AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 2000
REGISTRATION FILE NOS. 2-17226, 811-994
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 70 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 32 [X]
(CHECK APPROPRIATE BOX OR BOXES)
BURNHAM INVESTORS TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1325 AVENUE OF THE AMERICAS, 26TH FLOOR
NEW YORK, NEW YORK 10019
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(800) 874-FUND
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
JON M. BURNHAM
1325 AVENUE OF THE AMERICAS, 26TH FLOOR
NEW YORK, NEW YORK 10019
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
PAMELA J. WILSON, ESQ.
HALE AND DORR LLP
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
[X] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (B)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (A)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)
[ ] ON PURSUANT TO PARAGRAPH (A)(2) OF RULE 485
<PAGE>
May 1, 2000
PROSPECTUS
- --------------------------------------------------------------------------------
Burnham Fund
Burnham Dow 30 'sm' Focused Fund
Burnham Financial Services Fund
THE BURNHAM FAMILY OF FUNDS
Burnham Small Cap Value Fund
Burnham Money Market Fund
Burnham U.S. Treasury Money Market Fund
- --------------------------------------------------------------------------------
As with all mutual funds, the Securities and Exchange Commission does not
approve or disapprove these shares or say whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
[BURNHAM FINANCIAL GROUP LOGO]
<PAGE>
[LOGO]
TABLE OF CONTENTS
THE FUNDS
Profiles of the principal strategies and risks of each fund
Burnham Fund................................................ 2
Burnham Dow 30 'sm' Focused Fund............................ 6
Burnham Financial Services Fund............................. 9
Burnham Money Market Fund................................... 12
Burnham U.S. Treasury Money Market Fund..................... 15
THE INVESTMENT ADVISER.......................................... 18
YOUR ACCOUNT
Instructions and information on investing in the funds
Choosing A Share Class...................................... 20
How To Buy Shares........................................... 22
How To Exchange And Redeem Shares........................... 23
Transaction Policies........................................ 24
Tax Considerations And Distributions........................ 26
Dow Jones Disclaimer........................................ 27
FINANCIAL HIGHLIGHTS
Fund Performance Data
Burnham Fund................................................ 29
Burnham Dow 30 'sm' Focused Fund............................ 30
Burnham Financial Services Fund............................. 31
Burnham Money Market Fund................................... 32
Burnham U.S. Treasury Money Market Fund..................... 33
WHERE TO GET MORE INFORMATION
......................................................BACK COVER
Each of the Burnham funds has its
own risk profile, so be sure to read
this prospectus carefully before
investing in any of the funds.
Mutual funds are not bank accounts
and are neither insured nor
guaranteed by the FDIC or any other
government agency. An investment in
any mutual fund entails the risk of
losing money.
<PAGE>
THE BURNHAM FAMILY OF FUNDS
Burnham Asset Management was founded in 1989 and today,
together with the Burnham Securities Inc., manages
approximately $3 billion in assets for investors. The Burnham
Fund was created in 1975 and has been guided by the same
investment team since inception.
The Burnham family of funds has recently expanded to offer
greater flexibility to investors. All the funds share Burnham's
fundamental philosophy of prudent investment and risk
management through all phases of the economic cycle.
THE FUNDS 1
<PAGE>
BURNHAM FUND
TICKER SYMBOL:
BURHX
PORTFOLIO MANAGER
Jon M. Burnham has had primary day-to-day responsibility for the fund's
portfolio since 1995. Mr. Burnham is president, chief executive officer and
chairman of the board of trustees of the fund and the chairman and chief
executive officer of the adviser and distributor.
IS THIS FUND FOR YOU?
Burnham Fund is best suited for investors who:
- Want the relative stability of investments in large-capitalization companies
with some of the growth opportunities of smaller companies
- Seek capital growth with
a focus on risk management
- Are investing for the
long term
THE FUND SEEKS CAPITAL APPRECIATION, MAINLY LONG-TERM. INCOME IS GENERALLY
OF LESSER IMPORTANCE, MEANING THAT IT IS A SECONDARY GOAL.
MAIN STRATEGIES
- --------------------------------------------------------------------------------
The fund pursues its goal by investing in a diverse portfolio of common stocks.
The fund will invest predominately in large-capitalization companies.
HOW THE FUND SELECTS SECURITIES
In managing the fund's stock portfolio, the manager first uses sector research,
which focuses on selecting the industries the fund will invest in (top-down
research). The fund seeks to reduce risk by diversifying across many different
industries and economic sectors. In the past, the fund has tended to favor the
following sectors:
- Energy
- Finance
- Health Care
- Services
- Technology
The fund may emphasize different sectors in the future.
In selecting individual stocks, the manager looks for companies that appear to
have the following characteristics:
- Potential for sustained earnings growth of at least 15%-20%
per year
- Product leadership and strong management teams that focus on
enhancing shareholder value
- Companies with histories of paying regular dividends
- Securities that appear undervalued by the market or that seem
to be poised to benefit from restructuring or similar business
changes
Although the fund typically favors large "blue-chip" companies, it will consider
opportunities in medium- and small-capitalization companies that meet its
selection criteria.
THE FUNDS 2
<PAGE>
OTHER INVESTMENTS
The fund may also invest in debt securities of any maturity, duration or credit
quality (including junk bonds) from any government or corporate issuer. The fund
generally invests in short- to medium-term corporate bonds and maintains an
average portfolio credit rating of A.
The fund may invest without limit in dollar-denominated foreign securities but
only up to 15% of its total assets in non-dollar foreign securities. The fund
may make limited investments in derivative instruments. Derivatives are a type
of investment whose value is based on other securities or market indices.
Under normal conditions, the fund intends to remain fully invested. In
extraordinary conditions, the fund may invest extensively in cash or short-term
investment grade debt securities. In such circumstances, the fund would be
assuming a temporary defensive position and would not be pursuing its goal.
MAIN RISKS
- --------------------------------------------------------------------------------
The main risk of this fund is a downturn in the stock market, and particularly
in stocks of large-capitalization companies. The fund's investments in debt
securities will generally fall in value when interest rates rise.
Any of the following situations could cause the fund to lose money or
underperform in comparison with its peer group:
- Any of the categories of securities that the fund
emphasizes--large-capitalization stocks or particular
sectors--could fall out of favor with the market.
- Companies in the fund's portfolio could fail to achieve
earnings estimates or other market expectations, causing their
stock prices to drop.
- The fund's management strategy or securities selection methods
could prove less successful than anticipated.
- A bond issuer could be downgraded in credit rating or go into
default. The risk of default and the price volatility
associated with it are greater for junk bonds.
- If any of the fund's bonds are redeemed substantially earlier
or later than expected, performance could suffer.
- Investments in derivatives could magnify any of the fund's
gains or losses.
- Foreign investments present additional risks compared with
domestic investments. These may include:
- Unfavorable currency exchange rates
- Inadequate financial information
- Political and economic upheavals
These risks are greater in emerging markets.
DEFINITION OF
LARGE-CAPITALIZATION STOCKS
Large-capitalization stocks (commonly known as "blue-chip") are usually issued
by well established companies. These companies maintain a sound financial base
and offer a variety of product lines and businesses. As compared with smaller-
capitalization companies, securities of large companies historically have
involved less market risk and lower long-term market returns. Their stock prices
tend to rise and fall less dramatically than those of smaller-capitalization
companies.
This fund considers a stock to be a large-capitalization stock if its total
market capitalization (the value of all of its outstanding shares) is $8.5
billion or more.
THE FUNDS 3
<PAGE>
PAST PERFORMANCE
The chart and table below describe the fund's performance history. All mutual
funds present this information so that you can compare funds more readily. Bear
in mind that past performance is not a guarantee of future performance.
The bar chart shows the fund's annual total returns for the last ten years.
Returns for the fund's single best and single worst quarters give some
indication of how widely short-term performance has varied. These figures would
be lower if they reflected sales charges.
RETURN FOR CLASS A SHARES
[PERFORMANCE GRAPGH]
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
(1.76%) 17.98% 7.70% 9.35% (1.77%) 24.45% 17.60% 24.74% 22.08% 32.71%
BEST QUARTER: 22.87% IN 4TH QUARTER OF 1999
WORST QUARTER: (13.36%) IN 3RD QUARTER OF 1998
The table presents the fund's average annual returns over 1, 5 and 10 years for
each share class and the life of class for Class B shares along with those of
recognized U.S. common stock and bond indices. The fund's performance figures
assume that all distributions were reinvested in the fund. The performance
calculations reflect the deduction of the maximum sales charges and annual fund
operating expenses.
AVERAGE ANNUAL RETURNS
<TABLE>
<S> <C> <C> <C> <C>
Class B:
For the following periods ending 12/31/99 1 year 5 years 10 years inception*
CLASS A SHARES 26.08% 22.95% 14.18% --
CLASS B SHARES 27.60% 23.26% -- 17.70%
S & P 500 INDEX 21.04% 28.54% 18.20% 22.89%
LEHMAN GOV/CORP BOND INDEX (2.15)% 7.61% 7.60% 5.39%
</TABLE>
The S&P 500 Index includes the common stocks of 500 large U.S. companies.
The Lehman Brothers Government/Corporate Bond Index includes U.S. government and
corporate bonds. Both are unmanaged.
*Class B shares commenced operations on 10/18/93; their performance is compared
to index figures that begin on 11/1/93.
THE FUNDS 4
<PAGE>
FEES AND EXPENSES
The table below describes the fees and expenses you could expect as an investor
in this fund. SHAREHOLDER FEES are one-time expenses charged directly to you.
ANNUAL FUND OPERATING EXPENSES come out of fund assets, and are reflected in the
fund's total return.
FEE TABLE
Class A Class B
SHAREHOLDER FEES
fees paid directly from your investment
Maximum front-end sales charge (load) 5.00% NONE
% of offering price
Maximum contingent deferred sales charge NONE 5.00%
% of offering price or the amount you
receive when you sell shares, whichever is less
ANNUAL FUND OPERATING EXPENSES
expenses that are deducted from fund assets
Management fees 0.60% 0.60%
Distribution (12b-1) fees 0.25% 1.00%
Other expenses(1) 0.59% 0.59%
- --------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES(1) 1.44% 2.19%
(1)The adviser has agreed to cap the annual fund operating expenses, although it
may change or drop the cap at any time. With the cap, actual expenses are
projected to be:
Management fees 0.60% 0.60%
Distribution (12b-1) fees 0.25% 1.00%
Other expenses 0.49% 0.49%
- --------------------------------------------------------------------------------
Net Annual Fund Operating Expenses 1.34% 2.09%
Example
This example shows what you could pay in expenses over time. To help you compare
this fund's expenses with those of other funds, the example uses the same
hypothetical assumptions as other mutual fund prospectuses:
- $10,000 original investment
- 5% annual return
- No changes in operating expenses
- Reinvestment of all dividends and distributions
1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------
Class A $ 639 $ 933 $ 1,248 $ 2,138
Class B with redemption $ 622 $ 985 $ 1,275 $ 2,334
Class B without redemption $ 222 $ 685 $ 1,175 $ 2,334
Because actual returns and expenses may be different, this example is for
comparison purposes only. The 10 year figures for Class B shares assume the
conversion to Class A shares after eight years.
UNDERSTANDING SHAREHOLDER FEES
FRONT-END SALES CHARGE
An amount charged for the sale of some fund shares, usually sold by a broker or
sales professional. A sales charge or load is reflected in the asked or offering
price.
ASKED OR OFFERING PRICE
The price at which the fund's shares may be purchased. The asked or offering
price includes the current net asset value plus any sales charge.
CONTINGENT DEFERRED SALES CHARGE
A fee imposed when shares are redeemed during the first few years of ownership.
Please refer to "Choosing a Share Class" on page 20 for further information on
alternative purchase arrangements.
UNDERSTANDING FUND EXPENSES
MANAGEMENT FEES
Fee paid to the adviser for
the supervision of the fund's
investment program.
RULE 12b-1 FEES
Under SEC Rule 12b-1, mutual funds may use some of their assets to pay
commissions to brokers, other marketing expenses and shareholder service fees.
You should take 12b-1 fees into account when choosing a fund and share class.
OTHER EXPENSES
Fees paid by the fund for miscellaneous items such as transfer agency,
custodian, administration, professional and registration fees.
THE FUNDS 5
<PAGE>
BURNHAM
DOW 30'sm' FOCUSED
FUND
PORTFOLIO MANAGER
David Leibowitz has had the primary
day-to-day responsibility for the
fund's portfolio since its inception.
Mr. Leibowitz is a Managing
Director of Burnham Asset
Management Corp. and Burnham Securities Inc.
IS THIS FUND FOR YOU?
Burnham Dow 30 'sm' Focused Fund is best suited for investors who:
- Are investing for the
long term
- Seek capital appreciation from
a portfolio of DJIA stocks
- Want to increase their
exposure to the largest U.S.
companies
- Are comfortable with price
volatility
This fund's goal is non-fundamental and may be changed without shareholder
approval.
THE FUND'S GOAL IS CAPITAL APPRECIATION.
MAIN STRATEGIES
- --------------------------------------------------------------------------------
The fund pursues its goal by investing in stocks represented in the Dow Jones
Industrial Average 'sm' (DJIA 'sm'). The fund also invests in closely related
securities, called DJIA equivalents, including:
- Securities such as DIAMONDS 'sm', which represent percentage
interests in a basket of all 30 DJIA stocks.
- Derivatives that are based on U.S. stock indices or on individual
DJIA stocks. Derivatives are a type of investment whose value is
determined by underlying securities or market indices.
HOW THE FUND SELECTS SECURITIES
The fund invests approximately half of its assets passively and half actively.
Both halves may invest in DJIA stocks or DJIA equivalents; the passive half
invests in these in proportions that approximately match the composition of the
DJIA.
In managing the active portion of its assets, the fund may continue to hold
stocks that have been dropped from the DJIA. The fund may also emphasize or
overweight certain DJIA companies that appear to have the following
characteristics:
- Low price-to-earnings (P/E) ratios
- Attractive cash flows
- Higher actual and projected dividends
- Above-average growth rates relative to P/E ratios
- Perceived momentum in earnings growth
In both parts of the portfolio, the fund may invest in DJIA equivalents rather
than DJIA stocks in order to:
- Maintain liquidity
- Facilitate trading
- Reduce transaction costs
- Take advantage of relative bargains
Undernormal conditions, the fund intends to remain fully invested. In
extraordinary circumstances, the fund may invest up to 25% of its total assets
in cash or cash equivalents. In such circumstances, the fund would be assuming a
temporary defensive position and would not be pursuing its goal.
THE FUNDS 6
<PAGE>
MAIN RISKS
- --------------------------------------------------------------------------------
The main risk of this fund is a downturn in the stock market, and particularly
in the Dow Jones Industrial Average.
Any of the following situations could cause the fund to lose money or
underperform in comparison with its peer group:
- Blue-chip stocks could fall out of favor with the market, especially
in relation to small-capitalization stocks.
- DJIA companies in the fund's portfolio could fail to achieve
earnings estimates or other market expectations, causing their stock
prices to drop. If the fund overweights its investment in any such
company, it could suffer disproportionately higher losses.
- DJIA equivalents could underperform DJIA stocks because of weak
price correlation.
- The fund's management strategy, or other stock selection methods,
could prove to be less successful than anticipated.
- Investments in derivatives could magnify any of the fund's gains
or losses.
PAST PERFORMANCE
The fund does not yet have past performance data for a full calendar year. Next
year's propectus will provide performance data here.
NON-DIVERSIFICATION
The fund is non-diversified and may invest a larger portion of
its assets in the securities of a single issuer than diversified
funds. An investment in the fund could go up and down in value
more than an investment in a diversified fund.
DOW JONES INDUSTRIAL AVERAGE
The Dow Jones Industrial Average is the oldest continuing stock market average
in the world. The companies in it are household names and represent about
one-sixth of the market value of the U.S. stock market. Unlike a market index,
the DJIA is weighted by share price rather than market capitalization. Each day,
the prices of one share of each company in the average are totaled. Then,
instead of simply dividing by 30 to get an average, the total is multiplied by a
special divisor calculated to compensate for stock splits and similar events
that would otherwise distort the average.
The composition of the DJIA changes from time to time, as determined by the
editors of The Wall Street Journal. Dow Jones & Company, Inc. has no connections
with or obligations to the adviser or the fund.
Dow Jones does not sponsor, endorse, sell or promote the fund. Dow Jones does
not make any representation regarding the advisability of investing in the fund.
WHAT ARE DIAMONDS?
DIAMONDS are shares of a publicly traded unit investment trust
that owns the stocks of the DJIA in the same proportion as
represented in the DJIA. DIAMONDS trade on the American Stock
Exchange at approximately 99/100th of the value of the DJIA.
DIAMONDS have certain operational expenses that are deducted
from the dividends paid to DIAMOND investors.
THE FUNDS 7
<PAGE>
FEES AND EXPENSES
The table below describes the fees and expenses you could expect as an investor
in this fund. SHAREHOLDER FEES are one-time expenses charged directly to you.
ANNUAL FUND OPERATING EXPENSES come out of fund assets, and are reflected in the
fund's total return.
FEE TABLE
SHAREHOLDER FEES
fees paid directly from your investment
Maximum redemption fee 1.00%
charged only on shares you sell after
owning them for less than six months
ANNUAL FUND OPERATING EXPENSES
expenses that are deducted from fund assets
Management fees 0.60%
Distribution (12b-1) fees 0.25%
Other expenses(1) 18.98%
- --------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES(1) 19.83%
(1) The adviser has agreed to cap the annual fund operating expenses, although
it may change or drop the cap at any time. With the cap, actual expenses are
projected to be:
Management fees 0.60%
Distribution (12b-1) fees 0.25%
Other expenses 0.35%
- --------------------------------------------------------------------------------
Net annual fund operating expenses 1.20%
EXAMPLE
This example shows what you could pay in expenses over time. To help you compare
this fund's expenses with those of other funds, the example uses the same
hypothetical assumptions as other mutual fund prospectuses:
- $10,000 original investment
- 5% annual return
- No changes in operating expenses
- Reinvestment of all dividends and distributions
1 year 3 years 5 years 10 years
-------------------------------------------------
$1,836 $4,731 $6,832 $9,894
The figures in the example would be the same whether you sold your shares at the
end of the period or kept them. Because actual return and expenses may be
different, this example is for comparison purposes only. The example does not
reflect net annual fund operating expenses for the period assuming the
imposition of the expense cap. For the period, the fund's expenses impacted for
all expense cap waivers for the one, three, five and ten year periods would be
$122, $381, $660 and $1,455, respectively.
UNDERSTANDING SHAREHOLDER FEES
REDEMPTION FEES
Fees used to discourage short-term market timers from engaging in frequent
purchases and redemptions. This practice can disrupt the fund's investment
program and result in additional transaction costs that are borne by all
shareholders of the fund. (The fund is intended for investors with a long-term
investment outlook.)
UNDERSTANDING FUND
EXPENSES
MANAGEMENT FEES
Fees paid to the adviser for the
supervision of the fund's
investment program.
RULE 12b-1 FEES
Under SEC Rule 12b-1, mutual funds may use some of their assets to pay
commissions to brokers, other marketing expenses and shareholder service fees.
You should take 12b-1 fees into account when choosing a fund and share class.
OTHER EXPENSES
Fees paid by the fund for miscellaneous items such as transfer agency,
custodian, administration, professional and registration fees.
THE FUNDS 8
<PAGE>
BURNHAM
FINANCIAL SERVICES
FUND
SUBADVISER
Mendon Capital Advisors Corp.
is a registered investment adviser
incorporated in the State of
Delaware. The subadviser has been
providing investment advisory
services focused in the financial
services industry to private invest-
ment companies since 1996.
PORTFOLIO MANAGER
Anton Schutz has had the primary
day-to-day responsibility for the
fund's portfolio since its inception.
Mr. Schutz is the President of
Mendon Capital Advisors Corp.
and Vice President of Burnham
Securities Inc.
IS THIS FUND FOR YOU?
Burnham Financial Services Fund is best suited for investors who:
- - Are investing for
the long term
- - Wish to increase their
exposure to the financial
services sector
- - Seek potentially more
rapid capital growth than
might be achieved in
a sector-diversified fund
- - Are comfortable with
increased price volatility
This fund's goal is non-fundamental and may be changed without shareholder
approval.
THE FUND SEEKS CAPITAL APPRECIATION.
MAIN STRATEGIES
- --------------------------------------------------------------------------------
The fund pursues its goals by investing at least 75% of its assets in stocks of
U.S. companies in the financial services sector. The fund considers all of the
following as part of this sector:
- Banks and thrifts
- Securities brokers and dealers
- Investment management and advisory firms
- Insurance companies
- Specialty finance companies
- Financial conglomerates
- Publicly traded, government-sponsored financial intermediaries
- Any company that derives at least 50% of its revenues from doing
business with financial services companies, such as a financial
software company
HOW THE FUND SELECTS SECURITIES
In selecting stocks, the fund's manager uses a combination of growth and value
strategies. The manager seeks growth stocks of companies with the following
characteristics:
- Capable management
- Attractive business niches
- Sound financial and accounting practices
- Demonstrated ability to sustain growth in revenues, earnings and cash
flow
The manager also looks for opportunities to purchase value stocks of companies
that appear to be:
- Undervalued based on their balance sheets or individual circumstances
- Temporarily distressed
- Poised for a merger or acquisition
Although the fund may invest in companies of any size, it typically focuses on
those with market capitalizations of $8 billion or less. The fund generally
intends to invest in U.S. companies, but it may also invest up to 10% of its
total assets in foreign securities.
This stock selection strategy may lead the fund to concentrate its investments
in a limited number of regions of the U.S.
THE FUNDS 9
<PAGE>
OTHER INVESTMENTS
The fund may invest up to 25% of its total assets in:
- Companies outside the financial services sector
- Debt securities of any maturity, duration, or credit rating (including
junk bonds) from any government or corporate issuer, U.S. or foreign
The fund may use derivatives (a type of investment whose value is based on one
or more securities or market indices) to hedge against market changes or as a
substitute for securities transactions. It may also use derivatives in
attempts to profit from anticipated market movements.
Under normal conditions, the fund intends to remain fully invested. In
extraordinary circumstances, the fund may invest extensively in cash or
short-term investment-grade debt securities. In such circumstances, the fund
would be assuming a temporary defensive position and would not be pursuing its
goal.
MAIN RISKS
The main risks of this fund are the performance of the stock market and the
level of interest rates. Because this fund concentrates its investments in one
sector of the economy, investors should expect greater volatility than in a fund
that invests across several sectors.
Any of the following situations could cause the fund to lose money or
underperform in comparison with its peer group:
- An adverse event could disproportionately affect the financial
services sector.
- Rising interest rates increase the cost of financing to, and reduce
the profitability of, companies in the financial services sector.
- Any of the categories of securities that the fund emphasizes--
financial services companies and companies with less than $8 billion
in market capitalization--could fall out of favor.
- Companies in the fund's portfolio could fail to achieve earnings
estimates or other market expectations, causing their stock prices to
drop.
- Investments in derivatives could magnify any of the fund's gains or
losses.
- A bond issuer could be downgraded in credit quality or go into
default. The risk of default and the price volatility associated with
it are greater for junk bonds.
- Foreign investments present additional risks compared with domestic
investments. These may include:
- Unfavorable currency exchange rates
- Inadequate financial information
- Political and economic upheavals
These risks are greater in emerging markets.
PAST PERFORMANCE
The fund does not yet have past performance data for a full calendar year. Next
year's prospectus will provide performance data here.
WHY INVEST IN FINANCIAL
COMPANIES?
DEMOGRAPHICS
The largest consumers of financial services are those in the 45 to 64 age group,
which is projected to grow significantly over the next 20 years.
CONSOLIDATION
The current consolidation trend in the financial services sector presents
investment opportunities.
DEREGULATION
Deregulation of the financial services industry is enabling firms to enter a
wider variety of financial service businesses.
GLOBALIZATION
Increasing globalization provides opportunities for foreign firms to expand
their businesses in the financial services sector.
SPECIALIZATION
Financial service providers are "unbundling" financial products to meet customer
needs, provide profit opportunities and expand their markets.
THE FUNDS 10
<PAGE>
FEES AND EXPENSES
The table below describes the fees and expenses you could expect as an investor
in this fund. SHAREHOLDER FEES are one-time expenses charged directly to you.
ANNUAL FUND OPERATING EXPENSES come out of fund assets, and are reflected in the
fund's total return.
FEE TABLE
Class A Class B
SHAREHOLDER FEES
fees paid directly from your investment
Maximum front-end sales charge (load) 5.00% None
% of offering price
Maximum contingent deferred sales charge NONE 5.00%
% of offering price or the amount you receive
when you sell shares, whichever is less
ANNUAL FUND OPERATING EXPENSES
expenses that are deducted from fund assets
Management fees 0.75% 0.75%
Distribution (12b-1) fees 0.25% 1.00%
Other expenses(1) 6.42% 6.42%
- --------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES(1) 7.42% 8.17%
(1) The adviser has agreed to cap the annual fund operating expenses, although
it may change or drop the cap at any time. With the cap, actual expenses are
projected to be:
Management fees 0.75% 0.75%
Distribution (12b-1) fees 0.25% 1.00%
Other expenses 0.60% 0.60%
- --------------------------------------------------------------------------------
Net Annual Fund Operating Expenses 1.60% 2.35%
EXAMPLE
This example shows what you could pay in expenses over time. To help you compare
this fund's expenses with those of other funds, the example uses the same
hypothetical assumptions as other mutual fund prospectuses:
- $10,000 original investment
- 5% annual return
- No changes in operating expenses
- Reinvestment of all dividends and distributions
1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------
Class A $ 1,196 $ 2,539 $ 3,817 $ 6,752
Class B with redemption $ 1,204 $ 2,636 $ 3,873 $ 6,790
Class B without redemption $ 804 $ 2,336 $ 3,773 $ 6,790
Because actual return and expenses may be different, this example is for
comparison purposes only. The example does not reflect net annual fund operating
expenses for the period assuming the imposition of the fund's expense cap for
each respective class of shares. For the period, the fund's annual net operating
expenses for the one, three, five and ten year periods for Class A and B shares
are: $654 and $638; $980 and $1,033; $1,327 and $1,355; $2,305 and $2,691,
respectively. Class B shares without redemption for the period are $238, $733,
$1,255, and $2,691, respectively.
UNDERSTANDING
SHAREHOLDER FEES
FRONT-END SALES CHARGE
An amount charged for the sale of some fund shares, usually sold by a broker or
sales professional. A sales charge or load is reflected in the asked or offering
price.
ASKED OR OFFERING PRICE
The price at which the fund's shares may be purchased. The asked or offering
price includes the current net asset value plus any sales charge.
CONTINGENT DEFERRED SALES CHARGE
A fee imposed when shares are redeemed during the first few years of ownership.
Please refer to "Choosing a Share Class" on page 20 for further information on
alternative purchase arrangements.
UNDERSTANDING
FUND EXPENSES
MANAGEMENT FEES
Fee paid to the adviser for
the supervision of the fund's
investment program.
RULE 12b-1 FEES
Under SEC Rule 12b-1, mutual funds may use some of their assets to pay
commissions to brokers, other marketing expenses and shareholder service fees.
You should take 12b-1 fees into account when choosing a fund and share class.
OTHER EXPENSES
Fees paid by the fund for miscellaneous items such as transfer agency,
custodian, administration, professional and registration fees.
THE FUNDS 11
<PAGE>
Burnham
Small Cap Value
Fund
Is this fund for you?
Burnham Small Cap Value Fund is best suited for investors who:
- Are investing for the long term
- Want to increase their exposure to small-capitalization companies
- Seek potentially more rapid growth than might be achieved in a
larger-capitalization fund
- Are comfortable with increased price volatility
Portfolio manager
Jon M. Burnham has had primary day-to-day responsibility for the fund's
portfolio since its inception. Mr. Burnham is president, chief executive
officer and chairman of the board of trustees of the fund and the chairman and
chief executive officer of the adviser.
This fund's goal is non-fundamental and may be changed without shareholder
approval.
GOAL AND MAIN STRATEGIES
- --------------------------------------------------------------------------------
The fund seeks capital appreciation.
The fund pursues its goal by investing at least 80% of its assets in stocks of
U.S. and foreign companies with market capitalizations of $1.3 billion or less.
These stocks may trade on exchanges or over-the-counter (OTC).
How the fund selects securities
In managing the fund's portfolio, the manager emphasizes individual stock
selection. Using a value-oriented strategy, the fund initially seeks to identify
a pool of companies with the potential for long term capital appreciation that
are currently unrecognized by or temporarily out of favor with the market.
Its research methods include the following:
- Fundamental analysis of company balance sheets
- On-site visits
- Interviews with senior management
- Data from research firms, electronic databases and relevant technical
journals
In deciding which companies to invest in, the manager looks for a specific
catalyst that the manager believes will spur share price growth. These catalysts
might include:
- Increased investor attention
- Asset sales
- Corporate restructuring
- Upswing in a business or industry cycle
- Innovation, such as a new product introduction
- Favorable regulatory changes
The manager may sell a security when it achieves a clearly defined target price.
A security may be sold when any one of the following occur:
- A disruptive change in management
- The company is unable to operate under its financial burdens
- The cycle fails to maturalize
- A company's product or technology cannot be commercialized
Other investments
The fund may invest up to 20% of its assets in:
- Stocks of companies with market capitalizations of more than $1.3 billion.
- Derivatives, which are a type of investment whose value is based on
other securities or market indices
THE FUNDS
<PAGE>
The fund may use derivatives to hedge against market changes or as a substitute
for securities transactions. It may also use derivatives in attempts to profit
from anticipated market movements.
Under normal conditions, the fund intends to remain fully invested. In
extraordinary circumstances, the fund may invest extensively in cash or
short-term investment-grade debt securities. In such circumstances, the fund
would be assuming a temporary defensive position and would not be pursuing its
goal.
MAIN RISKS
- --------------------------------------------------------------------------------
The main risk of this fund is the performance of the stock market. Because the
fund emphasizes small-capitalization companies, investors should expect greater
volatility than in a fund that invests in medium- or large-capitalization
companies.
Any of the following situations could cause the fund to lose money or
underperform in comparison with its peer group:
- Small-capitalization stocks could fall out of favor with the market,
particularly in comparison with large- or medium-capitalization stocks.
- Companies in the fund's portfolio could fail to reach earnings estimates or
other market expectations, causing their stock prices to drop.
- The fund's management strategy or securities selection methods could prove
to be less successful than anticipated.
- Investments in derivatives could magnify any of the fund's gains or losses.
Derivatives can also make the fund's portfolio less liquid and harder to
value, especially in a declining market.
- Foreign investments present additional risks compared with domestic
investments. These may include:
- Unfavorable currency exchange rates
- Inadequate financial information
- Political and economic upheavals
These risks are greater in emerging markets.
Non-Diversification
The fund is non-diversified and may invest a larger portion of its assets in the
securities of a single issuer than diversified funds. An investment in the fund
could go up and down in value more than an investment in a diversified fund.
Definition of small-
capitalization companies
There are thousands of publicly traded companies with assets under $1.3 billion
in the U.S. alone. Small companies are often volatile, with the potential for
rapid growth and equally rapid decline. Many small companies are young and have
yet to prove their ability to sustain growth. They are generally more vulnerable
to business setbacks because of small product lines, niche markets and limited
financial resources. In a declining market, these stocks may be harder to sell,
which may further depress their prices.
Why invest in small- capitalization value stocks?
- Small-capitalization stocks offer the potential for superior long-term
performance.
- Small-capitalization value stocks have historically tended to outperform
small-cap growth stocks over the long term.
- Current market valuations appear to favor small-capitalization stocks.
- The absence of investment analysts in the smaller market capitalization
stocks magnifies market inefficiencies. This makes the fund's performance
more dependent on the manager's proprietary research.
Value Investing
An approach to investing that seeks to identify, through in-depth research and
analysis, companies that are undervalued in the market place -- companies whose
market value is less than their economic value. Such companies are often out of
favor or not closely followed by investors, but offer the potential for
substantial appreciation over time.
THE FUNDS
<PAGE>
PAST PERFORMANCE
- --------------------------------------------------------------------------------
No past performance data is available yet for this new fund.
THE FUNDS
<PAGE>
FEES AND EXPENSES
- --------------------------------------------------------------------------------
The table below describes the fees and expenses you could expect as an investor
in this fund. Shareholder Fees are one-time expenses charged directly to you.
Annual Fund Operating Expenses come out of fund assets, and are reflected in the
fund's total return.
Fee Table
Class A Class B
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
fees paid directly from your investment
Maximum front-end sales charge (load) 5.00% None
% of offering price
Maximum contingent deferred sales charge None 5.00%
% of offering price or the amount you receive
when you sell shares, whichever is less
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
expenses are deducted from fund assets
Management fees 1.00% 1.00%
Distribution 12b-1 fees 0.25% 1.00%
Other expenses(1)(2) 0.70% 0.70%
- --------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES(1) 1.95% 2.70%
(1) The adviser has agreed to cap the annual fund's operating expenses, although
it may change or drop the cap at any time. With the cap, actual expenses are
projected to be:
Management fees 1.00% 1.00%
Distribution (12b-1) fees 0.25% 1.00%
Other expenses 0.35% 0.35%
- --------------------------------------------------------------------------------
Net Annual Fund Operating Expenses 1.60% 2.35%
(2) Based on estimated amounts for the current fiscal year.
EXAMPLE
This example show what you could pay in expenses over time. To help you compare
this fund's expenses with those of other funds, the example uses the same
hypothetical assumptions as other mutual fund prospectuses:
- $10,000 original investment
- 5% annual return
- No changes in operating expenses
- Reinvestment of all dividends and distributions
1 year 3 year
- -----------------------------------------------------------------------
Class A $688 $1,082
Class B with redemption $673 1,138
Class B without redemption $273 838
Because actual return and expenses may be different, this example is for
comparison purposes only.
UNDERSTANDING
SHAREHOLDER FEES
FRONT-END SALES CHARGE
An amount charged for the sale of some fund shares, usually sold by a broker or
sales professional. A sales charge or load is reflected in the asked or offering
price.
ASKED OR OFFERING PRICE
The price at which the fund's shares may be purchased. The asked or offering
price includes the current net asset value plus any sales charge.
CONTINGENT DEFERRED SALES CHARGE
A fee imposed when shares are redeemed during the first few years of ownership.
Please refer to "Choosing a Share Class" for further information on
alternative purchase arrangements.
UNDERSTANDING
FUND EXPENSES
MANAGEMENT FEES
Fee paid to the adviser for
the supervision of the fund's
investment program.
RULE 12b-1 FEES
Under SEC Rule 12b-1, mutual funds may use some of their assets to pay
commissions to brokers, other marketing expenses and shareholder service fees.
You should take 12b-1 fees into account when choosing a fund and share class.
OTHER EXPENSES
Fees paid by the fund for miscellaneous items such as transfer agency,
administration, custodian, professional and registration fees.
THE FUNDS
<PAGE>
BURNHAM
MONEY MARKET
FUND
TICKER SYMBOL:
BURXX
- --------------------------------
SUBADVISER
Reich & Tang Asset Management L.P. was formed in 1994. Reich & Tang manages
discretionary equity and money market assets, principally for institutional
clients. The subadviser's investment philosophy is oriented toward the
preservation of capital.
Portfolio Manager
Molly Flewharty has had the primary day-to-day responsibility for the fund's
portfolio since inception. Ms. Flewharty is Senior Vice-President of Reich &
Tang Asset Management L.P.
IS THIS FUND FOR YOU?
Burnham Money Market Fund is best suited for investors who:
- Seek to preserve capital
- Are seeking a temporary
holding place for investments
- Are investing for the short-term
- Are seeking the highest possible
income available from short-term
securities
This fund's goal is non-fundamental and may be changed without shareholder
approval.
THE FUND'S GOAL IS MAXIMUM CURRENT INCOME THAT IS CONSISTENT WITH MAINTAINING
LIQUIDITY AND PRESERVING CAPITAL.
MAIN STRATEGIES
- --------------------------------------------------------------------------------
The fund is managed to maintain a stable $1.00 share price. The fund invests
only in dollar-denominated money market securities of the highest short-term
credit quality. Each security must have a remaining maturity of 13 months or
less. The fund's average weighted maturity will not exceed 90 days. Its yield
will go up and down with changes in short-term interest rates.
HOW THE FUND SELECTS SECURITIES
In managing the portfolio, the subadviser looks for securities that appear to
offer the best relative value based on analysis of:
- Credit quality - Yield
- Interest rate sensitivity - Price
An investment committee meets weekly to determine the fund's portfolio strategy
based on interest rates, credit quality and performance. The primary function of
the committee is to develop an approved list of securities that satisfy the
funds' credit criteria, guidelines and objectives. From time to time, the fund
may emphasize, or overweight, its investments in particular types of issuers or
maturities to increase current yields.
The fund may invest in certain foreign securities: dollar-denominated money
market securities of foreign issuers, foreign branches of U.S. banks, and U.S.
branches of foreign banks.
DEFINITION OF A MONEY MARKET FUND
A money market fund is a pool of assets investing in U.S.
dollar-denominated short-term debt obligations. Because of
the high degree of safety they provide, money market funds
typically offer the lowest return of any type of mutual
fund.
THE FUNDS 12
<PAGE>
Money market fund yield
The fund's current yield reflects the relationship between
the fund's current level of annual income and its price on a
particular day.
