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THE BURNHAM FUND INC. (the "Fund") is a diversified, open-end management
investment company whose principal investment objective is capital appreciation,
mainly long-term. Income is also considered, but is of lesser importance.
The Fund offers alternative purchase arrangements that provide investors with
the option of purchasing shares (i) subject to a front-end sales charge and a
Rule 12b-1 plan distribution fee ("Class A shares"); (ii) subject to a
contingent deferred sales charge ("CDSC") if held for less than six years, a
Rule 12b-1 plan distribution fee and a service fee ("Class B shares"); or (iii),
subject to a CDSC if held for less than one year, a Rule 12b-1 plan distribution
fee and a service fee ("Class C shares"). The Fund's multi-class distribution
system is described more fully under the headings "Alternative Purchase
Arrangements," "Purchase of Shares - Terms of Purchase," "Redemption of Shares,"
and "Distribution - Distribution Plan and Use of Distribution and Service Fees."
The purpose of offering different classes of shares is to provide investors with
options so that each may choose a method of purchasing the Fund's shares most
suited to his or her specific investment needs and preferences. The proceeds
from the sales of the three classes of shares are jointly invested in the Fund's
investment portfolio. Each class of shares represents an identical interest in
the portfolio, except as to class-specific distribution related matters and any
other matters relating only to a particular class. Each class of shares has
identical voting, dividend, liquidation and other rights except as described in
"Alternative Purchase Arrangements".
Burnham Asset Management Corporation (the "Adviser"), an affiliate of Burnham
Securities Inc. (the "Distributor"), the Fund's principal distributor, serves as
the Fund's investment adviser.
This Prospectus sets forth concisely the information you should know before
investing in the Fund. You should read it and keep it for future reference. A
Statement of Additional Information, dated April 28, 1995, has been filed with
the Securities and Exchange Commission (the "Commission") and contains further
information about the Fund. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus. You can obtain a copy without
charge by contacting your account executive or certified financial planner at a
dealer authorized to sell shares of the Fund or by calling or writing the
Distributor at the telephone numbers and address below.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
BURNHAM Securities Inc.
PRINCIPAL DISTRIBUTOR
1325 Avenue of the Americas, 17th Floor,
New York, New York 10019
Call Toll Free - 1-800-874-FUND
April 28, 1995
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FEE TABLE
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-end Sales Charge 5.00%1 None None
Maximum Front-end Sales Charge imposed on Reinvested Dividends None None None
Maximum Contingent Deferred Sales Charge None 5.00%2 1.00%2
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.63% 0.63% 0.63%
Distribution Fees3 0.25% 0.75% 0.75%
Service Fees None 0.25% 0.25%
Other Expenses (after expense reimbursement) 0.62% 0.62%4 0.62%4
------ ------ ------
Total Operating Expenses 1.50% 2.25% 2.25%5
====== ====== ======
1 Class A shares have reduced initial sales charges for purchases in excess of
$50,000. Certain purchases of Class A shares of $ 1 million or more are not
subject to front-end sales charges, but a contingent deferred sales charge is
imposed on the proceeds of such shares equal to 1% if the shares are redeemed
within the first 12 months after the end of the calendar month of their
purchase, and .5 of 1% if redeemed within the next 12 months. See "Purchase of
Shares -Initial Sales Charges (Class A Shares)" on Page 9.
2 The contingent deferred sales charge on Class B shares declines from 5% during
the first year to 0% in the sixth year after the date of purchase. Deferred
sales charge on Class C shares applies only if a redemption of shares occurs
within 12 months from the purchase date. See "Redemption of Shares" on Page 13.
3 The National Association of Securities Dealers, Inc. (the "NASD") imposes a
maximum limit on asset-based sales charges, which include distribution fees.
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the NASD. See "Distribution -- Distribution
Plan and Use of Distribution and Service Fees" on Pages 16 and 17.
4 The Adviser has voluntarily agreed to reimburse expenses of the Class B and
Class C shares in order to limit expenses. The Adviser reserves the right to
discontinue this policy at any time. The Adviser reimbursed the Class B and
Class C shares $5,424 and $14,135, respectively, in 1994.
5 The expense information for Class C shares has been restated to reflect
current fees that would have been APPLICABLE had they been in effect during the
previous fiscal year.
HYPOTHETICAL INVESTMENT
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
SHARE CLASS: A B C A B C A B C A B C
- - - - - - - - - - - -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment, assuming
(1) Payment of the Maximum Sales Charge,
(2) a 5% annual return, and
(3) redemption of shares at the end of the period.
10 YEAR FIGURES FOR CLASS B ASSUME CONVERSION
TO CLASS A SHARES AFTER EIGHT YEARS. $64 $73 $33 $95 $100 $70 $128 $130 $120 $220 $240 $258
You would pay the following expenses
on the same $1,000 investment, assuming
(1) Payment of the Maximum Sales Charge,
(2) a 5% annual return, and
(3) no redemptions at the end of the time period.
10 YEAR FIGURES FOR CLASS B SHARES ASSUME CONVERSION
TO CLASS A SHARES AFTER EIGHT YEARS. $64 $23 $23 $95 $70 $70 $128 $120 $120 $220 $240 $258
</TABLE>
The purpose of the foregoing table is to assist you in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. The examples provided are intended to show the dollar amount of
expenses that would be incurred over the indicated periods on a hypothetical
$1,000 investment in the Fund, assuming a 5% annual return and assuming that the
Fund's expenses continue at the rates shown in the table. However, the actual
return on an investment in the Fund may be greater or less than 5%. The examples
should not be considered as representative of past or future expenses; actual
expenses may be greater or less than those shown.
2
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FINANCIAL HIGHLIGHTS
The following table shows, on a per share basis, the changes in net asset
value, total return and ratios/supplementary data of the Class A shares for each
of the ten years in the period ended December 31, 1994, and for the Class B and
Class C shares for the period October 18, 1993 (inception date) through December
31, 1993, and year ended December 31, 1994, and may be used to trace the
performance of the shares of the Fund. Further information regarding the Fund's
performance is contained in the Fund's Annual Report to Shareholders which may
be obtained upon request and without charge.
The information for each of the ten years in the period ended December 31,
1994 was audited by Coopers & Lybrand L.L.P., the Fund's independent
accountants.1
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992 1991 1990 1989 3 1988 1987
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Year $ 21.86 $ 21.95 $ 22.16 $ 20.01 $ 23.62 $ 20.89 $ 19.58 $ 21.28
-----------------------------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income 0.75 0.81 0.88 1.07 1.19 1.25 0.19 0.85
Net Gains or Losses on
Securities(both realized
and unrealized) (1.15) 1.11 0.69 2.36 (1.62) 3.23 1.09 0.67
-----------------------------------------------------------------------------------------------------
Total from Investment
Operations (0.40) 1.92 1.57 3.43 (0.43) 4.48 2.28 1.52
LESS DISTRIBUTIONS
Dividends (from net
investment income) (0.87) (0.90) (1.12) (1.06) (1.24) (1.25) (0.75) (1.07)
Distributions
(from capital gains) (0.71) (1.11) (0.66) (0.22) (1.94) (0.50) (0.22) (2.15)
-----------------------------------------------------------------------------------------------------
Total Distributions (1.58) (2.01) (1.78) (1.28) (3.18) (1.75) (0.97) (3.22)
-----------------------------------------------------------------------------------------------------
Net Asset Value,
End of Year $ 19.88 $ 21.86 $ 21.95 $ 22.16 $ 20.01 $ 23.62 $ 20.89 $ 19.58
=====================================================================================================
Total Return2 (1.77%) 9.35% 7.70% 17.98% (1.76%) 22.75% 11.89% 6.69%
-----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets (in $millions),
End of Year 101.8 118.5 117.2 125.4 123.7 161.3 184.7 200.6
Ratio of Expenses to
Average Net Assets 1.5% 1.5% 1.2% 1.1% 1.2% 1.2% 1.1% 1.0%
Ratio of Net Income to
Average Net Assets 3.7% 3.7% 4.1% 5.0% 5.6% 5.3% 5.6% 3.9%
Portfolio Turnover Rate 87.9% 54.1% 68.5% 120.8% 107.4% 92.5% 94.4% 121.2%
</TABLE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
---------------------- -------------------- -------------------
YEAR ENDED DECEMBER 31, 1986 1985 1994 1993*'DD' 1994 1993*'DD'
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Year $ 21.95 $ 17.57 $ 21.84 $ 22.17 $ 21.87 $22.17
----------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income 0.75 0.88 0.49 0.13 0.72 0.15
Net Gains or Losses on
Securities(both realized
and unrealized) 3.61 4.57 (1.04) (0.46) (1.15) (0.45)
----------------------------------------------------------------------------
Total from Investment
Operations 4.36 5.45 (0.55) (0.33) (0.43) (0.30)
LESS DISTRIBUTIONS
Dividends (from net
investment income) (0.80) (0.91) (0.64) -0- (0.84) -0-
Distributions
(from capital gains) (4.23) (0.16) (0.71) -0- (0.71) -0-
----------------------------------------------------------------------------
Total Distributions (5.03) (1.07) (1.35) -0- (1.55) -0-
----------------------------------------------------------------------------
Net Asset Value,
End of Year $ 21.28 $ 21.95 $ 19.94 $ 21.84 $ 19.89 $21.87
============================================================================
Total Return2 21.81% 32.13% (2.52%) (1.49%) (1.95%) (1.35%)
----------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets (in $millions),
End of Year 160.6 99.8 0.3 0.2 0.0** 0.0**
Ratio of Expenses to
Average Net Assets 1.0% 1.1% 2.3% 2.2%'D' 1.5% 1.5%'D'
Ratio of Net Income to
Average Net Assets 3.8% 4.6% 2.9% 3.9%'D' 3.6% 3.5%'D'
Portfolio Turnover Rate 113.8% 113.5% 87.9% 54.1% 87.9% 54.1%
</TABLE>
* The Fund commenced offering Class B shares and Class C shares on October
18, 1993.
** Less than $100,000 of net assets. 'D' Annualized. 'DD' Based on average
shares outstanding.
1 The information for each of the last five years has been audited by Coopers &
Lybrand L.L.P., whose unqualified report thereon is included in the Fund's
Annual Report to Shareholders, which is incorporated by reference into the
Statement of Additional Information. The remaining figures, which have also
been audited, are not covered by the accountants' current report.
2 Total return does not reflect the maximum initial sales charge on Class A
shares.
