued at a fair value as determined in good faith by or under the direction of
Trust's board of trustees.
The NYSE is currently closed on weekends and on the following holidays:
New Year's Day, Washington's Birthday, Martin Luther King's Birthday, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
REDEMPTION IN KIND. The Fund intends to pay all redemptions in cash and is
obligated to redeem shares solely in cash up to the lesser of $250,000 or one
percent of the net assets of the
<PAGE>
Fund during any 90-day period for any one shareholder. However, redemptions in
excess of such limit may be paid wholly or partly by a distribution in kind of
readily marketable securities. If redemptions are made in kind, the redeeming
shareholders might incur brokerage fees in selling the securities received in
the redemptions.
TAXES
The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, and thus not be subject to federal
income taxes on amounts which it distributes to shareholders.
GENERAL INFORMATION
ADMINISTRATOR. Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202 (the "Administrator") is the Fund's Administrator. The Fund
Administration Servicing Agreement entered into between the Fund and the
Administrator relating to the Fund (the "Administration Agreement") will
remain in effect until terminated by either party. The Administration Agreement
may be terminated at any time, without the payment of any penalty, by the Board
of Trustees of the Fund upon the giving of ninety (90) days' written notice to
the Administrator, or by the Administrator upon the giving of ninety (90) days'
written notice to the Fund.
Under the Administration Agreement, the Administrator shall exercise
reasonable care and is not liable for any error or judgment or mistake of law or
for any loss suffered by the Corporation in connection with the performance of
the Administration Agreement, except a loss resulting from willful misfeasance,
bad faith or negligence on the part of the Administrator in the performance of
its duties under the Administration Agreement.
CUSTODIAN AND FUND ACCOUNTING AGENT. Firstar Trust Company ("Firstar"),
P.O. Box 701, Milwaukee, Wisconsin 53201, acts as Custodian of the securities
and other assets of the Fund. As Custodian, Firstar is responsible for, among
other things, safeguarding and controlling the Fund's cash and securities,
handling the receipt and delivery of securities, and collecting interest and
dividends on the Fund's investments. Firstar also performs portfolio accounting
services for the Fund. Firstar is not an affiliate of the Adviser or its
affiliates.
In addition the Fund has entered into a Fund Accounting Services Agreement
with Firstar Trust Company pursuant to which Firstar Trust Company has agreed to
maintain the financial accounts and records of the Fund and provide other
accounting services to the Fund.
TRANSFER AGENT. Firstar Trust Company also serves as transfer agent and
dividend disbursing agent for the Fund under a Transfer Agency Agreement. As
transfer and dividend disbursing agent, Firstar Trust Company has agreed to (i)
issue and redeem shares of the Fund, (ii) make dividend and other distributions
to shareholders of the Fund, (iii) respond to correspondence by Fund
shareholders and others relating to its duties, (iv) maintain shareholder
accounts, and (v) make periodic reports to the Fund.
<PAGE>
AUDITORS. Arthur Andersen LLP, 33 West Monroe Street, Chicago, Illinois
60603 serves as the Trust's independent public accountants, providing services
including (i) audit of the annual financial statements, (ii) assistance and
consultation in connection with Securities and Exchange Commission filings, and
(iii) review of the annual income tax returns filed on behalf of the Fund.
DISTRIBUTOR. The shares of the Fund are offered for sale on a continuous
basis through Funds Distributor, Inc. ("Distributor"), 60 State Street,
Boston, Massachusetts 02109, without any sales commissions or charges to the
Fund or to their shareholders. The Distributor acts pursuant to a written
Distribution Agreement with the Trust which expires in December, 1998, but may
continue from year to year thereafter, provided such continuance is approved
annually (i) by a majority of the trustees or by a majority of the outstanding
voting securities of the affected Fund and (ii) by a majority of the trustees
who are not parties to the Agreement or interested persons of any such party.
The Adviser pays the fees and expenses of the Distributor and all sales and
promotional expenses from its own resources.
As agent, the Distributor offers the Fund's shares only on a best-efforts
basis. The Distributor offers shares of the Fund to investors at net asset
value, without sales commissions, sales loads or other sales charges.
FINANCIAL STATEMENTS
The 1997 annual report to shareholders of the Fund, a copy of which
accompanies this Statement of Additional Information, contains financial
statements, notes thereto, supplementary information entitled "Financial
Highlights," and a report of independent accountants, all of which (but no
other part of the annual report) are incorporated herein by reference.
Additional copies of the annual report may be obtained at no charge by writing
or telephoning Burridge Funds at the address and telephone number on the cover
page of this Statement of Additional Information.
<PAGE>