MAIN RISKS
- --------------------------------------------------------------------------------
The main risk of this fund is the level of short-term interest rates. If
short-term interest rates rise steeply, the prices of money market securities
could fall and threaten the $1.00 share price that the fund tries to maintain.
Any of the following situations could cause the fund to lose money or
underperform in comparison with its peer group:
- An issuer could be downgraded in credit quality or go into default.
- Foreign securities present additional risks compared with domestic
investments. These may include:
- Inadequate financial information
- Political and economic upheavals
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation (FDIC) or any other government agency. Although the fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund.
PAST PERFORMANCE
The Fund does not yet have past performance data for a full calendar year. Next
year's prospectus will provide performance data here.
MONEY MARKET FUND YIELD
The fund's current yield reflects the relationship between the fund's current
level of annual income and its price on a particular day.
TYPES OF MONEY
MARKET SECURITIES
U.S. TREASURY BILLS
Debt obligations sold by the
U.S. Treasury that mature in
one year or less and are backed
by the U.S. government.
AGENCY NOTES
Debt obligations of U.S.
government agencies.
CERTIFICATES OF DEPOSIT
Receipts for funds deposited at banks that guarantee a
fixed interest rate over a specified time period.
REPURCHASE AGREEMENTS
Contracts, usually involving U.S. government securities,
whereby one party sells and agrees to buy back securities at a fixed price on a
designated date.
BANKERS' ACCEPTANCES
Bank-issued commitments to pay for merchandise sold in the
import/export market.
COMMERCIAL PAPER
Unsecured short-term obligations that companies typically issue to
finance current operations and expenses.
MEDIUM-TERM NOTES
Unsecured corporate debt obligations that are continuously offered in a range of
maturities and structures.
FLOATING RATE NOTE
A debt instrument with a variable interest rate that is typically tied to a
money market index. Floating rate notes usually have a maturity of less than
five years.
VARIABLE RATE DEMAND NOTES
Notes from commercial banks that are payable on demand. Interest is tied to a
money market rate, usually the bank Prime Rate. The rate on the note is
adjusted for changes in the base rate.
TAXABLE MUNICIPAL NOTES
Taxable debt obligation of a state or local government entity.
THE FUNDS 13
<PAGE>
FEES AND EXPENSES
- --------------------------------------------------------------------------------
The table below describes the fees and expenses you could expect as an investor
in this fund. SHAREHOLDER FEES are one-time expenses charged directly to you.
ANNUAL FUND OPERATING EXPENSES come out of fund assets, and are reflected in the
fund's total return.
FEE TABLE
SHAREHOLDER FEES NONE
fees paid directly from your investment
ANNUAL FUND OPERATING EXPENSES
expenses that are deducted from fund assets
Management fees 0.45%
Distribution (12b-1) fees NONE
Other expenses (1) 0.69%
- --------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES(1) 1.14%
(1) The adviser has agreed to cap the annual fund operating expenses, although
it may change or drop the cap at any time. With the cap, actual expenses are
projected to be:
Management fees 0.45%
Distribution (12b-1) fees NONE
Other expenses 0.52%
- --------------------------------------------------------------------------------
NET ANNUAL FUND OPERATING EXPENSES 0.97%
EXAMPLE
This example shows what you could pay in expenses over time. To help you compare
this fund's expenses with those of other funds, the example uses the same
hypothetical assumptions as other mutual fund prospectuses:
- $10,000 original investment
- 5% annual return
- No changes in operating expenses
- Reinvestment of all dividends and distributions
1 year 3 years 5 years 10 years
----------------------------------------------------------------
$ 116 $ 362 $ 628 $ 1,386
The figures in the example would be the same whether you sold your shares at the
end of the period or kept them. Because actual return and expenses may be
different, this example is for comparison purposes only. The example does not
reflect net annual operating expenses for the period assuming the imposition of
the expense cap. For the period, the fund's expenses impacted for all expense
cap waivers for the one, three, five and ten year periods would be $99, $309,
$536 and $1,190, respectively.
UNDERSTANDING FUND
EXPENSES
MANAGEMENT FEES
Fee paid to the adviser for
the supervision of the fund's
investment program.
OTHER EXPENSES
Fees paid by the fund for miscellaneous items such as transfer agency,
administration, custodian, professional and registration fees.
THE FUNDS 14
<PAGE>
Burnham
U.S. Treasury Money Market
Fund
TICKER SYMBOL:
BUTXX
- --------------------------------------
Subadviser
Reich & Tang Asset Management
L.P. was formed in 1994. Reich
& Tang manages discretionary equity and
money market assets, principally for
institutional clients. The subadviser's
investment philosophy is oriented
toward the preservation of capital
and long-term appreciation.
Portfolio Manager
Molly Flewharty has had the primary day-to-day responsibility for the fund's
portfolio since inception. Ms. Flewharty is Senior Vice-President of Reich &
Tang Asset Management L.P.
Is this fund for you?
Burnham U.S. Treasury Money Market Fund is best suited for investors who:
- Seek maximum preservation of
capital, liquidity and the highest
possible current income
- Are seeking stability and
accessibility for investment
- Are investing for the short term
- Are seeking the highest possible
credit risk protection on
investments
This fund's goal is non-fundamental and may be changed without shareholder
approval.
THE FUND'S GOAL IS MAXIMUM CURRENT INCOME THAT IS CONSISTENT WITH MAINTAINING
LIQUIDITY AND PRESERVING CAPITAL.
MAIN STRATEGIES
- --------------------------------------------------------------------------------
The fund is managed to maintain a stable $1.00 per share price. The fund invests
at least 80% of its assets in U.S. Treasury securities, which are backed by the
full faith and credit of the U.S. government. The fund's remaining securities
will be invested in debt obligations of U.S. government agencies backed by the
full faith and credit of the U.S. government. Each security will have a
remaining maturity of 13 months or less. The fund's average weighted maturity
will not exceed 90 days. Its yield will go up and down with changes in
short-term interest rates.
How the fund selects securities
In managing the portfolio, the subadviser looks for securities that appear to
offer the best relative value based on analysis of their:
- Interest rate sensitivity
- Yield
- Price
An investment committee meets weekly to determine the fund's portfolio strategy
based on interest rates, availability of cash, and performance. The primary
function of the committee is to develop an approved list of securities that
satisfy the fund's guidelines and objectives. From time to time, the fund may
emphasize, or overweight, its investments in particular types of issuers or
maturities to increase current yields.
DEFINITION OF A MONEY MARKET FUND
A money market fund is a pool of assets investing in U.S.
dollar-denominated short-term debt obligations. Because of
the high degree of safety they provide, money market funds
typically offer the lowest return of any type of mutual
fund.
THE FUNDS 15
<PAGE>
MAIN RISKS
The main risk of the fund is the level of short-term interest rates. There is
little risk of principal loss because the fund is managed to maintain a stable
$1.00 share price. However, the fund may be unable to avoid principal losses if
interest rates rise sharply in an unusually short period of time. If short-term
interest rates rise steeply, the prices of money market securities could fall
and threaten the $1.00 share price that the fund tries to maintain.
The fund should have minimal or no credit risk because it invests in securities
backed by the U.S. government, the most creditworthy issuer of fixed income
securities.
In addition, the fund's yield will vary; it is not fixed for a specific period
like the yield on a bank certificate of deposit. This may be an advantage when
interest rates are rising but not when they are falling.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation (FDIC) or any other government agency. Although the fund
seeks to preserve the value of your investment at $1.00 per share it is
possible to lose money by investing in the fund.
PAST PERFORMANCE
The Fund does not yet have past performance data for a full calendar year. Next
year's prospectus will provide performance data here.
MONEY MARKET FUND YIELD
The fund's current yield reflects the relationship between the fund's
current level of annual income and its price on a particular day.
Types of Money Market Securities
U.S. TREASURY SECURITIES
Debt obligations, including bills, notes, bonds and other debt securities sold
by the U.S. Treasury that mature in one year or less and are backed by the U.S.
government.
U.S. GOVERNMENT AGENCY AND OTHER OBLIGATIONS
Debt obligations of U.S.
government agencies. The fund
will invest only in agency securities
backed by the full faith and credit
of the U.S. government.
REPURCHASE AGREEMENTS
Contracts, usually involving U.S. government securities, under which one party
sells and agrees to buy back securities at a fixed price on a designated date.
THE FUNDS 16
<PAGE>
FEES AND EXPENSES
The table below describes the fees and expenses you could expect as an investor
in the fund. SHAREHOLDER FEES are one-time expenses charged directly to you.
ANNUAL FUND OPERATING EXPENSES come out of fund assets and are reflected in the
fund's total return.
FEE TABLE
SHAREHOLDER FEES NONE
fees paid directly from your investment
ANNUAL FUND OPERATING EXPENSES
expenses that are deducted from fund assets
Management fees 0.40%
Distribution (12b-1) fees NONE
Other expenses 0.46%
- --------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 0.86%
EXAMPLE
This example show what you could pay in expenses over time. To help you compare
this fund's expenses with those of other funds, the example uses the same
hypothetical assumptions as other mutual fund prospectuses:
- $10,000 original investment
- 5% annual return
- No changes in operating expenses
- Reinvestment of all dividends and distributions
1 year 3 years 5 years 10 years
------------------------------------------------------------
$ 88 $ 274 $ 477 $ 1,061
The figures in the example would be the same whether you sold your shares at the
end of the period or kept them. Because actual return and expenses may be
different, this example is for comparison purposes only.
UNDERSTANDING FUND EXPENSES
MANAGEMENT FEES
Fee paid to the adviser
for the supervision of the fund's
investment program.
OTHER EXPENSES
Fees paid by the fund for miscellaneous items such as transfer agency,
custodian, professional and registration fees.
THE FUNDS 17
<PAGE>
THE INVESTMENT
ADVISER
The funds' investment adviser is Burnham Asset Management Corporation, 1325
Avenue of the Americas, New York, NY 10019.
The adviser is responsible for economic research, industry and company analysis,
portfolio recommendations and all investment decisions. In return for these
services, the adviser receives a fee from each fund as described in the table
below.
FEE AS A % OF AVERAGE DAILY NAV
BURNHAM FUND 0.60%
- --------------------------------------------------------------------------------
BURNHAM DOW 30 'sm' FOCUSED FUND 0.60%
- --------------------------------------------------------------------------------
BURNHAM FINANCIAL SERVICES FUND 0.75%
- --------------------------------------------------------------------------------
BURNHAM SMALL CAP VALUE FUND 1.00%
- --------------------------------------------------------------------------------
BURNHAM MONEY MARKET FUND 0.45%
- --------------------------------------------------------------------------------
BURNHAM U.S. TREASURY MONEY MARKET FUND 0.40%
Total annual fund operating expenses of these funds are capped (see table
below), which may reduce the adviser's fee. These caps are temporary and may be
terminated or changed any time. The caps do not apply to transaction costs,
taxes, interest charges or extraordinary or litigation expenses.
OPERATING EXPENSE CAP AS A % OF AVERAGE DAILY NAV
CLASS A SHARES CLASS B SHARES
BURNHAM FUND 1.34% 2.09%
- --------------------------------------------------------------------------------
BURNHAM DOW 30 'sm' FOCUSED FUND 1.20% n/a
- --------------------------------------------------------------------------------
BURNHAM FINANCIAL SERVICES FUND 1.60% 2.30%
- --------------------------------------------------------------------------------
BURNHAM SMALL CAP VALUE FUND 1.60% 2.35%
- --------------------------------------------------------------------------------
BURNHAM MONEY MARKET FUND 0.97% n/a
- --------------------------------------------------------------------------------
BURNHAM U.S. TREASURY MONEY MARKET FUND n/a n/a
THE INVESTMENT ADVISER 18
<PAGE>
YOUR ACCOUNT
As an investor, you have flexibility in choosing a share class, setting up your
account, making exchanges between funds and withdrawing money from your account.
In this section, you will find detailed information about the various options
available to you. It is important to read the entire section so that you will
understand all of the factors--including tax liability, sales charges, and
transaction volume--that should influence your investment decisions.
YOUR ACCOUNT 19
<PAGE>
CHOOSING A SHARE CLASS
- --------------------------------------------------------------------------------
WHY TWO SHARE CLASSES?
By offering two share classes, a fund allows you to choose the method of
purchasing shares that is the most beneficial given the amount of your purchase,
length of time you expect to hold your shares and other relevant circumstances.
Shares of Burnham Dow 30 'sm' Focused Fund, Burnham Money Market Fund and
Burnham U.S. Treasury Money Market Fund are offered in one class only, with no
sales charge. Burnham Fund and Burnham Financial Services Fund offer shares in
two classes. Shares of Burnham Money Market Fund and Burnham U.S. Treasury
Money Market Fund are not subject to any 12b-1 distribution or service fees.
CLASS A SALES CHARGE CLASS B DEFERRED SALES CHARGE
<TABLE>
<S> <C>
Front-end sales charge decreases with the Contingent deferred sales charge (CDSC)
amount you invest and is included in decreases with the amount of time you
the offering price [see schedule] hold your shares [see schedule]
Rule 12b-1 fee of 0.25% annually of Rule 12b-1 fee of 0.75% and service fee
average net asset value of 0.25% annually of average net asset value
Maximum purchase $250,000
CLASS A SALES CHARGES
AMOUNT INVESTED SALES CHARGE
% OFFERING PRICE % NAV
less than $50,000 5.00% 5.26%
$50,000-$99,999 4.50% 4.71%
$100,000-$249,999 4.00% 4.17%
$250,000-$499,999 3.00% 3.09%
$500,000-$999,999 2.00% 2.04%
$1,000,000 and above --* --*
*PURCHASES OF $1 MILLION OR
MORE (CLASS A SHARES)
The following CDSC will be imposed on investments over $1 million if shares are
sold within two years of purchase. The charge is calculated from the NAV at the
time of purchase or sale, whichever is lower.
PURCHASE-TO-SALE PERIOD CDSC
Less than 1 year 1.00%
1-2 years 0.50%
CLASS B DEFERRED SALES CHARGE
PURCHASE-TO-SALE PERIOD CDSC
less than 1 year 5.00%
1-2 years 4.00%
2-4 years 3.00%
4-5 years 2.00%
5-6 years 1.00%
6 years and longer --
</TABLE>
Shares not subject to CDSC are redeemed first; remaining shares are redeemed in
the order purchased. No CDSC applies to shares that:
- Represent increases in the NAV above the net cost of the original investment
- Were acquired through reinvestment of dividends or distributions
After 8 years, Class B shares automatically convert to Class A.
YOUR ACCOUNT 20
<PAGE>
SALES CHARGE WAIVERS
Under certain conditions, the following investors can buy Class A shares without
a sales charge:
- Shareholders of the Burnham Fund who purchased
shares directly from the fund before August 27, 1998
- Customers of Burnham Securities Inc. with a
cumulative balance of at least $250,000
- Officers, directors, trustees, employees of the adviser, the fund's
distributor and any of their affiliated companies, and immediate family
members of any of these people
- Employee benefit plans having more than 25 eligible
employees or a minimum of $250,000
- Employees of dealers that are members of the National
Association of Securities Dealers, Inc. (NASD),
members of their immediate families, and their employee
benefit plans
- Certain trust companies, bank trust departments and investment advisers that
invest on behalf of their clients and charge account management fees
- Participants in no-transaction fee programs of
discount brokerages that maintain an omnibus account
with the funds
- Individuals investing distributions from tax-deferred
savings and retirement plans
- Individuals purchasing shares with redemption proceeds (made within the
previous 180 days) of another mutual fund where a sales charge has previously
been assessed. Proof of the date redemption will be required.
CDSC charges will be waived on redemptions of Class B shares in connection with:
- Distributions from certain employee tax-qualified
benefit plans
- Any shareholder's death or disability
- Withdrawals under an automatic withdrawal plan, provided
they are less than 10% of your account's original value
WAYS TO REDUCE SALES CHARGES
Investors can reduce or eliminate sales charges on Class A shares under certain
conditions.
COMBINED PURCHASE
Purchases made at the same time by an individual, his or her spouse and any
children under the age of 21 are added together to determine the sales charge
rate.
RIGHT OF ACCUMULATION
If you already hold Class A shares of a fund, the sales charge rate on
additional purchases can be based on your total Class A shares in the fund.
LETTER OF INTENT
This non-binding agreement allows you to purchase Class A shares over a period
of 13 months with the sales charge that would have applied if you had purchased
them all at once.
COMBINATION PRIVILEGE
You can use the combined total of Class A shares of multiple Burnham funds for
the purpose of calculating the sales charge.
PLEASE NOTE:
You must advise your dealer, the transfer agent or the fund if you qualify for a
reduction and/or waiver in sales charges.
CALCULATION OF NET ASSET VALUE
Each fund calculates its net asset value per share (NAV) at the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m. eastern time)
on each business day as defined in the Statement of Additional Information. If
the New York Stock Exchange closes early, the time for calculating the NAV and
the deadline for share transactions will be accelerated to the earlier closing
time. Purchase and redemption orders received before the regular close of the
New York Stock Exchange will be executed at the offering price calculated at
that day's closing.
DETERMINATION OF SHARE PRICE
The share price of a fund is the total value of its assets less its liabilities,
divided by the total number of outstanding fund shares. Each fund's securities
are valued on the basis of either market quotations or fair value pricing, which
may include the use of pricing services. Because foreign markets and U.S.
markets are open at different times, the value of a fund's securities may
change on days when you can't buy or sell fund shares. On some occasions, the
fund may use fair-value prices for foreign securities, which may be different
from the values used by other funds.
YOUR ACCOUNT 21
<PAGE>
HOW TO BUY SHARES
MINIMUM PURCHASE AMOUNT
INITIAL PURCHASE SUBSEQUENT PURCHASES
Individual retirement accounts $50 $50
Automatic investment program $50 $50
All other funds and programs $1,000 $250
These amounts may be waived or changed at the funds' discretion.
METHOD PROCEDURE
MAIL Open an account Complete and sign the application form.
Send a check drawn on a U.S. bank for at
least the minimum amount required, make the check
payable to "Burnham Investors Trust." Send the
check and application form to the address below.
Open an IRA Shares of the funds are available for
purchase through Individual Retirement Accounts
(IRAs) and other retirement plans. An IRA
application and further details about IRAs and
other retirement plans are available from the
distributor by calling 1-800-874-3863 or your
investment professional.
Subsequent purchase Send in a check for the appropriate
minimum amount (or more) with your account name
and number. For your convenience, you may use the
deposit slip attached to your quarterly account
statements.
FEDERAL Subsequent purchase This option is available to existing open
FUNDS WIRE accounts only. New accounts must complete an
application form and forward payment to the
address listed below.
Wire address STATE STREET BANK & TRUST CO.
225 FRANKLIN STREET, BOSTON MA
ABA# 011000028
DDA# 99046005
FUND ACCOUNT #
FOR CREDIT TO BURNHAM INVESTORS TRUST
(INDICATE FUND; CLASS A OR B SHARES)
AUTOMATIC You can make automatic monthly, quarterly or
INVESTMENT annual purchases (on the 5th or 15th day of each
PROGRAM month) of $50 or more. To activate the automatic
investment plan, complete an account application
notifying the funds. Your investment may come
from your bank account or from your balance in
the Burnham Money Market Fund or Burnham U.S.
Treasury Money Market Fund. You may change the
purchase amount or terminate the plan at any time
by writing to the funds.
ELECTRONIC To purchase shares via electronic funds transfer,
FUNDS TRANSFER check this option on your account application
form. Your bank must be a member of the ACH
system.
DEALER Contact your dealer to set up a new account,
purchase fund shares, and make subsequent
investments. Purchase orders that are received by
your dealer and are forwarded by the dealer to
the transfer agent before 4:00 p.m. eastern time
on any business day will receive that day's NAV.
Your dealer is responsible for properly
forwarding completed orders to the fund transfer
agent.
SEND REGULAR MAIL TO: SEND OVERNIGHT MAIL TO: CALL SHAREHOLDER
SERVICE AGENT:
BURNHAM INVESTORS TRUST BURNHAM INVESTORS TRUST BOSTON FINANCIAL DATA
C/O BFDS, INC. C/O BFDS, INC. SERVICES, INC.
P.O. BOX 8015 66 BROOKS DRIVE TOLL-FREE AT
BOSTON, MA 02266-8015 BRAINTREE, MA 02184-3839 1-800-462-2392
YOUR ACCOUNT 22
<PAGE>
HOW TO EXCHANGE AND REDEEM SHARES
- --------------------------------------------------------------------------------
METHOD PROCEDURE
- --------------------------------------------------------------------------------
BY MAIL Send a letter of instruction, an endorsed stock
power or share certificates (if you hold certificate
shares) to "Burnham Investors Trust" to the address
below. Please be sure to specify:
- the fund
- account number
- the dollar value or number of shares you wish to sell
Include all necessary signatures and any additional
documents as well as a medallion signature guarantee if
required.
BY TELEPHONE As long as the transaction does not require a
written or medallion signature guarantee, you or your
financial professional can sell shares by calling
Burnham Investors Trust at 1-800-462-2392. Press 1 and
follow the automated menu to speak to a customer service
representative. A check will be mailed to you on the
following business day.
AUTHORIZED BROKER/DEALER If you invest through an authorized broker/dealer
OR INVESTMENT PROFESSIONAL or investment professional, they can sell or
exchange shares for you. You may be charged a fee
for this.
SYSTEMATIC WITHDRAWAL PLANS If you have a share balance of at least $5,000, you
may elect to have monthly,quarterly or annual
payments of a specified amount ($50 minimum) sent to
you or someone you designate. The funds do not
charge for this service. See "Systematic Withdraw
Plan" information on page 25.
BY FEDERAL FUNDS WIRE Confirm with Burnham Investors Trust that a wire
redemption privilege, including your bank
designation, is in place on your account. Once this
is established, you may request to sell shares of
Burnham Investors Trust. Proceeds will be wired to
your pre-designated bank account. See "Federal
Funds Wire" information on page 24.
BY EXCHANGE Read the prospectus before making an exchange. Call
Burnham Investors Trust at 1-800-462-2392. Press 1
and follow the automated menu to speak to a
customer service representative to place your
exchange.
<TABLE>
<S> <C> <C>
SEND REGULAR MAIL TO: SEND OVERNIGHT MAIL TO: CALL SHAREHOLDER SERVICE AGENT:
BURNHAM INVESTORS TRUST BURNHAM INVESTORS TRUST BOSTON FINANCIAL DATA
C/O BFDS, INC. C/O BFDS, INC. SERVICES, INC.
P.O. BOX 8015 66 BROOKS DRIVE TOLL-FREE AT
BOSTON, MA 02266-8015 BRAINTREE, MA 02184-3839 1-800-462-2392
</TABLE>
YOUR ACCOUNT 23
<PAGE>
TRANSACTION POLICIES
- -----------------------------------------------------------------------------
FEDERAL FUNDS WIRES
A federal funds wire transaction must total at least $5,000. Your bank may also
charge a fee to send or receive wires.
SHARE CERTIFICATES
The funds no longer offer or issue share certificates. Certificates were
previously available to Burnham Fund Class A and B shareholders only. If you
hold a certificate that was previously issued and you wish to transfer or redeem
these shares, you must send them to the Fund's transfer agent. If you lose a
certificate, you will be charged a fee to replace it.
TELEPHONE TRANSACTIONS
The funds have procedures to verify that your telephone instructions are
genuine. These may include asking for identifying information and recording the
call. As long as the fund and its representatives take reasonable measures to
verify the authenticity of calls, you will be held responsible for any losses
caused by unauthorized telephone orders.
CHECK WRITING FOR BURNHAM MONEY MARKET FUND AND
BURNHAM U.S. TREASURY MONEY MARKET FUND
You must have a Burnham Money Market Fund or a Burnham U.S. Treasury Money
Market Fund account before adding this service. Call 1-800-462-2392 to request a
Shareholder Services application to add the check writing feature.
Individual checks must be for $250 or more. You may not close a Burnham Money
Market Fund or Burnham U.S.Treasury Money Market Fund account by writing a
check.
THIRD PARTY CHECKS
Third party checks that are payable to an existing shareholder of Burnham
Investors Trust, who is a natural person (not a corporation or partnership), and
endorsed over to Burnham Investors Trust or State Street Bank and Trust Company
will not be accepted.
REGULAR INVESTING AND DOLLAR-COST AVERAGING
Dollar-cost averaging is the practice of making regular investments over time.
When share prices are high, your investment buys fewer shares. When the share
price is low, your investment buys more shares. This generally lowers the
average price per share that you pay over time.
Dollar-cost averaging cannot guarantee you a profit or prevent losses in a
declining market.
OTHER POLICIES
Under certain circumstances, the funds reserve the right to:
- Suspend the offering of shares
- Reject any exchange or invest-
ment order
- Change, suspend or revoke
exchange privileges
- Suspend the telephone order
privilege without advance
notice to shareholders
- Satisfy an order to sell fund shares with securities rather than cash, for
certain large orders
- Suspend or postpone your right to sell fund shares on days when trading on
the New York Stock Exchange is restricted, or as otherwise permitted by SEC
- Change their investment minimums or other requirements for buying or
selling, or waive minimums and requirements for certain investors
- Pay redemption proceeds consisting of portfolio securities or non-cash
assets for redemptions of greater than $1 million
YOUR ACCOUNT 24
<PAGE>
TRANSACTION POLICIES continued
- --------------------------------------------------------------------------------
REDEEMING SHARES
You may redeem your shares in the funds at any time. The proceeds are generally
sent out within three business days after your order is executed. Sale proceeds
may be delayed beyond the normal three business days:
- In unusual circumstances where the law allows additional time if needed
- If a check you wrote to buy shares hasn't cleared by the time you sell the
shares
If you think you will need to redeem shares soon after buying them, you can
avoid the check clearing time (which may be up to 15 days) by investing by wire
or certified check.
EXCHANGE PRIVILEGE
Exchanges of shares have the same tax consequences as redemptions. The funds'
general policy is that sales charges on investments entering the fund complex
should be applied only once. Therefore, you may exchange shares freely between
funds within the same share class. Each fund reserves the right to modify this
policy in the future. Exchanges must meet the minimum initial investment
requirements of the fund.
THE FUNDS MAY CANCEL THE EXCHANGE PRIVILEGE OF ANY PERSON THAT, IN THE OPINION
OF THE FUNDS, IS USING MARKET TIMING STRATEGIES OR MAKING MORE THAN FOUR
EXCHANGES PER OWNER OR CONTROLLING PERSON PER CALENDAR YEAR.
ACCOUNT BALANCE BELOW MINIMUM AMOUNTS
The funds reserve the right to close your account if your balance falls below
the minimum initial investment amount of $1,000. Your fund will notify you and
allow you 60 days to bring the account balance back up to the minimum level.
This does not apply to reduced balances caused by market losses or accounts
that are not subject to a minimum investment requirement.
REINSTATEMENT PRIVILEGE
You may reinvest your proceeds from a redemption in shares of the same class.
The proceeds will be credited at NAV up to 90 days after the redemption of
shares.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan (SWP) is available for shareholders who maintain a
share balance of at least $5,000 in fund shares and who want to receive a
specific amount of cash in amounts not less than $50 either monthly, quarterly,
or annually. You may subscribe to this service by contacting your account
executive, or by contacting the distributor at (800) 874-FUND for a Shareholder
Services application form.
The funds' transfer agent will redeem a sufficient number of your shares, held
in book-entry form, at the net asset value (for Class A shares) or less the
appropriate CDSC (for Class B shares) at the close of business of the NYSE on or
about the 20th day of each payment month. A check will mailed to you no later
than three business days following the date the shares are redeemed.
Household delivery of fund documents
With your consent, Burnham may send a single prospectus and shareholder report
to your residence for you and any other member of your household who has an
account with the funds. If you want to revoke your consent to this practice, you
may do so by notifying Burnham, by phone or in writing. See "How to contact us".
Burnham will begin mailing separate prospectuses and shareholder reports to you
within 30 days after receiving your notice.
WHAT IS A MEDALLION SIGNATURE GUARANTEE?
A medallion signature guarantee verifies that your signature is authentic. Most
banks and financial institutions can provide you with a medallion signature
guarantee providing that the financial institution participates in the Medallion
Program. Some charge a fee, but it is usually waived if you are a customer of
the financial institution.
A notary public cannot provide a medallion signature guarantee.
You will need a medallion signature guarantee on a written request to sell
shares in certain cases, including:
- When selling more than $25,000 worth of shares
- When you want your check to be payable to someone other than the owner of
record, or sent somewhere other than the address of record
- When you want the proceeds sent by wire or electronic transfer to a bank
account you have not designated in advance
YOUR ACCOUNT 25
<PAGE>
TAX CONSIDERATIONS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
Each fund pays dividends and distributions, as described in the table below.
Unless you notify the fund otherwise, your income and capital gains
distributions from a fund will be reinvested in that fund. However, if you
prefer you may:
- Receive all distributions in cash
- Reinvest capital gains distributions, but receive your income
distributions in cash
You may indicate your distribution choice on your application form upon
purchase. You will pay taxes on the amount of the distribution whether you
reinvest the distribution or receive it as cash.
TYPE OF DISTRIBUTION DECLARED & PAID FEDERAL TAX STATUS
DIVIDENDS FROM
NET INVESTMENT INCOME ordinary income
Burnham Fund quarterly
Burnham Dow 30 'sm' Focused Fund annually
Burnham Financial Services Fund annually
Burnham Small Cap Value Fund annually
Burnham Money Market Fund declared daily
paid monthly
Burnham U.S. Treasury Fund declared daily
Money Market paid monthly
- --------------------------------------------------------------------------------
SHORT-TERM CAPITAL GAINS
(all funds) annually ordinary income
- --------------------------------------------------------------------------------
LONG-TERM CAPITAL GAINS
(all funds) annually capital gain
- --------------------------------------------------------------------------------
Each fund may also pay dividends and distributions at other times if necessary
for a fund to avoid U.S. federal income or excise tax. Distributions from
Burnham Fund, Burnham Dow 30 'sm' Focused Fund and Burnham Financial Services
Fund are expected to be primarily capital gains. Distributions from Burnham
Money Market Fund and Burnham U.S. Treasury Money Market Fund will be primarily
ordinary income.
The funds issue Form 1099 tax information statements recording all distributions
and redemptions for the preceding year. These forms are mailed to shareholders
and to the Internal Revenue Service each year by January 31. Any shareholder who
does not supply a valid taxpayer identification number to the funds may be
subject to federal backup withholding.
It is a taxable event whenever you redeem or exchange shares. Generally, you
will recognize a capital gain or capital loss in an amount equal to the
difference between the net amount of the redemption proceeds (or in the case of
an exchange, the fair market value of the shares) that you receive and your tax
basis for the shares you redeem or exchange.
You should consult your tax adviser about your own particular tax situation.
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they were paid the
previous year.
BUYING SHARES
BEFORE A DISTRIBUTION
The money a fund earns, either as income or as capital gains, is reflected in
its share price until the fund makes a distribution. At that time, the amount of
the distribution is deducted from the share price and is either reinvested in
additional shares or paid to shareholders in cash.
If you buy fund shares just before a distribution, you will get some of your
investment back in the form of a taxable distribution. You can avoid this by
waiting to invest until after the fund makes its distribution.
Investments in tax-deferred accounts are not affected by the timing of
distribution payments because there are no tax consequences to these
accounts.
BACKUP WITHHOLDING
When you fill out your application form, be sure to provide your Social Security
number or taxpayer ID number. Otherwise, the IRS will require each fund to
withhold 31% of all money you receive from the fund. In certain circumstances,
the IRS may also require a fund to withhold 31% of such payments even when an
appropriate number has been provided by a shareholder.
YOUR ACCOUNT 26
<PAGE>
DOW JONES DISCLAIMER
- --------------------------------------------------------------------------------
"Dow Jones'sm'," "Dow Jones Industrial Average'sm'", "DJIA'sm'" and "Dow
30'sm'" are service marks of Dow Jones & Company, Inc. Dow Jones has no
relationship to Burnham Dow 30'sm' Focused Fund or its distributor, other than
the licensing of the Dow Jones Industrial Average (DJIA) and its service marks
to the distributor to use in connection with the fund.
DOW JONES DOES NOT:
- Sponsor, sell or promote the fund.
- Recommend that any person invest in the fund or any other securities.
- Have any responsibility or liability for or make any decisions about the
timing, amount or pricing of fund share offerings or redemptions.
- Have any responsibility or liability for the administration, management or
marketing of the fund.
- Consider the needs of the fund or its shareholders in determining, composing
or calculating the DJIA or have any obligation to do so.
DOW JONES WILL NOT HAVE ANY LIABILITY IN CONNECTION WITH THE FUND.
Specifically,
- Dow Jones does not make any warrants, express or implied, and Dow Jones
disclaims any warranty about:
- The results to be obtained by the fund, its shareholders or any other
person in connection with the use of the DJIA and the data included in
the DJIA;
- The accuracy or completeness of the DJIA and its data;
- The merchantability and the fitness for a particular purpose or use of the
DJIA and its data.
- Dow Jones will have no liability for any errors, omissions or interruptions
in the DJIA or its data.
- Under no circumstances will Dow Jones be liable for any lost profits or
indirect, punitive, special or consequential damages or losses, even if Dow
Jones knows that they might occur.
The licensing agreement between the fund's distributor and Dow Jones is solely
for their benefit and not for the benefit of the fund, its shareholders or any
other third parties.
RETIREMENT PLANS
The funds offer a number of tax-deferred plans for retirement savings:
TRADITIONAL IRAS allow money to grow tax-deferred until you take it out at
retirement. Contributions may be deductible for some investors.
ROTH IRAS also offer tax-free
growth. Contributions are
taxable, but withdrawals
in retirement are tax-free for
investors who meet certain
requirements.
SEP-IRA and other types of plans are also available. Consult your tax
professional to determine which type of plan may be beneficial to you.
YOUR ACCOUNT 27
<PAGE>
FINANCIAL HIGHLIGHTS
THESE FINANCIAL HIGHLIGHTS TABLES ARE INTENDED TO HELP YOU UNDERSTAND EACH
FUND'S FINANCIAL PERFORMANCE OVER THE PAST 5 YEARS OR FOR THE LIFE OF THE FUND
REPORTING PERIOD. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE
SHARE. THE TOTAL RETURNS IN EACH TABLE REPRESENT THE RATE THAT AN INVESTOR
WOULD HAVE EARNED (OR LOST) ON AN INVESTMENT IN THAT FUND, ASSUMING REINVESTMENT
OF ALL DIVIDENDS AND DISTRIBUTIONS. THIS INFORMATION HAS BEEN AUDITED BY
PRICEWATERHOUSECOOPERS LLP, WHOSE REPORT, ALONG WITH THE FUNDS' FINANCIAL
STATEMENTS, IS INCLUDED IN THE ANNUAL REPORT, WHICH IS AVAILABLE UPON REQUEST.
FINANCIAL HIGHLIGHTS 28
<PAGE>
BURNHAM FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
CLASS A SHARES CLASS B SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of year ($) 34.31 30.04 25.65 23.19 19.88 35.21 30.75 26.31 23.45 19.94
------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income / (loss) 0.06 0.25 0.45 0.51 0.71 (0.17) 0.03 0.13 0.21 0.41
Net gains on securities
and options (both realized
and unrealized) 10.52 5.97 5.54 3.36 3.91 10.70 6.12 5.75 3.69 4.10
------------------------------------------------------------------------------------------
Total from investment operations 10.58 6.22 5.99 3.87 4.62 10.53 6.15 5.88 3.90 4.51
LESS DISTRIBUTIONS
Dividends
(from net investment income) (0.10) (0.32) (0.44) (0.55) (0.75) -- (0.06) (0.28) (0.18) (0.44)
Distributions from capital gains
(from securities and
options transactions) (3.08) (1.63) (1.16) (0.86) (0.56) (3.08) (1.63) (1.16) (0.86) (0.56)
------------------------------------------------------------------------------------------
Total distributions (3.18) (1.95) (1.60) (1.41) (1.31) (3.08) (1.69) (1.44) (1.04) (1.00)
------------------------------------------------------------------------------------------
Net asset value,
end of year ($) 41.71 34.31 30.04 25.65 23.19 42.66 35.21 30.75 26.31 23.45
------------------------------------------------------------------------------------------
Total return (%) 32.71 22.08 24.74 17.60 24.45 31.60 21.16 23.60 17.34 23.54
RATIO/SUPPLEMENTAL DATA
Net assets (in $ millions),
end of year 193.0 156.7 136.4 117.4 112.0 5.1 2.4 1.6 1.0 0.6
------------------------------------------------------------------------------------------
Ratio of total expenses after
reimbursement to average
net assets (%) (1) 1.3 1.3 1.1 1.3 1.5 2.1 2.1 2.0 2.1 2.2
Ratio of total expenses before
reimbursement to average
net assets (%) (1) 1.4 1.3 -- -- -- 2.2 2.2 -- -- --
------------------------------------------------------------------------------------------
Ratio of net income to average 0.1 0.8 1.6 2.1 3.3 (0.06) 0.0* 0.7 1.3 2.5
net assets (%) ------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 42.2 54.7 59.4 61.5 78.3 42.2 54.7 59.4 61.5 78.3
------------------------------------------------------------------------------------------
* Less than 0.1%
1 THE ADVISOR CURRENTLY LIMITS THE FUND'S TOTAL EXPENSES TO 1.34% AND 2.09% OF
AVERAGE NET ASSETS FOR CLASS A AND CLASS B, RESPECTIVELY. THIS LIMIT IS
VOLUNTARY AND THE ADVISOR COULD CHANGE OR DROP IT AT ANY TIME. FOR THE YEAR
ENDED DECEMBER 31, 1999, THE ADVISOR REIMBURSED BOTH SHARE CLASSES FOR
EXPENSES IN EXCESS OF THE VOLUNTARY EXPENSE LIMITATION.