3 At the close of business on September 6, 1989, the management of the Fund
was assumed by Burnham Asset Management Corporation, see "Management" on
page 16.
3
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THE FUND
The Burnham Fund Inc. is an open-end, diversified management investment
company. The Fund's shares are sold on a continuous basis and the Fund invests
the proceeds from the sale of its shares in a portfolio of securities. This
permits the Fund's shareholders to combine their investments in a professionally
managed portfolio consisting of many different securities. Set forth below is
information concerning the investment objectives and policies of the Fund and
the alternative arrangements for purchases and redemptions based on the three
classes of shares currently offered by the Fund. The shares of each class of
shares offered by the Fund represent interests in the same underlying portfolio
of securities.
THE FUND'S INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES. The Fund's principal investment objective is capital
appreciation, mainly long-term. Income generally will be of lesser importance.
The Fund may invest in securities without regard to income when, in the judgment
of the Adviser, such investments have a greater potential for growth. The Fund
may invest in income-producing securities without limitation if, in the judgment
of the Adviser, market or general economic conditions warrant greater emphasis
on income either as a temporary defensive position or because the Adviser
determines that, for a given period of time, greater overall growth may be
realized through investment in income-producing securities. There can be no
assurance that the Fund's investment objectives will be achieved.
INVESTMENT POLICIES. The Fund's investments normally will consist of common
stock or convertible securities, including convertible preferred stock and
convertible debentures, warrants which may be exchanged for common stock, and
options. However, when the Adviser determines that a temporary defensive
position is warranted or that greater overall growth may be realized through
investment in income-producing securities, it may invest without limitation in
fixed income securities. For temporary defensive purposes, the Fund may also
invest in cash items. The Fund will not concentrate more than 25% of the value
of its total assets in any one industry. As a diversified fund, it will invest
at least 75% of its total assets in cash, cash items and government securities
and in other securities which represent an investment of no more than 5% of the
value of the Fund's total assets in any one issuer.
The Fund's investment objectives and policies are fundamental and may not
be changed without approval of the holders of a majority of the Fund's
outstanding voting securities, as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"), as the lesser of either (i) 67% or more of the
Fund's voting securities present at a meeting of shareholders if the holders of
more than 50% of the Fund's outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding voting
securities.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers Class A, B and C shares to all investors. Class A shares
are sold with an initial sales charge that declines for larger orders. Purchases
of $1 million or more of Class A shares are sold without an initial sales charge
but are subject to a contingent deferred sales charge if held for less than two
years. Class B shares are sold without an initial sales charge but are subject
to a CDSC if held for less than six years. Class B shares are available to
investors purchasing less than $250,000 in the aggregate. Class C shares are
sold without an initial sales charge but are subject to a CDSC if held for less
than one year. Class C shares are available for investors purchasing less than
$1 million in the aggregate. Each class is described below in greater detail.
The different classes of the Fund provide the investor with alternative purchase
methods of acquiring shares and the investor
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should determine which class is best suited to his specific needs and
preferences.
Dealers may be compensated at different rates for selling Class A, Class B
or Class C shares.
CLASS A SHARES. Class A shares are sold at net asset value plus a sales charge
of up to 5% at the time of purchase. This initial sales charge may be reduced or
waived for certain purchases (see "Purchase of Shares"). Class A shares are
subject to a distribution fee at an annual rate of 0.25% of the average daily
net asset value of the Class A shares.
CLASS B SHARES. Class B shares are sold at net asset value without a sales
charge at the time of purchase. If shares are redeemed within six years from
their date of purchase, the investor will be subject to a CDSC up to a maximum
of 5% of the net asset value of such shares at the time of purchase or the net
asset value of such shares at the time of redemption, whichever is lower.(see
"Redemption of Shares -- Class B Shares"). Class B shares are only available to
investors who purchase less than $250,000. Class B shares are subject to a
distribution fee and a service fee of 0.75% and 0.25% per annum, respectively,
of the average daily net asset value of the Class B shares. Class B shares will
automatically convert to Class A shares of the Fund eight years after the end of
the calendar month in which the purchase order was accepted, on the basis of the
relative net asset values of the two classes, subject to the terms described
under "Conversion of Class B shares", on page 12.
CLASS C SHARES. Class C shares are sold at net asset value without an initial
sales charge. If shares are redeemed within 12 months from their date of
purchase, the investor will be subject to a CDSC of 1% of the net asset value of
such shares at the time of purchase or the net asset value of such shares at the
time of redemption, whichever is lower. Class C shares are only available to
investors purchasing less than $1,000,000. Class C shares are subject to a
distribution fee and a service fee of 0.75% and 0.25% per annum, respectively,
of the average daily net asset value of the Class C shares.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial given the length of time the
investor may expect to hold the shares, the investor's expected overall level of
investment in the Fund and other circumstances. Investors should consider
whether during the anticipated life of their investment in the Fund the
accumulated distribution and service fees attributable to Class B and C shares
would be less than the initial sales charge and accumulated distribution fees of
Class A shares if purchased at the same time. The prospective investor should
consider these fees plus the applicable sales charge alternatives in choosing
the method of purchasing shares. The tables under the captions "Fee Table" and
"Hypothetical Investment" on page 2 set forth examples of the fees and expenses
applicable to each class of shares.
Class A shares are subject to lower ongoing distribution fees and, to the
extent that dividends are paid, will have greater per share dividends than Class
B and C shares, which have higher ongoing expenses. The deduction of an initial
sales charge at the time of purchase of Class A shares, however, will result in
the investor not having all of his funds invested initially, and the investor
will own fewer shares initially than if Class B or Class C shares were
purchased. Certain investors may determine that it would be advantageous to
purchase Class B and Class C shares in order to have all their funds invested
initially, although remaining subject to higher ongoing expenses. Class A shares
with an initial sales charge may be more desirable for investors who qualify for
significantly reduced sales charges or who expect to hold their investments for
an extended period of time.
The proceeds from sales of the three classes of shares are jointly invested
in the same portfolio of investments of the Fund. The classes have identical
voting, dividend, liquidation and other rights, except
5
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(1) the amount of sales charges and the amount and type of fees permitted by the
different distribution and service plans; (2) voting rights on matters
concerning Rule 12b-1 plans, related service agreements and any other
miscellaneous matters relevant only to a particular class, as opposed to the
Fund generally; (3) each class of shares bears any expenses that the Fund's
Board of Directors (the "Board" or "Board of Directors") determines should be
allocated or charged on a class basis; (4) the designation of such classes; (5)
the fact that a class may have a conversion feature; and (6) different exchange
privileges for different classes.
For further information regarding the Rule 12b-1 distribution plans of the
respective classes, reference is hereby made to "Distribution - Distribution
Plan" on page 16.
RISK FACTORS
There are two types of risk generally associated with owning equity
securities: market risk and financial risk. Market risk is the risk associated
with the movement of the stock market in general. Financial risk is associated
with the financial condition and profitability of the underlying company.
Smaller capitalization companies may experience higher growth rates and higher
failure rates than do larger capitalization companies. The trading volume of
securities of smaller capitalization companies is normally less than that of
larger capitalization companies and, therefore, may disproportionately affect
their market price, tending to make them rise more in response to buying demand
and fall more in response to selling pressure than is the case with larger
capitalization companies.
There are two types of risk associated with owning debt securities:
interest rate risk and credit risk. Interest rate risk relates to fluctuations
in market value arising from changes in interest rates. If interest rates rise,
the value of debt securities will normally decline and if interest rates fall,
the value of debt securities will normally increase. All debt securities,
including U.S. Government securities, which are generally considered to be the
most creditworthy of all debt obligations, are subject to interest rate risk.
Securities with longer maturities generally will have a more pronounced reaction
to interest rate changes than shorter term securities.
Credit risk relates to the ability of the issuer to make periodic interest
payments and ultimately repay principal at maturity. Bonds rated Baa3 by Moody's
or BBB- by Standard & Poor's, are described by those rating agencies as having
speculative elements. If a debt security is rated below investment grade by one
rating agency and as investment grade by a different rating agency, the Adviser
will make a determination as to the debt security's investment grade quality.
The Adviser currently has no pre-set limits as to the percentage of the Fund's
portfolio which may be invested in equity securities, debt securities (including
"junk bonds" as described below), or cash equivalents. The Adviser's opinions
are based upon analysis and research, taking into account, among other factors,
the relationship of book value to market value of the securities, cash flow and
multiples of earnings of comparable securities.
Debt securities in which the Fund invests (such as corporate and U.S.
government bonds, debentures and notes) may or may not be rated by rating
agencies such as Moody's Investor Service Inc. or Standard & Poor's Corporation,
and, if rated, such rating may range from the very highest to the very lowest,
currently C for Moody's and D for Standard & Poor's. Medium and lower-rated debt
securities in which the Fund expects to invest are commonly known as "junk
bonds". The Fund may be subject to investment risks as to these unrated or lower
rated securities that are greater in some respects than the investment risks
incurred by a fund which invests only in securities rated in higher categories.
In addition, the secondary market for such securities may be less liquid and
market quotations less readily available than higher rated securities, thereby
increasing the degree to which judgment plays a role in valuing such securities.
The
6
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general policy of the Fund is to invest in debt securities, including junk
bonds, for the same reasons as investments in equities. Consequently, the
Adviser's own analysis of a debt instrument exercises a greater influence over
the investment decision than the stated coupon rate or credit rating. Although
such debt securities may pose a greater risk than higher rated debt securities
of loss of principal, the debt securities of reorganizing or restructuring
companies typically rank senior to the equity securities of such companies. See
"Investment Techniques - Medium and Lower Rated Corporate Debt Securities" in
the Statement of Additional Information.
The Fund is authorized to lend portfolio securities, borrow money from
banks as a temporary measure for extraordinary or emergency purposes in an
amount not to exceed 10% of the value of the Fund's total assets, and pledge up
to 15% of the value of its total assets to secure such borrowings. The Fund has
no current intention to engage in such activities to an extent exceeding 5% of
the value of the Fund's total assets.
The Fund may not invest more than 15% of the value of its total assets in
foreign securities not publicly traded in the United States, or invest in
foreign securities where there exist foreign governmental restrictions on the
repatriation of funds to the United States. Investments in foreign securities
may be subject, among other things, to adverse or unfavorable changes resulting
from changed economic or monetary policies in this country or abroad, or changed
conditions in dealings between nations.
