<PAGE>
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October 10, 1995
Dear Shareholder:
We are pleased to present to you the Third Quarter Report of The Burnham Fund
Inc. for 1995.
On September 30, 1995, the Fund's net asset value per share for Class A, B
and C shares was $22.33, $22.54 and $22.32, respectively (with dividends
reinvested but without the imposition of the maximum sales charge for Class A
shares), which represent increases for the quarter of 5.37%, 5.27% and 5.28%,
respectively. In the same period, the unmanaged Standard & Poor's 500 Index rose
7.95% (including income) and the unmanaged Lehman Brothers Government/ Corporate
Bond Index rose 1.91%. The average growth and income fund rose 7.12% for the
similar period, according to Lipper Analytical Services.
The Burnham Fund paid dividends in respect of its Class A, B and C shares for
the third quarter on October 11, 1995 to shareholders of record on September 30,
1995. The distribution of $0.20, $0.11 and $0.14, respectively, consisted of
$0.15, $0.06 and $0.09, respectively, for net investment income. In addition,
each class of shares received a distribution of $0.05 from short-term capital
gains.
The equity markets have continued to leap upward during the third quarter of
1995. Much of the optimism during the early part of the quarter was due, we
believe, to the apparently successful engineering of a 'soft landing' by the
Federal Reserve and continued low interest rates. Adding to this positive
environment was increased corporate merger, acquisition and stock buyback
activity, continued strong earnings comparisons, a stronger U.S. dollar, and
constructive governmental debate regarding U.S. fiscal policy. The sector
leaders during the period were transportation, telecommunications, health care
(drugs and health management), and the financial sectors (particularly insurance
and banks).
The Fund benefited from its positions in the quarter's leading sectors. Among
the Fund's best performing stocks were The Bank of New York, Citicorp, American
Home Products, Bristol-Myers Squibb, PLC Systems, Allstate, AT&T and American
Express. During the period, the Fund added to positions in banking, insurance,
autos, computers and telephone communications. The Fund reduced positions in
drugs, hotels, and oil and gas.
As we anticipated, the technology sector has become much more volatile.
Increased consumer demand for personal computers and peripherals has been trying
for both manufacturers and suppliers. Earnings for these high-growth cyclicals
have become more difficult to predict, and the risk of earnings disappointments
has risen. Many analysts are reducing their enthusiastic estimates for 1995 and
1996 as positive comparisons of earning growth against 1994 levels have become
harder to sustain. We remain positive on our long-term outlook for the U.S.
equity markets.
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We expect volatility in the months ahead, and positive surprises one year
from now. Inflation is low, corporate earnings are slowing but still healthy,
recession is unlikely to occur, and the Fed has room to ease. We believe that a
defensive posture is warranted during the volatility over the short term, but
long term we look for opportunities to add to our positions of quality growth
and income stocks.
The Fund maintains a 28% position in short to medium term bonds. We believe
interest rates will be favorable over the long term, but more attractive returns
may be achieved by investing conservatively in the equity markets. As our bonds
mature, we look to invest some of the proceeds in equities with attractive
income characteristics, which include, but not limited to areas such as real
estate investment trusts and the petroleum, telecommunications and finance
industries.
We thank you for your continued confidence in The Burnham Fund.