</TABLE>
FINANCIAL HIGHLIGHTS 29
<PAGE>
BURNHAM DOW 30'sm' FOCUSED FUND FINANCIAL HIGHLIGHTS
FOR THE PERIOD MAY 3 (INCEPTION) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NET ASSET VALUE,
Beginning of period ($) 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05
Net gains on securities
(both realized and unrealized) 0.27
--------------------------------------
Total from investment operations 0.32
LESS DISTRIBUTIONS
Dividends
(from net investment income) (0.05)
Distributions from capital gains
(from securities transactions) --
--------------------------------------
Total distributions (0.05)
--------------------------------------
Net asset value,
end of year ($) 10.27
--------------------------------------
Total return (%) 3.22
RATIO/SUPPLEMENTAL DATA
Net assets (in $ millions),
end of year 0.5
--------------------------------------
Ratio of total expenses after
reimbursement to average
net assets (%) (1) 1.2+
--------------------------------------
Ratio of total expenses before
reimbursement to average
net assets (%) (1) 19.9+
--------------------------------------
Ratio of net income to average
net assets (%) 0.7+
--------------------------------------
Portfolio turnover rate (%) 23.7
--------------------------------------
+ ANNUALIZED
1 THE ADVISER CURRENTLY LIMITS THE FUND'S TOTAL EXPENSES TO 1.20% OF AVERAGE
NET ASSETS. THIS LIMIT IS VOLUNTARY AND THE ADVISER COULD CHANGE OR DROP IT
AT ANY TIME. SINCE INCEPTION THE ADVISER REIMBURSED THE FUND FOR EXPENSES IN
EXCESS OF THE VOLUNTARY EXPENSE LIMITATION.
FINANCIAL HIGHLIGHTS 30
<PAGE>
BURNHAM FINANCIAL SERVICES FUND FINANCIAL HIGHLIGHTS
FOR THE PERIOD JUNE 7 (INCEPTION)
TO DECEMBER 31, 1999 1999
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
NET ASSET VALUE,
Beginning of period ($) 10.00 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income / (loss) 0.02 (0.00)*
Net (loss) on securities and options
(both realized and unrealized) (0.21) (0.25)
--------------------------------------
Total from investment operations (0.19) (0.25)
LESS DISTRIBUTIONS
Dividends
(from net investment income) (0.02) --
Distributions from capital gains
(from securities and
options transactions) -- --
--------------------------------------
Total distributions (0.02) --
--------------------------------------
Net asset value,
end of period ($) 9.79 9.75
--------------------------------------
Total return (%) (1.90) (2.50)
RATIO/SUPPLEMENTAL DATA
Net assets (in $millions),
end of period 3.0 0.0**
--------------------------------------
Ratio of total expenses after
reimbursement to average
net assets (%) (1) 1.6+ 2.3+
--------------------------------------
Ratio of total expenses before
reimbursement to average
net assets (%) (1) 7.4+ 8.2+
--------------------------------------
Ratio of net income to average
net assets (%) 0.7+ (0.1)+
--------------------------------------
Portfolio turnover rate (%) 89.6 89.6
--------------------------------------
* LESS THAN $(0.01) PER SHARE
** LESS THAN $100,000
+ ANNUALIZED
1 THE ADVISER CURRENTLY LIMITS THE FUND'S TOTAL EXPENSES TO 1.60% AND 2.35% OF
AVERAGE NET ASSETS FOR CLASS A AND CLASS B SHARES, RESPECTIVELY. THIS LIMIT
IS VOLUNTARY AND THE ADVISER COULD CHANGE OR DROP IT AT ANY TIME. SINCE
INCEPTION THE ADVISER REIMBURSED THE FUND FOR EXPENSES IN EXCESS OF THE
VOLUNTARY EXPENSE LIMITATION.
FINANCIAL HIGHLIGHTS 31
<PAGE>
BURNHAM MONEY MARKET FUND FINANCIAL HIGHLIGHTS
FOR THE PERIOD MAY 3 (INCEPTION) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NET ASSET VALUE,
Beginning of period ($) 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03
Net gains on securities
(both realized and unrealized) 0.00*
--------------------------------------
Total from investment operations 0.03
LESS DISTRIBUTIONS
Dividends
(from net investment income) (0.03)
Distributions from capital gains
(from securities transactions) (0.00)**
--------------------------------------
Total distributions (0.03)
--------------------------------------
Net asset value,
end of year ($) 1.00
--------------------------------------
Total return (%) 2.97
RATIO/SUPPLEMENTAL DATA
Net assets (in $millions),
end of period 32.9
--------------------------------------
Ratio of total expenses after
reimbursement to average
net assets (%) (1) 0.9+
--------------------------------------
Ratio of total expenses before
reimbursement to average
net assets (%) (1) 1.1+
--------------------------------------
Ratio of net income to average
net assets (%) 4.5+
--------------------------------------
* LESS THAN $0.01 PER SHARE
** LESS THAN $(0.01) PER SHARE
+ ANNUALIZED
1 THE ADVISOR CURRENTLY LIMITS THE FUND'S TOTAL EXPENSES TO 0.97% OF AVERAGE
NET ASSETS. THIS LIMIT IS VOLUNTARY AND THE ADVISOR COULD CHANGE OR DROP IT
AT ANY TIME. SINCE INCEPTION THE ADVISOR REIMBURSED THE FUND FOR EXPENSES IN
EXCESS OF THE VOLUNTARY EXPENSE LIMITATION.
FINANCIAL HIGHLIGHTS 32
<PAGE>
BURNHAM U.S. TREASURY MONEY MARKET FUND FINANCIAL HIGHLIGHTS
FOR THE PERIOD OCTOBER 13 (INCEPTION) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NET ASSET VALUE,
Beginning of period ($) 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.00*
--------------------------------------
Total from investment operations 0.00*
LESS DISTRIBUTIONS
Dividends
(from net investment income) (0.00)**
--------------------------------------
Total distributions (0.00)**
--------------------------------------
Net asset value,
end of period ($) 1.00
--------------------------------------
Total return (%) 1.0
RATIO/SUPPLEMENTAL DATA
Net assets (in $millions),
end of PERIOD 83.4
--------------------------------------
Ratio of total expenses after
reimbursement to average
net assets (%) (1) 0.8+
--------------------------------------
Ratio of total expenses before
reimbursement to average
net assets (%) (1) 0.9+
--------------------------------------
Ratio of net income to average
net assets (%) 4.6+
--------------------------------------
* LESS THAN $0.01 PER SHARE
** LESS THAN $(0.01) PER SHARE
+ ANNUALIZED
FINANCIAL HIGHLIGHTS 33
<PAGE>
THE BURNHAM FAMILY OF FUNDS aims to give investors the tools to build
prudent investment portfolios. The funds offer a variety of approaches to
stock investing, as well as two money market funds.
Burnham U.S. Burnham Burnham Dow Burnham
Treasury Money Money Market 30 'sm' Focused Financial
Money Market Fund Fund Burnham Fund Services Fund
- --------------------------------------------------------------------------------
MORE MORE
CONSERVATIVE AGGRESSIVE
WHERE TO GET
MORE
INFORMATION
ANNUAL AND SEMI-ANNUAL REPORTS
- --------------------------------------------------------------------------------
These include commentary from the fund managers on the market conditions and
investment strategies that significantly affected the funds' performance,
detailed performance data, a complete inventory of the funds' securities, and a
report from the funds' auditor.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
- --------------------------------------------------------------------------------
The SAI contains more detailed disclosure on features and policies of the funds.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into this document (that is, it is legally a part of
this prospectus). Information about the funds (including the SAI) can be
reviewed and copied at the Commission's Public Reference Room in Washington,
D.C.
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-942-8090. Reports and other information about
the funds are available on the EDGAR Database on the Commission's Internet site
at http://www.sec.gov. Copies of this information may be obtained, after
paying a duplicating fee, by electronic request at the following E-mail address:
[email protected], or by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102.
HOW TO CONTACT US
You can obtain these documents free of charge by contacting your dealer or:
DISTRIBUTOR:
[LOGO] Burnham Securities Inc.
1325 Avenue of the Americas, 26th Floor
New York, NY 10019
phone: 1-800-874-FUND
internet: www.burnhamfunds.com
email: [email protected]
SEC file number: 811-994
STATEMENT OF DIFFERENCES
------------------------
The service mark symbol shall be expressed as............................ 'sm'
<PAGE>
BURNHAM INVESTORS TRUST
STATEMENT OF ADDITIONAL INFORMATION
BURNHAM FUND
BURNHAM DOW 30'sm' FOCUSED FUND
BURNHAM FINANCIAL SERVICES FUND
BURNHAM SMALL CAP VALUE FUND
BURNHAM MONEY MARKET FUND
BURNHAM U.S. TREASURY MONEY MARKET FUND
MAY 1, 2000
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Funds' prospectus dated May 1, 2000, which is
incorporated by reference herein. The information in this Statement of
Additional Information expands on information contained in the prospectus. The
prospectus can be obtained without charge by contacting either the dealer
through whom you purchased shares or the Distributor at the phone number or
address below.
BURNHAM SECURITIES INC.
PRINCIPAL DISTRIBUTOR
1325 Avenue of the Americas, 26th Floor,
New York, New York 10019
1-(800) 874-FUND
<PAGE>
TABLE OF CONTENTS
. PAGE
Burnham Investors Trust....................................................... 1
Investment Techniques and Related Risks....................................... 1
Investment Restrictions.......................................................19
Services for Shareholders.....................................................20
Purchase and Redemption of Shares.............................................20
Net Asset Value...............................................................25
Taxes.........................................................................26
Trustees and Officers of the Trust............................................30
Investment Management and Other Services .....................................32
Control Persons and Principal Shareholders....................................37
Shares of Beneficial Interest.................................................38
Brokerage ....................................................................39
Determination of Performance .................................................41
Financial Statements .........................................................42
Appendix A - Description of Securities Ratings...............................A-1
Appendix B - Description of Dow Jones Industrials Average and DIAMONDS ......B-1
<PAGE>
BURNHAM INVESTORS TRUST
Burnham Investors Trust (the "Trust"), 1325 Avenue of the Americas, 26th Floor,
New York, New York 10019, is an open-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"). The Trust
offers shares of beneficial interest (the "shares") in the following six series,
each of which is a separate portfolio of investments with its own investment
objective: Burnham Dow 30 'sm' Focused Fund, Burnham Fund, (previously known as
The Burnham Fund Inc.), Burnham Financial Services Fund, Burnham Small Cap Value
Fund, Burnham Money Market Fund and Burnham U.S. Treasury Money Market Fund
(each a "Fund" and collectively, the "Funds"). Burnham Small Cap Value Fund is
currently not being offered to investors.
The Trust was organized as a Delaware business trust on August 20, 1998. The
Trust is the surviving entity of the reorganization of The Burnham Fund, Inc.
(the "Corporation"), a Maryland corporation, effected April 30, 1999. Before the
reorganization, the Corporation was an open-end management investment company in
operation since 1961, consisting of a single series, The Burnham Fund, Inc. Some
of the information in this Statement of Additional Information relates to the
Corporation before the reorganization.
INVESTMENT TECHNIQUES AND RELATED RISKS
References in this section to the Adviser include Burnham Asset Management
Corporation and any subadviser that may be managing a Fund's portfolio.
EQUITY INVESTMENTS
COMMON SHARES. (All Funds except Burnham Money Market Fund and Burnham U.S.
Treasury Money Market Fund) Common shares represent an equity (ownership)
interest in a company or other entity. This ownership interest often gives a
Fund the right to vote on measures affecting the company's organization and
operations. Although common shares generally have a history of long-term growth
in value, their prices, particularly those of smaller capitalization companies,
are often volatile in the short-term.
PREFERRED SHARES. (All Funds except Burnham Money Market Fund and Burnham U.S.
Treasury Money Market Fund) Preferred shares represent a limited equity interest
in a company or other entity and frequently have debt-like features. Preferred
shares are often entitled only to dividends at a specified rate, and have a
preference over common shares with respect to dividends and on liquidation of
assets. Preferred shares generally have lesser voting rights than common shares.
Because their dividends are often fixed, the value of some preferred shares
fluctuates inversely with changes in interest rates.
CONVERTIBLE SECURITIES. (Burnham Fund, Burnham Financial Services Fund, Burnham
Small Cap Value Fund) Convertible securities are bonds, preferred shares and
other securities that pay a fixed rate of interest or dividends. However, they
offer the buyer the additional option of converting the security into common
stock. The value of convertible securities depends partially on interest rate
changes and the credit quality of the issuer. The value of convertible
securities is also sensitive to company, market and other economic news, and
will change based on the price of the underlying common stock. Convertible
securities generally have less potential for gain than common stock, but also
less potential for loss, since their income provides a cushion against the
stock's price declines. However, because the buyer is also exposed to the risk
and reward potential of the underlying stock, convertible securities generally
pay less income than similar non-convertible securities.
WARRANTS AND RIGHTS. (Burnham Fund, Burnham Financial Services Fund, Burnham
Small Cap Value Fund) Warrants and rights are securities permitting, but not
obligating, their holder to purchase the underlying equity or fixed income
securities at a predetermined price. Generally, warrants and stock purchase
rights do not carry with them the right to receive dividends on or exercise
voting rights concerning the underlying equity securities. Further, they do not
represent any rights in the assets of the issuer. In addition, the value of
warrants and rights do not necessarily change with the value of the underlying
securities, and they become worthless if they are not exercised on
1
<PAGE>
or before their expiration date. As a result, an investment in warrants or
rights may entail greater investment risk than certain other types of
investments.
REAL ESTATE INVESTMENT TRUSTS. (Burnham Fund, Burnham Financial Services Fund,
Burnham Small Cap Value Fund) REITs are pooled investment vehicles that invest
primarily in income producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest most of their
assets directly in real property and derive income primarily from the collection
of rents. Equity REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs invest most of their assets in real
estate mortgages and derive income from interest payments. Like investment
companies, REITs are not taxed on income distributed to shareholders if they
comply with several requirements of the Internal Revenue Code of 1986 (the
"Code"). A Fund will indirectly bear its proportionate share of any expenses
(such as operating expenses and advisory fees) paid by REITs in which it invests
in addition to the expenses paid by the Fund.
RISKS ASSOCIATED WITH THE REAL ESTATE INDUSTRY. Although a Fund that invests in
REITs does not invest directly in real estate, it does invest primarily in real
estate equity securities and may concentrate its investments in the real estate
industry, and, therefore, an investment in the Fund may be subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others:
possible declines in the value of real estate;
adverse general or local economic conditions;
possible lack of availability of mortgage funds;
overbuilding;
extended vacancies of properties;
increases in competition, property taxes and operating expenses;
changes in zoning or applicable tax law;
costs resulting from the clean-up of, and liability to third parties for
damages resulting from, environmental problems;
casualty or condemnation losses;
uninsured damages from floods, earthquakes or other natural disasters;
limitations on and variations in rents; and
unfavorable changes in interest rates.
In addition, if a Fund has rental income or income from the disposition of real
property acquired as a result of a default on securities the Fund owns, the
receipt of such income may adversely affect its ability to retain its tax status
as a regulated investment company. Investments by a Fund in securities of
companies providing mortgage servicing will be subject to the risks associated
with refinancings and their impact on servicing rights.
FINANCIAL SERVICES COMPANIES. (All Funds) Each Fund may invest in financial
services companies. Burnham Financial Services Fund will invest primarily in
these companies and will therefore be subject to risks in addition to those that
apply to general equity and fixed income investments. Some events may
disproportionately affect the financial services sector as a whole or a
particular industry in this sector. Accordingly, Burnham Financial Services Fund
may be subject to greater market volatility than a fund that does not
concentrate in a particular economic sector
2
<PAGE>
or industry. Thus, it is recommended that you invest only part of your overall
investment portfolio in Burnham Financial Services Fund.
In addition, most financial services companies are subject to extensive
governmental regulation, which limits their activities and may (as with
insurance rate regulation) affect their ability to earn a profit from a given
line of business. Certain financial services businesses are subject to intense
competitive pressures, including market share and price competition. The removal
of regulatory barriers to participation in certain segments of the financial
services sector may also increase competitive pressures on different types of
firms. For example, the removal of traditional barriers between banking and
investment banking activities will allow large commercial banks to compete for
business that previously was the exclusive domain of securities firms.
Similarly, the removal of regional barriers in the banking industry has
intensified competition within the industry. The availability and cost of funds
to financial services firms is crucial to their profitability. Consequently,
volatile interest rates and unfavorable economic conditions can adversely affect
their financial performance.
Financial services companies in foreign countries are subject to similar
regulatory and interest rate concerns. In particular, government regulation in
certain foreign countries may include controls on interest rates, credit
availability, prices and currency transfers. In some countries, foreign
governments have taken steps to nationalize the operations of banks and other
financial services companies.
The Adviser believes that the ongoing deregulation of many segments of the
financial services sector continues to provide new opportunities for issuers in
this sector. As deregulation of various financial services businesses continues
and new segments of the financial services sector are opened to larger financial
services firms formerly prohibited from doing business in these segments (such
as national and money center banks), established companies in these market
segments (such as regional banks or securities firms) may become attractive
acquisition candidates for the larger firm seeking entrance into the segment.
Typically, acquisitions accelerate the capital appreciation of the shares of the
company to be acquired.
In addition, financial services companies in growth segments (such as securities
firms during times of stock market expansion) or geographically linked to areas
experiencing strong economic growth (such as certain regional banks) are likely
to participate in and benefit from such growth through increased demand for
their products and services. Many financial services companies which are
actively and aggressively managed are expanding services as deregulation opens
up new opportunities and also show potential for capital appreciation,
particularly from expanding into areas where nonregulatory barriers to entry are
low.
The Adviser will select for the Funds those financial services companies that it
believes are well positioned to take advantage of the ongoing changes in the
financial services sector. A financial services company may be well positioned
for one or more of the following reasons:
It may be an attractive acquisition for another company wishing to
strengthen its presence in a line of business or a geographic region or
to expand into new lines of business or geographic regions.
It may be planning a merger to strengthen its position in a line of
business or a geographic area.
It may be engaged in a line or lines of business experiencing or likely
to experience strong economic growth.
It may be linked to a geographic region experiencing or likely to
experience strong economic growth and be actively seeking to
participate in such growth.
It may be expanding into financial services or geographic regions
previously unavailable to it (due to an easing of regulatory
constraints) in order to take advantage of new market opportunities.
3
<PAGE>
SMALL CAPITALIZATION COMPANIES. (All Funds except Burnham Money Market Fund and
Burnham U.S. Treasury Money Market Fund) The Funds, and especially Burnham Small
Cap Value Fund, may invest in U.S. and foreign companies with market
capitalizations of $1.3 billion or less. Investing in the common stock of
smaller companies involves special risks and considerations not typically
associated with investing in the common stock of larger companies. The
securities of smaller companies may experience more market price volatility than
the securities of larger companies. These companies are typically subject to
more dramatic changes in earnings and business prospects than larger, more
established companies. In addition, the securities of smaller companies are less
liquid because they tend to trade over-the-counter or on regional exchanges, and
the frequency and volume of their trading are often substantially less than for
securities of larger companies.
INVESTMENT COMPANIES. (All Funds) A Fund may acquire securities of another
investment company if, immediately after such acquisition, the Fund does not own
in the aggregate (1) more than 3% of the total outstanding voting stock of such
other investment company, (2) securities issued by such other investment company
total an aggregate value exceeding 5% of the Fund's total assets, or (3)
securities issued by such other investment company and all other investment
companies total an aggregate value exceeding 10% of the Fund's total assets.
Investing in another registered investment company may result in duplication of
fees and expenses.
FIXED INCOME INVESTMENTS
TEMPORARY DEFENSIVE INVESTMENTS. (All Funds except Burnham Money Market Fund and
Burnham U.S. Treasury Money Market Fund) For temporary and defensive purposes,
each Fund except Burnham Dow 30 'sm' Focused Fund may invest up to 100% of its
total assets in investment grade short-term fixed income securities (including
short-term U.S. government securities, money market instruments, including
negotiable certificates of deposit, non-negotiable fixed time deposits, bankers'
acceptances, commercial paper and floating rate notes) and repurchase
agreements. Burnham Dow 30 'sm' Focused Fund may invest only 25% of its total
assets in temporary defensive investments. Each Fund may also hold significant
amounts of its assets in cash, subject to the applicable percentage limitations
for short-term securities.
GENERAL CHARACTERISTICS AND RISKS OF FIXED INCOME SECURITIES. (All Funds) Bonds
and other fixed-income securities are used by issuers to borrow money from
investors. The issuer pays the investor a fixed or variable rate of interest,
and must repay the principal amount at maturity. Some fixed-income securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. Fixed-income securities have varying degrees of
quality and varying maturities.
CREDIT RATINGS. In general, the ratings of Moody's Investors Service, Inc.
(Moody's), Standard & Poor's Ratings Group (S&P), FitchIBCA and Duff & Phelps
Credit Rating Co. (Duff) represent the opinions of these agencies as to the
credit quality of the securities which they rate. However, these ratings are
relative and subjective and are not absolute standards of quality. In addition,
changes in these ratings may significantly lag changes in an issuer's
creditworthiness. Changes by recognized agencies in the rating of any
fixed-income security or in the ability of the issuer to make payments of
interest and principal will also affect the value of the security.
After its purchase by a Fund, an issue of securities may cease to be rated or
its rating may be reduced below the minimum required for purchase by the Fund.
Neither of these events will necessarily require the Adviser, on behalf of a
Fund, to sell the securities.
LOWER RATED HIGH YIELD FIXED INCOME SECURITIES. (Burnham Fund, Burnham Financial
Services Fund, Burnham Small Cap Value Fund) Lower rated high yield fixed income
securities are those rated below Baa3 by Moody's, or below BBB- by S&P,
FitchIBCA or Duff, or securities which are unrated and determined by the Adviser
to be of comparable quality. Lower rated securities are generally referred to as
high yield bonds or junk bonds. See Appendix A attached to this Statement of
Additional Information for a description of the rating categories. A Fund may
invest in eligible unrated securities which, in the opinion of the Adviser,
offer comparable risks to those permissible rated securities.
4
<PAGE>
Debt obligations rated in the lower ratings categories, or which are unrated,
involve greater volatility of price and risk of loss of principal and income. In
addition, lower ratings reflect a greater possibility of an adverse change in
financial condition affecting the ability of the issuer to make payments of
interest and principal. The market price and liquidity of lower rated fixed
income securities generally respond to short-term economic, corporate and market
developments more dramatically than do higher rated securities. These
developments are perceived to have a more direct relationship to the ability of
an issuer of lower rated securities to meet its ongoing debt obligations.
Reduced volume and liquidity in the high yield bond market, or the reduced
availability of market quotations, will make it more difficult to dispose of the
bonds and accurately value a Fund's assets. The reduced availability of
reliable, objective pricing data may increase a Fund's reliance on management's
judgment in valuing high yield bonds. To the extent that a Fund invests in these
securities, the achievement of the Fund's objective will depend more on the
Adviser's judgment and analysis than it would otherwise be. In addition, high
yield securities in a Fund's portfolio may be susceptible to adverse publicity
and investor perceptions, whether or not these perceptions are justified by
fundamental factors. In the past, economic downturns and increases in interest
rates have caused a higher incidence of default by the issuers of lower rated
securities and may do so in the future, particularly with respect to highly
leveraged issuers.
CREDIT RISK. Credit risk relates to the ability of an issuer to pay interest and
principal as they become due. Generally, lower quality, higher yielding bonds
are subject to more credit risk than higher quality, lower yielding bonds. A
default by the issuer of, or a downgrade in the credit rating assigned to, a
fixed-income security in a Fund's portfolio will reduce the value of the
security.
INTEREST RATE RISK. Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting solely from the inverse relationship between
the market value of outstanding fixed-income securities and changes in interest
rates. An increase in interest rates will generally reduce the market value of
fixed-income investments, and a decline in interest rates will tend to increase
their value. In addition, debt securities with longer maturities, which tend to
produce higher yields, are subject to potentially greater capital appreciation
and depreciation than obligations with shorter maturities. Fluctuations in the
market value of fixed-income securities after their acquisition will not affect
the cash interest payable on those securities but will be reflected in the
valuations of those securities used to compute a Fund's net asset value.
CALL (PREPAYMENT) RISK AND EXTENSION RISK. Call risk is the risk that an issuer
will pay principal on an obligation earlier than scheduled or expected, which
would accelerate cash flows from, and shorten the average life and duration of,
the security. This typically happens when interest rates have declined, and a
Fund will suffer from having to reinvest in lower yielding securities.
Extension risk is the risk that an issuer may pay principal on an obligation
slower than expected. This typically happens when interest rates have increased.
Slower than expected prepayments will have the effect of extending the average
life and duration of the obligation and possibly of a Fund's fixed income
portfolio.
Prepayments that are faster or slower than expected may reduce the value of the
affected security.
MATURITY AND DURATION. The effective maturity of an individual portfolio
security in which a Fund invests is defined as the period remaining until the
earliest date when the Fund can recover the principal amount of such security
through mandatory redemption or prepayment by the issuer, the exercise by the
Fund of a put option, demand feature or tender option granted by the issuer or a
third party or the payment of the principal on the stated maturity date. The
effective maturity of variable rate securities is calculated by reference to
their coupon reset dates. Thus, the effective maturity of a security may be
substantially shorter than its final stated maturity.
Duration is a measure of a debt security's price sensitivity taking into account
expected cash flows and prepayments under a wide range of interest rate
scenarios. In computing the duration of its portfolio, a Fund will have to
estimate the duration of obligations that are subject to prepayment or
redemption by the issuer taking into account the influence of interest rates on
prepayments and coupon flows. Each Fund may use various techniques to shorten or
lengthen the option-adjusted duration of its fixed income portfolio, including
the acquisition of debt obligations at premium or discount, and the use of
mortgage swaps and interest rate swaps, caps, floors and collars.
5
<PAGE>
BANK AND CORPORATE OBLIGATIONS. (All Funds) Commercial paper represents
short-term unsecured promissory notes issued in bearer form by banks or bank
holding companies, corporations and finance companies. The commercial paper
purchased by the Funds consists of direct obligations of domestic or foreign
issuers. Bank obligations in which the Funds may invest include certificates of
deposit, bankers' acceptances and fixed time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand
by the investor, but may be subject to early withdrawal penalties which vary
depending upon market conditions and the remaining maturity of the obligation.
There are no contractual restrictions on the right to transfer a beneficial
interest in a fixed time deposit to a third party, although there is no market
for such deposits. Bank notes and bankers' acceptances rank junior to domestic
deposit liabilities of the bank and equal to other senior, unsecured obligations
of the bank. Bank notes are not insured by the Federal Deposit Insurance
Corporation or any other insurer. Deposit notes are insured by the Federal
Deposit Insurance Corporation only to the extent of $100,000 per depositor per
bank.
REPURCHASE AGREEMENTS. (All Funds) The Funds may enter repurchase agreements
with approved banks and broker-dealers. In a repurchase agreement, a Fund
purchases securities with the understanding that they will be repurchased by the
seller at a set price on a set date. This allows a Fund to keep its assets at
work but retain overnight flexibility pending longer term investments.
Repurchase agreements involve credit risk. For example, if a seller defaults, a
Fund will suffer a loss if the proceeds from the sale of the collateral are
lower than the repurchase price. If the seller becomes bankrupt, a Fund may be
delayed or incur additional costs to sell the collateral. To minimize risk,
collateral must be held with the Funds' custodian and at least equal the market
value of the securities subject to the repurchase agreement plus any accrued
interest.
U.S. GOVERNMENT SECURITIES. (All Funds) U.S. government securities include:
U.S. Treasury obligations and obligations issued or guaranteed by U.S.
government agencies, instrumentalities or sponsored enterprises which are
supported by
the full faith and credit of the U.S. Treasury (such as the Government
National Mortgage Association (GNMA)),
the right of the issuer to borrow from the U.S. Treasury (Federal Home
Loan Banks),
the discretionary authority of the U.S. government to purchase certain
obligations of the issuer (Fannie Mae (Federal National Mortgage
Association) and Federal Home Loan Mortgage Corporation (FHLMC)), or
only the credit of the agency and a perceived "moral obligation" of the
U.S. government.
No assurance can be given that the U.S. government will provide financial
support to U.S. government agencies, instrumentalities or sponsored enterprises
in the future.
U.S. government securities also include Treasury receipts, zero coupon
bonds, U.S. Treasury inflation-indexed bonds, deferred interest securities
and other stripped U.S. government securities. The interest and principal
components of stripped U.S. government securities are traded independently.
The most widely recognized trading program for such securities is the
Separate Trading of Registered Interest and Principal of Securities Program.
U.S. Treasury inflation-indexed obligations provide a measure of protection
against inflation by adjusting the principal amount for inflation. The
semi-annual interest payments on these obligations are equal to a fixed
percentage of the inflation-adjusted principal amount.
6
<PAGE>
MORTGAGE-BACKED SECURITIES. (All Funds except Burnham Dow 30 'sm' Focused Fund)
Burnham Money Market Fund and Burnham U.S. Treasury Money Market Fund may invest
only in those mortgage-backed securities that meet their credit quality and
portfolio maturity requirements. Mortgage-backed securities represent
participation interests in pools of adjustable and fixed rate mortgage loans
secured by real property.
Unlike conventional debt obligations, mortgage-backed securities provide monthly
payments derived from the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans. The
mortgage loans underlying mortgage-backed securities are generally subject to a
greater rate of principal prepayments in a declining interest rate environment
and to a lesser rate of principal prepayments in an increasing interest rate
environment. Under certain interest rate and prepayment scenarios, a Fund may
fail to recover the full amount of its investment in mortgage-backed securities
notwithstanding any direct or indirect governmental or agency guarantee. Since
faster than expected prepayments must usually be invested in lower yielding
securities, mortgage-backed securities are less effective than conventional
bonds in "locking" in a specified interest rate. In a rising interest rate
environment, a declining prepayment rate may extend the average life of many
mortgage-backed securities. Extending the average life of a mortgage-backed
security reduces its value and increases the risk of depreciation due to future
increases in market interest rates.
A Fund's investments in mortgage-backed securities may include conventional
mortgage pass through securities and certain classes of multiple class
collateralized mortgage obligations ("CMOs"). Mortgage pass-through securities
are fixed or adjustable rate mortgage-backed securities that provide for monthly
payments that are a "pass-through" of the monthly interest and principal
payments (including any prepayments) made by the individual borrowers on the
pooled mortgage loans, net of any fees or other amounts paid to any guarantor,
administrator and/or servicer of the underlying mortgage loans. CMOs are issued
in multiple classes, each having different maturities, interest rates, payment
schedules and allocations of principal and interest on the underlying mortgages.
Senior CMO classes will typically have priority over residual CMO classes as to
the receipt of principal and/or interest payments on the underlying mortgages.
The CMO classes in which a Fund may invest include but are not limited to
sequential and parallel pay CMOs, including planned amortization class ("PAC")
and target amortization class ("TAC") securities. Sequential pay CMOs apply
payments of principal, including any prepayments, to each class of CMO in the
order of the final distribution date. Thus, no payment of principal is made on
any class until all other classes having an earlier final distribution date have
been paid in full. Parallel pay CMOs apply principal payments and prepayments to
two or more classes concurrently on a proportionate or disproportionate basis.
The simultaneous payments are taken into account in calculating the final
distribution date of each class. Each Fund may invest in the most junior classes
of CMOs, which involve the most interest rate, prepayment and extension risk.
Different types of mortgage-backed securities are subject to different
combinations of prepayment, extension, interest rate and other market risks.
Conventional mortgage pass through securities and sequential pay CMOs are
subject to all of these risks, but are typically not leveraged. PACs, TACs and
other senior classes of sequential and parallel pay CMOs involve less exposure
to prepayment, extension and interest rate risk than other mortgage-backed
securities, provided that prepayment rates remain within expected prepayment
ranges or "collars." To the extent that the prepayment rates remain within these
prepayment ranges, the residual or support tranches of PAC and TAC CMOs assume
the extra prepayment, extension and interest rate risks associated with the
underlying mortgage assets.
AGENCY MORTGAGE SECURITIES. (All Funds except Burnham Dow 30 'sm' Focused Fund)
The Funds may invest in mortgage-backed securities issued or guaranteed by the
U.S. government, foreign governments or any of their agencies, instrumentalities
or sponsored enterprises. There are several types of agency mortgage securities
currently available, including, but not limited to, guaranteed mortgage
pass-through certificates and multiple class securities.
PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES. (Burnham Fund, Burnham Financial
Services Fund, Burnham Small Cap Value Fund) Mortgage-backed securities may also
be issued by trusts or other entities formed or sponsored by private originators
of and institutional investors in mortgage loans and other foreign or domestic
non-governmental entities (or represent custodial arrangements administered by
such institutions). These private originators and institutions include domestic
and foreign savings and loan associations, mortgage bankers, commercial banks,
insurance companies, investment banks and special purpose subsidiaries of the
foregoing. Privately issued mortgage-backed securities are generally backed by
pools of conventional (i.e., non-government guaranteed or insured) mortgage
loans.
7
<PAGE>
These mortgage-backed securities are not guaranteed by an entity having the
credit standing of a U.S. government agency. In order to receive a high quality
rating, they normally are structured with one or more types of "credit
enhancement." These credit enhancements fall generally into two categories: (1)
liquidity protection and (2) protection against losses resulting after default
by a borrower and liquidation of the collateral. Liquidity protection refers to
the providing of cash advances to holders of mortgage-backed securities when a
borrower on an underlying mortgage fails to make its monthly payment on time.
Protection against losses resulting after default and liquidation is designed to
cover losses resulting when, for example, the proceeds of a foreclosure sale are
insufficient to cover the outstanding amount on the mortgage. This protection
may be provided through guarantees, insurance policies or letters of credit,
through various means of structuring the transaction or through a combination of
such approaches.
ASSET-BACKED SECURITIES. (All Funds except Burnham Dow 30 'sm' Focused Fund)
Asset-backed securities represent individual interests in pools of consumer
loans, home equity loans, trade receivables, credit card receivables, and other
debt and are similar in structure to mortgage-backed securities. The assets are
securitized either in a pass-through structure (similar to a mortgage
pass-through structure) or in a pay-through structure (similar to a CMO
structure). Asset-backed securities may be subject to more rapid repayment than
their stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying loans. During periods of declining
interest rates, prepayment of certain types of loans underlying asset-backed
securities can be expected to accelerate. Accordingly, a Fund's ability to
maintain positions in these securities will be affected by reductions in the
principal amount of the securities resulting from prepayments, and the Fund must
reinvest the returned principal at prevailing interest rates, which may be
lower. Asset-backed securities may also be subject to extension risk during
periods of rising interest rates.
Asset-backed securities entail certain risks not presented by mortgage-backed
securities. The collateral underlying asset-backed securities may be less
effective as security for payments than real estate collateral. Debtors may have
the right to set off certain amounts owed on the credit cards or other
obligations underlying the asset-backed security, or the debt holder may not
have a first (or proper) security interest in all of the obligations backing the
receivable because of the nature of the receivable or state or federal laws
protecting the debtor. Certain collateral may be difficult to locate in the
event of default, and recoveries on depreciated or damaged collateral may not
fully cover payments due on these securities.
A Fund may invest in any type of asset-backed security if the Adviser determines
that the security is consistent with the Fund's investment objective and
policies. Burnham Money Market Fund and Burnham U.S. Treasury Money Market Fund
may invest only in those asset-backed securities that meet its credit quality
and portfolio maturity requirements.
FLOATING RATE/VARIABLE RATE NOTES. (All Funds) Some notes purchased by a Fund
may have variable or floating interest rates. Variable rates are adjustable at
stated periodic intervals; floating rates are automatically adjusted according
to a specified market rate for such investments, such as the percentage of the
prime rate of a bank, or the 91-day U.S. Treasury Bill rate. These obligations
may be secured by bank letters of credit or other support arrangements. If a
security would not satisfy a Fund's credit quality standards without such a
credit support, the entity providing a bank letter or line of credit, guarantee
or loan commitment must meet a Fund's credit quality standards.
The absence of an active secondary market for certain variable and floating rate
notes could make it difficult for a Fund to dispose of the instruments, and a
Fund could suffer a loss if the issuer defaults or there are periods during
which the Fund is not entitled to exercise its demand rights. Variable and
floating rate instruments held by a Fund will be subject to the Fund's
limitation on investments in illiquid securities if a reliable trading market
for the instruments does not exist and the Fund cannot demand payment of the
principal amount of such instruments within seven days.
STRUCTURED SECURITIES. (Burnham Fund, Burnham Financial Services Fund, Burnham
Small Cap Value Fund) Structured securities include notes, bonds or debentures
that provide for the payment of principal of and/or interest in amounts
determined by reference to changes in the value of specific currencies, interest
rates, commodities, indices or other financial indicators (the Reference) or the
relative change in two or more References. The interest rate or the principal
amount payable upon maturity or redemption may be increased or decreased
depending upon changes in
8
<PAGE>
the applicable Reference. The terms of structured securities may provide that
in certain circumstances no principal is due at maturity and, therefore, may
result in the loss of the Fund's investment. Structured securities may be
positively or negatively indexed, so that appreciation of the Reference may
produce an increase or decrease in the interest rate or value of the security at
maturity. In addition, the change in interest rate or the value of the security
at maturity may be a multiple of the change in the value of the Reference.