The Fund may purchase listed put and call options and write "secured"
listed put and "covered" listed call options on stocks and market indexes to an
extent not exceeding 4% of the value of the Fund's net assets. Transactions in
listed put and call options generally involve short-term trading that may cause
a higher than usual portfolio turnover rate. Such trading, although engaged in
for the purpose of attaining the Fund's investment objectives, may result in
greater risk and larger brokerage fees, taxes and other expenses than might
otherwise be the case. If short-term trading results in realization of net gains
from the sales of securities held for not more than one year, the Fund or its
shareholders will be taxed on any such gains at ordinary income rates.
Investors are advised to read the Statement of Additional Information for a
more complete description of the securities in which the Fund invests and their
risks.
NET ASSET VALUE, DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
NET ASSET VALUE. The Fund's net asset value per share is calculated separately
for each class of shares once daily as of the close of trading on the New York
Stock Exchange (the "NYSE") (excluding days on which the NYSE is closed). In
general, the net asset value per share is determined by adding the current value
of the Fund's portfolio securities and all other assets, subtracting its
liabilities, and dividing the remainder by the number of the Fund's outstanding
shares. The total of such liabilities allocated to a particular class, plus that
class' distribution fee and any other expenses specifically allocated to that
class are then deducted from the class' proportionate interest in the Fund's
assets, and the resulting amount for each class is divided by the number of
shares of that class outstanding to produce the "net asset value" per share.
Because of certain expenses attributable only to Class B and Class C shares,
e.g., a higher distribution fee, a service fee, and certain class-specific
expenses that may exceed those allocated to the other classes (see "Alternative
Purchase Arrangements"), the net income attributable to and the dividends
payable on Class B and Class C shares will be lower than the net income
attributable to and the dividends payable on Class A shares. For additional
information regarding the computation of net asset value, see "Net Asset Value,
Dividends, Capital Gains Distributions and Taxes -- Net Asset Value" in the
Statement of Additional Information on page 6.
7
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Portfolio securities are valued at market value if quotations are
available, at fair value as determined in good faith by the Board of Directors
if quotations are not readily available or circumstances otherwise warrant, or
in some cases at cost.
DIVIDENDS. In addition to any increase in the value of shares as a result of
increases in the value of the Fund's investments, the Fund may earn income in
the form of dividends and interest on its investments. It is the Fund's policy
to distribute substantially all of this income, less expenses, to its
shareholders quarterly. Unless cash dividends are requested by shareholders,
dividends are automatically reinvested in additional shares of the same class of
shares at net asset value on the ex-dividend date.
CAPITAL GAINS DISTRIBUTIONS. Capital gains or losses are the result of the
Fund's sales of its portfolio securities at prices that are higher or lower than
the prices paid by the Fund for such securities. Generally, total profits from
such sales, less losses, represent net capital gain. The Fund distributes net
capital gains, if any, to shareholders annually. Unless cash distributions are
requested by shareholders, capital gains distributions are automatically
reinvested in additional shares of the same class of shares at net asset value
on the ex-dividend date.
TAXES. The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, no Federal income or excise taxes will be
payable by the Fund so long as it annually distributes substantially all of its
investment company taxable income and net capital gains. For Federal income tax
purposes, the Fund's distributions of net investment income and short-term
capital gains are treated in the hands of the shareholders as ordinary income,
and distributions of long-term capital gains are treated as long-term capital
gains, whether paid in cash or reinvested in additional Fund shares. Tax-exempt
shareholders will not be required to pay tax on amounts distributed to them
unless the purchase of their shares is debt-financed. A dividend declared by the
Fund in October, November or December of any calendar year (but not distributed
in that year), payable to shareholders of record on a specified date in such a
month, will be deemed to have been received by the shareholders on December 31
of such calendar year provided that the dividend is actually paid by the Fund
during January of the following year. Ordinary income distributions may be
eligible in part for the 70% dividends received deduction for corporate
shareholders. Any loss with respect to shares that were held for six months or
less will be treated as a long-term capital loss to the extent of any long-term
capital gains distributions received from the Fund with respect to such shares.
Distributions and the proceeds of redemptions may in certain limited
circumstances be subject to backup withholding at the rate of 31%. For a fuller
description of tax consequences to shareholders, see "Net Asset Value,
Dividends, Capital Gains Distributions and Taxes - Taxation of Shareholders" in
the Statement of Additional Information on page 6.
PURCHASE OF SHARES
TERMS OF PURCHASE. The Fund's shares are sold on a continuous basis. Investors
in all three classes of shares may open an account by making an initial
investment of $1,000. Subsequent investments of at least $250 may be made. The
minimum in each instance is waived for an individual retirement account ("IRA").
There are no minimums for shares purchased under an Automatic Investment
Plan.The Fund reserves the right to waive or change minimums or to decline any
order to purchase its shares. Your initial purchase of either Class A, B or C
shares must be made through a broker or dealer having a sales agreement with the
Distributor. Sales of all classes will be suspended during any period when the
determination of the net asset value is suspended, and may be suspended by the
Board of the Fund whenever the Board judges it to be in the best interest of the
Fund to do so. Share certificates will be issued only upon a shareholder's
written request to the Fund. IRAs or other tax-qualified retirement plans
approved by the Internal Revenue Service are available from the Fund or the
Distributor.
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You may make purchases either through the Distributor or other
participating dealers, or directly through the Fund's transfer agent, State
Street. Shares may be purchased on any day the NYSE is open for business. Shares
are entitled to dividends beginning on the trade date, the day the purchase
order is received.
Your check or money order should be forwarded to the Distributor or to your
participating dealer. Orders received by the Distributor or participating
dealers prior to the close of regular trading on the NYSE are confirmed at the
public offering price determined on that day, provided that the order is
received by the Distributor prior to the Distributor's close of business.
Payment for Fund shares currently is due on the fifth business day after the
trade date (the "settlement date"). Beginning on June 7, 1995, all payments will
be due on the third business day after the trade date. Because the Distributor
or your securities dealer will forward purchasers' funds on the settlement date,
it may benefit from the temporary use of funds where payment is made to it prior
to the settlement date. A confirmation statement of the purchase will be
forwarded by the Fund to the shareholder.
PURCHASES THROUGH STATE STREET. Send your purchase order (by means of the Fund's
Application Form attached to this Prospectus) along with your check or money
order payable to "State Street Bank and Trust Company" to The Burnham Fund Inc.,
[Name of Class], c/o State Street Bank and Trust Company, P.O. Box 8505, Boston,
Massachusetts 02266-8505. Orders sent directly to State Street, with payment,
will be executed at the offering price next determined after the order is
accepted.
INITIAL SALES CHARGES (CLASS A SHARES). Class A shares are sold at an "Offering
Price" (equal to net asset value plus the initial sales charge) applicable to
purchases made at one time by a single purchaser, by an individual, his or her
spouse and their children under age 21, or by a single trust account, based on
the net asset value per share plus a maximum initial sales charge of 5% of the
Offering Price, which declines to 0% of the Offering Price, depending upon the
amount invested, as follows:
<TABLE>
<CAPTION>
DEALER CONCESSION
AS A % OF AS A % OF AS A % OF
OFFERING PRICE NET ASSET OFFERING PRICE
OF SHARES VALUE OF SHARES OF SHARES
AMOUNT INVESTED PURCHASED PURCHASED PURCHASED*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000...................................5.00% 5.26% 4.50%
$50,000 but less than $100,000......................4.50% 4.71% 4.00%
$100,000 but less than $250,000.....................4.00% 4.17% 3.50%
$250,000 but less than $500,000.....................3.00% 3.09% 2.75%
$500,000 but less than $1,000,000...................2.00% 2.04% 1.75%
$1,000,000 or more**................................0.00% 0.00% 0.00%
</TABLE>
* The entire sales charge may be re-allowed to dealers who achieve certain
levels of sales or who have rendered coordinated sales support efforts. Such
dealers may be deemed to be "underwriters."
**See "Purchases of Class A Shares of $1 Million or More".
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, and the distributor will pay authorized dealers an amount equal to
1% of the first $2 million of such purchases, plus .8 of 1% of the next $1
million, plus .40 of 1% on amount over $3 million. A CDSC will be imposed on the
proceeds of the redemptions of shares purchased aggregating $ 1 million or more
if they are redeemed within 24 months of the end of the calendar month of their
purchase, in an amount equal to 1% if the redemption occurs within the first 12
months and equal to .50 of 1% if the redemption occurs within the next 12
months, of the lesser of (a) the net asset value of the shares at the time of
purchase or (b) the net asset value of the shares at the time of redemption.
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The CDSC will be deducted from the redemption proceeds otherwise payable to the
shareholders and will be retained by the Distributor.
WAIVERS OF SALES CHARGE (CLASS A SHARES). Class A shares may be purchased at net
asset value, without an initial sales charge, by or on behalf of any officer,
director, account executive or full-time employee (or a member of the immediate
family of any such person) of the Fund, the Adviser or the Distributor, or any
company affiliated with the Adviser or the Distributor, or by or on behalf of
any employee (or a member of the immediate family of any employee) of any NASD
member. Class A shares purchased by any employees' trusts, pension,
profit-sharing or other employee benefit plan for employees of the Distributor
and its affiliates or of any NASD member are sold at their net asset value,
without an initial sales charge. The sales charge will also be waived for
individuals purchasing Class A shares with the proceeds of distributions from
tax-deferred savings plans and retirement plans of firms that are or were NASD
members. However, any such Class A shares redeemed within 90 days of purchase
will be subject to a sales charge (payable upon redemption to the Distributor)
at the rate otherwise applicable to purchases of the Class A shares on the
lesser of the net asset value of such shares at the time of purchase or the net
asset value of such shares at the time of redemption. The Fund may waive the
initial sales charge with respect to Class A shares for shareholders of
unaffiliated funds that charge a front-end sales charge upon redemption of the
unaffiliated fund shares within 90 days of purchase upon proof (satisfactory to
the Fund) of such purchase. In order to qualify for this option please contact
the Distributor. The sales charge will be waived for purchases by trust
companies and bank trust departments for funds over which they exercise
exclusive discretionary investment authority and charge an account management
fee and which are held in a fiduciary, agency, advisory, custodial or similar
capacity; and purchases by registered investment advisers for their clients for
whom they charge an account management fee. No such sales charge will be imposed
on any increase in net asset value, or on dividends or capital gain
distributions, or on reinvestment of distributions in additional Class A shares.