Very sincerely yours,
I.W. Burnham, II, President &
Portfolio Manager
Cumulative Performance Comparison
The Burnham Fund vs. Broad Market Indices
<TABLE>
<CAPTION>
Cumulative % Change Average Annualized % Change
------------------- ---------------------------
10 Years 5 Years 3 Years 10 Years 5 Years 3 Years
-------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
The Burnham Fund
(Class A Shares)............... 226.11% 68.39% 32.91% 12.55% 10.99% 9.95%
Standard & Poor's 500 Index
(with dividends reinvested).... 342.58% 121.40% 52.03% 16.04% 17.23% 14.98%
Lehman Brothers Government/
Corporate Bond Index........... 158.21% 60.27% 22.16% 9.95% 9.90% 6.90%
</TABLE>
The performance data quoted represents past performance and is not
indicative of future performance. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Average
total return for Class A shares, assuming the reinvestment of dividends
and excluding the maximum sales charge for the one, five and ten year
periods ended September 30, 1995 were 18.23%, 10.99% and 12.54%,
respectively. Such performance assuming the imposition of the Class A
shares' maximum 5% sales charge for the same periods would have been
12.32%, 9.85% and 11.97%, respectively. For Class B and C shares, average
total return for the one year period ended September 30, 1995 and life of
class total return for the period October 18, 1993 (inception date) to
September 30, 1995, were 17.50% and 18.10%, and 6.82% and 7.47%,
respectively.
2
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BURNHAM
Fund
INVESTMENT PERSPECTIVE
Equity Portfolio Distribution
by Industry Classification
September 30, 1995
<TABLE>
<CAPTION>
% Total
Equity Portfolio
----------------
<S> <C>
Energy -- Oil & Gas................... 13.00%
Pharmaceuticals....................... 9.57%
Communications Services............... 8.86%
Telephone Companies................... 7.52%
Automotive............................ 5.59%
Semiconductors........................ 5.15%
Banking............................... 4.23%
Real Estate........................... 4.17%
Utilities............................. 4.14%
Hotels................................ 3.26%
Computers & Software.................. 3.22%
Others................................ 31.29%
----------------
Total Equities........................ 100.00%
----------------
----------------
</TABLE>
Total Portfolio Distribution by Asset Class
September 30, 1995
[SEE APPENDIX TO GRAPHIC AND IMAGE MATERIAL]
Top 25% Portfolio Holdings
September 30, 1995
<TABLE>
<CAPTION>
Number of Shares/ % of
Principal Amount Value Net Assets
----------------- ----------- ----------
<S> <C> <C> <C>
Exxon Corporation................................ 45,000 $ 3,251,250 2.96%
Chrysler Corp. .................................. 60,000 $ 3,180,000 2.89%
AT&T Corp........................................ 40,000 $ 2,630,000 2.39%
The Bank of New York Co., Inc.,
7.5% conv. sub. deb. 8/15/01................... $ 1,000,000 $ 2,393,750 2.18%
US West Inc. .................................... 50,000 $ 2,356,250 2.14%
Motorola, Inc.................................... 30,000 $ 2,291,250 2.09%
Texaco Capital Inc., 8.65% gtd. notes 1/20/98.... $2,000,000 $ 2,105,532 1.92%
GTE Corp. ....................................... 50,000 $ 1,962,500 1.79%
Mobil Corp. ..................................... 19,000 $ 1,892,875 1.72%
Thermo Electron Corp. ........................... 40,000 $ 1,855,000 1.69%
American Express Co. ............................ 40,000 $ 1,775,000 1.62%
Caremark International........................... 80,000 $ 1,720,000 1.57%
American Home Products Corp. .................... 20,000 $ 1,697,500 1.55%
----------- ----------
Total Top 25% Portfolio Holdings................. $29,110,907 26.51%
----------- ----------
----------- ----------
</TABLE>
Cumulative Return
of a Hypothetical $10,000 Investment*
from inception (June 16, 1975)
through September 30, 1995
SEE APPENDIX TO GRAPHIC AND IMAGE MATERIAL
* All performance analyses shown herein represent past performance and are not
indicative of future performance. All dividends and distributions from income
and capital gains have been continually reinvested. Performance does not
include the imposition of the maximum 5% sales charge. Performance for other
classes of the Fund will be greater or less than the data shown in the graph
and tables based on differences in sales charges and fees paid by shareholders
investment in the different classes of the Fund.