Consequently, leveraged structured securities entail a greater degree of market
risk than other types of debt obligations. Structured securities may also be
more volatile, less liquid and more difficult to accurately price than less
complex fixed income investments.
PAY-IN-KIND, DELAYED PAYMENT AND ZERO COUPON BONDS. (Burnham Fund, Burnham
Financial Services Fund, Burnham Small Cap Value Fund) These securities are
generally issued at a discount from their face value because cash interest
payments are typically postponed until maturity or after a stated period. The
amount of the discount rate varies depending on such factors as the time
remaining until maturity, prevailing interest rates, the security's liquidity
and the issuer's credit quality. These securities also may take the form of debt
securities that have been stripped of their interest payments. The market prices
of pay-in-kind, delayed payment and zero coupon bonds generally are more
volatile than the market prices of securities that pay interest periodically and
in cash, and are likely to respond more to changes in interest rates than
interest-bearing securities having similar maturities and credit quality. A Fund
generally accrues income on securities that are issued at a discount and/or do
not make current cash payments of interest for tax and accounting purposes. This
income is required to be distributed to shareholders. A Fund's investments in
pay-in-kind, delayed payment and zero coupon bonds may require the Fund to sell
portfolio securities to generate sufficient cash to satisfy its income
distribution requirements.
FOREIGN SECURITIES
(All Funds except Burnham Dow 30 'sm' Focused Fund and Burnham U.S. Treasury
Money Market Fund) Each Fund may invest in the securities of corporate and
governmental issuers located in or doing business in a foreign country (foreign
issuers). A company is considered to be located in or doing business in a
foreign country if it satisfies at least one of the following criteria: (i) the
equity securities of the company are traded principally on stock exchanges in
one or more foreign countries; (ii) it derives 50% or more of its total revenue
from goods produced, sales made or services performed in one or more foreign
countries; (iii) it maintains 50% or more of its assets in one or more foreign
countries; (iv) it is organized under the laws of a foreign country; or (v) its
principal executive offices are located in a foreign country.
ADRS, EDRS, IDRS AND GDRS. (Burnham Fund, Burnham Financial Services Fund,
Burnham Small Cap Value Fund) American Depositary Receipts (ADRs) (sponsored or
unsponsored) are receipts typically issued by a U.S. bank, trust company or
other entity and evidence ownership of the underlying foreign securities. Most
ADRs are traded on a U.S. stock exchange. Issuers of unsponsored ADRs are not
contractually obligated to disclose material information in the U.S., so there
may not be a correlation between this information and the market value of the
unsponsored ADR. European Depositary Receipts (EDRs) and International
Depositary Receipts (IDRs) are receipts typically issued by a European bank or
trust company evidencing ownership of the underlying foreign securities. Global
Depositary Receipts (GDRs) are receipts issued by either a U.S. or non-U.S.
banking institution evidencing ownership of the underlying foreign securities.
BRADY BONDS. (Burnham Fund, Burnham Financial Services Fund, Burnham Small Cap
Value Fund) Brady bonds are securities created through the exchange of existing
commercial bank loans to sovereign entities for new obligations in connection
with debt restructurings under a debt restructuring plan introduced by former
U.S. Secretary of the Treasury, Nicholas P. Brady. Brady bonds may be
collateralized or uncollateralized, are issued in various currencies (but
primarily the U.S. dollar), and are actively traded in the over-the-counter
secondary market. Certain Brady bonds may be collateralized as to principal due
at maturity by U.S. Treasury zero coupon bonds with a maturity equal to the
final maturity of the bonds, although the collateral is not available to
investors until the final maturity of the bonds. Collateral purchases are
financed by the International Monetary Fund, the World Bank and the debtor
nation's reserves. Although Brady bonds may be collateralized by U.S. government
securities, repayment of principal and interest is not guaranteed by the U.S.
government. In light of the residual risk of Brady bonds and, among other
factors, the history of defaults with respect to commercial bank loans by public
and private entities in countries issuing Brady bonds, investments in Brady
bonds may be viewed as speculative. Brady bonds acquired by
9
<PAGE>
a Fund might be subject to restructuring arrangements or to requests for new
credit, which may reduce the value of the Brady bonds held by the Fund.
SOVEREIGN DEBT OBLIGATIONS. (All Funds except Burnham Dow 30 'sm' Focused Fund
and Burnham U.S. Treasury Money Market Fund) Investment in sovereign debt
obligations involves special risks not present in domestic corporate debt
obligations. The issuer of the sovereign debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to repay
principal or interest when due, and a Fund may have limited recourse in the
event of a default. During periods of economic uncertainty, the market prices of
sovereign debt, and a Fund's net asset value, may be more volatile than prices
of U.S. debt obligations. In the past, certain emerging market countries have
encountered difficulties in servicing their debt obligations, withheld payments
of principal and interest and declared moratoria on the payment of principal and
interest on their sovereign debts.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange, the relative size of the debt service burden, the
sovereign debtor's policy toward principal international lenders and local
political constraints. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
to reduce principal and interest arrearages on their debt. The failure of a
sovereign debtor to implement economic policies or repay principal or interest
when due may result in the cancellation of third-party commitments to lend funds
to the sovereign debtor, which may further impair such debtor's ability or
willingness to service its debts.
OBLIGATIONS OF SUPRANATIONAL ENTITIES. (Burnham Fund, Burnham Financial Services
Fund, Burnham Small Cap Value Fund) Each Fund may invest in obligations of
supranational entities designated or supported by governmental entities to
promote economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the World Bank), the Asian Development
Bank and the Inter-American Development Bank. Each supranational entity's
lending activities are limited to a percentage of its total capital (including
"callable capital" contributed by its governmental members at the entity's
call), reserves and net income. Participating governments may not be able or
willing to honor their commitments to make capital contributions to a
supranational entity.
RISKS OF FOREIGN SECURITIES. Investments in foreign securities may involve a
greater degree of risk than securities of U.S. issuers. There is generally less
publicly available information about foreign companies in the form of reports
and ratings similar to those published about issuers in the United States. Also,
foreign issuers are generally not subject to uniform accounting, auditing and
financial reporting requirements comparable to those applicable to United States
issuers.
To the extent that a Fund's foreign securities are denominated in currencies
other than the U.S. dollar, changes in foreign currency exchange rates will
affect the Fund's net asset value, the value of dividends and interest earned,
gains and losses realized on the sale of securities, and any net investment
income and gains that the Fund distributes to shareholders. Securities
transactions in some foreign markets may not be settled promptly so that a
Fund's foreign investments may be less liquid and subject to the risk of
fluctuating currency exchange rates pending settlement.
Foreign securities may be purchased on over-the-counter markets or exchanges
located in the countries where an issuer's securities are principally traded.
Many foreign markets are not as developed or efficient as those in the United
States. While growing in volume, they usually have substantially less volume
than U.S. markets. Securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
States exchanges, although a Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States. In certain foreign countries, there is the
possibility of adverse changes in investment or exchange control regulations,
expropriation, nationalization or confiscatory taxation, limitations on the
removal of assets of a Fund from a country, political or social instability, or
diplomatic developments. Moreover, individual foreign economies may differ
favorably or unfavorably from the United States economy in terms of growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
10
<PAGE>
Dividends, interest, and, in some cases, capital gains earned by a Fund on
certain foreign securities may be subject to foreign taxes, thus reducing the
net amount of income or gains available for distribution to the Fund's
shareholders.
The above risks may be intensified for investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominantly based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rates. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of substantial holdings difficult or
impossible at times. A Fund may be required to establish special custodial or
other arrangements before making certain investments in those countries.
Securities of issuers located in these countries may have limited marketability
and may be subject to more abrupt or erratic price movements.
RESTRICTED SECURITIES
(All Funds except Burnham U.S. Treasury Money Market Fund) A Fund may purchase
securities that are not registered (restricted securities) under the Securities
Act of 1933 (1933 Act), including commercial paper issued in reliance on Section
4(2) of the 1933 Act, and which are,therefore, restricted as to their resale.
However, a Fund will not invest more than 15% of its net assets (10% for Burnham
Money Market Fund) in illiquid investments. The Trustees may adopt guidelines
and delegate to the Adviser the daily function of determining the monitoring and
liquidity of restricted securities. The Trustees, however, will retain oversight
as to, and be ultimately responsible for, these determinations. If the Adviser
determines, based upon a continuing review of the trading markets for specific
Section 4(2) paper or Rule 144A securities, that they are liquid, they will not
be subject to the 15% limit (10% for Burnham Money Market Fund) in illiquid
investments. This investment practice could have the effect of decreasing the
level of liquidity in the Fund if sufficient numbers of qualified institutional
buyers are not interested in purchasing these restricted securities.
DERIVATIVE INSTRUMENTS
GENERAL. (All Funds except Burnham Money Market Fund and Burnham U.S. Treasury
Money Market Fund) The Funds may, but are not required to, invest in derivative
instruments, which are commonly defined as financial instruments whose
performance and value are derived, at least in part, from another source, such
as the performance of an underlying asset, security or index. The Funds'
transactions in derivative instruments may include:
the purchase and writing of options on securities (including index
options) and options on foreign currencies;
the purchase and sale of futures contracts based on financial, interest
rate and securities indices, equity securities or fixed income
securities; and
entering into forward contracts, swaps and swap related products, such
as equity index, interest rate or currency swaps, and related caps,
collars, floors and swaptions.
11
<PAGE>
The success of transactions in derivative instruments depends on the Adviser's
judgment as to their potential risks and rewards. Use of these instruments
exposes a Fund to additional investment risks and transaction costs. If the
Adviser incorrectly analyzes market conditions or does not employ the
appropriate strategy with these instruments, the Fund's return could be lower
than if derivative instruments had not been used. Additional risks inherent in
the use of derivative instruments include: adverse movements in the prices of
securities or currencies and the possible absence of a liquid secondary market
for any particular instrument. A Fund could experience losses if the prices of
its derivative positions correlate poorly with those of its other investments.
The loss from investing in derivative instruments is potentially unlimited.
Each Fund may invest in derivatives for hedging purposes, to enhance returns, as
a substitute for purchasing or selling securities, to maintain liquidity or in
anticipation of changes in the composition of its portfolio holdings. The risks
and policies of various types of derivative investments in which the Funds may
invest are described in greater detail above.
OPTIONS ON SECURITIES AND SECURITIES INDICES. (All Funds except Burnham Money
Market Fund and Burnham U.S. Treasury Money Market Fund) A Fund may purchase and
write (sell) call and put options on any securities in which it may invest or on
any securities index containing securities in which it may invest. These options
may be listed on securities exchanges or traded in the over-the-counter market.
A Fund may write covered put and call options and purchase put and call options
to enhance total return, as a substitute for the purchase or sale of securities,
or to protect against declines in the value of portfolio securities and against
increases in the cost of securities to be acquired.
WRITING COVERED OPTIONS. A call option on securities written by a Fund obligates
the Fund to sell specified securities to the holder of the option at a specified
price if the option is exercised at any time before the expiration date. A put
option on securities written by a Fund obligates the Fund to purchase specified
securities from the option holder at a specified price if the option is
exercised at any time before the expiration date. Options on securities indices
are similar to options on securities, except that the exercise of securities
index options requires cash settlement payments and does not involve the actual
purchase or sale of securities. In addition, securities index options are
designed to reflect price fluctuations in a group of securities or segment of
the securities market rather than price fluctuations in a single security.
Writing covered call options may deprive a Fund of the opportunity to profit
from an increase in the market price of the securities in its portfolio. Writing
covered put options may deprive a Fund of the opportunity to profit from a
decrease in the market price of the securities to be acquired for its portfolio.
All call and put options written by a Fund are covered. A written call option or
put option may be covered by (1) maintaining cash or liquid securities in a
segregated account with a value at least equal to a Fund's obligation under the
option, (2) entering into an offsetting forward commitment and/or (3) purchasing
an offsetting option or any other option which, by virtue of its exercise price
or otherwise, reduces the Fund's net exposure on its written option position. A
written call option on securities is typically covered by maintaining the
securities that are subject to the option in a segregated account. A Fund may
cover call options on a securities index by owning securities whose price
changes are expected to be similar to those of the underlying index.
A Fund may terminate its obligations under an exchange traded call or put option
by purchasing an option identical to the one it has written. Obligations under
over-the-counter options may be terminated only by entering into an offsetting
transaction with the counterparty to the option. These purchases are referred to
as "closing purchase transactions."
PURCHASING OPTIONS. A Fund would normally purchase call options in anticipation
of an increase, or put options in anticipation of a decrease ("protective puts")
in the market value of securities of the type in which it may invest. A Fund may
also sell call and put options to close out its purchased options.
The purchase of a call option would entitle a Fund, in return for the premium
paid, to purchase specified securities at a specified price during the option
period. A Fund would ordinarily realize a gain on the purchase of a call option
if, during the option period, the value of such securities exceeded the sum of
the exercise price, the premium paid and transaction costs; otherwise the Fund
would realize either no gain or a loss on the purchase of the call option.
12
<PAGE>
The purchase of a put option would entitle a Fund, in exchange for the premium
paid, to sell specified securities at a specified price during the option
period. The purchase of protective puts is designed to offset or hedge against a
decline in the market value of a Fund's portfolio securities. Put options may
also be purchased by a Fund for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. A Fund would
ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Fund would realize either no
gain or a loss on the purchase of the put option. Gains and losses on the
purchase of put options may be offset by countervailing changes in the value of
the Fund's portfolio securities.
A Fund's options transactions will be subject to limitations established by each
of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which a Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
RISKS ASSOCIATED WITH OPTIONS TRANSACTIONS. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If a Fund is unable
to effect a closing purchase transaction with respect to covered options it has
written, the Fund will not be able to sell the underlying securities or dispose
of assets held in a segregated account until the options expire or are
exercised. Similarly, if a Fund is unable to effect a closing sale transaction
with respect to options it has purchased, it would have to exercise the options
in order to realize any profit and will incur transaction costs upon the
purchase or sale of underlying securities.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (1) there may be insufficient trading interest in certain options;
(2) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (3) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (4) unusual or unforeseen circumstances may interrupt normal operations
on an exchange; (5) the facilities of an exchange or the Options Clearing
Corporation may not at all times be adequate to handle current trading volume;
or (6) one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of options (or a
particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
A Fund's ability to terminate over-the-counter options is more limited than with
exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities markets.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. (Burnham Fund, Burnham
Financial Services Fund, Burnham Small Cap Value Fund) To seek to increase total
return or hedge against changes in interest rates or securities prices, a Fund
may purchase and sell futures contracts, and purchase and write call and put
options on these futures contracts. A Fund may also enter into closing purchase
and sale transactions with respect to any of these contracts and options. These
futures contracts may be based on various securities (such as U.S. government
securities), securities indices and any other financial instruments and indices.
All futures contracts entered into by a Fund are traded on U.S. exchanges or
boards of trade that are licensed, regulated or approved by the Commodity
Futures Trading Commission ("CFTC").
13
<PAGE>
FUTURES CONTRACTS. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments for an
agreed price during a designated month (or to deliver the final cash settlement
price, in the case of a contract relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities will usually be liquidated in
this manner, a Fund may instead make, or take, delivery of the underlying
securities whenever it appears economically advantageous to do so. A clearing
corporation associated with the exchange on which futures contracts are traded
guarantees that, if still open, the sale or purchase will be performed on the
settlement date.
HEDGING AND OTHER STRATEGIES. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that a Fund proposes to acquire. When
interest rates are rising or securities prices are falling, a Fund can seek to
offset a decline in the value of its current portfolio securities through the
sale of futures contracts. When interest rates are falling or securities prices
are rising, a Fund, through the purchase of futures contracts, can attempt to
secure better rates or prices than might later be available in the market when
it effects anticipated purchases.
A Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated rise in
interest rates or a decline in market prices that would adversely affect the
value of the Fund's portfolio securities. These futures contracts may include
contracts for the future delivery of securities held by the Fund or securities
with characteristics similar to those of the Fund's portfolio securities.
If, in the opinion of the Adviser, there is a sufficient degree of correlation
between price trends for a Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in a Fund's portfolio may
be more or less volatile than prices of these futures contracts, the Adviser
will attempt to estimate the extent of this volatility difference based on
historical patterns and compensate for any differential by having the Fund enter
into a greater or lesser number of futures contracts or by attempting to achieve
only a partial hedge against price changes affecting the Fund's portfolio
securities.
When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of a Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.
On other occasions, a Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable market to be less favorable
than prices that are currently available. The Fund may also purchase futures
contracts as a substitute for transactions in securities, to alter the
investment characteristics of portfolio securities or to gain or increase its
exposure to a particular securities market.
OPTIONS ON FUTURES CONTRACTS. A Fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
put and call options on futures contracts will give a Fund the right (but not
the obligation) for a specified price to sell or to purchase, respectively, the
underlying futures contract at any time during the option period. As the
purchaser of an option on a futures contract, the Fund obtains the benefit of
the futures position if prices move in a favorable direction but limits its risk
of loss in the event of an unfavorable price movement to the loss of the premium
and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of a Fund's assets. By writing a call
option, a Fund becomes obligated, in exchange for the premium (upon exercise of
the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that a Fund intends to purchase. However,
the Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower
14
<PAGE>
than the exercise price. The loss incurred by the Fund in writing options on
futures is potentially unlimited and may exceed the amount of the premium
received.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. A Fund's ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid market.
A Fund may engage in futures and related options transactions either for bona
fide hedging purposes or to seek to increase total return as permitted by the
CFTC. To the extent that a Fund is using futures and related options for hedging
purposes, futures contracts will be sold to protect against a decline in the
price of securities that the Fund owns or futures contracts will be purchased to
protect the Fund against an increase in the price of securities it intends to
purchase. The Adviser will determine that the price fluctuations in the futures
contracts and options on futures used for hedging purposes are substantially
related to price fluctuations in securities held by the Fund or securities or
instruments which it expects to purchase. As evidence of its hedging intent,
each Fund expects that, on 75% or more of the occasions on which it takes a long
futures or option position (involving the purchase of futures contracts), the
Fund will have purchased, or will be in the process of purchasing, equivalent
amounts of related securities in the cash market at the time when the futures or
option position is closed out. However, in particular cases, when it is
economically advantageous for a Fund to do so, a long futures position may be
terminated or an option may expire without the corresponding purchase of
securities or other assets.
To the extent that a Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities, require the Fund to establish a
segregated account consisting of cash or liquid securities in an amount equal to
the underlying value of such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates or securities prices may result
in a poorer overall performance for a Fund than if it had not entered into any
futures contracts or options transactions.
Perfect correlation between a Fund's futures positions and portfolio positions
will be impossible to achieve. In the event of an imperfect correlation between
a futures position and a portfolio position which is intended to be protected,
the desired protection may not be obtained and the Fund may be exposed to risk
of loss.
Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent a Fund from closing out
positions and limiting its losses.
FOREIGN CURRENCY TRANSACTIONS. (Burnham Fund, Burnham Financial Services Fund,
Burnham Small Cap Value Fund) A Fund's foreign currency exchange transactions
may be conducted on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market. A Fund may also
enter into forward foreign currency exchange contracts to enhance return, to
hedge against fluctuations in currency exchange rates affecting a particular
transaction or portfolio position, or as a substitute for the purchase or sale
of a currency or assets denominated in that currency. Forward contracts are
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. Transaction hedging is the purchase
or sale of forward foreign currency contracts with respect to specific
receivables or payables of a Fund accruing in connection with the purchase and
sale of its portfolio securities quoted or denominated in the same or related
foreign currencies.
15
<PAGE>
Portfolio hedging is the use of forward foreign currency contracts to offset
portfolio security positions denominated or quoted in the same or related
foreign currencies. A Fund may elect to hedge less than all of its foreign
currency portfolio positions if deemed appropriate by the Adviser.
If a Fund purchases a forward contract or sells a forward contract for
non-hedging purposes, it will segregate cash or liquid securities, of any type
or maturity, in a separate account in an amount equal to the value of the Fund's
total assets committed to the consummation of the forward contract. The assets
in the segregated account will be valued at market daily and if the value of the
securities in the separate account declines, additional cash or securities will
be placed in the account so that the value of the account will be equal to the
amount of the Fund's commitment with respect to such contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. These transactions also preclude the
opportunity for currency gains if the value of the hedged currency rises.
Moreover, it may not be possible for the Fund to hedge against a devaluation
that is so generally expected that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates.
The cost to a Fund of engaging in foreign currency transactions varies with such
factors as the currency involved, the length of the contract period and the
market conditions then prevailing. Since transactions in foreign currency are
usually conducted on a principal basis, no fees or commissions are involved.
FOREIGN CURRENCY OPTIONS. Each Fund may purchase or sell (write) call and put
options on currency. A foreign currency option provides the option buyer with
the right to buy or sell a stated amount of foreign currency at the exercise
price on a specified date or during the option period. The owner of a call
option has the right, but not the obligation, to buy the currency. Conversely,
the owner of a put option has the right, but not the obligation, to sell the
currency. When the option is exercised, the seller of the option is obligated to
fulfill the terms of the written option. However, either the seller or the buyer
may, in the secondary market, close its position during the option period at any
time before expiration.
A purchased call option on a foreign currency generally rises in value if the
underlying currency appreciates in value. A purchased put option on a foreign
currency generally rises in value if the underlying currency depreciates in
value. Although purchasing a foreign currency option can protect a Fund against
an adverse movement in the value of a foreign currency, the option will not
limit changes in the value of such currency. For example, if a Fund was holding
securities denominated in a foreign currency that was appreciating and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, the Fund would not have to exercise its put option. Likewise, a Fund
might enter into a contract to purchase a security denominated in foreign
currency and, in conjunction with that purchase, might purchase a foreign
currency call option to hedge against a rise in value of the currency. If the
value of the currency instead depreciated between the date of purchase and the
settlement date, the Fund would not have to exercise its call. Instead, the Fund
could acquire in the spot market the amount of foreign currency needed for
settlement.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS. Buyers and sellers of
foreign currency options are subject to the same risks that apply to options
generally. In addition, there are certain additional risks associated with
foreign currency options. The markets in foreign currency options are relatively
thin, and a Fund's ability to establish and close out positions on such options
is subject to the maintenance of a liquid secondary market. A Fund will not
purchase or write such options unless and until, in the opinion of the Adviser,
the market for them has developed sufficiently to ensure that the risks in
connection with such options are not greater than the risks in connection with
the underlying currency. Nevertheless, there can be no assurance that a liquid
secondary market will exist for a particular option at any specific time. In
addition, options on foreign currencies are affected by most of the same factors
that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the underlying
currency relative to the U.S. dollar. As a result, the price of the option
position may vary with changes in the value of either or both currencies and may
have no relationship to the investment performance of a foreign security.
Because foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
16
<PAGE>
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Available quotation
information is generally representative of very large transactions in the
interbank market and thus may not reflect relatively smaller transactions (i.e.,
less than $1 million) where rates may be less favorable. The interbank market in
foreign currencies is a global, around-the-clock market. To the extent that the
U.S. currency option markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options markets until
they reopen.
FOREIGN CURRENCY FUTURES TRANSACTIONS. By using foreign currency futures
contracts and options on such contracts, the Fund may be able to achieve many of
the same objectives as it would through the use of forward foreign currency
exchange contracts. The Fund may sometimes be able to achieve these objectives
more effectively and at a lower cost by using futures transactions instead of
forward foreign currency exchange contracts.
The sale of a foreign currency futures contract creates an obligation by the
Fund, as seller, to deliver the amount of currency called for in the contract at
a specified future time for a specified price. The purchase of a currency
futures contract creates an obligation by the Fund, as purchaser, to take
delivery of an amount of currency at a specified future time at a specified
price. Although the terms of currency futures contracts specify actual delivery
or receipt, in most instances the contracts are closed out before the settlement
date without the making or taking of delivery of the currency. Currency futures
contracts are closed out by entering into an offsetting purchase or sale
transaction for the same aggregate amount of currency and delivery date. If the
sale price of a currency futures contract exceeds the price of the offsetting
purchase, the Fund realizes a gain. If the sale price is less than the
offsetting purchase price, the Fund realizes a loss. If the purchase price of a
currency futures contract is less than the offsetting sale price, the Fund
realizes a gain. If the purchase price of a currency futures contract exceeds
the offsetting sale price, the Fund realizes a loss.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED
OPTIONS. Buyers and sellers of foreign currency futures contracts and related
options are subject to the same risks that apply to the use of futures
generally. In addition, the risks associated with foreign currency futures
contracts and options on futures are similar to those associated with options on
foreign currencies, as described above.
SWAPS, CAPS, FLOORS, COLLARS AND SWAPTIONS. (Burnham Fund, Burnham Financial
Services Fund, Burnham Small Cap Value Fund) As one way of managing its exposure
to different types of investments, a Fund may enter into interest rate swaps,
currency swaps, and other types of swap agreements such as caps, collars, floors
and swaptions. In a typical interest rate swap, one party agrees to make regular
payments equal to a floating interest rate times a "notional principal amount,"
in return for payments equal to a fixed rate times the same notional amount, for
a specified period of time. If a swap agreement provides for payment in
different currencies, the parties might agree to exchange the notional principal
amount as well. Swaps may also depend on other prices or rates, such as the
value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor. A swaption is an option to buy or sell a swap position.
Swap agreements will tend to shift a Fund's investment exposure from one type of
investment to another. For example, if the Fund agreed to exchange payments in
dollars for payments in a foreign currency, the swap agreement would tend to
decrease the Fund's exposure to U.S. interest rates and increase its exposure to
foreign currency and interest rates. Caps and floors have an effect similar to
buying or writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a Fund's investments and its
share price and yield.
17
<PAGE>
Swap agreements are sophisticated risk management instruments that typically
require a small cash investment relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on a
Fund's performance. Swap agreements are subject to credit risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. A Fund may also suffer losses if
it is unable to terminate outstanding swap agreements or reduce its exposure
through offsetting transactions. A Fund will maintain in a segregated account
cash or liquid securities equal to the net amount, if any, of the excess of the
Fund's obligations over its entitlements with respect to swap, cap, collar,
floor or swaption transactions.
FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS.
(All Funds) The Funds may purchase or sell securities on a when-issued or
delayed delivery basis and make contracts to purchase or sell securities for a
set price at a set date beyond customary settlement time. A Fund will engage in
when-issued purchases of securities in order to obtain what is considered to be
an advantageous price and yield at the time of purchase. Securities purchased or
sold on a when-issued, delayed delivery or forward commitment basis involve a
risk of loss if the security to be purchased declines in value, or a security to
be sold increases in value, before the settlement date. The failure of the
issuer or other party to consummate the transaction may result in a Fund's
losing the opportunity to obtain an advantageous price. Although a Fund usually
intends to acquire the underlying securities, the Fund may dispose of such
securities before settlement. For purposes of determining a Fund's average
dollar-weighted maturity, the maturity of when-issued or forward commitment
securities will be calculated from the commitment date.
When a Fund purchases securities on a when-issued, delayed delivery or forward
commitment basis, the Fund will segregate in a separate account cash or liquid
securities of any type or maturity, having a value (determined daily) at least
equal to the amount of the Fund's purchase commitments.
DOW JONES INDEX EQUIVALENT SECURITIES. (Burnham Dow 30 'sm' Focused Fund) The
Fund may invest in the securities of the thirty companies which comprise the Dow
Jones Industrial Average (DJIA). In addition to the securities of the DJIA, the
Fund may also invest in securities which are considered "equivalents" of
investing in DJIA securities. Equity equivalents may be used for several
purposes: to simulate full investment in the underlying index while retaining a
cash balance for fund management purposes, to facilitate trading, to reduce
transactions costs or to seek higher investment returns where an equity
equivalent is priced more attractively then securities in the DJIA. These equity
equivalents include options, warrants, futures and other derivative instruments
based on the DJIA. Another equity equivalent of the DJIA is DIAMONDS, which
represent interests in a unit investment trust investing in DJIA stocks. For a
more detailed discussion of DIAMONDS and a history of the DJIA, see Appendix B.
OTHER INVESTMENT PRACTICES AND RISKS
LENDING PORTFOLIO SECURITIES. (All Funds) The Funds may lend their portfolio
securities. These loans are secured by the delivery to a Fund of cash
collateral, which may be invested in short-term debt securities and money market
funds. The Funds may make loans only to broker-dealers who are members of the
New York Stock Exchange (NYSE), or who have net capital of at least $10,000,000.
Such loans will not be made against less than 100% cash collateral maintained at
100% of the market value (marked-to-market daily) of the loaned securities.
Loans will be made only if a Fund can terminate the loan at any time.
When a Fund lends portfolio securities, there is a risk that the borrower may
fail to return the securities. As a result, a Fund may incur a loss or, in the
event of a borrower's bankruptcy, may be delayed in, or prevented from,
liquidating the collateral.
REVERSE REPURCHASE AGREEMENTS. (Burnham Fund, Burnham Financial Services Fund,
Burnham Small Cap Value Fund) The Funds may enter reverse repurchase agreements
whereby a Fund sells portfolio assets with an agreement to repurchase the assets
at a later date at a set price. A Fund continues to receive principal and
interest payments on these securities. The Funds will maintain a segregated
custodial account consisting of cash or liquid securities of any type or
maturity, having a value at least equal to the repurchase price, plus accrued
interest.
18
<PAGE>
Reverse repurchase agreements involve the risk that the value of the securities
sold by a Fund may decline below the price of the securities the Fund is
obligated to repurchase. Reverse repurchase agreements are borrowings by a Fund
and are subject to its investment restrictions on borrowing.
RISKS OF NON-DIVERSIFICATION. Burnham Dow 30 'sm' Focused Fund and Burnham Small
Cap Value Fund are classified as "non-diversified" under the 1940 Act.
Non-diversification means that the proportion of a Fund's assets that may be
invested in the securities of a single issuer is not limited by the Act. Since
they may invest a larger proportion of their assets in a single issuer, an
investment in these Funds may be subject to greater fluctuations in value than
an investment in a diversified fund.
SHORT-TERM TRADING AND PORTFOLIO TURNOVER. (All Funds except Burnham Dow 30
Focused Fund) Short-term trading means the purchase and subsequent sale of a
security after it has been held for a relatively brief period of time. A Fund
may engage in short-term trading in response to stock market conditions, changes
in interest rates or other economic trends and developments, or to take
advantage of yield disparities between various fixed income securities in order
to realize capital gains or enhance income. Short-term trading may have the
effect of increasing a Fund's portfolio turnover rate. A high rate of portfolio
turnover (100% or more) involves correspondingly higher brokerage costs that
must be borne directly by the Fund and thus indirectly by the shareholders,
reducing the shareholder's return. Short-term trading may also increase the
amount of taxable gains that must be distributed to shareholders.
19
<PAGE>
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
The following investment restrictions are considered fundamental, which means
they may be changed only with the approval of the holders of a majority of a
Fund's outstanding voting securities, defined in the 1940 Act as the lesser of:
(1) 67% or more of that Fund's voting securities present at a meeting if the
holders of more than 50% of that Fund's outstanding voting securities are
present or represented by proxy, or (2) more than 50% of that Fund's outstanding
voting securities.
1. A Fund may not borrow money or issue senior securities, except
to the extent permitted by the 1940 Act.
2. A Fund may not make loans to other persons, except loans of
securities not exceeding one-third of the Fund's total assets,
investments in debt obligations and transactions in repurchase
agreements.
3. A Fund may not purchase, sell or invest in real estate, but,
subject to its other investment policies and restrictions may
invest in securities of companies that deal in real estate or
are engaged in the real estate business. These companies
include real estate investment trusts and securities secured
by real estate or interests in real estate. A Fund may hold
and sell real estate acquired through default, liquidation or
other distribution of an interest in real estate as a result
of the Fund's ownership of securities.
4. A Fund may not invest in commodities or commodity futures
contracts, except for transactions in financial derivative
contracts, such as forward currency contracts; financial
futures contracts and options on financial futures contracts;
options on securities, currencies and financial indices; and
swaps, caps, floors, collars and swaptions.
5. A Fund may not underwrite securities of other issuers, except
insofar as a Fund may be deemed an underwriter under the 1933 Act when
selling portfolio securities.
6. Each Fund, except Burnham Small Cap Value Fund and Burnham Dow
30 'sm' Focused Fund, with respect to 75% of its total assets, may
not invest more than 5% of its total assets in the securities
of any single issuer, or own more than 10% of the outstanding
voting securities of any one issuer, in each case other than
(1) securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities or (2) securities of other
investment companies.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
The following restrictions may be modified by the Trustees without shareholder
approval.
1. A Fund (other than Burnham Money Market Fund and Burnham U.S. Treasury
Money Market Fund) may not invest more than 15% of its net assets in
illiquid
20
<PAGE>
securities. Burnham Money Market Fund and Burnham U.S. Treasury Money
Market Fund may not invest more than 10% of its net assets in illiquid
securities. A security is illiquid if it cannot be disposed of in 7 days
at a price approximately equal to the price at which the Fund is valuing
the security.
2. A Fund may not invest in other open-end investment companies except to
the extent allowed in the 1940 Act.
3. A Fund may not invest in a company for the purpose of exercising
control or management of the company.
4. A Fund may not write or purchase options in excess of 4% of the value
of the Fund's total net assets.
5. A Fund may not engage in short sales.
Except with respect to 300% asset coverage for borrowing, whenever any
investment restriction states a maximum percentage of a Fund's assets that may
be invested in any security, such percentage limitation will be applied only at
the time the Fund acquires such security and will not be violated by subsequent
increases in value relative to other assets held by the Fund.
SERVICES FOR SHAREHOLDERS
SHAREHOLDER ACCOUNTS
When an investor initially purchases shares, an account will be opened on the
books of the Trust by the transfer agent. The investor appoints the transfer
agent as agent to receive all dividends and distributions and to automatically
reinvest them in additional shares of the same class of shares. Distributions or
dividends are reinvested at a price equal to the net asset value of these shares
as of the ex-dividend date.
Shareholders who do not want automatic dividend and distribution reinvestment
should check the appropriate box in item 5 of the new account application or
notify the transfer agent and, ten business days after receipt of such notice,
all dividends and distributions will be paid by check.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
Shares of Burnham Dow 30 'sm' Focused Fund, Burnham Money Market Fund and
Burnham U.S. Treasury Money Market Fund are offered in one class only, with no
sales charge. Burnham Fund, Burnham Financial Services Fund and Burnham Small
Cap Value Fund offer Class A and Class B shares. The Trustees and officers
reserve the right to change or waive a Fund's minimum investment requirements
and to reject any order to purchase shares (including purchases by exchange)
when in their judgment the rejection is in the Fund's best interest.
FOR BURNHAM FUND, BURNHAM FINANCIAL SERVICES FUND AND BURNHAM SMALL CAP VALUE
FUND ONLY:
INITIAL SALES CHARGES ON CLASS A SHARES.
Shares are offered at a price equal to their net asset value plus a sales charge
which is imposed at the time of purchase. The sales charges applicable to
purchases of shares of Class A shares of each Fund are described in the
prospectus. Up to 100% of the sales charge may be re-allowed to dealers who
achieve certain levels of sales or who have rendered coordinated sales support
efforts. These dealers may be deemed underwriters. Other dealers will receive
the following compensation:
<TABLE>
<S> <C>
AMOUNT INVESTED DEALER CONCESSION AS A %
</TABLE>
21
<PAGE>
<TABLE>
OF OFFERING PRICE OF
SHARES PURCHASED
--------------------
<S> <C>
Less than $50,000 4.50%
$50,000 but less than $100,000 4.00%
$100,000 but less than $250,000 3.50%
$250,000 but less than $500,000 2.75%
$500,000 but less than $1,000,000 1.75%
$1,000,000 or more See below.
</TABLE>
OBTAINING A REDUCED SALES CHARGE FOR CLASS A SHARES
Methods of obtaining a reduced sales charge referred to in the prospectus are
described in more detail below.
PURCHASES OF CLASS A SHARES OF $1 MILLION OR MORE. On purchases by a single
purchaser aggregating $1 million or more, the investor will not pay an initial
sales charge. The Distributor may pay a commission to broker-dealers who
initiate and are responsible for such purchases as follows:
[bullet] 1% on amounts between $1 million and $2 million
[bullet] 0.80% on the next $1 million
[bullet] 0.40% on the excess over $3 million
A CDSC will be imposed on the proceeds of the redemptions of these shares if
they are redeemed within 24 months of the end of the calendar month of their
purchase. The CDSC will be equal to
[bullet] 1% if the redemption occurs within the first 12 months and
[bullet] 0.50% if the redemption occurs within the next 12 months.
The CDSC will be based on the NAV at the time of purchase or sale, whichever is
lower.
No sales charge will be imposed on increases in net asset value, dividends or
capital gain distributions, or reinvestment of distributions in additional Class
A shares. In determining whether the sales charge is payable, the first Class A
shares redeemed will be those, if any, on which a sales charge was paid at the
time of purchase, and the remaining Class A shares will be redeemed in the order
in which they were purchased. Class B shares will not be sold to investors who
qualify to purchase Class A shares at net asset value.
RIGHTS OF ACCUMULATION (Class A Shares). If you already hold Class A shares, you
may qualify for a reduced sales charge on your purchase of additional Class A
shares. If the value of the Class A shares you currently hold plus the amount
you wish to purchase is $50,000 or more, the sales charge on the Class A shares
being purchased will be at the rate applicable to the total aggregate amount.