In determining whether the sales charge is payable, it will be deemed that the
first Class A shares redeemed are those, if any, on which a sales charge was
paid at the time of purchase, and that the remaining Class A shares are redeemed
in the order in which they were purchased. Class B and C shares will not be sold
to investors who qualify to purchase Class A shares at net asset value.
RIGHTS OF ACCUMULATION (CLASS A SHARES). The scale of reduced sales charges set
forth above for purchases of Class A shares is applicable on a cumulative basis
to qualifying purchases if the dollar amount thereof plus the value of the Class
A shares then held of record by the purchaser is $50,000 or more. In such event,
the sales charge on the Class A shares being purchased will be at the rate
applicable to the aggregate amount in accordance with the scale set forth above.
Although the Distributor's policy is to give investors the lowest commission
rate possible under the sales charge structure, there can be no assurance that
an investor will receive the rights of accumulation to which he may be entitled
unless, at the time of placing his purchase order, the investor or the dealer
through whom he has purchased his shares makes a request for the discount and
gives the Distributor sufficient information to determine and confirm whether
the purchase will qualify for the discount. The rights of accumulation may be
amended or terminated at any time as to all purchases occurring thereafter.
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 purchase
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 prior to the signing of the Letter of
Intent may be included in such total amount and
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will be valued on the date of the Letter of Intent. The Letter of Intent will
not be a binding obligation on either the purchaser or the Fund. During the
period of the Letter of Intent, State Street 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 Letter of Intent is reduced. These shares will
be released upon completion of the intended investment. If the total Class A
shares stated in 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.
REDUCED SALES CHARGES FOR GROUP PURCHASES AND EXISTING SHAREHOLDERS
GROUP PURCHASES (CLASS A SHARES). A reduced sales charge is available to
employees (and partners) of the same employer as a group, provided that each
participant makes the required initial minimum investment. The sales charge
applicable to each participant of such a group will be determined in accordance
with the table set forth below under "Reduced Sales Charges -- Class A Shares,"
based on the aggregate sales of Class A shares to, and shares holdings of, all
members of the group. To be eligible for such reduced sales charges, all
purchases must be pursuant to an employer or partnership-sanctioned plan meeting
certain requirements: one such requirement is that the plan must be open to
specified partners or employees of the employer and its subsidiaries, if any.
Such plan may, but is not required to provide for payroll deductions, IRAs or
investments pursuant to retirement plans under Section 401 or 408 of the Code.
The Distributor may also offer a reduced sales charge for aggregating
related fiduciary accounts under such conditions that the Distributor will
realize economies of scale in its sales efforts and sales-related expenses.
A qualified purchase is one that (i) relates to an investment in the Fund
held for more than six months, (ii) is not made solely for the purpose of
acquiring shares at a discount, and (iii) satisfies certain uniform criteria
that enable the Distributor to realize economies of scale in its costs and
expenses of the distribution of Fund shares. A qualified group must have more
than 10 members, must make those members available for group meetings with
representatives of the Fund and must agree to include sales materials and other
materials relating to the Fund in its publications or other regular periodic
communications to its members at no cost to the Distributor (other than its
normal expenses associated with the production, printing and distribution of
such materials).
In order to obtain such reduced sales charge, the purchaser must provide
sufficient information at the time of purchase to permit verification that the
purchase qualifies for the reduced sales charge. Approval of group purchases at
a reduced sales charge is subject to the discretion of the Distributor.
EXISTING SHAREHOLDERS (CLASS A SHARES). The Board has determined until further
notice that shareholders who purchased Class A shares before April 28, 1995
("existing Class A shares") are subject to a reduced initial sales charge of up
to 3% for Class A shares.
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<TABLE>
<CAPTION>
DEALER CONCESSION OR
AS A PERCENTAGE AS A PERCENTAGE AGENCY COMMISSION
OF OFFERING PRICE OF NET ASSET VALUE AS A PERCENTAGE OF
AMOUNT INVESTED OF SHARES PURCHASED OF SHARES PURCHASED OFFERING PRICE*
- --------------- ------------------- ------------------- ---------------
<S> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.50%
$100,000 but less than $250,000 2.75% 2.83% 2.25%
$250,000 but less than $500,000 2.25% 2.30% 1.75%
$500,000 but less than $1,000,000 1.75% 1.78% 1.50%
$1,000,000 or more 0.00% 0.00% 0.00%
</TABLE>
* The entire sales charge may be re-allowed to dealers who achieve certain
levels of sales or who have rendered coordinated sales support efforts. Such
dealers may be deemed to be "underwriters." The third column sets forth the
dealer concession received by dealers other than the Distributor for selling
Class A shares. The Distributor retains the balance of the initial sales charge.
CLASS B SHARES 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 the Fund are redeemed within six years after the end
of the calendar month in which a purchase order for Class B shares was accepted,
a CDSC will be imposed by applying the appropriate percentage indicated below to
the lesser of: (1) the net asset value of such shares at the time of purchase or
(2) the net asset value of such shares at the time of redemption. The CDSC will
be deducted from the redemption proceeds otherwise payable to the shareholder
and retained by the Distributor. The CDSC to be imposed on such share
redemptions will be assessed according to the following schedule:
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE ORDER APPLICABLE CLASS B
OF LESS THAN $250,000 CONTINGENT DEFERRED
WAS ACCEPTED SALES CHARGE
- ------------ ------------
<S> <C>
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
</TABLE>
Class B shares purchased before April 28, 1995 ("existing Class B shares")
are subject to no CDSC unless shares are redeemed within eighteen (18) months of
their purchase in which case a CDSC of 1.25% will be imposed.
CONVERSION OF CLASS B SHARES. Class B shares will automatically convert to Class
A shares of the 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
purchased Class B shares in the shareholder's account. For the purposes of
calculating the holding period, Class B shares will be deemed to have been
issued on the date on which the issuance of Class B shares occurred. 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.
Only Class B shares have this conversion feature. 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
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suspended, and Class B shares would continue to be subject to the Class B
distribution fee until redeemed. The Fund intends voluntarily to allow existing
Class B shares to have the conversion privilege permitting holders of existing
Class B shares to convert to Class A shares as described above.
CLASS C SHARES PURCHASES. Purchases of Class C shares will be processed at net
asset value next determined after receipt of your purchase order for less than
$1,000,000. Class C shares are not subject to an initial sales charge but may be
subject to a CDSC upon redemption.
If Class C shares are redeemed within one year after the end of the
calendar month in which a purchase order for Class C shares was accepted, a CDSC
of 1.00% is imposed on the lesser of (1) the net asset value of such shares at
the time of purchase or (2) the net asset value of such shares at the time of
redemption. The CDSC will be deducted from the redemption proceeds otherwise
payable to the shareholder and will be retained by the distributor.
EXEMPTIONS FROM CDSC (ALL CLASSES). No CDSC will be imposed when a shareholder
redeems Class A, B or C shares in the following instances: (a) 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) shares
acquired through reinvestment of income dividends or capital gains
distributions; (c) Class A shares purchases in the amount of $1 million or more
held for more than 24 months, Class B shares held for more than six years or
Class C shares held for more than one year from the end of the calendar month in
which the purchase order was accepted.
The CDSC will not apply to purchases of Class A shares at net asset value
described under "Waivers of Initial Sales Charge" above and will be waived in
the case of redemptions of Class A, B and C shares in connection with (i)
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"), (ii)
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 (iii) following the death or disability of a shareholder. If the Board
determines to discontinue the waiver of the CDSC, the disclosure in the Fund's
Prospectus will be appropriately revised.
In determining whether the Class A, B or C shares CDSC is payable, it will
be 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, B or C
shares if within 90 days after such redemption, the proceeds are invested in the
same Class of shares of the Fund.
OTHER DEALER COMPENSATION. The Distributor may provide additional non-cash
compensation to dealers in connection with the sale of shares to the extent
permitted by the NASD Rules of Fair Practice established from time to time which
include gifts currently not exceeding $100 per year, occasional meals, tickets
to entertainment events and payments or reimbursements in connection with
meetings held by the Fund or a dealer for training and educational purposes.
REDEMPTION OF SHARES
An investor of the Fund may redeem shares on any day the Fund is open for
business - normally when the NYSE is open - using the proper procedures
described below. See "Net Asset Value" in the Statement of Additional
Information for a listing 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 participat-
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ing dealer who will assist you with your redemption. Requests received by your
dealer prior to 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 and will receive the net asset value of the shares
being redeemed which is next determined after the request is 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 an eligible
guarantee. Eligible guarantors include member firms of a national securities
exchange, certain banks and saving associations, 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 prior to 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. In the case of redemption
requests by a corporation, trust fiduciary, executor or administrator, where the
name and title of the individual(s) authorizing such redemption is not shown in
the account registration, a copy of the corporate resolution or other legal
documentation appointing the authorized signer and certified within the prior 60
days must accompany the redemption request. Shareholders may obtain from the
Distributor, the Fund or the Transfer Agent, forms of resolutions and other
documentation which have been prepared in advance to assist in your compliance
with the Fund's procedures.
If you do hold certificates for your shares, you must submit your duly
endorsed certificates with an appropriate guarantee of the signature(s) on the
certificates in addition to your written instructions, and in accordance with
the requirements listed below.
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 Fund.
TERMS OF REDEMPTION. The amount of your redemption proceeds will be based on the
net asset value per share next computed after the Distributor, the Fund 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. If you have
purchased shares by check, your redemption proceeds and any from which any
applicable CDSC will have been deducted, will normally be mailed or wired the
day after your redemption is processed. Your redemption proceeds may be delayed
until the check used to make the purchase 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 only redeem their shares through that firm. The
Fund is prepared to redeem its shares on any day the NYSE is open for business.
However, 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 the Fund
normally uses is restricted or an emergency exists, as determined by the
Commission, so that disposal of the 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.
If a certificate presented for redemption or a redemption request
represents all shares you own except for additional shares of less than $100
value for which no certificates were issued, those additional shares will also
be redeemed unless you specifically exclude them in writing when you make your
redemption request.
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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 60
calendar days after such redemption and the account meets the minimum account
size. This privilege may be modified or terminated at any time by the Fund.
In order to obtain such privilege, the shareholder must clearly indicate by
written request to the Fund that the purchase represents a reinvestment of a
prior redemption of Class A shares. If a shareholder realizes a capital gain on
redemption of its shares, such gain is taxable for Federal income tax purposes
even though all of such proceeds are reinvested. If a shareholder incurs a
capital loss on a redemption and reinvests the proceeds in the Fund, part or all
of such loss may not be deductible for such purposes.