Average Annual Total Return
Period ending September 30, 1995
<TABLE>
<S> <C>
One Year................. 18.23%
Five Years............... 10.99%
Ten Years................ 12.54%
Fifteen Years............ 12.58%
Twenty Years............. 13.58%
</TABLE>
3
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STATEMENT OF NET ASSETS
September 30, 1995
(Unaudited)
Number of
Shares Value(a)
- --------------------------------------------------------------------
COMMON STOCKS 67.07%
ALUMINUM PRODUCTION 0.96%
Aluminum Company of America....... 20,000 $ 1,057,500
AUTOMOTIVE 3.75%
Chrysler Corp..................... 60,000 3,180,000
General Motors Corp............... 20,000 937,500
-----------
4,117,500
-----------
BANKING 2.84%
The Bank of New York Co., Inc..... 20,000 930,000
Citicorp.......................... 20,000 1,415,000
Home Financial Corp............... 50,000 771,875
-----------
3,116,875
-----------
BUILDING PRODUCTS 1.62%
Manville Corp..................... 50,000(b) 656,250
USG Corp.......................... 40,000(b) 1,120,000
-----------
1,776,250
-----------
COMMUNICATIONS SERVICES 5.94%
AT&T Corp......................... 40,000 2,630,000
ECI Telecom Ltd................... 50,000 1,115,625
GTE Corp.......................... 50,000 1,962,500
Vodafone Group ADR................ 20,000(b) 820,000
-----------
6,528,125
-----------
COMPUTERS & SOFTWARE 2.16%
Hewlett Packard Co................ 10,000 833,750
Microsoft Corp.................... 10,000(b) 905,625
Phoenix Technologies Ltd.......... 50,000(b) 637,500
-----------
2,376,875
-----------
CONGLOMERATES 1.13%
ITT Corp.......................... 10,000 1,240,000
-----------
DATA PROCESSING SYSTEMS 2.03%
EMC Corp.......................... 60,000(b) 1,087,500
General Motors Corp. Cl. 'E'...... 25,000 1,137,500
-----------
2,225,000
-----------
ENERGY - OIL AND GAS 8.72%
Amoco Oil Co...................... 25,000 1,603,125
Chevron Corp...................... 25,000 1,215,625
Exxon Corporation................. 45,000 3,251,250
Mobil Corporation................. 19,000 1,892,875
Texaco Inc........................ 25,000 1,615,625
-----------
9,578,500
-----------
ELECTRICAL CONNECTORS 0.70%
AMP Inc........................... 20,000 770,000
-----------
ENGINEERING/
INDUSTRIAL PRODUCTION 1.78%
Thermo Electron Corp.............. 40,000(b) $ 1,855,000
Thermolyte Corp. (Note 4)......... 10,000(b) 100,000
-----------
1,955,000
-----------
FOOD CHAINS 1.39%
McDonald's Corp................... 40,000 1,530,000
-----------
FOREST PRODUCTS 1.19%
Georgia Pacific Corp.............. 15,000 1,312,500
-----------
FOOD PRODUCTS 1.02%
General Mills Co.................. 20,000 1,115,000
-----------
HEALTHCARE REIT 1.26%
Meditrust SBI..................... 40,000 1,385,000
-----------
HOTELS 2.18%
Hilton Hotels Corp................ 20,000 1,277,500
Marriott International Inc........ 30,000 1,121,250
-----------
2,398,750
-----------
INSURANCE 2.00%
Allstate Corp..................... 35,000 1,238,125
Chubb Corp........................ 10,000 960,000
-----------
2,198,125
-----------
MEDICAL SUPPLIES 0.73%
PLC Systems Inc................... 40,000(b) 800,000
-----------
MINING 0.46%
Homestake Mining.................. 30,000 510,000
-----------
OFFICE EQUIPMENT 1.47%
Xerox Corp........................ 12,000 1,612,500