The Distributor's policy is to give investors the lowest commission rate
possible under the sales charge structure. However, to take full advantage of
rights of accumulation, at the time of placing a purchase order, the investor or
his dealer must request the discount and give the Distributor sufficient
information to determine and confirm whether the purchase qualifies for the
discount. Rights of accumulation may be amended or terminated at any time as to
all purchases occurring thereafter.
22
<PAGE>
LETTER OF INTENT (Class A Shares). If you intend to purchase Class A shares
valued at $50,000 or more during a 13-month period, you may make the purchases
under a Letter of Intent so that the initial Class A shares you purchase qualify
for the reduced sales charge applicable to the aggregate amount of your
projected purchase. Your initial purchase must be at least 5% of the intended
purchase. Purchases made within 90 days before the signing of the Letter of
Intent may be included in such total amount and will be valued on the date of
the Letter of Intent. The Letter of Intent will not impose a binding obligation
to buy or sell shares on either the purchaser or the Fund.
During the period of the Letter of Intent, the transfer agent will hold shares
representing 3% of the intended purchase in escrow to provide payment of
additional sales charges that may have to be paid if the total amount purchased
under the Letter of Intent is reduced. These shares will be released upon
completion of the intended investment. If the total Class A shares covered by
the Letter of Intent are not purchased, a price adjustment is made, depending
upon the actual amount invested within the period covered by the Letter of
Intent, by a redemption of sufficient shares held in escrow for the account of
the investor. A Letter of Intent can be amended: (a) during the 13-month period
if the purchaser files an amended Letter of Intent with the same expiration date
as the original; and (b) automatically after the end of the period, if the total
purchases of Class A shares credited to the Letter of Intent qualify for an
additional reduction in the sales charge. For more information concerning the
Letter of Intent, see the application form or contact the Distributor.
CLASS B SHARE PURCHASES.
Purchases of Class B shares will be processed at net asset value next determined
after receipt of your purchase order for less than $250,000. Class B shares are
not subject to an initial sales charge but may be subject to a CDSC upon
redemption.
If Class B shares of a Fund are redeemed within six years after the end of the
calendar month in which a purchase order was accepted, a CDSC will be charged by
calculating the appropriate percentage on the NAV at the time of purchase or
sale, whichever is lower. The CDSC will be deducted from the redemption proceeds
otherwise payable to the shareholder and retained by the Distributor.
-------------------------------------------------------
PURCHASE-TO-SALE PERIOD CDSC
----------------------- ----
Up to one year............................. 5.00%
One year but less than two years........... 4.00%
Two years but less than four years......... 3.00%
Four years but less than five years........ 2.00%
Five years but less than six years......... 1.00%
Six years or more.......................... None
-------------------------------------------------------
CONVERSION OF CLASS B SHARES. Class B shares will automatically convert to Class
A shares of a Fund eight years after the calendar month in which the purchase
order for Class B shares was accepted, on the basis of the relative net asset
values of the two classes and subject to the following terms. Class B shares
acquired through the reinvestment of dividends and distributions ("reinvested
Class B shares") will be converted to Class A shares on a pro-rata basis only
when Class B shares not acquired through reinvestment of dividends or
distributions ("purchased Class B shares") are converted. The portion of
reinvested Class B shares to be converted will be determined by the ratio that
the purchased Class B shares eligible for conversion bear to the total amount of
the purchased Class shares in the shareholder's account. For the purposes of
calculating the holding period, reinvested Class B shares will be deemed to have
been issued on the date on which the issuance of Class B shares occurred.
23
<PAGE>
This conversion to Class A shares will relieve Class B shares that have been
outstanding for at least eight years (a period of time sufficient for the
Distributor to have been compensated for distribution expenses related to such
Class B shares) from the higher ongoing distribution fee paid by Class B shares.
Conversion of Class B shares to Class A shares is contingent on a determination
that such conversion does not constitute a taxable event for the shareholder
under the Internal Revenue Code. If such determination is no longer available,
conversion of Class B shares to Class A shares would have to be suspended, and
Class B shares would continue to be subject to the Class B distribution fee
until redeemed.
EXEMPTIONS FROM CDSC
No CDSC will be imposed on Class A or Class B shares in the following instances:
(a) redemptions of shares or amounts representing increases
in the value of an account above the net cost of the
investment due to increases in the net asset value per
share;
(b) redemptions of shares acquired through reinvestment of
income, dividends or capital gains distributions;
(c) redemptions of Class A shares purchased in the amount of $1
million or more and held for more than 24 months or Class B
shares held for more than six years from the end of the
calendar month in which the shares were purchased.
The CDSC will not apply to purchases of Class A shares at net asset value
described under "Waivers of Sales Charge" in the prospectus and will be waived
for redemptions of Class A and Class B shares in connection with:
- distributions to participants or beneficiaries of plans
qualified under Section 401(a) of the Code or from custodial
accounts under Code Section 403(b)(7), individual retirement
accounts under Code Section 408(a), deferred compensation
plans under Code Section 457 and other employee benefit
plans ("plans"),
- withdrawals under an automatic withdrawal plan where the
annual withdrawal does not exceed 10% of the opening value
of the account (only for Class B shares); and
- redemptions following the death or disability of a
shareholder.
In determining whether the CDSC on Class A or Class B shares is payable, it is
assumed that shares not subject to a CDSC are redeemed first and that other
shares are then redeemed in the order purchased. A shareholder will be credited
with any CDSC paid in connection with the redemption of any Class A or Class B
shares if, within 120 days after such redemption, the proceeds are invested in
the same class of shares of the Fund.
REDEMPTION OF SHARES
Investors in the Funds may redeem shares on any day the Funds are open for
business--normally when the NYSE is open--using the proper procedures described
below. See "Net Asset Value" for a list of the days on which the NYSE will be
closed.
1. Through the Distributor or Other Participating Dealers. If your account
has been established by the Distributor or a participating dealer, contact the
Distributor or your account executive at a participating dealer to
24
<PAGE>
assist you with your redemption. Requests received by your dealer before the
close of the NYSE and transmitted to the transfer agent by its close of business
that day will receive that day's net asset value per share.
2. Regular Redemption Through Transfer Agent. Redemption requests may be
sent by mail to the transfer agent will receive the net asset value of the
shares being redeemed which is next determined after the request is received in
"good form." "Good form" means that the request is signed in the name in which
the account is registered and the signature is guaranteed by a guarantor who
participates in the medallion signature guarantee program. Eligible guarantors
include member firms of a national securities exchange, certain banks and
savings associations and, credit unions, as defined by the Federal Deposit
Insurance Act. You should verify with the transfer agent that the institution is
an acceptable (eligible) guarantor before signing. The transfer agent reserves
the right to request additional confirmation from guarantor institutions, on a
case by case basis, to establish eligibility. A GUARANTEE FROM A NOTARY PUBLIC
IS NOT ACCEPTABLE. Once you have a medallion signature guarantee on file with
the Fund, redemption requests for $25,000 or less (whether written or
telephonic) which are payable to the registered owner to the legal address of
record, do not require an additional medallion signature guarantee at the time
of redemption.
3. Redemption by Telephone. Redemption requests may be made by telephone
with the transfer agent for amounts of $25,000 or less if you have a medallion
signature guarantee on file with the Fund. You or your financial professional
can sell shares of the Fund by calling 1-800-462-2392. Please press 1 and follow
the automated menu to be connected to speak with a customer service
representative of the Fund. A check will be mailed to you on the following
business day.
Redemption requests by a corporation, trust fiduciary, executor or administrator
(if the name and title of the individual(s) authorizing such redemption is not
shown in the account registration) must be accompanied by a copy of the
corporate resolution or other legal documentation appointing the authorized
individual, signed and certified within the prior 60 days. You may obtain from
the Distributor, the Fund or the transfer agent, forms of resolutions and other
documentation which have been prepared in advance to help you comply with the
Funds' procedures.
The Distributor does not charge for its services in connection with the
redemption of Fund shares, but upon prior notice may charge for such services in
the future. Other securities firms may charge their clients a fee for their
services in effecting redemptions of shares of the Funds.
TERMS OF REDEMPTIONS. The amount of your redemption proceeds will be based on
the net asset value per share next computed after the Distributor, the Funds or
the Transfer Agent receives the redemption request in proper form. Payment for
your redemption normally will be mailed to you, except as provided below. Your
redemption proceeds, reduced by any applicable CDSC, will normally be mailed or
wired the day after your redemption is processed. If you have purchased shares
by check, the payment of your redemption proceeds may be delayed until the
purchase check has cleared, which may take fifteen or more days. This potential
delay can be avoided by purchasing shares with federal funds or a certified
check.
Beneficial owners of shares held of record in the name of the Distributor or a
participating dealer may redeem their shares only through that firm. The right
of redemption may be suspended or the date of payment postponed under certain
emergency or extraordinary situations, such as suspension of trading on the
NYSE, or when trading in the markets a Fund normally uses is restricted or an
emergency exists, as determined by the Securities and Exchange Commission (the
"Commission"), so that disposal of a Fund's assets or determination of its net
asset value is not reasonably practicable, or for such other periods as the
Commission by order may permit.
Each Fund reserves the right to redeem your account if its value is less than
$1,000 due to redemptions. The affected Fund will give the shareholder 30 days'
notice to increase the account value to at least $1,000. Redemption proceeds
will be mailed in accordance with the procedures described above.
REDEMPTIONS IN KIND. Although the Funds would not normally do so, each Fund has
the right to pay the redemption price of shares of the Fund in whole or in part
in portfolio securities as prescribed by the Trustees. When the shareholder
sells portfolio securities received in this fashion, a brokerage charge would be
incurred. The Funds will value securities distributed in an in kind redemption
at the same value as is used in determining NAV.
25
<PAGE>
REINSTATEMENT PRIVILEGE (CLASS A SHARES)
A shareholder of Class A shares who has redeemed such shares and has not
previously exercised the reinstatement privilege may reinvest any portion or all
the redemption proceeds in Class A shares at net asset value, provided that such
reinstatement occurs within 120 calendar days after such redemption and the
account meets the minimum account size requirement. This privilege may be
modified or terminated at any time by the Funds.
In order to use this privilege, the shareholder must clearly indicate by written
request to the applicable Fund that the purchase represents a reinvestment of
proceeds from previously redeemed Class A shares. If a shareholder realizes a
gain on redemption of shares, this gain is taxable for federal income tax
purposes even if all of such proceeds are reinvested. If a shareholder incurs a
loss on a redemption and reinvests the proceeds in the same Fund, part or all of
such loss may not be deductible for such tax purposes.
THE REINSTATEMENT PRIVILEGE MAY BE USED BY EACH SHAREHOLDER ONLY ONCE,
REGARDLESS OF THE NUMBER OF SHARES REDEEMED OR REPURCHASED. However, the
privilege may be used without limit in connection with transactions for the sole
purpose of transferring a shareholder's interest in a Fund to his or her
Individual Retirement Account or other tax-qualified retirement plan account.
NET ASSET VALUE
Each Fund determines its net asset value per share (NAV) each business day at
the close of regular trading (typically 4:00 p.m. eastern time) on the New York
Stock Exchange (NYSE) by dividing the Fund's net assets by the number of its
shares outstanding. If the NYSE closes early, the Funds accelerate the
determination of NAV to the closing time. For purposes of calculating the NAV of
Fund shares, the Funds use the following procedures.
The Funds generally value equity securities traded on a national exchange or the
Nasdaq Stock Market at their last sale price on the day of valuation. The Funds
generally value equity securities for which no sales are reported on a valuation
day, and securities traded over-the-counter, at the last available bid price.
The Funds value debt securities on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally use
electronic data processing techniques (matrix pricing) to value normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
The Funds value short-term debt instruments that have a remaining maturity
of 60 days or less at the time of purchase at amortized cost, which approximates
market value.
If market quotations are not readily available or if in the opinion of the
Adviser any quotation or market price is not representative of true market
value, the Funds may determine the fair value of any security in good faith in
accordance with procedures approved by the Trustees.
Burnham Money Market Fund and Burnham U.S. Treasury Money Market Fund generally
use the amortized cost valuation method of valuing portfolio securities. Under
the amortized cost method, assets are valued by constantly amortizing over the
remaining life of a security the difference between the principal amount due at
maturity and the cost of the security to a Fund. The Trustees will from time to
time review the extent of any deviation between the amortized cost value of each
Fund's portfolio and the portfolio's net asset value as determined on the basis
of available market quotations. If any deviation occurs that may result in
unfairness either to new investors or existing shareholders, the Trustees will
take such actions, if any, as they deem appropriate to eliminate or reduce this
unfairness to the extent reasonably practicable. These actions may include
selling portfolio securities before maturity to realize gains or losses or to
shorten a Fund's average portfolio maturity, withholding dividends, splitting,
combining or otherwise recapitalizing outstanding shares or using available
market quotations to determine net asset value per share.
26
<PAGE>
The Funds value foreign securities, if any, on the basis of quotations from the
primary market in which they are traded. The Funds' custodian translates assets
or liabilities expressed in foreign currencies into U.S. dollars based on London
currency quotations as of 5:00 p.m., London time (12:00 noon, New York time) on
the date of determining a Fund's NAV. If quotations are not readily available,
or the value of foreign securities has been materially affected by events
occurring after the closing of a foreign market, the Funds may value their
assets by a method that the Trustees believe accurately reflects fair value.
On any day an international market is closed and the NYSE is open, any foreign
securities will be valued at the prior day's close with the current day's
exchange rate. Trading of foreign securities may take place on Saturdays and
U.S. business holidays on which a Fund's NAV is not calculated. Consequently, a
Fund's portfolio securities may trade and the NAV of that Fund's shares may be
significantly affected on days when a shareholder has no access to that Fund.
The NYSE is closed on the following holidays:
New Year's Day Good Friday Labor Day
Martin Luther King, Jr. Day Memorial Day Thanksgiving Day
Presidents Day Independence Day Christmas Day
TAXES
Each series of the Trust, including each Fund, is treated as a separate entity
for U.S. federal income tax purposes. Each Fund has elected or intends to elect
to be treated, and intends to qualify for each taxable year, as a "regulated
investment company" under subchapter M of the Code. As such, each Fund intends
to comply with the requirements of the Code regarding the sources of its income,
the timing of its distributions, and the diversification of its assets. If each
Fund meets all such requirements, each Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain which
is distributed to shareholders in accordance with the timing and other
requirements of the Code. If a Fund did not qualify as a regulated investment
company, it would be treated as a U.S. corporation subject to U.S. federal
income tax.
Each Fund will be subject to a 4% non-deductible federal excise tax on a portion
of its undistributed ordinary income and capital gains if it fails to meet
certain distribution requirements with respect to each calendar year. Each Fund
intends under normal circumstances to seek to avoid liability for such tax by
satisfying such distribution requirements.
In order to qualify as a regulated investment company under the Code, each Fund
must, among other things, derive at least 90% of its gross income for each
taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including gains from options, futures and forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "90% income test") and satisfy certain annual
distribution and quarterly diversification requirements. For the purposes of the
90% income test, the character of income earned by certain entities in which a
Fund invests that are not treated as corporations (e.g. partnerships or trusts)
for U.S. tax purposes will generally pass through to such Fund. Consequently, a
Fund may be required to limit its equity investments in such entities that earn
fee income, rental income or other nonqualifying income.
Dividends from investment company taxable income, which includes net investment
income, net short-term capital gain in excess of net long-term capital loss and
certain net foreign exchange gains are taxable as ordinary income. Dividends
from net long-term capital gain in excess of net short-term capital loss ("net
capital gain"), if any, are taxable to a Fund's shareholders as long-term
capital gains for federal income tax purposes without regard to the length of
time shares of the Fund have been held. For U.S. federal income tax purposes,
all dividends are taxable to a shareholder whether paid in cash or in shares.
The U.S. federal income tax status of all distributions will be reported to
shareholders annually.
Any dividend declared by a Fund as of a record date in October, November or
December and paid the following January will be treated for U.S. federal income
tax purposes as received by shareholders on December 31 of the year in which it
is declared.
27
<PAGE>
Each Fund will not distribute net capital gains realized in any year to the
extent that a capital loss is carried forward from prior years against such
gain. For federal income tax purposes, a Fund is permitted to carry forward a
net capital loss in any year to offset its own net capital gains, if any, during
the eight years following the year of the loss. To the extent subsequent net
capital gains are offset by such losses, they would not result in federal income
tax liability to a Fund and, as noted above, would not be distributed to
shareholders.
A Fund's investment in debt obligations that are at risk of or in default
presents special tax issues for the applicable Fund. Tax rules are not entirely
clear about issues such as when the Fund may cease to accrue interest, original
issue discount, or market discount; when and to what extent deductions may be
taken for bad debts or worthless securities; how payments received on
obligations in default should be allocated between principal and income; and
whether exchanges of debt obligations in a workout context are taxable. These
and other issues will be addressed by a Fund, in the event that it invests in
such securities, in order to seek to ensure that it distributes sufficient
income to preserve its status as a regulated investment company and does not
become subject to federal income or excise tax.
Each Fund that invests in certain pay-in-kind securities, zero coupon
securities, deferred interest securities, or, in general, other securities with
original issue discount (or with market discount if a Fund elects to include
market discount in income currently), must accrue income on such investments for
each taxable year, which generally will be prior to the receipt of the
corresponding cash payments. However, a Fund must distribute, at least annually,
all or substantially all of its net income, including such income, to
shareholders to qualify as a regulated investment company under the Code and
avoid U.S. federal income and excise taxes. Therefore, a Fund may have to
dispose of its portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage itself by borrowing the cash, to allow
satisfaction of the distribution requirements.
Foreign exchange gains and losses realized by a Fund in connection with certain
transactions involving foreign currency-denominated debt securities, certain
futures contracts and options relating to foreign currency, foreign currency
forward contracts, foreign currencies, or payables or receivables denominated in
a foreign currency are subject to Section 988 of the Code. Section 988 generally
causes such gains and losses to be treated as ordinary income and losses and may
affect the amount, timing and character of Fund distributions to shareholders.
Under future treasury regulations, any such transactions that are not directly
related to a Fund's investment in stock or securities (or its options contracts
or futures contracts with respect to stock or securities) may have to be limited
in order to enable the Fund to satisfy the 90% income test. If the net foreign
exchange loss for a year were to exceed a Fund's investment company taxable
income (computed with regard to such loss), the resulting ordinary loss for such
year would not be deductible by the Fund or its shareholders in future years.
Options written or purchased and futures contracts entered into by a Fund on
certain securities, indices and foreign currencies, as well as certain forward
currency contracts, may cause a Fund to recognize gains or losses from
marking-to-market even though such options may not have lapsed, been closed out,
or exercised, or such futures or forward contracts may not have been performed
or closed out. The tax rules applicable to these contracts may affect the
characterization of some capital gains and losses realized by a Fund as
long-term or short-term. Certain options, futures and forward contracts relating
to foreign currency may be subject to Section 988, as described above, and
accordingly may produce ordinary income or loss. Additionally, a Fund may be
required to recognize gain if an option, futures contract, forward contract,
short sale or other transaction that is not subject to the mark-to-market rules
is treated as a "constructive sale" of an appreciated "financial position" held
by a Fund under Section 1259 of the Code. Any net mark-to-market gains and/or
gains from constructive sales may also have to be distributed to satisfy the
distribution requirements referred to above even though a Fund may receive no
corresponding cash amounts, possibly requiring the disposition of Fund
securities or borrowing to obtain the necessary cash. Losses on certain options,
futures or forward contracts and/or offsetting positions (Fund securities or
other positions with respect to which a Fund's risk of loss is substantially
diminished by one or more options, futures or forward contracts) may also be
deferred under the tax straddle rules of the Code, which may also affect the
characterization of capital gains or losses from straddle positions and certain
successor positions as long-term or short-term. Certain tax elections may be
available that would enable a Fund to ameliorate some adverse effects of the tax
rules described in this paragraph. The tax rules applicable to options, forward
contracts and straddles may affect the amount, timing and character of the
Fund's income and gains or losses and hence of its distributions to
shareholders.
In some countries, restrictions on repatriation may make it difficult or
impossible for a Fund to obtain cash corresponding to its earnings from such
countries, which may cause a Fund to have difficulty obtaining cash necessary
to satisfy tax distribution requirements.
28
<PAGE>
Each Fund other than Burnham Dow 30 'sm' Focused Fund, Burnham Money Market Fund
and Burnham U.S. Treasury Money Market Fund may be subject to withholding and
other taxes imposed by foreign countries including taxes on interest, dividends
and capital gains, with respect to its investments in such countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes in some cases. Investors in a Fund would be entitled to claim U.S. foreign
tax credits or deductions with respect to such taxes, subject to certain holding
period requirements and other provisions and limitations contained in the Code,
only if more than 50% of the value of the applicable Fund's total assets at the
close of the taxable year were to consist of stock or securities of foreign
corporations and the Fund were to file an election with the Internal Revenue
Service. Because the investments of the Funds are such that each Fund expects
that it generally will not meet this 50% requirement, shareholders of each Fund
generally will not directly take into account the foreign taxes, if any, paid by
that Fund and will not be entitled to any related tax deductions or credits.
Such taxes will reduce the amounts these Funds would otherwise have available to
distribute. A Fund generally may deduct any foreign taxes that are not passed
through to its shareholders in computing its income available for distribution
to shareholders to satisfy applicable tax distribution requirements.
If a Fund acquires any equity interest (including, under future regulations, an
option to acquire stock such as is inherent in a convertible bond) in certain
foreign corporations that receive at least 75% of their annual gross income from
passive sources (such as interest, dividends, certain rents and royalties, or
capital gains) or that hold at least 50% of their assets in investments
producing such passive income ("passive foreign investment companies"), the Fund
could be subject to U.S. federal income tax and additional interest charges on
"excess distributions" actually or constructively received from such companies
or on gain from the sale of stock in such companies, even if all income or gain
actually realized is timely distributed by a Fund to its shareholders. The Fund
would not be able to pass through to their shareholders any credit or deduction
for such a tax. An election may generally be available to ameliorate these
adverse tax consequences, but any such election could require the Funds to
recognize taxable income or gain (subject to tax distribution requirements)
without the concurrent receipt of cash. These investments could also result in
the treatment of associated capital gains as ordinary income. The Funds (other
than Burnham Dow 30 'sm' Focused Fund, Burnham Money Market Fund and Burnham
U.S. Treasury Money Market Fund, which are not permitted to acquire foreign
stock) may limit and/or manage stock holdings, if any, in passive foreign
investment companies to minimize each Fund's tax liability or maximize its
return from these investments.
Dividends received by a Fund, if any, from U.S. domestic corporations in respect
of the stock of such corporations with a tax holding period of at least 46 days
(91 days in the case of certain preferred stock), extending before and after
each dividend held in an unleveraged position and distributed and designated by
the Fund (except for capital gain dividends received from a regulated investment
company) may be eligible for the 70% dividends received deduction generally
available to a corporation under the Code. Corporate shareholders must meet the
minimum holding period requirements referred to above with respect to their
shares of the applicable Fund, taking into account any holding period reductions
from certain hedging or other transactions or positions that diminish their risk
of loss with respect to Fund shares, in order to qualify for the deduction and,
if they borrow to acquire or otherwise incur debt attributable to such shares,
they may be denied a portion of the dividends received deduction. The entire
qualifying dividend, including the otherwise deductible amount, will be included
in determining the excess (if any) of a corporate shareholder's adjusted current
earnings over its alternative minimum taxable income, which may increase its
alternative minimum tax liability.
Additionally, any corporate shareholder should consult its tax adviser regarding
the possibility that its basis in its Fund shares may be reduced, for federal
income tax purposes, by reason of "extraordinary dividends" received with
respect to the shares, and, to the extent such basis would be reduced below
zero, current recognition of income would be required.
At the time of an investor's purchase of Fund shares (other than shares of
Burnham Money Market Fund and Burnham U.S. Treasury Money Market Fund), a
portion of the purchase price may be attributable to undistributed net
investment income and/or realized or unrealized appreciation in the Fund's
portfolio. Consequently, subsequent distributions by a Fund with respect to such
shares from such income and/or appreciation may be taxable to such investor even
if the net asset value of the investor's shares is, as a result of the
distributions, reduced below the investor's cost for such shares, and the
distributions economically represent a return of a portion of the purchase
price.
29
<PAGE>
Upon a redemption, exchange or other disposition of shares of a Fund in a
transaction that is treated as a sale for tax purposes, a shareholder may
realize a taxable gain or loss, depending upon the difference between the
redemption proceeds and the shareholder's tax basis in his shares. Generally, no
gain or loss should result upon a redemption of shares of Burnham Money Market
Fund or Burnham U.S. Treasury Money Market Fund, provided that it maintains a
constant net asset value per share. With respect to the other Funds, such gain
or loss will generally be treated as capital gain or loss if the shares are
capital assets in the shareholder's hands. Any loss realized by a shareholder
upon the redemption, exchange or other disposition of shares with a tax holding
period of six months or less will be treated as a long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gain with
respect to such shares.
In addition, if Class A shares redeemed or exchanged have been held for less
than 91 days, (1) in the case of a reinvestment in a Fund at net asset value
pursuant to the reinvestment privilege, the sales charge paid on such shares is
not included in their tax basis under the Code and (2) in the case of an
exchange, all or a portion of the sales charge paid on such shares is not
included in their tax basis under the Code, to the extent a sales charge that
would otherwise apply to the shares received is reduced pursuant to the exchange
privilege. In either case, the portion of the sales charge not included in the
tax basis of the shares redeemed or surrendered in an exchange is included in
the tax basis of the shares acquired in the reinvestment or exchange.
Any loss realized on a redemption or other disposition of shares may be
disallowed under "wash sale" rules to the extent the shares disposed of are
replaced with other investments in the Fund (including those made pursuant to
reinvestment of dividends and/or capital gain distributions) within a period of
61 days beginning 30 days before and ending 30 days after a redemption or other
disposition of the shares. In such a case, the disallowed portion of any loss
generally would be included in the federal tax basis of the shares acquired.
Withdrawals under the automatic withdrawal plan involve redemptions of shares,
which are subject to the tax rules described above. Additionally, reinvesting
pursuant to the reinvestment privilege does not eliminate the possible
recognition of gain or loss upon the initial redemption of Fund shares but may
require application of some of these tax rules, e.g., the wash sale rule.
Shareholders should consult their own tax advisers regarding their particular
circumstances to determine whether a disposition of Fund shares is properly
treated as a sale for tax purposes, as is assumed in the foregoing discussion.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
The foregoing discussion relates solely to U.S. federal income tax consequences
for shareholders who are U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) and who are subject to
U.S. federal income tax. The discussion does not address special tax rules
applicable to certain classes of investors, such as tax-exempt entities,
insurance companies, securities dealers and financial institutions. Dividends,
capital gain distributions, and ownership of or gains realized on the redemption
(including an exchange) of Fund shares may also be subject to state and local
taxes. A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent, if any, a Fund's distributions
are derived from interest on (or, in the case of intangible property taxes, the
value of its assets is attributable to) investments in certain U.S. government
obligations, provided in some states that certain thresholds for holdings of
such obligations and/or reporting requirements are satisfied. Shareholders
should consult their tax advisers regarding the applicable requirements in their
particular states, as well as the federal, and any other state or local, tax
consequences of ownership of shares of, and receipt of distributions from, a
Fund in their particular circumstances.
Shareholders may be subject to 31% backup withholding on reportable payments,
including dividends, capital gain distributions, and, except in the case of
Burnham Money Market Fund and Burnham U.S. Treasury Money Market Fund, the
proceeds of redemptions (and exchanges) or repurchases of shares, if they fail
to furnish the Funds with their correct taxpayer identification number and
certain certifications. A fund may nevertheless be required to withhold if it
receives notice from the IRS or a broker that the number provided is incorrect
or backup withholding is applicable as a result of previous underreporting of
interest or dividend income.
Non-U.S. investors may be subject to different U.S. federal income tax
treatment. These investors may be subject to nonresident alien withholding tax
at the rate of 30% (or a lower rate under an applicable tax treaty) on amounts
treated as ordinary dividends from the Fund and, unless an effective IRS Form
W-8, Form W-8BEN or other withholding certificate is on file, to 31% backup
withholding on certain other payments from the Fund. Non-U.S. investors should
consult their tax advisers regarding such treatment and the application of
foreign taxes to an investment in the Funds.
The Funds may be subject to state or local taxes in any jurisdiction where the
Funds may be deemed to be doing business. In addition, in those states or
localities which have income tax laws, the treatment of a Fund and its
shareholders under such laws may differ from their treatment under federal
income tax laws, and an investment in the Fund may have tax consequences for
shareholders different from those of a direct investment in the Fund's portfolio
securities. Shareholders should consult their own tax advisers concerning these
matters.
30
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST
TRUSTEES AND OFFICERS
The direction and supervision of the Trust is the responsibility of the Board of
Trustees, which has been elected by the shareholders of the Trust. The Board
establishes each Fund's policies and oversees and reviews the management of each
Fund. The Board meets regularly to review the activities of the officers, who
are responsible for day-to-day operations of the Funds. The Board also reviews
the various services provided by the Adviser, the subadvisers and the
Administrator to ensure that each Fund's general investment policies and
programs are being carried out and administrative services are being provided to
the Funds in a satisfactory manner. The Trustees and officers of the Trust and
their principal occupations during the past five years are:
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION
NAME, ADDRESS AND DATE OF BIRTH WITH THE TRUST DURING THE PAST 5 YEARS
- ------------------------------- -------------- -----------------------
<S> <C> <C>
I.W. BURNHAM, II* (D.O.B. 1/7/09) Honorary Honorary Chairman of the Board of Burnham Asset
1325 Avenue of the Americas Chairman and Management Corporation and Burnham
New York, New York Trustee Securities Inc.
JON M. BURNHAM* (D.O.B. 1/24/36) Chairman and Chairman, Chief Executive Officer and Director of
1325 Avenue of the Americas President, Chief Burnham Asset Management Corporation and Burnham
New York, New York Executive Securities Inc. Son of I.W. Burnham, II
Officer and
Trustee
CLAIRE B. BENENSON (D.O.B. 2/11/19) Trustee Consultant on Financial Conferences; Trustee of Zweig
870 United Nations Plaza Series Trust. Trustee of Euclid Market Neutral Fund.
New York, New York Former Trustee of Simms Global Fund and former
Director of Financial Conferences and Chairman,
Department of Business and Financial Affairs, The New
School for Social Research
LAWRENCE N. BRANDT (D.O.B. 7/27/27) Trustee Director and President of Lawrence N. Brandt, Inc. (Real
2510 Rockcreek Drive, N.W. Estate Development).
Washington, D.C.
ALVIN P. GUTMAN (D.O.B. 3/19/18) Trustee Chairman of the Board of Pressman-Gutman Co., Inc.
8350 Fisher Rd. (textile converters).
Elkins Park, Pennsylvania
WILLIAM W. KARATZ (D.O.B. 8/9/26) Trustee Senior counsel to, and formerly a partner in, the law firm
100 E. 50th St. of Winthrop, Stimson, Putman & Roberts
New York, New York
JOHN C. MCDONALD (D.O.B. 1/23/36) Trustee President of MBX Inc. (telecommunications).
49-035 Calle Flora
La Quinta, CA
</TABLE>
31
<PAGE>
<TABLE>
<S> <C> <C>
DONALD B. ROMANS (D.O.B. 4/22/31) Trustee President of Romans and Company (Private Investors and
233 East Wacker Drive Financial Consultants); Chairman of Merlin Corp. Trustee
Chicago, Illinois of Zweig Series Trust. Trustee of Euclid Market Neutral
Fund.
ROBERT F. SHAPIRO (D.O.B. 12/19/34) Trustee Vice Chairman and Partner of Klingenstein, Fields & Co.,
787 Seventh Avenue Inc.President of RFS & Associates, Inc. (investment and
New York, New York consulting firm). Former Chairman, New Street Capital
Corp.
ROBERT M. SHAVICK (D.O.B. 9/20/25) Trustee Legal Consultant; Member, Panel of Arbitrators,
1255 N. Gulfstream Ave. American Arbitration Association, New York Stock
Sarasota, Florida Exchange, American Stock Exchange and National
Association of Securities Dealers, Inc. Former Director of
Florida Business Journal, Public Trustee-Pension Funds
for employees of the town of Longboat Key, Florida;
Hearing Officer, Sarasota Manatee Airport Authority; and
Mediator, Curcuit and County Courts, Florida.
ROBERT S. WEINBERG (D.O.B. 11/17/27) Trustee President of R.S. Weinberg & Associates (management
265 North Union Boulevard consultants) and former Professor of Marketing
St. Louis, Missouri Management, John M. Olin School of Business,
Washington University, St. Louis, Mo.
ROBERT J. WILBUR (D.O.B. 1/5/24) Trustee Former Vice President and General Manager of the Nassau
5141 S.E. Brandywine Way Branch of Morgan Guananty Trust Company.
Stuart, Florida
MICHAEL E. BARNA (D.O.B. 2/2/61) Executive Vice Executive Vice President and Assistant Secretary of
1325 Avenue of the Americas President, Chief Burnham Asset Management Corporation.
New York, New York Financial
Officer,
Treasurer and
Secretary
RONALD M. GEFFEN (D.O.B. 1/21/52) Vice President Managing Director of Burnham Asset Management
1325 Avenue of the Americas Corporation and Burnham Securities Inc.
New York, New York
DEBRA B. HYMAN (D.O.B. 4/17/61) Executive Vice Vice President of Burnham Asset Management
1325 Avenue of the Americas President Corporation and Burnham Securities Inc. Daughter of Jon
New York, New York M. Burnham and granddaughter of I.W. Burnham, II.
FRANK A. PASSANTINO (D.O.B. 7/21/64) First Vice First Vice President of Burnham Asset Management
1325 Avenue of the Americas President and Corporation and Burnham Securities Inc.
New York, New York Assistant Secretary
LOUIS S. ROSENTHAL (D.O.B. 3/10/28) Vice President First Vice President of Prudential Securities Inc.
1331 Barrowdale Rd
Rydal, Pennsylvania
</TABLE>
32
<PAGE>
<TABLE>
<S> <C> <C>
GEORGE SOMMERFELD (D.O.B. 10/27/34) Compliance Executive Vice President of Burnham Asset Management
1325 Avenue of the Americas Officer Corporation and Burnham Securities, Inc.
New York, New York
<FN>
* Interested person of the Trust as that term is defined in the 1940 Act
</FN>
</TABLE>
On April 7, 2000, the Trustees and officers, as a group, owned 3.1% of
the outstanding shares of Burnham Fund; 26.5% of the outstanding shares of
Burnham Financial Services Fund; 21.2% of the outstanding shares of Burnham Dow
30 'sm' Focused Fund; less than 1% of the outstanding shares of Burnham Money
Market Fund and less than 1% of the outstanding shares of Burnham U.S. Treasury
Money Market Fund.
COMPENSATION OF TRUSTEES AND OFFICERS.
Trustees and officers affiliated with the Distributor or the Adviser are not
compensated by the Trust for their services.
The following table sets forth the compensation paid by the Funds to the
Trustees during the fiscal year ended December 31, 1999:
TOTAL COMPENSATION FROM BURNHAM INVESTORS TRUST
NAME OF PERSON, POSITION PAID TO TRUSTEES*
- ----------------------- -----------------
Claire B. Benenson, Trustee ........................ $ 9,000
Lawrence N. Brandt, Trustee ......................... $ 9,000
Alvin P. Gutman, Trustee ............................ $ 6,500
William W. Karatz, Trustee .......................... $ 7,500
John C. McDonald, Trustee ........................... $ 8,000
Donald B. Romans, Trustee ........................... $ 9,000
Robert F. Shapiro, Trustee .......................... $ 8,000
Robert M. Shavick, Trustee .......................... $ 8,000
David H. Solms, Trustee ............................. $ 6,000
Robert S. Weinberg, Trustee ......................... $ 8,000
Robert J. Wilbur, Trustee ........................... $ 8,000
---------
TOTAL ............................................... $87,000
=========
* No pension or retirement benefits have been paid by the Funds to the trustees
during the fiscal year-ended December 31, 1999.
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT ADVISER
Burnham Asset Management Corporation, located at 1325 Avenue of the Americas,
New York, New York, was organized in 1989 in its capacity as investment adviser
to the Funds, high net worth individuals and tax-exempt institutional investors.
Burnham Asset Management Corporation is a wholly-owned subsidiary of Burnham
Financial Group Inc. I.W. Burnham, II and Jon M. Burnham own 45% and 40%,
respectively, of Burnham Financial Group Inc.
33
<PAGE>
The Funds have entered into an investment advisory contract (the "Advisory
Agreement") with the Adviser, which was approved by the Funds' Board of Trustees
and shareholders. Pursuant to the Advisory Agreement, the Adviser will: (a)
either furnish continuously an investment program for each Fund and determine,
subject to the overall supervision and review of the Trustees, which investments
should be purchased, held, sold or exchanged, or select a subadviser to carry
out this responsibility, and (b) supervise all aspects of each Fund's investment
operations except those which are delegated to an administrator, custodian,
transfer agent or other agent. The Funds bear all costs of their organization
and operation not specifically required to be borne by another provider.
As compensation for its services under the Advisory Agreement, each Fund pays
the Adviser monthly a fee based on a stated percentage of the average daily net
assets of the Fund as follows:
- --------------------------------------------------------------------------------
FUND NAME ANNUAL ADVISORY FEE (%)
- --------- -----------------------
Burnham Dow 30 'sm' Focused Fund 0.60
Burnham Fund* 0.60
Burnham Financial Services Fund 0.75
Burnham Small Cap Value Fund 1.00
Burnham Money Market Fund 0.45
Burnham U.S. Treasury Money Market Fund 0.40
- --------------------------------------------------------------------------------
* Before May 3, 1998, Burnham Fund paid the Adviser an advisory fee of 0.625%
annually of average daily net assets.