The reinstatement privilege may be used by shareholders once, irrespective
of the number of shares redeemed or repurchased, except that the privilege may
be used without limit in connection with transactions for the sole purpose of
transferring a shareholder's interest in the Fund to his or her Individual
Retirement Account or other tax-qualified retirement plan account.
The Fund reserves the right to redeem your account if its value is less
than $500 due to redemptions. The Fund will give the shareholder 30 days' notice
to increase the account value to at least $500. Redemption proceeds will be
mailed.
ORGANIZATION OF THE FUND
The Fund was originally organized as a Delaware corporation in 1960; on
September 7, 1989, it was reincorporated in Maryland under the name The Burnham
Fund Inc.
As permitted under Maryland corporate law, the Fund does not hold annual
meetings of shareholders. There normally are no meetings of shareholders for the
purpose of electing directors. At such time as less than a majority of the
directors holding office has been elected by shareholders, the directors then in
office will call a shareholders' meeting for the election of directors.
Applicable law requires the Secretary to call a meeting of shareholders when
requested in writing to do so by the holders of record of not less than 25% of
the Fund's outstanding shares. In addition, the Board will call a meeting of
shareholders for the purpose of voting upon the question of removal of any
director or directors when requested in writing to do so by the record holders
of not less than 10% of the Fund's outstanding shares.
The Fund has an authorized capital of 40 million shares of common stock,
par value $.10 per share, which are presently divided into four classes of
shares, of which three classes are presently issued by the Fund. Shares of one
class are not convertible into, or exchangeable for, shares of any other class.
Each class of shares represents an identical interest in the Fund's
investment portfolio. As such, they have the same rights, privileges and
preferences, except with respect to the:
(a) designation of each class, (b) effect of the respective sales charges, if
any, for each class, (c) distribution fees borne by each class, (d) expenses
allocable exclusively to each class, and (e) voting rights on matters
exclusively affecting a single class of the Fund. When issued, the shares of
each class are fully paid and nonassessable and have no preemptive, conversion
or exchange rights. The shares are transferable without restriction. The Board
of Directors is authorized to classify or reclassify any unissued shares of
stock of the Fund and to increase or decrease the number of authorized shares of
any class, without shareholder approval.
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MANAGEMENT
Under the laws of the State of Maryland, the board of directors is responsible
for managing the business and affairs of the Fund. Acting pursuant to an
Investment Advisory Agreement entered into with the Fund, Burnham Asset
Management Corporation (the "Adviser") serves as the investment manager of the
Fund. Its principal place of business is 1325 Avenue of the Americas, 17th
Floor, New York, New York 10019. The Adviser has been providing investment
advisory services to the Fund since 1989.
The Adviser provides research and statistical services and makes investment
recommendations to the Fund. Together with the Distributor, the Adviser supplies
a staff trained in accounting and shareholder services to aid in the Fund's
administration and day-to-day operations. For the Fund's fiscal year ended
December 31, 1994, the fee paid to the Adviser was paid monthly based on an
annual rate of 0.625 of 1% of the Fund's average daily net asset values.
The Adviser will assume expenses of each class of the Fund in the event
that aggregate ordinary expenses incurred in any fiscal year exceed the most
restrictive expense limitations imposed upon the Fund in states in which shares
are then eligible for sale. Currently, the most restrictive expense limitation,
which excludes certain distribution fees from operating expenses, is 2 1/2% of
the first $30 million of average net assets, 2% of the next $70 million of
average net assets and 1 1/2% of the remaining average net assets. The Adviser
has agreed to voluntarily reimburse expenses of Class A, B and C shares in order
to limit such expenses (as defined above.) The Adviser reserves the right to
discontinue this policy at any time.
INVESTMENT MANAGEMENT. The Adviser utilizes an Investment Committee which is
comprised of five members of the Adviser to supervise and provide investment
management to the Fund. The investment management of the Fund involves four
closely related activities: economic research, industry and company analysis,
portfolio recommendation and investment action-the decision to buy, sell or hold
securities.
Mr. I.W. Burnham, II has the primary responsibility for the day-to-day
management of the Fund's investment portfolio. Mr. Burnham is the President,
Chief Executive Officer and Director of the Fund. He has functioned in his role
as portfolio manager with the Fund since 1975. Currently, Mr. Burnham is
Honorary Chairman of the Adviser and Distributor.
DISTRIBUTION
PRINCIPAL DISTRIBUTOR. Burnham Securities Inc. serves as principal distributor
of shares of the Fund on a "best efforts" basis. Subject to review by the Board
of Directors, the Fund executes certain purchases and sales of portfolio
securities through the Distributor.
DISTRIBUTION PLAN. Each Class of shares of the Fund has adopted a Distribution
Plan and Agreement (the "Plan(s)") pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Under the Plans, Class A, B and C shares of the Fund are
authorized to pay the Distributor a distribution fee for expenses incurred in
connection with the distribution of shares of the Fund and for shareholder
servicing.
Each Plan provides that the Fund will pay the Distributor a distribution
fee based on the average daily net asset value of the relevant class of the
Fund's shares, as compensation in connection with the promotion, offering and
sale of the shares, and related activities. The Plans are classified as
"compensation plans" because the Fund will pay the distribution fees regardless
of the amount of actual distribution expenses. To the extent that the
distribution fees exceed the actual distribution expenses of the Distributor,
any excess may be considered direct compensation to the Distributor. At any
given time, the Distributor may incur expenses in distributing shares of the
Fund which are in excess of the total payments made by the Fund pursuant to the
Plans. Because there is no requirement under the Plans that the Distributor be
reimbursed for all its expenses or any
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requirement that the Plans be continued from year to year, this excess amount
does not constitute a liability of the Fund. For a further description of the
Plans, see "Investment Management and Other Services -- Distribution Plans" in
the Statement of Additional Information on page 10.
CLASS A SHARES. Class A shares of the Fund pay the Distributor a distribution
fee at an annual rate of 0.25% of the average daily net asset value of Class A
shares.
CLASS B SHARES. Class B shares of the Fund pay the Distributor a distribution
fee at the annual rate of 0.75% of the average daily net asset value of Class B
shares. Class B shares will also pay a service fee at the annual rate of 0.25%
of the average daily net asset value of Class B shares.
Dealers will receive from the Distributor a fee equal to 5% of the gross
proceeds from the sale of Class B shares at the time a sale is settled. Pursuant
to the Plan for Class B shares and the related selling and service agreement,
commencing at the end of the 1st calendar quarter following each sale, Dealers
will be paid quarterly payments equal to 0.25% per annum of the average daily
net asset value of Class B shares.
CLASS C SHARES. Class C shares of the Fund pay the Distributor a distribution
fee at the annual rate of 0.75% of the average daily net asset value of Class C
shares. Class C shares will also pay a service fee at the annual rate of 0.25%
of the average daily net asset value of Class C shares.
Dealers will receive from the Distributor a fee equal to 1% of the gross
proceeds from the sale of Class C shares at the time a sale is settled. Pursuant
to the Plan for Class C shares and the related service agreement, commencing at
the end of the thirteenth (13th) month following each sale of shares, Dealers
will be paid quarterly payments equal to 0.85% per annum of the average daily
net asset value of Class C shares.
USE OF DISTRIBUTION AND SERVICE FEES. All or a portion of the distribution fees
paid by either Class A, B or C shares of the Fund may be used by the Distributor
to pay costs of printing reports and prospectuses for potential investors and
all or a portion of the distribution and/or service fees may be paid to
broker-dealers or others for the provision of personal continuing services to
shareholders, including such matters as responding to shareholder inquiries
concerning the status of their accounts and assistance in account maintenance
reports such as change in address.
Broker-dealers, financial planners and similar financial intermediaries
that sell shares of the Fund will be compensated differently depending on the
class of shares an investor chooses. In addition, the Distributor or its
affiliates may, from their own resources, and without limitation, compensate
their employees for sales of shares of any class.
SERVICES FOR SHAREHOLDERS
SHAREHOLDER ACCOUNTS. The Transfer Agent maintains a share account that reflects
the current holdings of each shareholder. Share certificates will be issued only
upon specific written requests. Each shareholder is sent a detailed confirmation
for each transaction in shares of the Fund.
PAYMENT OF DIVIDENDS AND DISTRIBUTIONS BY CHECK. Unless you direct otherwise,
your income dividends and capital gains distributions are automatically
reinvested in additional shares of the same class at net asset value on the
ex-dividend date. You may elect to receive payment of all dividends and
distributions by check by contacting your account executive if your account is
maintained at the Distributor, or by giving written notice to the Transfer
Agent. Commencing ten business days after the Transfer Agent receives such
notice, all future dividends and distributions will be paid to you by check.
AUTOMATIC INVESTMENT PROGRAM. You may participate in the Automatic Investment
Program at any time after you have established an account with the Fund. The
Automatic Investment Program gives you the convenience of automatically
investing in the Fund on
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a monthly or quarterly basis. You may choose any amount of at least $50.00 for
automatic investments in your Fund account from your bank account.
Your monthly or quarterly investments will be made by electronic funds
transfer from your bank account if your bank is a member of a National Automatic
Clearing House Association ("NACHA"). This service is subject to the rules of
the bank account, NACHA and the Fund. Presently, there is no charge for this
service. The Fund may modify or terminate this service by written notice to you.
For further details, see the application form attached to this Prospectus
or call State Street (1-(800) 462-2392) or the Distributor (1-(800) 874-FUND).
AUTOMATIC CASH WITHDRAWAL PLAN. An Automatic Cash Withdrawal Plan is available
for shareholders who wish to receive a specific amount of cash either monthly or
quarterly. You may subscribe to this service by contacting your account
executive or by completing an Application Form, or by calling the Distributor at
the telephone numbers set forth on the cover page of this Prospectus, and by
depositing with the Distributor or the Transfer Agent a minimum of $5,000 in
Fund shares at their current net asset value. All dividend and capital gains
distributions will be reinvested.