-----------
PHARMACEUTICALS 6.42%
American Home Products Corp....... 20,000 1,697,500
Bristol Myers Squibb Co........... 20,000 1,457,500
Caremark International Inc........ 80,000 1,720,000
Humana Inc........................ 55,000 1,106,875
Pfizer Inc........................ 20,000 1,067,500
-----------
7,049,375
-----------
PHOTO PRODUCTS & SERVICES 1.08%
Eastman Kodak Co.................. 20,000 1,185,000
-----------
REAL ESTATE REIT 2.80%
Franchise Finance Corp. of America 60,000 1,290,000
National Golf Properties.......... 60,000 1,312,500
Sizzler Property Investments...... 50,000 468,750
-----------
3,071,250
-----------
SEMICONDUCTORS 3.46%
Intel Corp........................ 25,000 1,504,687
Motorola, Inc..................... 30,000 2,291,250
-----------
3,795,937
-----------
4
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STATEMENT OF NET ASSETS (CONTINUED)
September 30, 1995
(Unaudited)
Number of Shares
Put Options, or
Principal Amount Value(a)
- --------------------------------------------------------------------
TELEPHONE COMPANIES 5.05%
Bell Atlantic Corp................ 25,000 $ 1,534,375
SBC Communications Inc............ 30,000 1,650,000
US West Inc....................... 50,000 2,356,250
-----------
5,540,625
-----------
TRAVEL RELATED &
FINANCIAL SERVICES 1.62%
American Express Co............... 40,000 1,775,000
-----------
UTILITIES 2.77%
Kansas Power & Light.............. 20,000 472,500
Montana Power & Light............. 20,000 462,500
Puget Sound Power & Light......... 40,000 930,000
Southern Co....................... 50,000 1,181,250
-----------
3,046,250
-----------
TOTAL COMMON STOCKS............... 73,655,062
-----------
PUT OPTIONS 0.02%
Standard & Poor's 100 Nov. 1995 @ 520 100 puts(b) 18,750
-----------
TOTAL PUT OPTIONS................. 18,750
-----------
CONVERTIBLE PREFERRED STOCK 0.52%
Storage Technology Corp.
$3.50 cum. conv. pfd............. 10,000 572,500
-----------
TOTAL CONVERTIBLE
PREFERRED STOCK.................. 572,500
-----------
CORPORATE CONVERTIBLE BONDS 3.32%
BANKING 2.18%
The Bank of New York Company, Inc.,
7 1/2% conv. sub. deb. 8/15/01... $1,000,000 2,393,750
-----------
ELECTRONICS 0.23%
VLSI Technology Inc.,
8 1/4% conv. sub. note 10/01/05.. 250,000 255,000
-----------
STEEL 0.44%
USX Corp.,
7% conv. sub. deb. 6/15/17....... 500,000 476,250
-----------
UTILITIES 0.47%
Consolidated Natural Gas Co.,
7 1/4% conv. sub. deb. 12/15/15.. 500,000 517,500
-----------
TOTAL CORPORATE CONVERTIBLE
BONDS........................... 3,642,500
-----------
CORPORATE BONDS 26.50%
BANKING 1.88%
Chase Manhattan Corp.,
7 7/8% sub. notes 8/01/04........ 1,000,000 1,022,158
Morgan (J.P.) & Co., Inc.,
7 5/8% sub. notes 11/15/98....... 1,000,000 1,038,108
-----------
2,060,266
-----------
BROADCASTING 0.48%
Ackerley Communications, Inc.,
10 3/4% sr. secured notes
'Series A' 10/01/03............. $ 500,000 $ 530,000
-----------
BUILDING PRODUCTS 1.83%
USG Corp., 8% sr. notes 12/15/96 500,000 502,870
USG Corp., 8% sr. notes 3/15/97 1,500,000 1,509,725
-----------
2,012,595
-----------
CHEMICALS 1.35%
duPont (E.I.) de Nemours & Co.,
6% notes 12/01/01................ 1,000,000 973,750
duPont (E.I.) de Nemours & Co.,
6 3/4% notes 10/15/02............ 500,000 506,877