ADVISORY FEES PAID BY FUND:
<TABLE>
<CAPTION>
- --------------------------------------- -------------------------------------- -------------------------------------
Fund Name Amount Paid to Adviser Adviser Reimbursement to Fund
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ -----------
1997 1998 1999 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ -----------
Burnham Fund N/A N/A $ 1,750 N/A N/A $ 55,330
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ -----------
Burnham Dow 30 'sm' Focused Fund $811,886 $905,674 $1,034,637 $ 386 $32,247 $171,917
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ -----------
Burnham Financial Services Fund N/A N/A $ 6,309 N/A N/A $ 49,561
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ -----------
Burnham Small Cap Value Fund N/A N/A N/A N/A N/A N/A
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ -----------
Burnham Money Market Fund N/A N/A $ 76,685 N/A N/A $ 44,702
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ -----------
Burnham U.S. Treasury Money Market N/A N/A $ 62,555 N/A N/A $ 16,797
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ -----------
</TABLE>
From time to time, the Adviser may reduce its fee or make other arrangements to
limit a Fund's expenses to a specified percentage of average daily net assets.
The Adviser retains the right to re-impose a fee and recover any other payments
to the extent that, at the end of any fiscal year, that Fund's annual expenses
fall below this limit.
Securities held by the Funds may also be held by other investment advisory
clients for which the Adviser or its affiliates provides investment advice.
Because of different investment objectives or other factors, a particular
security may be bought for one or more Funds or clients when one or more are
selling the same security. If opportunities for purchase or sale of securities
by the Adviser for the Funds or for other investment advisory clients arise for
consideration at or about the same time, transactions in such securities will be
made, insofar as feasible, for the respective Funds or clients in a manner
deemed equitable to all of them. To the extent that transactions on behalf of
more than one client of the Adviser or its affiliates may increase the demand
for securities being purchased or the supply of securities being sold, there may
be an adverse effect on price.
34
<PAGE>
Pursuant to the Advisory Agreement, the Adviser is not liable to the Funds or
their shareholders for any error of judgment or mistake of law or for any loss
suffered by the Funds in connection with the matters to which the Advisory
Agreement relates, except a loss resulting from 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.
Under the Advisory Agreement, the Trust and the Funds may use the name "Burnham"
or any name derived from or similar to it only for so long as the Advisory
Agreement or any extension, renewal or amendment thereof remains in effect. If
the Advisory Agreement is no longer in effect, the Trust and the Funds (to the
extent that they lawfully can) will cease to use such a name or any other name
indicating that it is advised by or otherwise connected with the Adviser.
The continuation of the Advisory Agreement and the Subadvisory Agreements, the
Administration Agreement and the Distribution Agreement (discussed below), was
approved by all of the Trustees including the independent trustees. These
agreements will continue in effect from year to year, provided that their
continuance is approved annually in accordance with the requirements of the 1940
Act. The 1940 Act currently requires approval by both (i) the holders of a
majority of the outstanding voting securities of the Trust or the Trustees, and
(ii) a majority of the Trustees who are not parties to the Agreement or
"interested persons" of any such parties. These agreements may be terminated on
60 days written notice by any party or by vote of a majority of the outstanding
voting securities of the affected Fund and will terminate automatically if
assigned.
SUBADVISERS
The Adviser has engaged the services of subadvisers to provide portfolio
management services to certain of the Funds. For their services to these Funds,
the Adviser pays each subadviser a subadvisory fee expressed as an annual
percentage of the applicable Fund's average daily net assets. These Funds have
no obligation to pay subadvisory fees.
<TABLE>
<CAPTION>
SUBADVISER SUBADVISED FUND SUBADVISORY FEE (%)
- ---------- --------------- -------------------
<S> <C> <C> <C>
Mendon Capital Burnham Financial 0.45%
Advisers Corp. Services Fund
Reich & Tang Burnham Money Less than $100 million 0.15%
Asset Management LP Market Fund $100 million but less than $150 million 0.10%
$150 million or more 0.05%
Burnham U.S. Treasury Less than $100 million 0.15%
Money Market Fund $100 million but less than $150 million 0.10%
$150 million or more 0.05%
</TABLE>
Mendon Capital Advisors Corp. ("Mendon Capital") is the subadviser to Burnham
Financial Services Fund. Their principal office is located at 1325 Avenue of the
Americas, 26th floor, New York, New York 10019. Mendon Capital is a corporation
organized in the state of Delaware. Mendon Capital is a registered investment
adviser and has been providing investment advisory services focused in the
financial services industry to private investment companies since 1996. As of
the fiscal year ended December 31, 1999 Mendon Capital was paid $3,823 for their
service as a subadviser.
Reich & Tang Asset Management L.P. ("Reich & Tang") is the subadviser to Burnham
Money Market Fund and Burnham U.S. Treasury Money Market Fund. Reich & Tang is a
Delaware limited partnership with its principal office at 600 Fifth Avenue, New
York, New York 10020. Nvest Companies L.P. is the limited partner and owner of a
99.5% interest in Reich & Tang. Reich & Tang is a registered investment adviser
and has been providing investment advisory services to mutual funds and other
institutional clients since 1994. As of the fiscal year ended December 31, 1999
Reich & Tang was paid $48,929 for their service as a subadviser.
35
<PAGE>
CODE OF ETHICS. To mitigate the possibility that a Fund will be adversely
affected by personal trading of employees, the Funds, Adviser, Sub-Advisers and
Distributor have adopted Codes of Ethics under Rule 17j-1 of the 1940 Act. These
codes contain policies restricting securities trading in personal trading
accounts of Trustees and others who normally come into possession of
information on fund portfolio transactions. These codes of ethics permit
personnel subject to the codes to invest in securities, including securities
that may be purchased or held by the Trust. These codes of ethics can be
reviewed and copied at the SEC's Public Reference Room in Washington, D.C.,
and information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-942-8090. Also, these codes of ethics are
available on the EDGAR Database on the Commission's Internet site at
http://www.sec.gov, and copies of these codes of ethics may be obtained, after
paying a duplicating fee, by electronic request at the following E-mail address:
[email protected], or by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102.
ADMINISTRATOR
Burnham Asset Management Corporation serves as administrator ("Administrator")
to the Funds pursuant to an Administration Agreement. Under the Administration
Agreement, the Administrator provides the Funds with office space and personnel
to assist the Funds in managing their affairs. The Administrator's duties
require it to supervise all aspects of the Funds' operations not related to the
Funds' investments. For its services to the Funds, the Administrator is paid by
each Fund at the following annual percentage of each Fund's average daily net
assets:
---------------------------------------------------------
AVERAGE DAILY
NET ASSETS ADMINISTRATION FEE
---------- ------------------
For amounts up to $150,000,000 0.150%
$150,000,000 to 300,000,000 0.125%
Over $300,000,000 0.100%
---------------------------------------------------------
For the fiscal year-ended December 31, 1999, the Admistrator was paid $168,926,
$1,271, $444, $25,488 and $23,534 by the Burnham Fund, Burnham Financial
Services Fund, Burnham Dow 30 'sm' Focused Fund, Burnham Money Market Fund and
Burnham U.S. Treasury Money Market Fund, respectively.
DISTRIBUTOR
Distribution Agreement. The Funds have a Distribution Agreement with Burnham
Securities Inc. (the "Distributor"). Under the Distribution Agreement, the
Distributor is obligated to use its best efforts to sell shares of each class of
the Funds. Shares of the Funds are also sold by selected broker-dealers (the
"Selling Brokers") which have entered into selling agency agreements with the
Distributor. The Distributor accepts orders for the purchase of shares of the
Funds which are continually offered at net asset value next determined, plus any
applicable sales charge. If in connection with the sale of Class A or Class B
shares, the Distributor and Selling Brokers receive compensation from a sales
charge imposed, in the case of Class A shares, at the time of sale. In the case
of Class B shares, the broker receives compensation immediately, but the
Distributor is compensated on a deferred basis. The Distributor may pay extra
compensation to financial services firms selling large amounts of fund shares.
This compensation would be calculated as a percentage of fund shares sold by the
firm.
The table below sets forth both the aggregate amounts of sales charges paid by
The Burnham Fund, Inc. and the amount retained by the Distributor for the fiscal
years ended 1997 and 1998 and for Burnham Investors Trust for fiscal year-ended
1999:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1999
----------------- ----------------- -----------------
Amount Amount Amount
Aggregate Received by Aggregate Received by Aggregate Received by
Amount Paid Distributor Amount Paid Distributor Amount Paid* Distributor
- ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
$ 64,435 $ 64,435 $ 304,781 $ 304,781 $ 451,741 $ 451,741
</TABLE>
* Of the aggregate amount paid for December 31, 1999, Burnham Fund paid
$448,679, Burnham Financial Services Fund paid $2,333 and Burnham Dow 30 'sm'
Focused Fund paid $729.
During the fiscal year ended December 31, 1999, the Distributor received
commissions and compensation from the Funds as listed in the table below:
NET UNDERWRITING COMPENSATION ON
DISCOUNTS AND REDEMPTIONS AND BROKERAGE OTHER
COMMISSIONS REPURCHASES COMMISSIONS COMPENSATION
- --------------------------------------------------------------------------------
$ 8,529 $ 445 $106,993 $ 0
36
<PAGE>
DISTRIBUTION PLANS. The Trust has adopted distribution plans for Burnham Dow 30
Focused Fund and for the Class A and Class B Shares of Burnham Fund, Burnham
Financial Services Fund and Burnham Small Cap Value Fund (the "Plans") in
accordance with Rule 12b-1 under the 1940 Act. The Plans compensate the
Distributor for its services and distribution expenses under the Distribution
Contract. The principal services and expenses for which such compensation may be
used include: compensation to employees or account executives and reimbursement
of their expenses; overhead and telephone costs of such employees or account
executives; printing of prospectuses or reports for prospective shareholders;
advertising; preparation, printing and distribution of sales literature; and
allowances to other broker-dealers. A report of the amounts expended under each
Plan is submitted to and approved by the Trustees each quarter.
The Plans are subject to annual approval by the Trustees. The Plans are
terminable at any time by vote of the Trustees or by vote of a majority of the
shares of the applicable class or Fund. Pursuant to each Plan, a new Trustee who
is not an interested person (as defined in the 1940 Act) must be nominated by
existing Trustees who are not interested persons.
If a Plan is terminated (or not renewed) with respect to any one or more classes
or Funds, the Plan may continue in effect with respect to a class or Fund as to
which it has not been terminated (or has been renewed). Although there is no
obligation for the Trust to pay expenses incurred by the Distributor in excess
of those paid to the Distributor under a Plan, if the Plan is terminated, the
Board will consider how to treat such expenses. Any expenses incurred by the
Distributor but not yet recovered through distribution fees could be recovered
through future distribution fees. If the Distributor's actual distribution
expenditures in a given year are less than the Rule 12b-1 payments it receives
from the Funds for that year, and no effect is given to previously accumulated
distribution expenditures in excess of the Rule 12b-1 payments borne by the
Distributor out of its own resources in other years, the difference would be
profit to the Distributor for that year.
Because amounts paid pursuant to a Plan are paid to the Distributor, the
Distributor and its officers, directors and employees may be deemed to have a
financial interest in the operation of the Plans. None of the Trustees who is
not an interested person of the Trust has a financial interest in the operation
of any Plan.
The Plans were adopted because of their anticipated benefits to the Funds. These
anticipated benefits include: increased promotion and distribution of each
Fund's shares, an enhancement in each Fund's ability to maintain accounts and
improve asset retention, increased stability of net assets for the Funds,
increased stability in each Fund's positions, and greater flexibility in
achieving investment objectives. The costs of any joint distribution activities
between the Funds will be allocated among the Funds in proportion to their net
assets.
For the fiscal year ended December 31, 1999, the Funds paid fees under their
Rule 12b-1 Plans according to the table below.
<TABLE>
<S> <C> <C> <C> <C>
MARKETING AND PRINTING AND UNDERWRITER BROKER-DEALER SALES
ADVERTISING MAILING OF COMPENSATION COMPENSATION PERSONNEL
PROSPECTUSES COMPENSATION
- --------------------------------------------------------------------------------------------
$ 245,245 $ 6,000 $ 8,529 $ 120,800 $ 13,553
</TABLE>
CUSTODIAN
Investors Fiduciary Trust Company, 801 Pennsylvania Avenue, Kansas City,
MO 64105, serves as custodian of the Trust's securities and cash.
TRANSFER AGENT AND DIVIDEND PAYING AGENT.
37
<PAGE>
State Street Bank and Trust Company, P.O. Box 8505, Boston, Massachusetts
02266-8505, is transfer and dividend paying agent for the Trust. Its
compensation is based on schedules agreed on by the Trust and the transfer
agent.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, is the independent accountant for the Trust. In addition to reporting
annually on the financial statements of the Trust, the accountants assist and
consult with the Trust in connection with the preparation of certain filings of
the Trust with the SEC.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
As of April 7, 2000, the persons listed in the table below are deemed to be
control persons or principal owners of a Fund, as defined in the 1940 Act.
Control persons are presumed to control a Fund for purposes of voting on matters
submitted to a vote of shareholders. Principal holders own of record or
beneficially 5% or more of a Fund's outstanding voting securities.
NAME OF FUND NAME OF CONTROL PERSON OR PRINCIPAL HOLDER
PAID PERCENTAGE OWNERSHIP
- --------------------------------------------------------------------------------
Burnham Fund - Class A Shares None
Burnham Fund - Class B Shares Lewco Securities Corp.
34 Exchange Place, 4th Floor
Jersey City, NJ 07302-3901
5.78%
Burnham Money Market Burnham Securities Inc.
Special Custody "reinvest"
sweep account for exclusive
benefit of BSI customers
1325 Ave of the Americas, 26th Fl.
New York, NY 10019
99.18%
Burnham U.S. Treasury Money Market Burnham Securities Inc.
Special Custody "reinvest"
sweep account for exclusive
benefit of BSI customers
1325 Ave of the Americas, 26th Fl.
New York, NY 10019
99.98%
Burnham Dow 30 'sm' Focsued Fund David Leibowitz and Wendy
Leibowitz JT Ten
203 Soundview Ave.
White Plains, NY 10626-3825
52.54%
I.W. Burnham, II
465 Park Avenue
New York, NY 10022
10.74%
Lewco Securities Corp.
34 Exchange Place, 4th Floor
Jersey City, NJ 07302-3901
16.38%
Charles Schwab & Co., Inc.
Special Custody Account
101 Montgomery Street
San Francisco, CA 94104
7.11%
Burnham Financial Services Fund FTC & Co.
- - Class A Shares Attn: Datalynx
P.O. Box 173736
Denver, CO 80217
84.28%
Burnham Financial Services Fund Lewco Securities Corp.
- - Class B Shares 34 Exchange Place, 4th Floor
Jersey City, NJ 07302-3901
99.82%
38
<PAGE>
SHARES OF BENEFICIAL INTEREST
DESCRIPTION OF THE TRUST'S SHARES.
The Trust is a business trust organized on August 20, 1998 under Delaware law.
The Trustees are responsible for the management and supervision of the Funds.
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of the Funds, with a par value
of $0.10 per share or such other amount as the Trustees may establish. Under the
Declaration of Trust, the Trustees have the authority to create and classify
shares of beneficial interest in separate series, without further action by
shareholders. As of the date of this Statement of Additional Information, the
Trustees have authorized shares only of the Funds described in the prospectus.
Additional series may be added in the future. The Declaration of Trust also
authorizes the Trustees to classify and reclassify the shares of the Funds, or
any other series of the Trust, into one or more classes. As of the date of this
Statement of Additional Information, the Trustees have authorized the issuance
of the classes of shares of the Funds described in the prospectus.
Each share of a Fund represents an equal proportionate interest in the assets
belonging to that Fund. When issued, shares are fully paid and nonassessable. In
the event of liquidation of a Fund, shareholders are entitled to share pro rata
in the net assets of the Fund available for distribution to such shareholders.
Shares of a Fund are freely transferable and have no preemptive, subscription or
conversion rights.
In accordance with the provisions of the Declaration of Trust, the Trustees have
initially determined that shares entitle their holders to one vote per share on
any matter on which such shares are entitled to vote. The Trustees may determine
in the future, without the vote or consent of shareholders, that each dollar of
net asset value (number of shares owned times net asset value per share) will be
entitled to one vote on any matter on which such shares are entitled to vote.
Unless otherwise required by the 1940 Act or the Declaration of Trust, the Funds
have no intention of holding annual meetings of shareholders. Shareholders may
remove a Trustee by the affirmative vote of at least two-thirds of the Trust's
outstanding shares. At any time that less than a majority of the Trustees
holding office were elected by the shareholders, the Trustees will call a
special meeting of shareholders for the purpose of electing Trustees.
Under Delaware law, shareholders of a Delaware business trust are protected from
liability for acts or obligations of the Trust to the same extent as
shareholders of a private, for-profit Delaware corporation. In addition, the
Declaration of Trust expressly provides that the Trust has been organized under
Delaware law and that the Declaration of Trust will be governed by Delaware law.
It is possible that the Trust might become a party to an action in another state
whose courts refused to apply Delaware law, in which case the Trust's
shareholders could be subject to personal liability.
To guard against this risk, the Declaration of Trust:
contains an express disclaimer of shareholder liability for acts or
obligations of the Trust and provides that notice of this disclaimer
may be given in each agreement, obligation and instrument entered into
or executed by the Trust or its Trustees,
provides for the indemnification out of Trust or Fund property of any
shareholders held personally liable for any obligations of the Trust or
of the Fund and
provides that the Trust shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the
Trust and satisfy any judgment thereon.
Thus, the risk of a shareholder incurring financial loss beyond his or her
investment because of shareholder liability with respect to a Fund is limited to
circumstances in which all of the following factors are present: (1) a court
refused to apply Delaware law; (2) the liability arose under tort law or, if
not, no contractual limitation of liability was in
39
<PAGE>
effect; and (3) the Fund itself would be unable to meet its obligations. In the
light of Delaware law, the nature of the Trust's business and the nature of its
assets, the risk of personal liability to a shareholder is remote.
The Declaration of Trust further provides that the Trust will indemnify each of
its Trustees and officers against liabilities and expenses reasonably incurred
by them, in connection with, or arising out of, any action, suit or proceeding,
threatened against or otherwise involving the Trustee or officer, directly or
indirectly, by reason of being or having been a Trustee or officer of the Trust.
The Declaration of Trust does not authorize the Trust or any Fund to indemnify
any Trustee or officer against any liability to which he or she would otherwise
be subject by reason of or for willful misfeasance, bad faith, gross negligence
or reckless disregard of such person's duties.
BROKERAGE
Purchases and sales of portfolio securities are generally placed with
broker-dealers who provide the best price (inclusive of brokerage commissions)
and execution for orders. However, transactions may be allocated to
broker-dealers who provide research. Also, higher fees may be paid to brokers
that do not furnish research or furnish less valuable research if a good faith
determination is made that the commissions paid are reasonable in relation to
the value of the brokerage and research services provided. Among these services
are those that brokerage houses customarily provide to institutional investors,
such statistical and economic data and research reports on companies and
industries.
Research services might be useful and valuable to the Adviser, the subadvisers
and their affiliates in serving other clients as well as the Funds. Similarly,
research services obtained by the Adviser, subadvisers or the Distributor from
the placement of portfolio brokerage of other clients might be useful and of
value to the Adviser or subadvisers in carrying out their obligations to the
Funds.
A Fund may execute purchases and sales of portfolio securities through the
Distributor if it is able to obtain the best combination of price (inclusive of
brokerage commissions) and execution. The Distributor can charge a Fund
commissions for these transactions, subject to review by the non-interested
Trustees. The Trustees may permit payment of commissions which, though higher
than the lowest available, are deemed reasonable. The Trustees have adopted
procedures pursuant to Rule 17e-1 under the 1940 Act to ascertain that the
brokerage commissions paid to the Distributor are reasonable.
No transactions may be effected by a Fund with the Distributor acting as
principal for its own account. Over-the-counter purchases and sales normally are
made with principal market makers except where, in management's opinion, better
executions are available elsewhere.
<TABLE>
<CAPTION>
- ----------------------------------------- ---------------------------------------------------------------
Fund Name Brokerage Commissions Paid
- ----------------------------------------- ---------------------------------------------------------------
1997 1998 1999
- ----------------------------------------- -------------------- -------------------- ---------------------
<S> <C> <C> <C>
Burnham Fund $216,771 $191,061 $176,291
- ----------------------------------------- -------------------- -------------------- ---------------------
Burnham Dow 30 'sm' Focused Fund N/A N/A $ 423
- ----------------------------------------- -------------------- -------------------- ---------------------
Burnham Financial Services Fund N/A N/A $ 8,222
- ----------------------------------------- -------------------- -------------------- ---------------------
Burnham Small Cap Value Fund N/A N/A N/A
- ----------------------------------------- -------------------- -------------------- ---------------------
Burnham Money Market Fund N/A N/A N/A
- ----------------------------------------- -------------------- -------------------- ---------------------
Burnham U.S. Treasury Money Market Fund N/A N/A N/A
- ----------------------------------------- -------------------- -------------------- ---------------------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------- --------------------------------------------- -----------------------------
Commissions paid by
Fund to Distributor as a
percentage of Fund's total
Fund Name Brokerage Commissions Paid to Distributor brokerage commissions.
- ---------------------------------------- --------------------------------------------- -----------------------------
1997 1998 1999 1999
- ---------------------------------------- ------------ ----------- -------------------- -----------------------------
<S> <C> <C> <C> <C>
Burnham Fund $147,149 $102,991 $101,711 57.69%
- ---------------------------------------- ------------ ----------- -------------------- -----------------------------
Burnham Dow 30 'sm' Focused Fund N/A N/A $ 423 100.00%
- ---------------------------------------- ------------ ----------- -------------------- -----------------------------
Burnham Financial Services Fund N/A N/A $ 4,859 59.10%
- ---------------------------------------- ------------ ----------- -------------------- -----------------------------
Burnham Small Cap Value Fund N/A N/A N/A N/A
- ---------------------------------------- ------------ ----------- -------------------- -----------------------------
Burnham Money Market Fund N/A N/A N/A N/A
- ---------------------------------------- ------------ ----------- -------------------- -----------------------------
Burnham U.S. Treasury Money Market Fund N/A N/A N/A N/A
- ---------------------------------------- ------------ ----------- -------------------- -----------------------------
</TABLE>
DETERMINATION OF PERFORMANCE
TOTAL RETURN
The Funds may quote their performance in terms of total return in communications
to shareholders, or in advertising material. Total return is calculated
according to the following formula:
P (1 + T)(n) = ERV
Where:
P = a hypothetical initial payment of $1,000,
T = average annual total return, and
n = number of years.
In calculating the above, it is assumed that the maximum sales load (or other
charges deducted from payments) is deducted from the initial $1,000 payment and
all recurring fees that are charged to all shareholder accounts are included.
The average annual total return of the Class A shares of Burnham Fund, assuming
the reinvestment of dividends, for the one, five and ten year periods ended
December 31, 1999, was 26.08%, 22.94% and 14.18%, respectively. The average
annual returns of the Class B shares of Burnham Fund, assuming the reinvestment
of dividends, for the one and five year periods ended December 31, 1999 and the
life of the class period (October 18, 1993 to December 31, 1999) were 27.54%,
23.27% and 17.66%, respectively.
The average annual total return of Burnham Dow 30 'sm' Focused Fund, assuming
the reinvestment of dividends, for the life of fund period. (May 3, 1999 to
December 31, 1999), was 3.22%. The average annual total return of the Class A
shares of Burnham Financial Services Fund, assuming the reinvestment of
dividends, for the life of fund period (June 7, 1999 to December 31, 1999), was
(6.90)%. The average annual total return of the Class B shares of Burnham
Financial Services Fund, assuming the reinvestment of dividends, for the life of
fund period (June 7, 1999 to December 31, 1999), was (7.50)%.
A Fund's performance depends on market conditions, portfolio composition and
expenses. Thus, investment yields, current distributions or total returns may
differ from past results, and there is no assurance that historical performance
will continue. With respect to Class B shares, results are reduced if a
contingent deferred sales charge were imposed on the redemption of these shares.
41
<PAGE>
EFFECTIVE YIELD.
Burnham Money Market Fund's and Burnham U.S. Treasury Money Market Fund's yield
quotations as they appear in reports and other material distributed by the Fund
or by the Distributor are calculated as prescribed by the Commission. The yield
of each Fund for a 7-day period (the "base period") will be computed by
determining the net change in value (calculated as set forth below) of a
hypothetical account having a balance of one share at the beginning of the
period, dividing the net change in account value by the value of the account at
the beginning of the base period to obtain the base period return, and
multiplying the base period return by 365/7 with the resulting yield figure
carried to the nearest hundredth of one percent.
Net changes in value of a hypothetical account will include the value of
additional shares purchased with dividends from the original share and dividends
declared on both the original share and any such additional shares, but will not
include realized gains or losses or unrealized appreciation or depreciation on
portfolio investments.
The Funds' effective yields are computed by compounding the unannualized base
period return by adding 1 to the base period return, raising the sum to a power
equal to 365 divided by 7, and subtracting one from the result, according to the
following formula:
Effective Yield = [(base period return + 1)(n)365/7] -1
For the seven day period ended December 31, 1999, Burnham Money Market Fund had
a yield of 4.84% and an effective yield of 4.96%. For the seven day period
ended December 31, 1999, Burnham U.S. Treasury Money Market Fund had a yield of
4.39% and an effective yield of 4.49%.
FINANCIAL STATEMENTS
The audited financial statements of the Trust for the annual period ended
December 31, 1999 are included in the Trust's Annual Report to Shareholders
dated December 31, 1999. These audited financial statements, in the opinion of
management, reflect all adjustments necessary to a fair statement of the results
for the periods presented. You can obtain a copy of the Trust's Annual Report
dated December 31, 1999 by writing or calling the Distributor at the address or
telephone numbers set forth on the cover of this Statement of Additional
Information. The Annual Report is incorporated by reference into this Statement
of Additional Information by reference to the Annual Report as filed with the
Securities and Exchange Commission March 2, 2000 (accession
#0000935069-00-000095).
42
<PAGE>
APPENDIX A -- DESCRIPTIONS OF SECURITIES RATINGS
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. (MOODY'S): "PRIME-1" and "PRIME-2" are Moody's
two highest commercial paper rating categories. Moody's evaluates the salient
features that affect a commercial paper issuer's financial and competitive
position. The appraisal includes, but is not limited to the review of such
factors as:
1. Quality of management.
2. Industry strengths and risks.
3. Vulnerability to business cycles.
4. Competitive position.
5. Liquidity measurements.
6. Debt structures.
7. Operating trends and access to capital markets.
Differing degrees of weight are applied to the above factors as deemed
appropriate for individual situations.
STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW-HILL COMPANIES, INC.
(S&P): "A-1" and "A-2" are S&P's two highest commercial paper rating categories
and issuers rated in these categories have the following characteristics:
1. Liquidity ratios are adequate to meet cash requirements.
2. Long-term senior debt is rated A or better.
3. The issuer has access to at least two additional channels of borrowing.
4. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances.
5. Typically, the issuer is in a strong position in a well-established
industry or industries.
6. The reliability and quality of management is unquestioned.
Relative strength or weakness of the above characteristics determine whether an
issuer's paper is rated "A-1" or "A-2". Additionally, within the "A-1"
designation, those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) rating category.
BOND RATINGS
S&P: An S&P bond rating is a current assessment of the creditworthiness of an
obligor with respect to a specific debt obligation. This assessment may take
into consideration obligors such as guarantors, insurers or lessees.
The bond ratings are not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. S&P does not perform any audit
in connection with any ratings and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
A-1
<PAGE>
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditor's rights.
The S&P bond ratings and their meanings are:
"AAA" Bonds rated "AAA" have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely
strong.
"AA" Bonds rated "AA" have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
"A" Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
"BBB" Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in higher rated categories.
"BB" Bonds rated "BB" are regarded as less vulnerable in the near term than
lower rated obligors. However, they face major ongoing uncertainties and
exposure to adverse business, financial, or economic conditions which
could lead to the obligor's inadequate capacity to meet its financial
commitments.
"B" Bonds rated "B" are regarded as more vulnerable than obligors rated
"BB", but the obligor currently has the capacity to meet its financial
commitments. Adverse business, financial, or economic conditions will
impair the obligor's capacity or willingness to meet its financial
commitments.
"CCC" An obligor rated "CCC" is currently vulnerable, and is dependent upon
favorable business, financial, or economic conditions to meet its
financial commitments.
"CC" An obligor rated "CC" is currently highly vulnerable.
A-2
<PAGE>
Plus (+) or Minus (-): The ratings from "AA" to "CC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings. The letter P indicates a provisional rating which assumes
successful completion of a project financed by the bonds being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This rating,
while addressing credit quality after completion of the project, makes no
comment on the likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise his own judgement with respect to such
likelihood and risk.
Under present commercial bank regulations issued by the Comptroller of the
Currency, bonds rated in the top four categories ("AAA" , "AA", "A", and "BBB ",
commonly known as "investment-grade" ratings) are generally regarded as eligible
for bank investment.
MOODY'S: The Moody's ratings and their meanings are:
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as gilt edge. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower then the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba Bonds which are rated Ba judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
A-3
<PAGE>
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance
of other terms of the contract over any long period of time may be
small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Con. Bonds rated Con. are bonds for which the security depends on the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by: (a) earnings of projects
under construction, (b) earnings of projects unseasoned in operating
experience, (c) rentals that begin when facilities are completed, or
(d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
A-4
<PAGE>
APPENDIX B
DESCRIPTION OF DOW JONES INDUSTRIAL AVERAGE AND DIAMONDS
(BURNHAM DOW 30 'sm' FOCUSED FUND ONLY)
DOW JONES INDUSTRIAL AVERAGE
The Dow Jones Industrial Average was introduced to the investing public by
Charles Dow on May 26, 1896 and originally was composed of only 12 stocks. It
has since become one of the most well known and widely followed indicators of
the U.S. stock market and is the oldest continuing stock market average in the
world. As of March, 1998, the 30 blue-chip stocks in the DJIA represented
approximately one-sixth of the over $12 trillion market value of all U.S. stocks
and one-fifth of the market value of all stocks listed on the New York Stock
Exchange. Many of the companies represented in the DJIA are household names and
leaders in their respective industries, and their stocks are broadly held by
both individual and institutional investors. Because the DJIA is so well known
and its performance is generally perceived to reflect that of the overall
domestic equity market, it is often used as benchmark for investments in
equities, mutual funds, and other asset classes.
The DJIA is unique for a market index. It is price-weighted rather than market
capitalization weighted. In essence, the DJIA consists of one share of each of
the 30 stocks included in the DJIA. Thus, the weightings of the components of
the DJIA are affected only by changes in their prices, while the weightings of
stocks in other indices are affected by price changes and changes in shares
outstanding. This distinction stems from the fact that, when initially created,
the DJIA was a simple average and was computed merely by adding up the prices of
stocks in the average and dividing the sum by the total number of stocks in the
average. However, it eventually became clear that a method was needed to smooth
out the effects of stock splits and composition changes to prevent these events
from distorting the level of the average. Therefore, a divisor was created that
has been periodically adjusted over time. This divisor, when divided into the
sum of the prices of the stocks in the DJIA, generates the number that is
reported every day in newspapers, on television and radio, and over the
Internet. With the incorporation of the divisor, the DJIA is not technically an
average anymore.
The DJIA is computed and maintained by the editors of The Wall Street Journal,
which is published by Dow Jones. Periodically, the editors review and make
changes to the composition of the DJIA. In selecting a company's stock to be
included in the DJIA, the following criteria are generally used: (1) the firm is
not a utility or a transportation company (there are separate Dow Jones averages
for these sectors); (2) the company has an excellent reputation in its field;
(3) the company has grown successfully, and (4) the company has a large
individual and institutional investor base. All of the 30 stocks currently
included in the DJIA are listed in the New York Stock Exchange, although this is
not a criterion for selection. The inclusion of any particular company in the
DJIA does not constitute a prediction as to the company's future results of
operations or stock market performance. For the sake of continuity, composition
changes are rare, and generally have occurred only after corporate acquisitions
or other d ramatic shifts in a company's core business. When the editors do
decide that a component stock needs to be changed, they also review the other
stocks in the average to confirm their continued presence. Thus, when a review
is completed, multiple changes often occur.
The DJIA currently consists of the common stocks of the following 30 companies:
Alcoa Inc.
American Express Co.
AT & T Corp.
Boeing Co.
Caterpillar Inc.
Citigroup Inc.
Coca-Cola Co.
DuPont Co.
Eastman Kodak Co.
B-1
<PAGE>
Exxon Mobil Corp.
General Electric Co.
General Motors Corp.
Home Depot Inc.
Honeywell International Inc.
Hewlett-Packard Co.
International Business Machines Corp.
Intel Corp.
Internatinal Paper Co.
J.P. Morgan & Co.
Johnson & Johnson
McDonald's Corp.
Merck & Co.
Microsoft Corp.
Minnesota Mining & Manufacturing Co.
Philip Morris Cos.
Procter & Gamble Co.
SBC Communications Inc.
United Technologies Corp.
Wal-Mart Stores Inc.
Walt Disney Co.
Dow Jones, Dow Jones Industrial Average, DJIA and DIAMONDS are service marks of
Dow Jones & Company, Inc. and have been licensed by the Fund in connection with
the operation of the Fund. The Fund is not sponsored, endorsed, sold or promoted
by Dow Jones. Dow Jones makes no representation, or warranty, express or
implied, to the shareholders of the Fund or any member of the public regarding
the advisability of investing in securities generally or in the Fund
particularly. Dow Jones' only relationship to the Fund is the licensing of
certain trademarks and trade names of Dow Jones and of the Dow Jones Industrial
Average which is determined, composed and calculated by Dow Jones without regard
to the Fund. Dow Jones has no obligation to take the needs of the Fund or its
shareholders into consideration in determining, composing or calculating the Dow
Jones Industrial Average. Dow Jones is not responsible for and has not
participated in the determination of the timing of issuing, the purchase prices
of, or quantities of the Fund's shares or in the determination or calculation of
the redemption price the Fund's shares. Dow Jones has no obligations or
liability in connection with the administration or marketing of the Fund.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW
JONES INDUSTRIAL AVERAGE OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE
NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND,
SHAREHOLDERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW
JONES INDUSTRIAL AVERAGE OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO
EXPRESS OR IMPLIED WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE DOW JONES INDUSTRIAL AVERAGE OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW
JONES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY
AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES AND THE FUND.
B-2
<PAGE>
DIAMONDS
DIAMONDS are shares of a publicly-traded unit investment trust that owns the
stocks in the DJIA in approximately the same proportions as represented in the
DJIA. DIAMONDS trade on the American Stock Exchange (AMEX) at approximately .01
(or 1/100) of the value of the DJIA. Because DIAMONDS replicate the DJIA, any
price movement away from the value of the underlying stocks is generally quickly
eliminated by professional traders. In light of the structural features of
DIAMONDS, the Adviser believes that the movement of DIAMONDS share prices should
closely track the movement of the DJIA. The DIAMONDS program bears operational
expenses, which are deducted from the dividends paid to DIAMONDS investors. To
the extent that the Fund invests in DIAMONDS, the Fund must bear these expenses
in addition to the expenses of its own operation.
Investments in DIAMONDS are subject to limits in the 1940 Act on investments in
other investment companies. Under one of the 1940 Act limitations, the Fund may
invest in DIAMONDS only to the extent that the Fund and its affiliated persons
do not own more than 3% of the outstanding securities of DIAMONDS' issuer. The
issuer of DIAMONDS is not obligated to redeem DIAMONDS representing more than 1%
of the issuer's total outstanding securities during any period of less than 30
days. DIAMONDS are subject to certain risks, including (1) the risk that their
prices may not correlate perfectly with changes in the DJIA; and (2) the risk of
possible trading halts due to market conditions or other reasons that, in the
view of the AMEX, would make trading in DIAMONDS inadvisable.
B-3
<PAGE>
BURNHAM INVESTORS TRUST
POST-EFFECTIVE AMENDMENT NO. 70
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Agreement and Declaration of Trust, dated August 20, 1998.(2)
(b) By-Laws dated August 20, 1998, as amended on August 27, 1998.(2)
(c) None.
(d)(1) Investment Advisory Agreement between the Registrant and Burnham
Asset Management Corporation.(2)
(d)(2) Investment Subadvisory Agreement between Burnham Asset Management
Corporation and Mendon Capital Advisors Corp. with respect to Burnham
Financial Services Fund.*
(d)(3) Investment Subadvisory Agreement between Burnham Asset Management
Corporation and Reich & Tang Asset Management, LP with respect to
Burnham Money Market Fund.(3)
(d)(4) Investment Subadvisory Agreement between Burnham Asset Management
Corporation and Reich & Tang Asset Management, LP with respect to
Burnham U.S. Treasury Money Market Fund.*
(e)(1) Distribution Agreement between the Registrant and Burnham Securities
Inc.(2)
(e)(2) Specimen Selling and Service Agreement.(1)
(f) None.