The Distributor, participating dealers or the Transfer Agent will make
payments to you either monthly or quarterly in amounts of not less than $25. To
provide funds for these payments, the Distributor or the Transfer Agent will
redeem a sufficient number of your shares held in uncertificated form at the net
asset value at the close of business of the NYSE on or about the 20th day of
each payment month (or, if that day is not a regular business day for the NYSE,
then on or about the next regular business day). A check will be mailed to you
not later than seven days following the date the shares are redeemed. Since
withdrawal payments represent the proceeds from the sale of Fund shares, the
amount of the shareholder's investment in the Fund will be reduced to the extent
that withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such sales will be subject to income tax. You
may terminate the Plan at any time by written notice to the Transfer Agent or
the Transfer Agent may terminate the Plan at any time upon receiving directions
to that effect from the Fund. The Transfer Agent will also terminate the Plan
upon receipt of evidence satisfactory to it of your death or legal incapacity.
Upon termination of the Plan by you, the Transfer Agent, or the Fund,
shares remaining unredeemed will be held in an uncertificated account in your
name, and the account will continue as a dividend-reinvestment account unless
and until proper instructions are received from you, your executor or guardian,
or as otherwise appropriate. The Transfer Agent shall incur no liability to you
for any action taken or omitted by the Transfer Agent in good faith. In the
event that State Street shall cease to act as transfer agent for the Fund, you
will be deemed to have appointed any successor tranfer agent as your Agent in
administering the Plan.
RETIREMENT PLANS. Tax-qualified retirement plans and IRAs may invest
contributions thereto in shares of the Fund. Brochures which provide further
information about and include (1) tax-qualified retirement plans, their related
Trust Agreement and application forms, and (2) IRAs, a contribution deposit
form, and the "disclosure" statement required by Treasury regulations, are
available from the Fund by calling the telephone numbers listed on the cover
page of this Prospectus. Investors are urged to consult their own tax advisors
regarding the tax consequences of participation in tax-qualified retirement
plans or IRAs.
You may purchase shares through tax-qualified retirement plans or IRAs only
by sending payment with a properly completed application directly to State
Street, which will provide custodian services. After receipt of payment, State
Street will make all purchases.
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SHAREHOLDER INQUIRIES. You may telephone 1-800-462-2392 for inquiries concerning
the Fund, including purchase and sales of shares of the Fund, as well as
inquiries concerning dividends and account statements. If you prefer, you may
write to State Street Bank and Trust Company, P.O. Box 8505, Boston,
Massachusetts 02266-8505. Inquiries concerning management and investment
policies of the Fund may be directed to Burnham Asset Management Corp., 1325
Avenue of the Americas,17th Floor, New York, New York 10019 or by telephone at
1(800) 874-FUND.
POSSIBLE CONFLICTS OF INTEREST BETWEEN CLASSES. The Board of the Fund has
determined that currently no conflict of interest exists among Class A, B and C
shares of the Fund. On an ongoing basis, the Board shall monitor the Fund for
the existence of any material conflicts of interest among the classes of
outstanding shares. The Board shall take such action as is reasonably necessary
to eliminate any such conflict that may develop.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT. State Street Bank and Trust
Company, P.O. Box 8505, Boston, Massachusetts 02266-8505.
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., 1301 Avenue of the Americas,
New York, New York 10019.
COUNSEL. Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, NY
10022.
APPLICATION TERMS.
TAX IDENTIFICATION NUMBERS. Because of certain changes to the Internal Revenue
Code of 1986, as amended, the failure to provide a tax identification number by
an investor will subject your account to special Federal income tax
withholdings; the law will require the Fund to withhold 31% of each taxable
dividend or capital gain distribution paid to you in cash or reinvested in your
account and will require the Fund to withhold 31% of any redemption. The amount
withheld is paid to the Internal Revenue Service toward the amount of Federal
income taxes you owe. The Fund will not return to you an amount withheld due to
your failure to provide a correct certified number. In addition, you may be
subject to a $50 I.R.S. penalty. Therefore, please include your correct Social
Security number or Taxpayer Identification Number on the Fund Application.
The following sets forth examples of what identification numbers to list:
TYPE OF ACCOUNT TAXPAYER NUMBER
- --------------- ---------------
Individual Account................Social Security Number of Applicant
Joint Account.....................Social Security Number of Person Reporting Tax
Custodian Account for a Minor............Social Security Number of Minor
Corporation, Partnership, Trust,
Estate, Pension, Broker, etc.....Taxpayer Identification Number
Nonresident Alien..........................None Required
MISCELLANEOUS. The terms of the Application shall be construed according to the
laws of the State of New York.
The broker-dealer represented on the Fund Application must have an
effective sales agreement with the Distributor signed by a principal of the
firm. The broker-dealer further represents that it has informed the investor of
the terms and conditions relating to the options elected.
If the investor does not sign the Application, the broker-dealer represents
that the form is completed in accordance with the investor's instructions and
agrees to indemnify the Fund, its servicing agent, and the Distributor for any
loss or liability resulting from acting upon such instructions.
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TABLE OF CONTENTS
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Fee Table ........................................ 2
Hypothetical Investment .......................... 2
Financial Highlights ............................. 3
The Fund ......................................... 4
The Fund's Investment Objectives and Policies .... 4
Alternative Purchase Arrangements ................ 4
Risk Factors ..................................... 6
Net Asset Value, Dividends, Capital Gains
Distributions and Taxes ....................... 7
Purchase of Shares ............................... 8
Redemption of Shares ............................. 13
Organization of the Fund ......................... 15
Management ....................................... 16
Distribution ..................................... 16
Services for Shareholders ........................ 17
</TABLE>
Prospectus
April 28, 1995
No dealer, salesman or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
in connection with the offer contained in this Prospectus, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund, the Adviser, or the Distributor. This
Prospectus does not constitute an offering in any state in which such offering
may not lawfully be made.
- ----------------------------------------------------------------
CONTINUITY KNOWLEDGE
[PHOTOGRAPH OF CLOCK] [PHOTOGRAPH OF CHESS PIECE]
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GROWTH INCOME
- ---------------------------------------------------------------
[PHOTOGRAPH OF STEPS] [PHOTOGRAPH OF COINS]
BURNHAM SECURITIES INC.
PRINCIPAL DISTRIBUTOR
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[LOGO] GENERAL APPLICATION FORM
THIS APPLICATION WILL NOT ESTABLISH AN IRA OR QUALIFIED RETIREMENT PLAN
Please use this form if you would like to purchase The Burnham Fund shares
through Burnham Securities Inc. (The Burnham Fund's distributor) or through
State Street Bank and Trust Company (The Burnham Fund's transfer agent). If you
are a customer of another investment firm or financial intermediary, contact
your account executive. FOR AN IRA, A MONEY PURCHASE PENSION PLAN OR A PROFIT
SHARING PLAN APPLICATION YOU CAN CALL BURNHAM SECURITIES INC. TOLL-FREE AT
1-800-874-FUND OR STATE STREET BANK AND TRUST COMPANY AT 1-800-462-2392.
[ ] EXISTING ACCOUNT NUMBER ______________________________ [ ] NEW ACCOUNT
1. OPENING YOUR ACCOUNT
Be sure to consult the Fund's prospectus under "Purchase of Shares" for details
regarding sales charges, Rights of Accumulation, Letters of Intent and minimum
purchase requirements. Letters of intent may be submitted with this application
or within 90 days of this initial purchase. If you are establishing a Letter of
Intent (available for Class A Shares only) please check this box [ ].
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PURCHASE METHOD (Check one only) [ ] CLASS A SHARES (FRONT-END SALES CHARGE)
[ ] CLASS B SHARES (CONTINGENT DEFERRED SALES CHARGE) [ ] CLASS C SHARES (LEVEL-CONTINGENT DEFERRED SALES CHARGE)
CHECK IS ENCLOSED FOR: $____________________________________ Minimum initial requirement is $1,000 (unless
otherwise provided in the Prospectus). For Letter of Intent the minimum must equal 5% of the intended amount.
PLEASE MAKE YOUR CHECK PAYABLE TO "STATE STREET BANK AND TRUST COMPANY" AND MAIL TO: P.O. BOX 8505, BOSTON, MA 02266-8505.
PLEASE INDICATE CLASS A, B OR C ON YOUR CHECK.
2. ACCOUNT REGISTRATION
[ ] INDIVIDUAL _____________________________________________________________________________________________________________
First Name, Middle Initial, Last Name
[ ] JOINT OWNER(S) ______________________________________________________________________________________________________________
(if Applicable) First Name, Middle Initial, Last Name
______________________________________________________________________________________________________________
(if Applicable) First Name, Middle Initial, Last Name
JOINT TENANCY WITH RIGHTS OF SURVIVORSHIP WILL BE PRESUMED UNLESS OTHERWISE SPECIFIED.
[ ] UGMA/UTMA LIST ONLY ONE CUSTODIAN AND ONE MINOR PER ACCOUNT. PROVIDE MINOR'S SOCIAL SECURITY NUMBER
________________________________________________________________________________________________________________________
Custodian's First Name, Middle Initial, Last Name
________________________________________________________________________________________________________________________
Minor's First Name, Middle Initial, Last Name
[ ] UNIFORM GIFTS TO MINORS ACT [ ] UNIFORM TRANSFERS TO MINORS ACT UNDER THE STATE WHERE THE GIFT IS MADE:_______
---------- - ------- - ---------- ----- - ---------------------
(Social Security Number) (Tax Identification Number)
[ ] CORPORATION, PARTNERSHIP, IF CORPORATION, A CERTIFIED COPY OF THE CORPORATE RESOLUTION MUST BE PROVIDED WITH THIS APPLICATION.
OR OTHER ENTITY
____________________________________________________________________________________________________________
(Print Exact Name of the Organization)
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[ ] TRUST IF A TRUST, A CERTIFIED COPY OF THE TRUST AGREEMENT MUST BE PROVIDED WITH THIS APPLICATION.
NAME OF TRUST: ______________________________________________________________________________________
DATE OF TRUST INSTRUMENT (MO. - DAY - YR.): _____-_____-_____
NAME OF TRUSTEE(S): _________________________________________________________________________________
FOR THE BENEFIT OF: __________________________________________________________________________________
3. MAILING ADDRESS
( )
____________________________________________________ ________________________
Street Address Business Phone
( )
____________________________________________________ ________________________
City State Zip Code Home Phone
[ ] U.S. Citizen [ ] Non-U.S. Citizen [ ] U.S. Citzen Abroad (Country:______________________________________)
4. DIVIDENDS AND CAPITAL GAINS All distributions will be reinvested into the Fund
unless you elect otherwise.