-----------
1,480,627
-----------
COMMUNICATION SERVICES 0.91%
Storer Communications Inc.,
10% deb. 5/15/03................. 1,000,000 1,005,000
-----------
ENERGY - OIL & GAS 0.87%
Maxus Energy Corp.,
9 3/8% notes 11/01/03............ 1,000,000 955,000
-----------
FINANCIAL SERVICES 8.93%
Exxon Capital Corp.,
7 7/8% gtd. notes 4/15/96........ 1,000,000 1,010,430
Ford Motor Credit Corp.,
9 1/4% notes 6/15/98............. 1,000,000 1,069,918
General Electric Capital Corp.,
8% notes 1/15/98................. 1,000,000 1,037,894
GMAC Corp.,
7.65% notes 2/04/97.............. 400,000 407,429
GMAC Corp.,
7 3/4% notes 4/15/97............. 1,000,000 1,012,542
GMAC Corp.,
7 3/4% notes 1/15/99............. 1,000,000 1,038,053
MGM Grand Hotel Finance Corp.,
11 3/4% gtd. notes 5/01/99....... 1,000,000 1,070,000
Texaco Capital Inc.,
9% gtd. notes 11/15/97........... 1,000,000 1,051,250
Texaco Capital Inc.,
8.65% gtd. notes 1/30/98......... 2,000,000 2,105,532
-----------
9,803,048
-----------
FOOD & BEVERAGE 0.44%
Spreckles Industries Inc.,
11 1/2% sr. sec. notes 9/01/00... 500,000 485,000
-----------
5
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STATEMENT OF NET ASSETS (CONCLUDED)
September 30, 1995
(Unaudited)
<PAGE>
Principal
Amount Value(a)
- --------------------------------------------------------------------
FOOD & TOBACCO 1.92%
Philip Morris Companies Inc.,
9 1/4% 12/01/97.................. $1,000,000 $ 1,060,210
RJR Nabisco, 8% notes 1/15/00..... 1,000,000 1,045,000
-----------
2,105,210
-----------
HOTELS 2.23%
Marriott Corp.,
9 5/8% sr. notes 'B' 2/01/96..... 525,000 526,050
Marriott Corp.,
8 1/8% sr. notes 'C' 12/01/96.... 450,000 442,980
Marriott Corp.,
8 7/8% sr. notes 'D' 5/01/97..... 115,000 114,485
Marriott Corp.,
9 7/8% sr. notes 'E' 11/01/97.... 850,000 850,257
Marriott Corp., 9 3/8% deb. 6/15/07 500,000 511,602
-----------
2,445,374
-----------
PAPER PRODUCTS 1.69%
Kimberly Clark Corp.
9% notes 8/01/00................. 700,000 774,551
Riverwood International Corp.,
10 3/4% sr. notes II 6/15/00..... 500,000 542,500
Riverwood International Corp.,
10 3/4% sr. notes 6/15/00........ 500,000 542,500
-----------
1,859,551
-----------
PHARMACEUTICALS 1.92%
Johnson & Johnson,
7 3/8% euronotes 11/09/97........ 1,000,000 1,025,625
Lilly (Eli) & Co.,
8 1/8% notes 12/01/01............ 1,000,000 1,084,224
-----------
2,109,849
-----------
TELEPHONE COMPANIES 1.59%
Bell South TeleCommunications Inc.,
6 1/4% notes 5/15/03............. 1,000,000 980,436
Southwestern Bell Corp.,
8.30% notes 6/01/96.............. 750,000 760,874
-----------
1,741,310
-----------
UTILITIES 0.46%
AES Corp.,
9 3/4% sr. sub. notes 6/15/00.... 500,000 510,625
-----------
TOTAL CORPORATE BONDS............ 29,103,455
-----------
COMMERCIAL PAPER 1.76%
Associates Corp. of NA,
6.10% 10/02/95................... 1,931,900 1,931,900
-----------
TOTAL COMMERCIAL PAPER........... 1,931,900
-----------
Value(a)
- --------------------------------------------------------------------
TOTAL INVESTMENTS 99.19% $108,924,167
CASH AND OTHER ASSETS,
LESS LIABILITIES 0.81% 889,879
------ -----------
NET ASSETS 100.00% $109,814,046
====== ===========
CLASS A SHARES
(Equivalent to $22.33 per share based on
4,889,403.880 shares of Capital Stock outstanding.)