(g)(1) Custodian Contract between the Registrant and Investors Fiduciary
Trust Company.(1)
(g)(2) Letter Agreement between the Registrant and Investors Fiduciary
Trust Company.(3)
(h)(1) Transfer Agency Agreement between the Registrant and State Street
Bank and Trust Company.(1)
(h)(2) Letter Agreement between the Registrant and State Street Bank and
Trust Company.(3)
(h)(3) Administration Agreement between the Registrant and Burnham Asset
Management Corporation.(2)
<PAGE>
(i)(1) Consent of counsel.*
(i)(2) Opinion and consent of counsel.*
(j) Consent of independent accountants. *
(k) Financial Statements:
The following reports and financial statements are incorporated in Part C by
reference to Burnham Investor Trust's Annual Report to Shareholders for the year
ended December 31, 1999 filed on March 2, 2000 (accession #0000935069-00-000095)
Report of Independent Accountants for the year ended December 31, 1999;
Statement of Net Assets at December 31, 1999, Statement of Assets and
Liabilities at December 31, 1999, Statement of Operations for the year ended
December 31, 1999, Statement of Changes in Net Assets for each of the two years
in the period ended December 31, 1999 and Note to Financial Statements.
(l) None.
(m)(1) Rule 12b-1 Plans for Class A and Class B shares of Burnham
Fund, Burnham Financial Services Fund and Burnham Small
Cap Value Fund.(2)
(m)(2) Rule 12b-1 Plan for the Dow 30 'sm' Focused Fund.(2)
(o) Rule 18f-3 Multiple Class Plan.(2)
(p)(1) Code of Ethics applicable to Burnham Investors Trust.*+
(p)(2) Code of Ethics applicable to Burnham Asset Management
Corporation.*+
(p)(3) Code of Ethics applicable to Mendon Capital Advisors Corp.*+
- --------------------------------------------------------------------------------
* Filed herewith
+ Under Rule 17j-1 of The Investment Company Act of 1940, as amended, no
code of ethics is required of an investment adviser to a money market
fund. As such, no code of ethics applicable to Reich and Tang Asset
Management L.P., subadviser to Burnham Money Market Fund and Burnham
U.S. Treasury Money Market Fund, is included.
(1) Incorporated by reference to post effective amendment no. 66
(File Nos. 2-17226 and 811-994) (filed April 30, 1998).
(2) Incorporated by reference to post-effective amendment no. 67
(File Nos. 2-17266 and 811-994) (filed February 18, 1999).
(3) Incorporated by reference to post-effective amendment no. 68
(File Nos. 2-17266 and 811-994) (filed April 30, 1999).
(4) Incorporated by reference to post-effective amendment no. 69
(File Nos. 2-17266 and 811-994) (filed July 23, 1999).
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
THE REGISTRANT.
To the knowledge of the Registrant, it does not control, is not controlled by,
and is not under common control with any other person.
ITEM 25. INDEMNIFICATION.
Except for the Agreement and Declaration of Trust, dated August 20, 1998,
establishing the Registrant as a trust under Delaware law, there is no contract,
arrangement or statute under which any director, officer, underwriter or
affiliated person of the Registrant is insured or indemnified. The Declaration
of Trust provides that no trustee or officer will be indemnified against any
<PAGE>
liability of which the Registrant would otherwise be subject by reason of or for
willful misfeasance, bad faith, gross negligence of reckless disregard of such
person's duties.
Registrant's Trustees and officers are insured under a standard investment
company errors and omissions insurance policy covering loss incurred by reason
of negligent errors and omissions committed in their capacities as such.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The information required by this item is set forth in the Form ADV of the
Registrant's investment adviser, Burnham Asset Management Corporation. The
following sections of the Form ADV are incorporated herein by reference:
(a) Items 1 and 2 of Part 2; and
(b) Section IV, Business Background, of each Schedule D
The information required by this item is set forth in the Form ADV of the
Registrant's investment subadviser, Mendon Capital Advisers Corp. The following
sections of the Form ADV are incorporated herein by reference:
(a) Items 1 and 2 of Part 2; and
(b) Section IV, Business Background, of each Schedule D
The information required by this item is set forth in the Form ADV of the
Registrant's investment subadviser, Reich & Tang Asset Management LP. The
following sections of the Form ADV are incorporated herein by reference:
(a) Items 1 and 2 of Part 2; and
(b) Section IV, Business Background, of each Schedule D
ITEM 27. PRINCIPAL UNDERWRITERS.
(1) Burnham Securities Inc. is the principal distributor of the
Registrant's shares.
(2) The officers and directors of the Distributor who also serve the
Registrant are as follows:
Name Position with Distributor Position with Registrant
- ---- ------------------------- ------------------------
I.W. Burnham, II Honorary Chairman of Honorary Chairman of
the Board and Director the Board and Trustee
Jon M. Burnham Chairman of the Board, President, Chief
Chief Executive Officer Executive Officer and
and Director Chairman of the Board
Debra B. Hyman Vice President and Executive Vice President
Director
Ronald M. Geffen Managing Director Vice President
Frank A. Passantino First Vice President Vice President and
Assistant Secretary
The principal business address of all such persons is 1325 Avenue of the
Americas, 26th Floor, New York, New York 10019.
<PAGE>
(3) No commissions or other compensation have been paid by the Registrant,
directly or indirectly, to any principal underwriter who is not an affiliated
person of the Registrant or an affiliated person of such an affiliated person
during the last fiscal year.
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Burnham Asset Management Corporation
1325 Avenue of the Americas, 26th Floor
New York, New York 10019
Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, MO 64105
PFPC Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
ITEM 29. MANAGEMENT SERVICES.
The Registrant has not entered into any management-related service contracts not
discussed in Part A or B of this Registration Statement.
ITEM 30. UNDERTAKINGS.
None.
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, Burnham Investors Trust certifies that it meets all of the
requirements for effectiveness of this registration statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this post-effective
amendment no. 70 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and State of New York on the
28th day of April, 2000.
BURNHAM INVESTORS TRUST
By: /s/ Jon M. Burnham*
Jon M. Burnham
Chairman, President and Chief Executive Officer
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
post-effective amendment no. 70 to the registration statement on Form N-1A has
been signed below by the following persons in the capacities and on the dates
indicated:
SIGNATURE TITLE DATE
/s/ I.W. Burnham, II
- ------------------------- Honorary Chairman
I.W. Burnham, II* and Trustee April 28, 2000
/s/ Jon M. Burnham President, Chief
- ------------------------- Executive Officer and April 28, 2000
Jon M. Burnham* Chairman
/s/ Michael E. Barna
- ------------------------- Chief Financial April 28, 2000
Michael E. Barna Officer
/s/ Claire B. Benenson
- ------------------------- Trustee April 28, 2000
Claire B. Benenson*
/s/ Lawrence N. Brandt
- ------------------------- Trustee April 28, 2000
Lawrence N. Brandt*
/s/ Alvin P. Gutman
- ------------------------- Trustee April 28, 2000
Alvin P. Gutman*
/s/ William W. Karatz
- ------------------------- Trustee April 28, 2000
William W. Karatz*
/s/ John C. McDonald
- ------------------------- Trustee April 28, 2000
John C. McDonald*
/s/ Donald B. Romans
- ------------------------- Trustee April 28, 2000
Donald B. Romans*
/s/ Robert F. Shapiro
- ------------------------- Trustee April 28, 2000
Robert F. Shapiro*
/s/ Robert M. Shavick
- ------------------------- Trustee April 28, 2000
Robert M. Shavick*
/s/ Robert S. Weinberg
- ------------------------- Trustee April 28, 2000
Robert S. Weinberg*
/s/ Robert J. Wilbur
- ------------------------- Trustee April 28, 2000
Robert J. Wilbur*
<PAGE>
*By: /s/ Michael E. Barna, Attorney-in-fact under powers of attorney previously
filed.
<PAGE>
EXHIBIT INDEX
Exhibit Number
- --------------
(d)(2) Investment Subadvisory Agreement between Burnham Asset Management
Corporation and Mendon Capital Advisors Corp.
(d)(4) Investment Subadvisory Agreement between Burnham Asset Management
Corporation and Reich & Tang Asset Management, LP.
(i)(1) Consent of counsel.
(i)(2) Opinion and consent of counsel.
(j) Consent of independent accountants.
(p)(1) Code of Ethics for Burnham Investors Trust.
(p)(2) Code of Ethics for Burnham Asset Management Corporation, Burnham
Securities Inc. and and Mendon Capital Advisors Corp.
(p)(3) Code of Ethics for Mendon Capital Advisors Corp.
STATEMENT OF DIFFERENCES
------------------------
Characters normally expressed as superscript shall be preceded by 'pp'. The
section symbol shall be expressed as 'SS'. The service mark symbol shall be
expressed as 'sm'.
June 4, 1999
BURNHAM INVESTORS TRUST, on behalf of
Burnham Financial Services Fund
1325 Avenue of the Americas, 26th Floor
New York, NY 10019
MENDON CAPITAL ADVISORS CORP.
1325 Avenue of the Americas
26th Floor
New York, New York 10019
SUB-ADVISORY AGREEMENT
Dear Sirs:
Burnham Investors Trust (the "trust"), of which Burnham Financial Services
Fund (the "fund") is a series, has been organized as a business trust under the
laws of the State of Delaware to engage in the business of an investment
company. The trust's shares of beneficial interest are currently divided into
five series (including the fund), each series representing the entire undivided
interest in a separate portfolio of assets.
The board of trustees of the trust (the "trustees") has selected
Burnham Asset Management Corp.(the "adviser") to provide overall investment
advice and management for the fund, and to provide certain other services, under
the terms and conditions provided in the investment advisory agreement, dated as
of the date hereof, between the trust, on behalf of the fund, and the adviser
(the "investment advisory agreement").
The adviser and the trustees have selected Mendon Capital Advisors
Corp. (the "sub-adviser") to provide the adviser and the fund with the advice
and services set forth below, and the sub-adviser is willing to provide such
advice and services, subject to the review of the trustees and overall
supervision of the adviser, under the terms and conditions hereinafter set
forth. The sub-adviser hereby represents and warrants that it is registered as
an investment adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). Accordingly, the trust, on behalf of the fund, and the adviser
agree with the sub-adviser as follows:
<PAGE>
1. DELIVERY OF DOCUMENTS. The trust has furnished the sub-adviser with
copies, properly certified or otherwise authenticated, of each of the
following:
(a) agreement and declaration of trust of the trust
dated August 20, 1998 (the "declaration of trust");
(b) by-laws of the trust as in effect on the date hereof;
(c) resolutions of the trustees selecting the sub-adviser
as the investment sub-adviser to the fund and
approving this sub-advisory agreement (the
"agreement");
(d) resolutions of the trustees selecting the adviser as
investment adviser to the fund and approving the
investment advisory agreement and resolutions adopted
by the initial shareholder of the fund approving the
investment advisory agreement;
(e) the adviser's investment advisory agreement;
(f) the fund's prospectus and statement of additional
information; and
(g) the trust's code of ethics.
The adviser will furnish the sub-adviser from time to time with copies,
properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any.
2. INVESTMENT SERVICES. The sub-adviser will use its best efforts to
provide to the fund continuing and suitable investment advice with
respect to investments, consistent with the investment policies,
objectives and restrictions of the fund as set forth in the fund's
prospectus and statement of additional information. In the performance
of the sub-adviser's duties hereunder, subject always to the provisions
contained in the documents delivered to the sub-adviser pursuant to
Section 1 above, as from time to time amended or supplemented, the
sub-adviser will, at its own expense:
(a) furnish the adviser and the fund with advice and
recommendations, consistent with the investment
policies, objectives and restrictions of the fund as
set forth above,
<PAGE>
with respect to the purchase, holding and disposition
of portfolio securities and other permitted
investments;
(b) furnish the adviser and the fund with advice in
connection with policy decisions to be made by the
board of trustees or any committee thereof about the
fund's investments and, as requested, furnish the
fund with research, economic and statistical data in
connection with the fund's investments and investment
policies that is reasonably available to the
sub-adviser and necessary for the sub-adviser to
perform its obligations hereunder;
(c) submit such reports relating to the valuation of the
fund's securities as the adviser may reasonably
request;
(d) subject to prior consultation with the adviser,
assist the fund in any negotiations relating to the
fund's investments with issuers, investment banking
firms, securities brokers or dealers and other
institutions or investors;
(e) consistent with the provisions of Section 7 of this
agreement, place orders for the purchase, sale or
exchange of portfolio securities for the fund's
account with brokers or dealers selected by the
adviser or the sub-adviser, provided that in
connection with the placing of such orders and the
selection of such brokers or dealers the sub-adviser
will seek to obtain best price and execution, except
as otherwise provided in the prospectus and statement
of additional information of the fund or except as
otherwise required by the fund;
(f) from time to time or at any time reasonably requested
by the adviser or the trustees, make reports to the
adviser or the trustees, as requested, of the
sub-adviser's performance of the foregoing services;
(g) subject to the supervision of the adviser, maintain
and preserve the records required by the Investment
Company Act of 1940 (the "1940 Act") to be maintained
by the sub-adviser (the sub-adviser agrees that such
records are the property of the trust and copies will
be surrendered to the trust promptly upon request
therefor);
(h) give instructions to the custodian (including any
sub-custodian) of the fund as to deliveries of
securities to and
<PAGE>
from such custodian and payments of cash for the
account of the fund, and advise the adviser on the
same day such instructions are given;
(i) cooperate generally with the fund and the adviser to
provide information necessary for the preparation of
registration statements and periodic reports to be
filed with the Securities and Exchange Commission,
including Form N-1A, semi-annual reports on Form
N-SAR, periodic statements, shareholder
communications and proxy materials furnished to
holders of shares of the fund, filings with states
and with United States agencies responsible for tax
matters, and other reports and filings of like
nature.
In the performance of its duties hereunder, the sub-adviser is and will
be an independent contractor and unless otherwise expressly provided or
authorized will have no authority to act for or represent the fund or
trust in any way or otherwise be deemed to be an agent of the fund, the
trust or of the adviser.
3. EXPENSES PAID BY THE SUB-ADVISER. The sub-adviser will pay the cost of
maintaining the staff and personnel necessary for it to perform its
obligations under this agreement, the expenses of office rent,
telephone, telecommunications and other facilities that it is obligated
to provide in order to perform the services specified in Section 2, and
any other expenses incurred by it in connection with the performance of
its duties hereunder.
4. EXPENSES OF THE FUND NOT PAID BY THE SUB-ADVISER. The sub-adviser will
not be required to pay any expenses which this agreement does not
expressly state will be payable by the sub-adviser. In particular, and
without limiting the generality of the foregoing but subject to the
provisions of Section 3, the sub-adviser will not be required to pay
any fund expense or to reimburse the adviser for any such expense that
the adviser is required to pay or costs of any broker-dealer in
connection with the fund.
5. COMPENSATION OF THE SUB-ADVISER. The adviser will pay the sub-adviser,
as compensation for services and expenses assumed hereunder, a fee as
set forth in Schedule I. Sub-advisory fees payable hereunder will be
computed daily and paid monthly in arrears. If this agreement is
effective subsequent to the first day of the month, or if this
agreement is terminated, the fee provided in this section will be
computed on the basis of the number of days in the month for which this
agreement is in effect,
<PAGE>
subject to a pro rata adjustment based on the number of days elapsed in
the current month as a percentage of the total number of days in such
month. The sub-adviser understands and agrees that neither the trust
nor the fund has any liability for the sub-adviser's fee hereunder.
Calculations of the sub-adviser's fee will be based on average net
asset values as provided by the adviser.
6. OTHER ACTIVITIES OF THE SUB-ADVISER AND ITS AFFILIATES. Nothing herein
contained will prevent the sub-adviser or any of its affiliates,
directors, employees, or associates from engaging in any other business
or from acting as investment adviser or investment manager for any
other person or entity, whether or not having investment policies or a
portfolio similar to the fund. It is specifically understood that
officers, directors and employees of the sub-adviser and its affiliates
may engage in providing portfolio management services and advice to
other investment advisory clients of the sub-adviser or of its
affiliates.
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases or
sales of portfolio securities for the account of the fund, neither the
sub-adviser nor any of its directors, officers or employees will act as
principal or agent or receive any commission. The sub-adviser will not
knowingly recommend that the fund purchase, sell or retain securities
of any issuer in which the sub-adviser has a financial interest without
obtaining prior approval of the adviser prior to the execution of any
such transaction. Access persons (as defined in Rule 17j-1 under the
1940 Act) of the sub-adviser will provide personal trading reports to a
designated representative of the adviser in accordance with the trust's
code of ethics.
8. NO PARTNERSHIP OR JOINT VENTURE. The trust, the fund, the adviser and
the sub-adviser are not partners of or joint venturers with each other
and nothing herein shall be construed so as to make them such partners
or joint venturers or impose any liability as such on any of them.
9. LIMITATION OF LIABILITY OF THE SUB-ADVISER. Neither the sub-adviser or
any director, employee or shareholder of the sub-adviser will be liable
for any error of judgment or mistake of law or for any loss suffered by
the trust, the fund or the adviser in connection with the matters to
which this agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the sub-adviser's part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this agreement.
10. DURATION AND TERMINATION OF THIS AGREEMENT. This agreement will remain
in effect until June 4, 2001 and from year to year thereafter, but only
so
<PAGE>
long as such continuance is specifically approved at least annually
by (a) a majority of the trustees who are not interested persons of
the adviser, of the sub-adviser or (other than as board members) of the
trust, cast in person at a meeting called for the purpose of voting on
such approval, and (b) either (i) the trustees or (ii) a majority of
the outstanding voting securities of the fund. This agreement may, on
60 days written notice, be terminated at any time without the payment
of any penalty by the fund by vote of a majority of the outstanding
voting securities of the fund or by the board of trustees or by the
adviser or by the sub-adviser. Termination of this agreement with
respect to the fund will not be deemed to terminate or otherwise
invalidate any provisions of any contract between you and any other
series of the trust. This agreement will automatically terminate in the
event of its assignment or upon the termination of the adviser's
investment advisory agreement. In interpreting the provisions of
this Section 10, the definitions contained in Section 2(a) of the 1940
Act (including the definitions of "assignment," "interested person" and
"voting security"), will be applied.
11. AMENDMENT OF THIS AGREEMENT. No provision of this agreement may be
changed or waived orally, but only by an instrument in writing signed
by the party against which enforcement of the change or waiver is
sought. No amendment, transfer, assignment, sale, hypothecation or
pledge of this agreement will be effective until approved by (a) the
trustees, including a majority of the trustees who are not interested
persons of the adviser, the sub-adviser or (other than as board
members) the trust, cast in person at a meeting called for the purpose
of voting on such approval, and (b) a majority of the outstanding
voting securities of the fund, as defined in the 1940 Act.
12. MISCELLANEOUS.
(a) The captions in this agreement are included for convenience of
reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect. This agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument. The name Burnham Investors Trust is the
designation of the trustees under the declaration of trust,
dated August 20, 1998 and the declaration of trust has been
filed with the Secretary of State of the State of Delaware.
The obligations of the trust and the fund are
<PAGE>
not personally binding upon, nor will resort be had to the
private property of, any of the trustees, shareholders,
officers, employees or agents of the trust or the fund, but
only the fund's property will be bound. The fund will not be
liable for the obligations of any other series of the trust.
(b) Nothing herein contained will limit or restrict the
sub-adviser or any of its directors, officers, affiliates, or
employees from buying, selling or trading in any securities
for its or their own account or accounts. The trust and fund
acknowledge that the sub-adviser and its directors, officers,
affiliates, and employees, and its other clients may at any
time have, acquire, increase, decrease or dispose of positions
in investments which are at the same time being acquired or
disposed of by the fund. The sub-adviser will have no
obligation to acquire for the fund, a position in any
investment which the sub-adviser, its directors, officers,
affiliates, or employees may acquire for its or their own
accounts or for the account of another client if, in the sole
discretion of the sub-adviser, it is not feasible or desirable
to acquire a position in such investment for the fund. Nothing
herein contained will prevent the sub-adviser from purchasing
or recommending the purchase of a particular security for one
or more funds or clients while other funds or clients may be
selling the same security.
(c) Any information supplied by the sub-adviser, which is not
otherwise in the public domain, in connection with the
performance of its duties hereunder is confidential and may be
used only by the fund and/or its agents, and only in
connection with the fund and its investments.
(D) GOVERNING LAW. This agreement shall be governed by the
substantive law of the State of New York and the applicable
provisions of the 1940 Act.
Yours very truly,
BURNHAM ASSET MANAGEMENT CORP.
By: /s/ Jon M. Burnham
JON M. BURNHAM
Its: PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
The foregoing agreement is hereby agreed to as of the date thereof.
MENDON CAPITAL ADVISORS CORP.
BY: /s/ ANTON SCHUTZ
Anton Schutz
Its: PRESIDENT
SCHEDULE I
ANNUAL FEE RATE AS A PERCENTAGE
FUND OF AVERAGE DAILY NET ASSET VALUE
Burnham Financial Services Fund 0.45%
The average net asset value for the month will be based on the net
asset value used in determining the price at which fund shares are sold,
repurchased or redeemed on each day of the month.
If this agreement becomes effective as to a fund subsequent to the
first day of a month, or terminates before the last day of a month, your
compensation for such fraction of the month will be determined by applying the
foregoing percentages to the average daily net asset value of the fund during
such fraction of a month and in the proportion that such fraction of a month
bears to the entire month.
BURNHAM ASSET MANAGEMENT CORP.
1325 Avenue of the Americas, 26th Floor
New York, NY 10019
OCTOBER 12,1999
BURNHAM INVESTORS TRUST, on behalf of
Burnham U.S. Treasury Money Market Fund
1325 Avenue of the Americas, 26th Floor
New York, NY 10019
REICH & TANG ASSET MANAGEMENT, L.P.
600 Fifth Avenue
New York, New York 10020-2302
SUBADVISORY AGREEMENT
Dear Sirs:
Burnham Investors Trust (the "trust"), of which Burnham U.S. Treasury
Money Market Fund (the "fund") is a series, has been organized as a business
trust under the laws of the State of Delaware to engage in the business of an
investment company. The trust's shares of beneficial interest are currently
divided into six series (including the fund), each series representing the
entire undivided interest in a separate portfolio of assets.
The board of trustees of the trust (the "trustees") has selected
Burnham Asset Management Corp.(the "adviser") to provide overall investment
advice and management for the fund, and to provide certain other services, under
the terms and conditions provided in the investment advisory agreement, dated as
of the date hereof, between the trust, on behalf of the fund, and the adviser
(the "investment advisory agreement").
The adviser and the trustees have selected Reich & Tang Asset
Management, L.P. (the "subadviser") to provide the adviser and the fund with the
advice and services set forth below, and the subadviser is willing to provide
such advice and services, subject to the review of the trustees and overall
supervision of the adviser, under the terms and conditions hereinafter set
forth. The subadviser hereby represents and warrants that it is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). Accordingly, the trust, on behalf of the fund, and the adviser
agree with the subadviser as follows:
<PAGE>
1. DELIVERY OF DOCUMENTS. The trust has furnished the subadviser with
copies, properly certified or otherwise authenticated, of each of the
following:
(1) agreement and declaration of trust of the trust, dated August 20,
1998 (the "declaration of trust");
(2) by-laws of the trust as in effect on the date hereof;
(3) resolutions of the trustees selecting the subadviser as the
investment subadviser to the fund and approving this subadvisory
agreement (the "agreement");
(4) resolutions of the trustees selecting the adviser as
investment adviser to the fund and approving the
investment advisory agreement and resolutions adopted by the
initial shareholder of the fund approving the investment advisory
agreement;
(5) the adviser's investment advisory agreement;
(6) the fund's prospectus and statement of additional information; and
(7) the trust's code of ethics.
The adviser will furnish the subadviser from time to time with copies,
properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any.
2. INVESTMENT SERVICES. The subadviser will use its best efforts to
provide to the fund continuing and suitable investment advice with
respect to investments, subject always to the provisions of the
trust's declaration of trust and by-laws and the investment Company Act
of 1940, as amended (the "1940 Act"), and to the investment objective,
policies and restrictions (including, without limitation, the
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") for qualification as a registered investment
company) of the fund, as each of the same shall be from time to time in
effect as set forth in the fund's prospectus and statement of
additional information, or any investment guidelines or other
instructions received in writing from the adviser, and subject,
further, to such policies and instructions
<PAGE>
as the board of trustees may from time to time establish and deliver to
the subadviser.
In the performance of the subadviser's duties hereunder, subject always to the
provisions contained in the documents delivered to the subadviser pursuant to
section 1 above, as from time to time amended or supplemented, the subadviser
will, at its own expense:
(1) furnish the adviser and the fund with advice and
recommendations, consistent with the investment
policies, objectives and restrictions of the fund as
set forth above, with respect to the purchase,
holding and disposition of portfolio securities and
other permitted investments;
(2) furnish the adviser and the fund with advice in
connection with policy decisions to be made by the
board of trustees or any committee thereof about the
fund's investments and, as requested, furnish the
fund with research, economic and statistical data in
connection with the fund's investments and investment
policies;
(3) submit such reports relating to the valuation of the
fund's securities as the adviser may reasonably
request;
(4) subject to prior consultation with the adviser,
assist the fund in any negotiations relating to the
fund's investments with issuers, investment banking
firms, securities brokers or dealers and other
institutions or investors;
(5) consistent with the provisions of Section 7 of this
agreement, place orders for the purchase, sale or
exchange of portfolio securities for the fund's
account with brokers or dealers selected by the
adviser or the subadviser, provided that in
connection with the placing of such orders and the
selection of such brokers or dealers the subadviser
will seek to obtain best price and execution, except
as otherwise provided in the prospectus and statement
of additional information of the fund;
(6) from time to time or at any time requested by the
adviser or the trustees, make reports to the adviser
or the trustees, as requested, of the sub-adviser's
performance of the foregoing services;
<PAGE>
(7) subject to the supervision of the adviser, maintain
and preserve the records required by the 1940 act to
be maintained by the subadviser (the subadviser
agrees that such records are the property of the
trust and copies will be surrendered to the trust
promptly upon request therefor);
(8) give instructions to the custodian (including any
sub-custodian) of the fund as to deliveries of
securities to and from such custodian and payments of
cash for the account of the fund, and advise the
adviser on the same day such instructions are given;
(9) cooperate generally with the fund and the adviser to
provide information necessary for the preparation of
registration statements and periodic reports to be
filed with the Securities and Exchange Commission,
including Form N-1A, semi-annual reports on Form
N-SAR, periodic statements, shareholder
communications and proxy materials furnished to
holders of shares of the fund, filings with states
and with United States agencies responsible for tax
matters, and other reports and filings of like
nature.
In the performance of its duties hereunder, the subadviser is and will be an
independent contractor and unless otherwise expressly provided or authorized
will have no authority to act for or represent the fund or trust in any way or
otherwise be deemed to be an agent of the fund, the trust or of the adviser.
3. EXPENSES PAID BY THE SUBADVISER. The subadviser will pay the
cost of maintaining the staff and personnel necessary for it
to perform its obligations under this agreement, the expenses
of office rent, telephone, telecommunications and other
facilities that it is obligated to provide in order to perform
the services specified in Section 2, and any other expenses
incurred by it in connection with the performance of its
duties hereunder.
4. EXPENSES OF THE FUND NOT PAID BY THE SUBADVISER. The
subadviser will not be required to pay any expenses which this
agreement does not expressly state will be payable by the
subadviser. In particular, and without limiting the generality
of the foregoing but subject to the provisions of Section 3,
the subadviser will not be required to pay any fund expense or
to reimburse the adviser for any such expense that the adviser
is required to pay.
<PAGE>
5. COMPENSATION OF THE SUBADVISER. The adviser will pay the
subadviser, as compensation for services and expenses assumed
hereunder, a fee as set forth in Schedule I. Subadvisory fees
payable hereunder will be computed daily and paid monthly in
arrears. If this agreement is effective subsequent to the
first day of the month, or if this agreement is terminated,
the fee provided in this section will be computed on the basis
of the number of days in the month for which this Agreement is
in effect, subject to a pro rata adjustment based on the
number of days elapsed in the current month as a percentage of
the total number of days in such month. The subadviser
understands and agrees that neither the trust nor the fund has
any liability for the subadviser's fee hereunder. Calculations
of the subadviser's fee will be based on average net asset
values as provided by the adviser.
6. OTHER ACTIVITIES OF THE SUBADVISER AND ITS AFFILIATES. Nothing
herein contained will prevent the subadviser or any of its
affiliates or associates from engaging in any other business
or from acting as investment adviser or investment manager for
any other person or entity, whether or not having investment
policies or a portfolio similar to the fund. It is
specifically understood that officers, directors and employees
of the subadviser and its affiliates may engage in providing
portfolio management services and advice to other investment
advisory clients of the sub-adviser or of its affiliates.
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the fund, neither the subadviser nor any of its directors,
officers or employees will act as principal or agent or
receive any commission. The subadviser will not knowingly
recommend that the fund purchase, sell or retain securities of
any issuer in which the subadviser has a financial interest
without obtaining prior approval of the adviser prior to the
execution of any such transaction. The subadviser will provide
quarterly reports to a designated representative of the
adviser reporting any violation of the subadviser's code of
ethics.
8. NO PARTNERSHIP OR JOINT VENTURE. The trust, the fund, the
adviser and the sub-adviser are not partners of or joint
venturers with each other and nothing herein shall be
construed so as to make them such partners or joint venturers
or impose any liability as such on any of them.
<PAGE>
9. LIMITATION OF LIABILITY OF THE SUBADVISER. The subadviser will
not be liable for any error of judgment or mistake of law or
for any loss suffered by the trust, the fund or the adviser in
connection with the matters to which this agreement relates,
except a loss resulting from willful misfeasance, bad faith or
gross negligence on the sub-adviser's part in the performance
of its duties or from reckless disregard by it of its
obligations and duties under this agreement.
10. DURATION AND TERMINATION OF THIS AGREEMENT. This agreement
will remain in effect until July 31, 2000 and from year to
year thereafter, but only so long as such continuance is
specifically approved at least annually in accordance with the
requirements of the 1940 Act as now in effect or as amended,
subject, however, to such exemptions as may be granted by the
securities and exchange commission by any rule, regulation,
order or interpretive position. This agreement may, on 60 days
written notice, be terminated at any time without the payment
of any penalty by the fund by vote of a majority of the
outstanding voting securities of the fund or by the board of
trustees or by the adviser or by the subadviser. Termination
of this agreement with respect to the fund will not be deemed
to terminate or otherwise invalidate any provisions of any
contract between you and any other series of the trust. This
agreement will automatically terminate in the event of its
assignment or upon the termination of the adviser's investment
advisory agreement. In interpreting the provisions of this
Section 10, the definitions contained in Section 2(a) of the
1940 Act (including the definitions of "assignment,"
"interested person" and "voting security"), will apply.
11. AMENDMENT OF THIS AGREEMENT. No provision of this agreement
may be changed or waived orally, but only by an instrument in
writing signed by the party against which enforcement of the
change or waiver is sought. No amendment, transfer,
assignment, sale, hypothecation or pledge of this agreement
shall be effective until approved in accordance with the
requirements of the 1940 Act as now in effect or as amended,
subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission by any rule, regulation,
order or interpretive position.
12. MISCELLANEOUS.
(1) The captions in this agreement are included for
convenience of reference only and in no way define or
limit any of the provisions hereof or otherwise affect
their construction or
<PAGE>
effect. This agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument. The name Burnham Investors Trust is the
designation of the trustees under the declaration of trust,
dated August 20, 1998 and the declaration of trust has been
filed with the Secretary of State of the State of Delaware.
The obligations of the trust and the fund are not personally
binding upon, nor will resort be had to the private property
of, any of the trustees, shareholders, officers, employees or
agents of the trust or the fund, but only the fund's property
shall be bound. The fund will not be liable for the
obligations of any other series of the trust.
(2) Nothing herein contained will limit or restrict the subadviser
or any of its officers, affiliates or employees from buying,
selling or trading in any securities for its or their own
account or accounts. The trust and fund acknowledge that the
subadviser and its officers, affiliates and employees, and its
other clients may at any time have, acquire, increase,
decrease or dispose of positions in investments which are at
the same time being acquired or disposed of by the fund. The
subadviser will have no obligation to acquire for the fund, a
position in any investment which the subadviser, its officers,
affiliates or employees may acquire for its or their own
accounts or for the account of another client if, in the sole
discretion of the sub-adviser, it is not feasible or desirable
to acquire a position in such investment for the fund. Nothing
herein contained will prevent the subadviser from purchasing
or recommending the purchase of a particular security for on
or more funds or clients while other funds or clients may be
selling the same security.
(3) Any information supplied by the subadviser, which is not
otherwise in the public domain, in connection with the
performance of its duties hereunder is confidential and may be
used only by the fund and/or its agents, and only in
connection with the fund and its investments.
(4) GOVERNING LAW. This agreement shall be governed by the
substantive law of the State of New York and the applicable
provisions of the 1940 Act.
Yours very truly,
BURNHAM ASSET MANAGEMENT CORP.
By: /s/ Michael E. Barna
Its: EXECUTIVE VICE PRESIDENT
<PAGE>
The foregoing agreement is hereby agreed to as of the date thereof.
BURNHAM INVESTORS TRUST
on behalf of Burnham U.S. Treasury Money
Market Fund
By: /S/ MICHAEL E. BARNA
Its: EXECUTIVE VICE PRESIDENT
REICH & TANG ASSET MANAGEMENT, L.P.
By: /S/ RICHARD DESANCTIS
ITS: CHIEF FINANCIAL OFFICER
<PAGE>
SCHEDULE I
ANNUAL FEE RATE
FUND AS A PERCENTAGE OF
NAME ASSETS UNDER MANAGEMENT AVERAGE DAILY NET ASSETS
U.S. TREASURY
MONEY MARKET FUND LESS THAN $100 MILLION 0.15%
$100 MILLION BUT LESS THAN $150 MILLION 0.10%
$150 MILLION OR MORE 0.05%
The average net asset value for the month will be based on the net
asset value used in determining the price at which fund shares are sold,
repurchased or redeemed on each day of the month.
If this agreement becomes effective as to a fund subsequent to the
first day of a month, or terminates before the last day of a month, your
compensation for such fraction of the month will be determined by applying the
foregoing percentages to the average daily net asset value of the fund during
such fraction of a month and in the proportion that such fraction of a month
bears to the entire month.
(Exhibit (i)(2))
April 27,2000
Burnham Investors Trust
1325 Avenue of the Americas, 17th Floor
New York, New York 10019
Re: Burnham Investors Trust
-----------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel to Burnham Investors Trust, a
Delaware business trust (the "Trust"), in connection with certain matters
relating to the formation of the Trust and the issuance of Shares of beneficial
interest in the Trust. Capitalized terms used herein and not otherwise herein
defined are used as defined in the Agreement and Declaration of Trust of the
Trust dated August 20, 1998, as amended by an amendment to the Agreement and
Declaration of Trust of the Trust approved by the Board of Trustees on February
18, 1999 (the "Governing Instrument").
In rendering this opinion, we have examined copies of the following
documents, each in the form provided to us: the Certificate of Trust of the
Trust as filed in the Office of the Secretary of State of the State of Delaware
(the "Recording Office") on August 20, 1998 (the "Certificate"); the Governing
Instrument; the By-laws of the Trust, as amended by an Amendment to the By-laws
of Burnham Investors Trust approved by the Board of Trustees on August 27, 1998
(the "By-laws"); certain resolutions of the Trustees of the Trust (i) dated
August 27, 1998 relating to the organization of the Trust, (ii) dated February
18, 1999 relating to the amendment of the Governing Instrument, and (iii) dated
May 13, 1999 relating to the establishment of Burnham U.S. Treasury Money Market
Fund as a new series of the Trust (the "Money Market Fund") (the "Resolutions"
and together with the Governing Instrument and the Bylaws, the "Governing
Documents"); an Adoption of and Amendment to Notification of Registration filed
with the Securities and Exchange Commission on February 16, 1999 by which the
Trust adopted the
<PAGE>
Notification of Registration Filed Pursuant to Section 8(a) of the Investment
Company Act of 1940 on Form N-8A of The Burnham Fund, Inc., a Maryland
corporation (the "Fund"); Post-Effective Amendment No. 67 to the Registration
Statement under the Securities Act of 1933 on Form N-1A of the Fund, by which
the Trust adopted such Registration Statement filed with the Securities and
Exchange Commission on February 18, 1999; Post-Effective Amendment No. 70 to the
Registration Statement under the Securities Act of 1933 on Form N-1A of the
Trust to be filed with the Securities and Exchange Commission on or about the
date hereof (the "Post-Effective Amendment'); and a certification of good
standing of the Trust obtained as of a recent date from the Recording Office. In
such examinations, we have assumed the genuineness of all signatures, the
conformity to original documents of all documents submitted to us as copies or
drafts of documents to be executed, and the legal capacity of natural persons to
complete the execution of documents. We have further assumed for the purpose of
this opinion: (i) the due authorization, execution and delivery by, or on behalf
of, each of the parties thereto of the above-referenced instruments,
certificates and other documents, and of all documents contemplated by the
Governing Instrument, the By-laws and applicable resolutions of the Trustees to
be executed by investors desiring to become Shareholders; (ii) the payment of
consideration for Shares, and the application of such consideration, as provided
in the Governing Instrument, and compliance with the other terms, conditions and
restrictions set forth in the Governing Instrument and all applicable
resolutions of the Trustees of the Trust in connection with the issuance of
Shares (including, without limitation, the taking of all appropriate action by
the Trustees to designate Series and Classes of Shares and the rights and
preferences attributable thereto as contemplated by the Governing Instrument);
(iii) that appropriate notation of the names and addresses of, the number of
Shares held by, and the consideration paid by, Shareholders will be maintained
in the appropriate registers and other books and records of the Trust in
connection with the issuance, redemption or transfer of Shares; (iv) that no
event has occurred subsequent to the filing of the Certificate that would cause
a termination or reorganization of the Trust under Section 3 or Section 4 of
Article IX of the Governing Instrument; (v) that the activities of the Trust
have been and will be conducted in accordance with the terms of the Governing
Instrument and the Delaware Business Trust Act, 12 Del. C. Secs. 3801 et seq.