[ ] REINVEST ALL INCOME DIVIDENDS AND CAPITAL GAINS
[ ] CASH PAYMENT FOR INCOME DIVIDENDS AND CAPITAL GAINS
[ ] REINVEST ONLY CAPITAL GAINS AND PAY INCOME DIVIDENDS IN CASH
CASH DISTRIBUTIONS WILL BE MAILED TO ADDRESS OF RECORD UNLESS YOU INDICATE OTHERWISE UNDER "PAYMENTS TO OTHERS".
5. DEALER/BROKER INFORMATION Please have your broker agent complete thr following:
DEALER NAME:____________________________________________________________________________________________________________
DEALER ADDRESS (BRANCH OFFICE):_________________________________________________________________________________________
______________________________________________________ ____________________________________________________________
City, State, Zip Dealer Branch Office # Phone #
______________________________________________________ ____________________________________________________________
Dealer Authorization Signature REP # Rep Last Name, First Name
_______________________________________
Dealer Code (If unknown, leave blank)
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6. SHAREHOLDER ACCOUNT OPTIONS
[ ] A. COMBINED PURCHASE AND RIGHTS OF ACCUMULATION (ROA)(CLASS A SHARES ONLY)
Shares may be purchased at the offering price applicable to the total of
(a) dollar amount then being purchased plus (b) the combined holdings
(valued at their current offering price) of the purchaser, his or her
spouse, their children under the age of 21 and certain others of shares
of the Fund as stated in the Prospectus. In order for this cumulative
quantity discount to be made available, the shareholder or his or her
securities dealer must disclose the shareholder's total holdings in the
Fund each time an order is placed.
LIST THE RELATED ACCOUNT INFORMATION, EMPLOYER'S INFORMATION OR THE FUND
ACCOUNT NUMBER(S) THAT YOU OR YOUR IMMEDIATE FAMILY
ALREADY OWN:___________________________________________________________
[ ] B. LETTER OF INTENT (CLASS A SHARES ONLY)
I agree to the statement of intention and escrow terms set forth under
"Letter of Intent" in the Prospectus. Although I am not obligated to do
so, it is my intention to make investments over a 13 month period in
shares of The Burnham Fund Inc. which will equal or exceed:
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[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
Purchases made within the last 90 days will be included.
EXISTING ACCOUNT NUMBER(S)____________________________________________________________________________
[ ] C. NAV PURCHASES (INCLUDE EMPLOYEE OR BROKER NUMBER OF PERSON THROUGH WHOM ELIGIBILITY IS CLAIMED)
</TABLE>
[ ] Check this box if you are an officer, director, account executive or
full-time employee (or an immediate family member of any such person) of
The Burnham Fund Inc., Burnham Asset Management Corporation, Burnham
Securities Inc. or any affiliate thereof.
[ ] Check this box if you are any employee of an NASD member firm. If
checked, please state name and address of your
employer:______________________________________________________________
[ ] D. AUTOMATIC CASH WITHDRAWAL PLAN (FOR ACCOUNTS OF $ 5,000 OR MORE)
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<S> <C>
You are hereby authorized and instructed to send a check for $___________________________________________minimum $25)
[ ] Monthly, on approximately the 20th day OR [ ] Quarterly, on approximately the 20th day of January, April, July and
October
[ ] CHECK THIS BOX and complete Section 7 "Payments to Others" ONLY IF your withdrawal check is to be made payable
to person(s) other than registered owner. PAYEE:_______________________________________________________________________
[ ] E. AUTOMATIC INVESTMENT PROGRAM
[ ] You are hereby authorized and instructed to draw on my bank account, on approximately
THE [ ] 5TH OR [ ] 15TH of the following Month:___________________________________ and be repeated
($50 monthly minimum)
[ ] each month OR [ ] each quarter until further notice.
</TABLE>
The amount of each investment (NOT INCLUDING THE INITIAL INVESTMENT
SHOWN ABOVE) SHOULD BE $____________ .
* If the 5th or 15th of the month is not a business day, the withdrawal
from your bank account will be made on the next business day. (The
investment in the Fund will be made within 3 business days after each
withdrawal).
PLEASE COMPLETE BANK INFORMATION ON THE FOLLOWING PAGE IF YOU ARE
PARTICIPATING IN THE AUTOMATIC INVESTMENT PROGRAM.
<PAGE>
BANK INFORMATION: NOTE: YOUR BANK MUST BE A MEMBER OF NACHA (SEE "SERVICES FOR
SHAREHOLDERS - AUTOMATIC INVESTMENT PROGRAM" IN THE PROSPECTUS). PLEASE CALL
YOUR BANK IF YOU ARE UNSURE.
_______________________________________________________________________________
Bank Name and Branch Address
___________________________________ _________________________________________
City State Zip Code Bank Transit Routing Number (ABA Number) *
* This nine digit-number used to identify your bank to the NACHA can be found on
the lower left-hand corner of your bank check or deposit slip. If your account
is with a Savings Bank or Credit Union, you must contact the institution to
obtain their ABA Number.
<TABLE>
<S> <C>
TYPE OF BANK ACCOUNT: (CHECK ONE)
[ ] CHECKING ACCOUNT [ ] NOW ACCOUNT/ MONEY MARKET DEPOSIT [ ] SAVING ACCOUNT**
BANK ACCOUNT NUMBER:____________________ ** Passbook Savings accounts are NOT eligible.
</TABLE>
7. PAYMENTS TO OTHERS Complete if checks are to be made payable to someone
other than the registered owner(s).
[ ] DISTRIBUTION CHECKS [ ] SYSTEMATIC WITHDRAWAL CHECKS
MAKE CHECKS PAYABLE TO:
______________________________________________________________________
(First Name) (Middle Initial) (Last Name)
_____________________________________________________________________
(Street Address) (Apt #)
__________________________ ________________________________________
(City) (State) (Zip Code) (Account Number, if applicable)
PLEASE MAKE PAYMENTS TO THE FOLLOWING BANK ACCOUNT:
NAME OF DEPOSITOR (as it appears on Bank Records)_____________________
BANK A/C NO. (Attach a voided check)_________________________________
SIGNATURE GUARANTEE (if required)_____________________________________
8. TAXPAYER INDENTIFICATION NUMBER/SIGNATURE(S)
IN ACCORDANCE WITH THE LAW, UNLESS THIS FORM IS COMPLETED AND SIGNED, YOUR
ACCOUNT WILL BE SUBJECT TO A 31% BACKUP WITHHOLDING.
PART 1. TAXPAYER IDENTIFICATION NUMBER:
Please enter the taxpayer identification number in the appropriate area. For
most individual taxpayers this is the social security number.
-------- - ----- - --------- -------- - ----- - ---------
SOCIAL SECURITY NUMBER TAXPAYER IDENTIFICATION NUMBER (TIN)
PART 2. BACKUP WITHHOLDING: [ ] Check the box if you are not subject
to backup withholding because (1) you have not been notified that you are
subject to backup withholding as a result to report all interest or dividends
(2) the Internal Revenue Service has notified you that you are no longer subject
to backup withholding.
CERTIFICATION: Under penalties of perjury, I certify that the information
provided on this form is true, correct and complete.
x
____________________________________________ _________________
SIGNATURE DATE
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THE BURNHAM FUND INC. (the "Fund") is a diversified, open-end management
investment company whose principal investment objective is capital appreciation,
mainly long-term. Income is also considered but is of lesser importance.
Burnham Asset Management Corporation (the "Adviser"), an affiliate of Burnham
Securities Inc. (the "Distributor"), serves as investment adviser.
This Statement of Additional Information, which should be kept for future
reference, is not a prospectus. It should be read in conjunction with the
Prospectus of the Fund, dated April 28, 1995, which can be obtained without cost
by contacting the dealer through whom you purchased shares or by calling or
writing the Distributor at the telephone number and address printed on this
page. This Statement of Additional Information is intended to provide you with
additional information regarding the activities and operations of the Fund.
The Fund offers alternative purchase arrangements that provide investors with
the option of purchasing shares (i) subject to a front-end sales charge and a
Rule 12b-1 plan distribution fee ("Class A shares"); (ii) subject to a
contingent deferred sales charge ("CDSC") if held for less than six years, a
Rule 12b-1 plan distribution fee and a service fee ("Class B shares"); or (iii),
subject to a CDSC if held for less than one year, a Rule 12b-1 plan distribution
fee and a service fee ("Class C shares"). The Fund's multi-class distribution
system is described more fully in the Prospectus under the headings "Alternative
Purchase Arrangements," "Purchase of Shares - Terms of Purchase," "Redemption of
Shares," and "Distribution - Distribution Plans."
Reference is made to the Fund's investment objectives and policies set forth in
the Fund's Prospectus under the heading "The Fund's Investment Objectives and
Policies." The Fund's investment techniques and investment restrictions are set
forth herein.
BURNHAM Securities Inc.
PRINCIPAL DISTRIBUTOR
1325 Avenue of the Americas, 17th Floor,
New York, New York 10019
Call Toll Free - 1-800-874-FUND
April 28, 1995
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INVESTMENT TECHNIQUES
In seeking to achieve its investment objectives, the Fund may, to a limited
extent, purchase listed put and call options, write "secured" listed put and
"covered" listed call options, invest in foreign securities and warrants and
lend its portfolio securities.
WARRANTS. The Fund may invest in warrants, subject to the limitations described
below. The holder of a warrant has the right to purchase a given number of
shares of a particular company at a specified price until expiration. Such
investments generally can provide a greater potential for profit or loss than
investment of an equivalent amount in the underlying common stock. The prices of
warrants do not necessarily move parallel to the prices of the underlying
securities. If the holder does not sell the warrant, he risks the loss of his
entire investment if the market price of the underlying stock does not, before
the expiration date, exceed the exercise price of the warrant plus the cost
thereof. It should be understood that investing in warrants is a speculative
activity. Warrants pay no dividends and confer no rights (other than the right
to purchase the underlying stock) with respect to the assets of the corporation
issuing them. The Fund may not invest more than 5% of the value of its net
assets in warrants, or invest more than 2% of the value of its net assets in
warrants not traded on a national securities exchange. However, these
restrictions on the purchase of warrants by the Fund do not apply to warrants
attached to or otherwise included in a unit with other securities.
OPTIONS. To maximize potential gains, which, however, may also result in greater
losses, from a given commitment of investment dollars, the Fund may purchase
listed put and call options on stocks and stock indexes and write "secured"
listed put and "covered" listed call options on stocks and stock indexes up to
an aggregate of 4% of the value of its net assets, subject to any further
restrictions imposed by state securities regulations.