CLASS B SHARES
(Equivalent to $22.54 per share based on
27,482.117 shares of Capital Stock outstanding.)
CLASS C SHARES
(Equivalent to $22.32 per share based on
124.960 shares of Capital Stock outstanding.)
- -------------------
(a) Investments in securities traded on a national securities exchange are
valued at the last reported sales price on the primary exchange on which they
are traded on the last business day of the period. Securities traded in the
over-the-counter market (including securities listed on exchanges whose primary
market is believed to be over-the-counter) and listed securities for which no
sale was reported on that date are valued at the mean between the last reported
bid and asked prices. Short-term money market instruments which have a maturity
of more than 60 days are valued at prices based on market quotations for
securities of similar type, yield and maturity. Short-term money market
instruments which have a maturity of 60 days or less are valued at amortized
cost which approximates value.
(b) Non-income producing security.
6
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7
<PAGE>
OFFICERS OF THE FUND
I.W. Burnham, II President
and Chief Executive Officer
Jon M. Burnham, Executive Vice President
Michael E. Barna, First Vice President
Chief Financial Officer, Treasurer and Secretary
Ronald M. Geffen, Vice President
Debra B. Hyman, Vice President
Frank A. Passantino, Vice President and Assistant Secretary
Louis S. Rosenthal, Vice President
Leon C. Sunstein, Jr., Vice President
Mara D. Cohen, Assistant Treasurer
INVESTMENT ADVISER
Burnham Asset Management Corporation
1325 Avenue ofthe Americas
New York, New York 10019
DISTRIBUTOR
Burnham Securities Incorporated
1325 Avenue of the Americas
New York, New York 10019
Telephone: 1 (800) 874-FUND
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
SERVICING AGENT
Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
This report has been prepared for the information of shareholders of The Burnham
Fund Inc. and is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus that includes information
regarding the Fund's objectives, policies, management, records and other
information.
QUARTERLY REPORT
September 30, 1995
CONTINUITY KNOWLEDGE
[PHOTOGRAPH OF CLOCK] [PHOTOGRAPH OF CHESS PIECE]
[LOGO]
GROWTH INCOME
[PHOTOGRAPH OF STEPS] [PHOTOGRAPH OF COINS]
Burnham Securities Inc.
PRINCIPLE DISTRBUTOR
<PAGE>
APPENDIX TO GRAPHIC AND IMAGE MATERIAL
Graph 1 Page 3 of Report 'Total Portfolio Distribution by Asset Class'
The pie chart sets out to describe the asset allocation of The Burnham Fund as
of September 30, 1995. The asset allocation is broken out in the following
manner: Common Stocks, Convertible Preferred Securities and Options - 68%;
Corporate & Convertible bonds - 30%; Cash equivalents - 2%.
Graph 2 Page 3 of Report 'Cumulative Return of a Hypothetical $10,000
Investment'
The line chart describes a hypothetical investment of $10,000 over the
investment period June 16, 1975 (inception date) to September 30, 1995.
The performance figures do not include the imposition of the maximum sales
charge of 5%. All dividends and distributions from income and capital gains
have been continually reinvested. The performance in the graph represent past
performance and are not indicative of future performance. The performance at
the end of the period reflects a total hypothetical value of $117,064
representing a cumulative total return of 1,070.64% and an annualized compound
rate of return of 12.86%.