(the "Delaware Act"); and (vi) that each of the documents examined by us is in
full force and effect and has not been modified, supplemented or otherwise
amended, except as herein referenced. No opinion is expressed herein with
respect to the requirements of, or compliance with, federal or state securities
or "blue sky" laws. Further, we express no opinion on the sufficiency or
accuracy of any registration or offering documentation relating to the Trust or
the Shares. As to any facts material to our opinion, other than those assumed,
we have relied without independent investigation on the above-referenced
documents and on the accuracy, as of the date hereof, of the matters therein
contained.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that:
1. The Trust is a duly organized and validly existing business trust in
good standing under the laws of the State of Delaware.
<PAGE>
2. The Shares, when issued to Shareholders in accordance with the terms,
conditions, requirements and procedures set forth in the Governing Documents,
will constitute legally issued, fully paid and non-assessable Shares of
beneficial interest in the Trust.
3. Under the Delaware Act and the terms of the Governing Instrument,
each Shareholder of the Trust, in such capacity, will be entitled to the same
limitation of personal liability as that extended to stockholders of private
corporations for profit organized under the general corporation law of the State
of Delaware; provided, however, that we express no opinion with respect to the
liability of any Shareholder who is, was or may become a named Trustee of the
Trust. Neither the existence nor exercise of the voting rights granted to
Shareholders under the Governing Instrument will, of itself, cause a Shareholder
to be deemed a trustee of the Trust under the Delaware Act. Notwithstanding the
foregoing or the opinion expressed in paragraph 2 above, we note that, pursuant
to Section 2 of Article VIII of the Governing Instrument, the Trustees have the
power to cause Shareholders, or Shareholders of a particular Series, to pay
certain custodian, transfer, servicing or similar agent charges by setting off
the same against declared but unpaid dividends or by reducing Share ownership
(or by both means).
We understand that you are currently in the process of registering or
qualifying Shares in the various states, and we hereby consent to the filing of
a copy of this opinion with the Securities and Exchange Commission as part of
the Post-Effective Amendment and with the securities administrators of such
states. In giving this consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as provided in this
paragraph, the opinion set forth above is expressed solely for the benefit of
the addressee hereof and may not be relied upon by, or filed with, any other
person or entity for any purpose without our prior written consent. This opinion
speaks only as of the date hereof and is based on our understandings and
assumptions as to present facts and our review of the above-referenced documents
and certificates and the application of Delaware law as the same exists on the
date hereof, and we undertake no obligation to update or supplement this opinion
after the date hereof for the benefit of any person or entity with respect to
any facts or circumstances that may hereafter come to our attention or any
changes in facts or law that may hereafter occur or take effect.
Sincerely,
MORRIS, NICHOLS, ARSHT & TUNNELL
/s/ MORRIS, NICHOLS, ARSHT & TUNNELL
April [25], 2000
Burnham Investors Trust
1325 Avenue of the Americas, 26th Floor
New York, New York 10019
Re: Burnham Investors Trust
File Nos. 2-17226 and 811-994; Post-Effective Amendment No. 70
Counsel's Representation Pursuant to Rule 485(b)(4)
Gentlemen:
As counsel to Burnham Investors Trust (the "Trust"), we have reviewed
post-effective amendment no. 70 to the Trust's Registration Statement, prepared
by the Trust for electronic filing with the Securities and Exchange Commission.
We hereby represent, pursuant to Rule 485(b)(4) under the Securities Act of
1933, as amended (the "1933 Act"), that the post-effective amendment does not in
our view contain disclosure that would make it ineligible to become effective
pursuant to Rule 485(b) under the 1933 Act.
We consent to the filing of this letter by the Trust with the Securities
and Exchange Commission together with post-effective amendment no. 70.
Sincerely yours,
/s/ Hale and Dorr LLP
Hale and Dorr LLP
cc: Mr. Michael Barna
Pamela J. Wilson, Esq.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N1-A of our report dated February 17, 2000, relating to the
financial statements and financial highlights which appears in the December 31,
1999 Annual Report to Shareholders of Burnham Investors Trust, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and "Independent
Accountants" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
New York, New York
April 27, 2000
(Exhibit (p)(1))
BURNHAM INVESTORS TRUST
CODE OF ETHICS AND PROCEDURES
PURSUANT TO RULE 17J-1 UNDER THE
INVESTMENT COMPANY ACT OF 1940
This Code of Ethics has been adopted on November __, 1999 by Burnham
Investors Trust (the "Trust") in compliance with Rule 17j-1 under the Investment
Company Act of 1940, as amended, (the "Act"). This Code of Ethics supersedes the
code of ethics previously adopted by the Trust.
The Board of Trustees understands that Burnham Asset Management
Corporation ("Burnham Asset"), the investment adviser of the Trust, and Burnham
Securities Inc. ("Burnham Securities"), the principal underwriter of the Trust,
have each adopted a code of ethics containing similar provisions appropriately
adopted for Burnham Asset and Burnham Securities.
Rule 17j-1(a) makes it unlawful for any affiliated person of the Trust
in connection with the purchase or sale, directly or indirectly, by such person
of a security held or to be acquired by the Trust:
1. To employ any device, scheme or artifice to defraud the Trust;
2. To make to the Trust any untrue statement of a material fact
or omit to state to the Trust a material fact necessary in
order to make the statements made, in light of the
circumstances under which they are made, not misleading;
3. To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the Trust;
or
4. To engage in any manipulative practice with respect to the
Trust.
Rule 17j-1(b) requires the Trust to adopt a written code of ethics
containing provisions reasonably necessary to prevent its access persons from
engaging in any act, practice or course of business prohibited by Rule 17j-1(a)
and to use reasonable diligence and institute procedures reasonably necessary to
prevent violations of such code.
Accordingly, the Code of Ethics of the Trust is set forth below:
<PAGE>
1. DEFINITIONS.
(a) "Access person" means any trustee, officer or advisory
person of the Trust or the Trust's investment adviser.
(b) "Advisory person" means (i) any employee of the Trust or
investment adviser (or of any company in a control relationship to the Trust or
investment adviser) who, in connection with his or her regular functions or
duties, makes, participates in or obtains information regarding the purchase or
sale of a security held or to be acquired by the Trust, or whose functions
relate to the making of any recommendations with respect to such purchases or
sales; and (ii) any natural person in a control relationship to the Trust or
investment adviser who obtains information concerning recommendations made to
the Trust with regard to the purchase or sale of a security held or to be
acquired.
(c) "Business Day" shall refer to any day in which the New
York Stock Exchange is open for business.
(d) "A security held or to be acquired" shall mean, any
security which, within the most recent 15 days: (i) is or has been held by the
Trust or (ii) is being or has been considered by the Trust or its investment
adviser for purchase by the Trust; and any option to purchase or sell and any
security convertible into or exchangeable for, a security.
(e) "Beneficial ownership" shall be interpreted in the same
manner as it would be in determining whether a person is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, except that the determination of direct or
indirect beneficial ownership shall apply to all securities which an access
person has or acquires. For a further explanation of beneficial ownership, see
Appendix A.
(f) "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the Act.
(g) "Disinterested trustee" means a trustee of the Trust who
is not an "interested person" of the Trust within the meaning of Section
2(a)(19) of the Act.
<PAGE>
(h) "Limited offering" means an offering that is exempt from
registration under the Securities Act of 1933.
(i) "Purchase or sale of a security" includes, INTER ALIA,
transactions in options to purchase or sell a security.
(j) "Security" shall have the meaning set forth in Section
2(a)(36) of the Act, but shall not include shares of registered open-end
investment companies, securities issued by the government of the United States,
short-term debt securities which are "government securities" within the meaning
of Section 2(a)(16) of the Act, bankers' acceptances, bank certificates of
deposit, commercial paper, repurchase agreements and other money market
instruments.
(k) A security is "being considered for purchase or sale" when
a recommendation to purchase or sell a security has been made and communicated
and, with respect to the person making the recommendation, when such person
seriously considers making a recommendation.
(l) An "unlawful action" is any of the following activities by
any affiliated person of or principal underwriter for the Trust, or any
affiliated person of an investment adviser of or principal underwriter for the
Trust, in connection with the purchase or sale, directly or indirectly, by the
person of a security held or to be acquired by the Trust:
(i) to employ any device, scheme or artifice to
defraud the Trust;
(ii) to make any untrue statement of a material
fact to the Trust or omit to state a material fact necessary in order to make
the statements made to the Trust, in light of the circumstances under which they
are made, not misleading;
(iii) to engage in any act, practice or course of
business that operates or would operate as a fraud or deceit on the Trust; or
(iv) to engage in any manipulative practice with
respect to the Trust.
<PAGE>
2. PROHIBITED PURCHASES AND SALES.
No access person shall purchase or sell, directly or indirectly, any
security in which he has, or by reason of such transaction acquires, any direct
or indirect beneficial ownership and which to his actual knowledge at the time
of such purchase or sale:
(a) is being considered for purchase or sale by the Trust; or
(b) is being purchased or sold by the Trust.
2a. INITIAL PUBLIC OFFERINGS AND LIMITED OFFERINGS
Each access person and advisory person must obtain approval from the
Trust or the Trust's investment adviser before directly or indirectly acquiring
beneficial ownership in any securities in an initial public offering or in a
limited offering.
2b. BLACKOUT PERIODS
Access persons and all advisory persons are prohibited from buying and
selling a security held by or to be acquired for investment accounts in which
they maintain a beneficial interest for one (1) Business Day prior to and one
(1) Business Day following trade activity of the Trust in such a security for
the period of time in which it is restricted. The primary portfolio manager of
each Fund is prohibited from buying or selling a security for his/her personal
account or any other account in which there is a beneficial interest, for three
(3) Business Days before the Trust trades in that security. Access persons and
advisory persons who purchase a security within two (2) to three (3) Business
Days prior to the purchase of the same security by the Trust, will be required
to hold the purchased security for a minimum period of three calendar months.
Access persons and advisory persons who sell a security within two (2) to three
(3) Business Days prior to a sale of the same security by the Trust will be
required to disgorge the proceeds received to the extent that the price received
by the employee exceed that received by the Trust at time of sale.
<PAGE>
2c. DISINTERESTED TRUSTEES
(a) No disinterested trustee shall engage in any buy or sell
transaction in a security of any issuer identified at a formal meeting of the
Board of Trustees of the Trust within two (2) Business Days after the
adjournment of such meeting.
(b) If a disinterested trustee gains knowledge of a Trust transaction,
that trustee shall not knowingly engage in a transaction in that company's
securities for a period of two (2) Business Days after the Trust's transaction.
(c) If a recommendation for a transaction is made by a disinterested
trustee to the Trust at any time, there shall be no transaction by that trustee
within two (2) Business Days before and after making such recommendation.
(d) Each disinterested trustee shall annually certify his or her
compliance with the Code of Ethics.
3. EXEMPTED TRANSACTIONS.
The prohibitions of Section 2 of this Code shall not apply to:
(a) purchases or sales effected in any account over which the access
person has no direct or indirect influence or control;
(b) purchases or sales of securities which are not eligible for
purchase or sale by the Trust; (c) purchases or sales which are non-volitional
on the part of either the access person or the Trust;
(d) purchases which are part of an automatic dividend reinvestment
plan;
(e) purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired; and
(f) purchases or sales which receive the prior approval of the
compliance officer of Burnham Asset (the "Compliance Officer") or a member of
the Trust's Investment Committee, because they are only remotely potentially
harmful to the Trust, because they would be very
<PAGE>
unlikely to affect a highly institutional market, or because they
clearly are not related economically to the securities to be purchased,
sold or held by the Trust.
4. REPORTING.
(a) INITIAL HOLDINGS REPORT. No later than 10 days after a person
becomes an access person, that person shall report to the Compliance
Officer the following information; provided, however, that an access
person shall not be required to make a report with respect to
transactions effected for any account over which such person does not
have any direct or indirect influence or control:
(i) the title, number of shares and principal amount of each
security in which the access person had any direct or indirect
beneficial ownership when the person became an access person;
(ii) the name of any broker, dealer or bank with the access
person maintained an account in which any securities were held for the
direct or indirect benefit of the access person as of the date the
person became an access person; and
(iii) the date that the report is submitted by the access
person.
(b) QUARTERLY TRANSACTION REPORTS. No later than 10 days after
the end of a calendar quarter, each access person, except as described
in Section 4(d) below, shall report to the Compliance Officer the
following information with respect to transactions in any security in
which such access person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership in the security;
provided, however, that an access person shall not be required to make
a report with respect to transactions effected for any account over
which such person does not have any direct or indirect influence or
control:
(i) the date of the transaction, the title, the interest rate
and maturity date (if applicable), the number of shares, and the principal
amount of each security involved;
(ii) the nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
(iii) the price at which the transaction was effected;
<PAGE>
(iv) the name of the broker, dealer or bank with or through
whom the transaction was effected; and
(v) the date the report was submitted.
An access person whose transactions in any security would be recorded by the
Trust's investment adviser or principal underwriter pursuant to Rule
204-2(a)(12) under the Investment Advisers Act of 1940, as amended, need not
provide quarterly transaction reports to the Compliance Officer.
(c) ANNUAL HOLDINGS REPORTS. Annually, each access person must submit
the following information (which information must be current as of a date no
more than 30 days before the report is submitted):
(i) the title, number of shares and principal amount of each
security in which the access person had any direct or indirect beneficial
ownership;
(ii) the name of any broker, dealer or bank with whom the
access person maintains an account in which any securities are held for the
direct or indirect benefit of the access person; and
(iii) the date that the report is submitted.
(d) A disinterested trustee of the Trust need not make:
(i) an initial holdings report under Section 4(a);
(ii) an annual holdings report under Section 4(c); or
(iii) a quarterly transaction report under Section 4(b) unless
the trustee at the time of that transaction knew or, in the ordinary course of
fulfilling his official duties as a trustee of the Trust, should have known
that, during the 15-day period immediately preceding or immediately following
the date of the transaction by the trustee, such security was purchased or sold
by the Trust or was being considered by the Trust or its investment adviser for
purchase or sale by the Trust.
<PAGE>
(e) Any report filed under this Section 4 may contain a statement that
the report shall not be construed as an admission by the person making such
report that he has any direct or indirect beneficial ownership in the security
to which the report relates.
(f) With respect to those transactions executed through a broker, an
access person may fulfill his reporting requirement by directing the broker(s)
to transmit to the Compliance Officer, a duplicate of confirmations of such
transactions. The duplicate confirmations should be addressed "Personal and
Confidential."
5. DUTIES OF THE COMPLIANCE OFFICER.
(a) The Compliance Officer shall identify each access person and notify
each person who is an access person that such person is subject to this Code of
Ethics, including the reporting requirements, and shall deliver a copy of this
Code of Ethics to each such person.
(b) The Compliance Officer shall review the reports submitted by each
access person to determine whether there may have been any transactions
proscribed by this Code of Ethics. In such event, the Compliance Officer shall
submit such report to the Board of Trustees at its next meeting following
receipt of the report by the Compliance Officer. The Compliance Officer shall
have discretion not to submit a report to the Board of Trustees with respect to
a transaction if he finds that by reason of the size of the transaction, the
circumstances thereof or otherwise, no fraud or deceit or manipulative practice
could reasonably be found to have been practiced by the access person in
connection with his or her holding or acquisition of the security or that no
other material violation of this Code of Ethics has occurred. A written
memorandum of any such finding shall be filed with any such reports submitted
pursuant to this Code of Ethics.
(c) The Compliance Officer shall:
(i) preserve in an easily accessible place a copy of this Code
of Ethics and any other code of ethics which at any time within the past five
years has been in effect;
(ii) maintain in an easily accessible place a list of all
access persons who are, or within the past five years have been, required to
make reports;
<PAGE>
(iii) preserve for a period of not less than five years from
the end of the fiscal year in which it was made, the first two years in an
easily accessible place, a copy of each report made by an access person and a
copy of any written memoranda prepared by the Compliance Officer in connection
therewith;
(iv) preserve in an easily accessible place for a period of
not less than five years following the end of the fiscal year in which the
violation occurs a record of any violation of this Code of Ethics and of any
action taken as a result of such violation;
(v) preserve for a period of not less than five years from the
end of the fiscal year in which it was made, the first two years in an easily
accessible place, a copy of (i) each report made to the Board of Trustees,
including any written report describing any material violations of the Code or
procedures or sanctions imposed in response to material violations and (ii) any
documents certifying that the Trust, the investment adviser or principal
underwriter, as applicable each had adopted procedures reasonably necessary to
prevent access persons from violating the Code; and
(vi) maintain a record of any decision, and the reasons
supporting the decision, to approve the acquisition by an access person or
advisory person of securities under Section 2a, for at least five years after
the end of the fiscal year in which the approval is granted.
6. CONFIDENTIAL STATUS OF THE TRUST'S PORTFOLIO.
(a) The current portfolio positions of the Trust and current
portfolio transactions, programs and studies must be kept confidential.
(b) If information regarding the Trust's portfolio should
become known to any access person, whether in the line of duty or otherwise, he
or she should not reveal it to anyone unless it is properly part of his work to
do so.
(c) No access person shall purchase or sell a security on
behalf of the Trust or himself while in possession of material non-public
information, nor shall any access person communicate material non-public
information to another person.
<PAGE>
(d) When providing information or responding to inquiries
regarding the Trust's activities, access persons shall maintain the
confidentiality of the foregoing and any other confidential information.
7. GIFTS.
Investment personnel are prohibited from receiving any gift or other
items of more than a DE MINIMIS value from any person or entity that does
business with or on behalf of the Trust. Such items should not include the
following: (a) unsolicited entertainment, (b) occasional business meals or
promotional business items consistent with customary business practice.
8. SANCTIONS.
Upon being informed of a violation of this Code of Ethics, the Board of
Trustees may impose such sanctions as it deems appropriate, including, INTER
ALIA, a letter of censure or suspension, termination of the employment of the
violator, resignation of a disinterested trustee or a request for disgorgement
of any profits received from a securities transaction effected in violation of
this Code of Ethics.
9. SERVICE AS A DIRECTOR.
Access persons are prohibited from serving on the boards of directors
of publicly traded companies absent prior authorization based upon a
determination that the board service would be consistent with the interests of
the Trust and its shareholders.
10. ANNUAL REVIEW OF CODE OF ETHICS.
(a) The Board of Trustees of the Trust, including a majority of
Trustees who are not interested persons, must approve the Code of Ethics of the
Trust, the code of ethics of each investment adviser and principal underwriter
of the Trust and any material changes to these codes. The Board must base its
approval of a code and any material changes to the Code on the determination
that the Code contains provisions reasonably necessary to prevent access persons
from engaging in any Unlawful Actions. Before approving a code of the Trust,
investment adviser or principal underwriter or any amendment to any of the
codes, the Board of Trustees must receive a certification from the Trust,
investment adviser or principal underwriter that it has
<PAGE>
adopted procedures reasonably necessary to prevent access persons from violating
the investment adviser's or principal underwriter's code of ethics.
The Trust's Board must approve the code of an investment adviser or
principal underwriter before initially retaining the services of the investment
adviser or principal underwriter. The Trust's Board must approve a material
change to a code no later than six months after adoption of the material change.
(b) Access persons are required to certify annually that they have
complied with the requirements of the Code of Ethics and that they have
disclosed or reported all personal securities transactions required to be
disclosed or reported pursuant to the requirements of the code.
<PAGE>
APPENDIX A
"BENEFICIAL OWNERSHIP"
The only guidance as to what constitutes beneficial ownership is
provided by rules and releases of the Securities and Exchange Commission ("SEC")
and court cases, which generally speaking may be summarized as follows:
(i) SECURITIES OWNED OF RECORD OR HELD IN YOUR NAME.
Securities owned of record or held in your name are generally
considered to be beneficially owned by you.
(ii) SECURITIES HELD IN THE NAME OF ANY OTHER PERSON.
Securities held in the name of any other person are deemed to be
Securities held in the name of any other person are deemed to be beneficially
owned by you if by reason of any contract, understanding, relationship,
agreement or other arrangement, you obtain therefrom benefits substantially
equivalent to those of ownership, including the power to vote, or to direct the
disposition of, such securities. Beneficial ownership includes securities held
by others for your benefit (regardless of record ownership), e.g., securities
held for you or members of your immediate family, defined below, by agents,
custodians, brokers, trustees, executors or other administrators; securities
owned by you, but which have not been transferred into your name on the books of
the company; securities which you have pledged; securities owned by a
partnership of which you are a member and securities owned by a corporation that
should be regarded as your personal holding corporation. As a natural person,
beneficial ownership is deemed to include securities held in the name or for the
benefit of your immediate family, which includes your spouse, your minor
children and step-children and your relatives or relatives of your spouse who
are sharing your home or who are directors or officers of the company or its
subsidiary, unless because of special and countervailing circumstances, you do
not enjoy the benefits substantially equivalent to those of ownership. Benefits
substantially equivalent to ownership include, for example, application of the
income derived from such securities to maintain a common home, to meet expenses
which such person otherwise would meet from other sources,
<PAGE>
and the ability to exercise a controlling influence over the purchase, sale or
voting of such securities. You are also deemed the beneficial owner of
securities held in the name of some other person, even though you do not obtain
benefits of ownership, if you can vest or revest title in yourself at once, or
at some future time.
(iii) RIGHTS TO ACQUIRE SECURITIES WITHIN SIXTY DAYS.
In addition, the SEC has promulgated certain rules which provide that a person
shall be deemed the beneficial owner of a security if he has the right to
acquire beneficial ownership of such security at any time (within 60 days)
including but not limited to any rights to acquire: (i) through the exercise of
any option, warrant or right; (ii) through the conversion of a security; or
(iii) pursuant to the power to revoke a trust, discretionary account, or similar
arrangement.
(iv) SECURITIES HELD IN TRUST. With respect to ownership of securities
held in trust, beneficial ownership includes the ownership of securities as a
trustee in instances where either you as trustee or a member of your "immediate
family" have a vested interest in the income or corpus of the trust, the
ownership by you of a vested beneficial interest in the trust and the ownership
of securities as a settlor of a trust in which you as the settlor have the power
to revoke the trust without obtaining the consent of the beneficiaries. Certain
exemptions to these trust beneficial ownership rules exist, including an
exemption for instances where beneficial ownership is imposed solely by reason
of your being settlor or beneficiary of the securities held in trust and the
ownership, acquisition and disposition of such securities by the trust is made
without your prior approval as settlor or beneficiary. "Immediate family" of you
as trustee means your son or daughter (including your legally adopted child) or
any descendants of either, your step-son or step-daughter, your father or mother
or any ancestor of either, your step-father or step-mother and your spouse.
(v) SECURITIES HELD INDIRECTLY. The SEC has promulgated rules with
respect to indirect beneficial ownership. To the extent that stockholders of a
company use it as a personal trading or investment medium and the company has no
other substantial business, stockholders are regarded as beneficial owners, to
the extent of their respective interests, of the stock thus
<PAGE>
invested or traded in. A general partner in a partnership is considered to have
indirect beneficial ownership in the interest in the partnership. Indirect
beneficial ownership is not, however, considered to exist solely by reason of an
indirect interest in portfolio securities held by any holding company registered
under the Public Utility Holding Company Act of 1935, any investment company
registered under the Investment Company Act of 1940, a pension or retirement
plan holding securities of an issuer whose employees generally are beneficiaries
of the plan and a business trust with over 25 beneficiaries.
(vi) OTHER CONSIDERATIONS. The final determination of beneficial
ownership is a question to be determined in light of the facts of a particular
case. Thus, while you may include security holdings of other members of your
family, you may nonetheless disclaim beneficial ownership of such securities.
Any questions regarding determinations of beneficial ownership for purposes of
this Code and Rule 17j-1 should be submitted to the Compliance Officer.
<PAGE>
FORM OF REPORT
BURNHAM INVESTORS TRUST
SECURITIES TRANSACTIONS FOR
THE CALENDAR QUARTER ENDED
(mo./day/year)
During the calendar quarter referred to above, the following
transactions were effected in securities of which I had, or by reason of such
transaction acquired, direct or indirect beneficial ownership, and which are
required to be reported pursuant to the Trust's Code of Ethics.
Broker/
Dealer
Nature of or Bank
No. of Transaction Through
Date of Shares of (Purchase, Whom
Security Transaction Principal Amount Sale, Other) Price Effected
- --------------------------------------------------------------------------------
This report (i) excludes transactions with respect to which I had no
direct or indirect influence of control, (ii) other transactions not required to
be reported, and (iii) is not an admission that I have or had any direct
beneficial ownership in the securities listed above.
Date: Signature:
------------------------------ ---------------------------------
(Exhibit (p)(2))
BURNHAM ASSET MANAGEMENT CORPORATION
CODE of ETHICS
I. INTRODUCTION
A primary duty of all directors, officers and employees of Burnham
Asset Management Corporation ("The Adviser") and its affiliated companies, when
dealing with investment advisory clients, is to conduct themselves in
conformance with the highest ethical standards. Thus, no director, officer or
employee of the Adviser shall engage in any activity that could result in an
actual, potential, or perceived conflict of interest and must avoid any action
which my be perceived as a breach of trust.
This Code of Ethics ("Code") and the accompanying Policy and Procedures
Designed to Detect and Prevent Insider Trading sets forth the policies
concerning the purchase or sale of securities by directors, officers or
employees or their family members. It further sets forth the procedures to be
us" to report the purchase or sale of any securities by such person. This Code
is designed to avoid any act, practice, or course of business prohibited by
Section 17(j) of the. Investment Company Act of 1940, as amended ("Investment
Company Act") and Rule 17j-l promulgated thereunder, to ensure compliance with
the requirements of Sections 204A and 204 of the investment Advisers Act of 1940
and Rule 204-2(a)(12) thereunder and to prevent the misuse of material
non-public information.
II. Definitions
A. "The Adviser" means Burnham Asset Management Corporation.
B. "Security" shall mean, in addition to any stock or bond, any warrant
or option to buy or sell any security and any warrant for, option in, or
security immediately convertible to that security. The term security does not
include securities issued by the U.S. Government, state or municipal governments
<PAGE>
bankers acceptances, bank certificates of deposit, commercial paper, and capital
shares of registered open-end investment companies.
C. "Advisory Client" means any individual, group of individuals,
partnership, trust or company, including a registered investment company for
whom the Adviser acts as investment adviser.
D. "Advisory Person" means any director, officer or employee of the
Adviser or any company in a control relationship to the Adviser, who, in
connection with his/her regular functions or duties, makes, any recommendation
for the purchase or sale of a security, or participates in the determination of
which recommendation shall based*, or obtains. Any information concerning which
securities is being recommended to be purchased or sold on behalf of Advisory
Client.
E. "Control" shall have the same meaning as that set forth in section
2(a)(9) of the Investment Company Act.
F. A security is "being considered for purchase or sale" When a
recommendation to purchase or sell a security has been made and communicated
and, with respect to the person making the recommendation, when such person
seriously considers making such a recommendation.
G. "Affiliate Account" means the account of any family member an
defined herein; the account for which any Advisory Person is a custodian or
trustee the account of any partnership joint venture, trust or other entity in
which an Advisory Person or his/her family member has a beneficial interest the
account at a director or officer of a mutual fund Advisory Client.
H. "Family Member" means the spouse, minor child, parent or sibling of
an Advisory Person, and any adult related blood or marriage that resides in the
same household or any minor child or other relative dependent for financial
support upon a director, officer or employee.
I. "Beneficial Interest" means an interest whereby a parson can,
directly or indirectly, control the disposition at 4L security or derive a
monetary or other benefit from the purchase sale or ownership of a security.
III. PROHIBITIONS
1. No Advisory Person my purchase or sell, directly or indirectly, for
his/her personal account or an Affiliate Account, a security in which he/she, by
reason of such transaction acquires any beneficial interest which he/she knew,
or in the exercise of reasonable prudence, should have known at the time of the
purchase or sale
<PAGE>
a. is being considered or is likely to be considered in the near
future for the purchase or sale for an Advisory Client;
b. is being purchased or sold for Advisory Clients.
2. No Advisory Person, except in the coarse of his/her duties, reveal to
any other person any information regarding securities transactions being
considered, recommended or executed on behalf of Advisory Clients.
3. No Advisory Person shall purchase or sell securities while in
possession of material non-public information nor shall arty Advisory Person or
employee communicate, material non-public information to another person.
4. No Advisory Person may have a direct or indirect beneficial interest in
a brokerage account or similar account in which securities or commodities may be
traded with any financial institution other than Burnham Securities Inc.
Exceptions to this prohibition say be granted by the Compliance Supervisor.
Should an exception be granted, the Advisory Person will be required to assure
that duplicate copies of all confirmations and monthly brokerage statements are
sent to the Compliance Supervisor.
IV. EXEMPTED TRANSACTIONS
The Prohibitions of Section III of this Code shall not apply to the
following transactions:
a. Purchases or sales effected in any account over which the
Advisory Person has no direct or indirect influence or
control.
b. Purchases or sales of securities which are not eligible for
purchase or sale by Advisory Clients.
c. Purchases or sales which are non-volitional on the part of the
Advisory Person.
d. Purchases or sales of securities which are part of an
automatic dividend reinvestment plan.
e. Purchases of securities effected upon the exercise of rights
issued by an issuer pro rata to all holders of a class of its
securities, to the extent such rights were acquired from such
issuer, and sales of such rights so acquired.
<PAGE>
f. Purchases or sale which receive the prior approval of the
Compliance Officer because they are not potentially harmful to
any Advisory Client's interest since they would be unlikely to
affect a highly institutional market or they clearly are not
related economically to the securities or futures contracts to
be purchased, sold or hold by an Advisory Client.
V. PROCEDURES
1. All Advisory Persons will receive and acknowledge receipt of this
Code.
2. All Advisory Persons shall, no later than 10 days after the end of
each calendar quarter, complete a Securities Transaction Report and
submit this to the compliance supervisor. This report must be
completed whether or not any securities transactions occurred. A
copy of this report is attached as Exhibit 1.
VI. DUTIES OF THE COMPLIANCE SUPERVISOR
The administration of the duties and obligations imposed by this code
shall be the responsibility of the compliance Supervisor. The duties include:
1. Maintenance of a current list of all Advisory Persons.
2. Review of Report of Securities Transactions by Advisory Persons, and
any other records deemed necessary with a view toward assurance of compliance
with this Code.'
3. Furnishing to all advisory Persons a copy of this Code and issuing,
either personally or with the assistance of counsel, interpretations of this
Code.
4. Maintain, or cause to be maintained, in an easily accessible place,
for a period of not less than five (5) years: a copy or this Code; (ii) a record
of any violation of this Code and any action taken as a result of such violation
(iii) a list of all persons who, within the last five (5) years have been
required to make reports pursuant to this Code; (iv) a copy of all reports filed
pursuant to this Code.
All Advisory Persons are charged with reporting any violations of this Code to
the Compliance Supervisor.
MENDON CAPITAL ADVISORS CORP.
CODE OF ETHICS
I. INTRODUCTION
A primary duty of all directors, officers and employees of Mendon
Capital Advisors Corp. ("The Adviser") and its affiliated companies, when
dealing with investment advisory clients, is to conduct themselves in
conformance with the highest ethical standards. Thus, no director, officer or
employee of the Adviser shall engage in any activity that could result in an
actual, potential, or perceived conflict of interest and must avoid any action
which my be perceived as a breach of trust.
This Code of Ethics ("Code") and the accompanying Policy and Procedures
Designed to Detect and Prevent Insider Trading sets forth the policies
concerning the purchase or sale of securities by directors, officers or
employees or their family members. It further sets forth the procedures to be
us" to report the purchase or sale of any securities by such person. This Code
is designed to avoid any act, practice, or course of business prohibited by
Section 17(j) of the. Investment Company Act of 1940, as amended ("Investment
Company Act") and Rule 17j-l promulgated thereunder, to ensure compliance with
the requirements of Sections 204A and 204 of the investment Advisers Act of 1940
and Rule 204-2(a)(12) thereunder and to prevent the misuse of material
non-public information.
II. DEFINITIONS
A. "The Adviser" means Mendon Capital Advisors Corp.
B. "Security" shall mean, in addition to any stock or bond, any warrant
or option to buy or sell any security and any warrant for, option in, or
security immediately convertible to that security. The term security does not
include securities issued by the U.S. Government, state or municipal governments
bankers acceptances, bank certificates of deposit, commercial paper, and capital
shares of registered open-end investment companies.
<PAGE>
C. "Advisory Client" means any individual, group of individuals,
partnership, trust or company, including a registered investment company for
whom the Adviser acts as investment adviser.
D. "Advisory Person" means any director, officer or employee of the
Adviser or any company in a control relationship to the Adviser, who, in
connection with his/her regular functions or duties, makes, any recommendation
for the purchase or sale of a security, or participates in the determination of
which recommendation shall based*, or obtains. Any information concerning which
securities is being recommended to be purchased or sold on behalf of Advisory
Client.
E. "Control" shall have the same meaning as that set forth in section
2(a)(9) of the Investment Company Act.
F. A security is "being considered for purchase or sale" When a
recommendation to purchase or sell a security has been made and communicated
and, with respect to the person making the recommendation, when such person
seriously considers making such a recommendation.
G. "Affiliate Account" means the account of any family member an
defined herein; the account for which any Advisory Person is a custodian or
trustee the account of any partnership joint venture, trust or other entity in
which an Advisory Person or his/her family member has a beneficial interest the
account at a director or officer of a mutual fund Advisory Client~
H. "Family Member" means the spouse, minor child, parent or sibling of
an Advisory Person, and any adult related blood or marriage that resides in the
same household or any minor child or other relative dependent for financial
support upon a director, officer or employee.
I. "Beneficial Interest" means an interest whereby a parson can,
directly or indirectly, control the disposition at 4L security or derive a
monetary or other benefit from the purchase sale or ownership of a security.
III. PROHIBITIONS
1. No Advisory Person my purchase or sell, directly or indirectly, for
his/her personal account or an Affiliate Account, a security in which he/she, by
reason of such transaction acquires any beneficial interest which he/she knew,
or in the exercise of reasonable prudence, should have known at the time of the
purchase or sale
<PAGE>
a. is being considered or is likely to be considered in the near future
for the purchase or sale for an Advisory Client;
b. is being purchased or sold for Advisory Clients.
2. No Advisory Person, except in the coarse of his/her duties, reveal
to any other person any information regarding securities transactions being
considered, recommended or executed on behalf of Advisory Clients.
3. No Advisory Person shall purchase or sell securities while in
possession of material non-public information nor shall arty Advisory Person or
employee communicate, material non-public information to another person.
4. No Advisory Person may have a direct or indirect beneficial interest
in a brokerage account or similar account in which securities or commodities may
be traded with any financial institution other than Burnham Securities Inc.
Exceptions to this prohibition say be granted by the Compliance Supervisor.
Should an exception be granted, the Advisory Person will be required to assure
that duplicate copies of all confirmations and monthly brokerage statements are
sent to the Compliance Supervisor.
IV. EXEMPTED TRANSACTIONS
The Prohibitions of Section III of this Code shall not apply
to the following transactions:
a. Purchases or sales effected in any account over
which the Advisory Person has no direct or indirect
influence or control.
b. Purchases or sales of securities which are not
eligible for purchase or sale by Advisory Clients.
c. Purchases or sales which are non-volitional on the
part of the Advisory Person.
d. Purchases or sales of securities which are part of an
automatic dividend reinvestment plan.
e. Purchases of securities effected upon the exercise of
rights issued by an issuer pro rata to all holders of
a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such
rights so acquired.
f. Purchases or sale which receive the prior approval of
the Compliance Officer because they are not
potentially harmful to
<PAGE>
any Advisory Client's interest since they would be
unlikely to affect a highly institutional market or
they clearly are not related economically to the
securities or futures contracts to be purchased, sold
or hold by an Advisory Client.
V. Procedures
1. All Advisory Persons will receive and acknowledge receipt of this
Code.
2. All Advisory Persons shall, no later than 10 days after the
end of each calendar quarter, complete a Securities
Transaction Report and submit this to the compliance
supervisor. This report must be completed whether or not any
securities transactions occurred. A copy of this report is
attached am Exhibit 1.
VI. Duties of the Compliance Supervisor
The administration of the duties and obligations imposed by this code
shall be the responsibility of the compliance Supervisor. The duties include:
1. Maintenance of a current list of all Advisory Persons.
2. Review of Report of Securities Transactions by Advisory Persons, and
any other records deemed necessary with a view toward assurance of compliance
with this Code.'
3. Furnishing to all advisory Persons a copy of this Code and issuing,
either personally or with the assistance of counsel, interpretations of this
Code.
4. Maintain, or cause to be maintained, in an easily accessible place,
for a period of not less than five (5) years: a copy or this Code; (ii) a record
of any violation of this Code and any action taken as a result of such violation
(iii) a list of all persons who, within the last five (5) years have been
required to make reports pursuant to this Code; (iv) a copy of all reports filed
pursuant to this Code.
All Advisory Persons are charged with reporting any violations of this Code to
the Compliance Supervisor.