PURCHASING LISTED PUT AND CALL OPTIONS. Listed put and call options are
relatively short-term contracts (generally with a life of nine months or less).
By purchasing a call option, the Fund obtains the right during the term of the
option to purchase or otherwise participate in the value of the underlying
security or securities at a specified price. Similarly, a put option entitles
the holder to sell or otherwise participate in the value of the underlying
security or securities at a specified price. To achieve gains on such
investments, the option must be sold before its expiration at more than its cost
or exercised under advantageous conditions (as when the call price is less than
current market value or the put price exceeds current market value of the
underlying securities). Otherwise, the purchase of the option results in a loss.
Put and call options on stocks and stock indexes are traded on the American
Stock Exchange, Chicago Board Options Exchange, Philadelphia Stock Exchange,
Pacific Stock Exchange and New York Stock Exchange ("NYSE"). The national
securities exchanges on which such options are listed ordinarily will provide a
market for the sale of the options owned by the Fund. In certain instances, such
a market may not be available, as when the price of the security underlying a
call has declined too far below the exercise price. The prices of options do not
necessarily move parallel to the prices of the underlying securities. Investing
in option contracts is a speculative activity and there are no dividend or
interest payments on funds so invested.
WRITING LISTED PUT AND CALL OPTIONS ON STOCKS. The Fund is authorized to write
"covered" listed call options on stocks; that is, options on securities the Fund
holds in its portfolio or has an absolute and immediate right to acquire,
without additional cash consideration, upon conversion or exchange of securities
currently held in the Fund's portfolio. A call option gives the purchaser of the
option the right to buy, and a writer has the obligation to sell, the underlying
security at the exercise price during the option period. So long as the
obligation of a writer of a call continues, he may be given an exercise notice
by the broker-dealer through whom such option was sold, requiring him to deliver
the underlying securities against payment of the exercise price. This obligation
terminates upon (1) expiration of the option, or (2) such earlier time at which
the writer effects a closing transaction through
2
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purchase of such option on an exchange. Once a writer has been given an exercise
notice in respect of a call option, he will thereafter be unable to effect a
closing purchase transaction on that option. To secure his obligation to deliver
the underlying security, a writer of a call option is required to deposit in
escrow the underlying security or other assets in accordance with the rules of
the Options Clearing Corporation and of the various options exchanges.
By writing call options on its securities portfolio, the Fund may realize,
through the receipt of premiums, a greater current return than would be realized
on its securities alone. As a covered option writer, the Fund, in return for the
premium, gives up the opportunity for profit from a price increase in the
underlying security above the exercise price so long as its obligation as a
writer continues, but retains the risk of loss should the price of the security
decline. Unlike one who owns securities not subject to an option, the Fund, as a
covered call option writer, has no control over when it might be required to
sell its securities covered by the option, since it might be given an exercise
notice at any time prior to the expiration of its obligation as a writer. If one
of its call options expires unexercised, the Fund realizes a gain in the amount
of the premium. Such a gain, of course, might be offset by a decline in the
market value of the underlying security during the option period. If one of its
call options is exercised, the Fund realizes a gain or loss from the sale of the
underlying security. The proceeds of sale are increased by the amount of the
premium.
By writing a put option on a stock, the Fund is obligated to purchase a
given security at a specified price. As a put option writer, the Fund has no
control over when it might be required to purchase the underlying security,
since it might be given an exercise notice at any time prior to the expiration
of its obligation as a writer. If a put option written by the Fund expires
unexercised, the Fund realizes a gain in the amount of the premium. Put options
involve the risk that the Fund will be required to purchase a security at a
price above the prevailing market, although the cost to the Fund is reduced to
the extent of the premium received by it, less transaction charges.
At the time of writing put options, the Fund will establish a segregated
account consisting of cash, U.S. Government securities or other appropriate
high-grade debt securities equal to the exercise price, i.e., the price at which
the Fund is obligated to purchase the underlying security. The Fund has
undertaken, so long as its shares are registered under certain state securities
regulations, to engage in the writing of put options only as an investment
technique used to further the objectives and policies of the Fund, and not as a
means of generating principal income.
To the extent that a secondary market is available on the exchanges, the
Fund, as an option writer, is able to liquidate its position prior to the
assignment of an exercise notice by purchasing in a closing purchase transaction
an option of the same series as the option previously written. Of course, the
cost of such a liquidation purchase plus transaction costs may be greater than
the premium received upon writing the original option.
OPTIONS ON STOCK INDEXES. The Fund may also purchase and sell put and call
options on stock indexes traded on national securities exchanges. Currently,
options on stock indexes are traded on the national securities exchanges listed
above under "Purchasing Listed Put and Call Options." Options on stock indexes
are similar to options on specific stocks except that, rather than the right to
take or make delivery of stock at a specified price, an option on a stock index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the stock index upon which the option is based is
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option
expressed in dollars times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular stock, gain or loss from the
purchase or writing of index options depends upon movements in the
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level of stock prices in the stock market generally or, in the case of certain
indexes, in an industry or segment of the market, rather than movements in the
price of a particular stock. Accordingly, successful use by the Fund of stock
index options will be subject to the ability of the Adviser correctly to predict
movements in the direction of the stock market generally or of a particular
industry or market segment.
The Fund may write only "covered" call options and "secured" put options. A
call option on a stock index is "covered" if the Fund holds a call option on the
same index as the call option written where the exercise price of the call
option held is equal to or less than the exercise price of the call option
written, or greater than the exercise price of the call option written if the
difference is maintained by the Fund in cash, Treasury bills or other high-grade
short-term obligations in a segregated account. A put option on a stock index is
"secured" if the Fund holds a put option on the same index as the put option
written where the exercise price of the put option held is equal to or greater
than the exercise price of the put option written, or less than the exercise
price of the put option written if the difference is similarly maintained by the
Fund in a segregated account.
LENDING PORTFOLIO SECURITIES. To generate extra interest income, the Fund may
lend portfolio securities to a limited extent. Such loans entitle the Fund to
cash collateral, and the extra cash thus obtained may be invested in short-term,
interest-bearing securities. The Fund may make such loans only to brokers or
dealers who are members of the NYSE, or who have net capital, under the rules
and regulations applicable to such broker or dealer, of at least $10,000,000.
Such loans will not be made against less than 100% cash collateral, and the
borrower will be required to maintain the collateral at 100% of the market value
(marked-to-market daily) of the securities on loan. No such loan will be made
which would cause the aggregate market value of all securities loaned by the
Fund to exceed 15% of the value of the Fund's total assets. Loans will be made
only if: (1) the Fund retains the right to obtain any dividend, interest or
other distribution benefits on the securities and any increase in their market
value; and (2) the Fund is able to terminate the loan at any time (such right of
termination will be exercised, among other things, to obtain the return of the
securities on loan for the purpose of voting on any matters considered material
by the Fund's management). To date, the Fund has never made loans of its
portfolio securities.
MEDIUM TO LOWER RATED CORPORATE DEBT SECURITIES. The Fund may invest in
securities that are rated in the medium to lowest rating categories by S&P and
Moody's, some of which may be so-called "junk bonds". The Fund has historically
invested in securities of distressed issuers when the intrinsic values of such
securities have, in the opinion of the Adviser, warranted such investment.
Corporate debt securities rated Baa are regarded by Moody's as being neither
highly protected nor poorly secured. Interest payments and principal security
appears adequate to Moody's for the present, but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such securities are regarded by Moody's as lacking outstanding investment
characteristics and having speculative characteristics. Corporate debt
securities rated BBB are regarded by S&P as having adequate capacity to pay
interest and repay principal. Such securities are regarded by S&P as normally
exhibiting adequate protection parameters, although adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for securities in this rating category than in
higher rated categories.
Corporate debt securities which are rated B are regarded by Moody's as
generally lacking characteristics of the desirable investment. In Moody's view,
assurance of interest and principal payments or of maintenance of other terms of
the security over any long period of time may be small. Corporate debt
securities rated BB, B, CCC, CC and C are regarded by S&P on balance as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. In S&P's view,
although such securities likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. BB and B are regarded
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by S&P as indicating the two lowest degrees of speculation in this group of
ratings. Securities rated D by S&P or C by Moody's are in default and are not
currently performing. The Fund will rely on the Adviser's judgment, analysis and
experience in evaluating such debt securities. In this evaluation, the Adviser
will take into consideration, among other things, the issuer's financial
resources, its sensitivity to economic conditions and trends, its operating
history, the quality of the issuer's management and regulatory matters as well
as the price of the security. The Adviser may also consider, although it does
not rely primarily on, the credit ratings of Moody's and S&P in evaluating lower
rated corporate debt securities. Such ratings evaluate only the safety of
principal and interest payments, not market value risk. Additionally, because
the creditworthiness of an issuer may change more rapidly than is able to be
timely reflected in changes in credit ratings, the Adviser monitors the issuers
of corporate debt securities held in the Fund's portfolio. The credit rating
assigned to a security is a factor considered by the Adviser in selecting a
security for the Fund, but the intrinsic value in light of market conditions and
the Adviser's analysis of the fundamental values underlying the issuer are of at
least equal significance. Because of the nature of medium and lower rated
corporate debt securities, achievement by the Fund of its investment objective
when investing in such securities is dependent on the credit analysis of the
Adviser. If the Fund purchased primarily higher rated debt securities such risks
would be substantially reduced.
A general economic downturn or a significant increase in interest rates
could severely disrupt the market for medium and lower grade corporate debt
securities and adversely affect the market value of such securities. Securities
in default are relatively unaffected by such events or by changes in prevailing
interest rates. In addition, in such circumstances, the ability of issuers of
medium and lower grade corporate debt securities to repay principal and to pay
interest, to meet projected business goals and to obtain additional financing
may be adversely affected. Such consequences could lead to an increased
incidence of default for such securities and adversely affect the value of the
corporate debt securities in the Fund's portfolio. The secondary market prices
of medium and lower grade corporate debt securities are less sensitive to
changes in interest rates than are higher rated debt securities, but are more
sensitive to adverse economic changes or individual corporate developments.
Adverse publicity and investor perceptions, whether or not based on rational
analysis, may also affect the value and liquidity of medium and lower grade
corporate debt securities, although such factors also present investment
opportunities when prices fall below intrinsic values. Yields on debt securities
in the Fund's portfolio that are interest rate sensitive can be expected to
fluctuate over time. In addition, periods of economic uncertainty and changes in
interest rates can be expected to result in increased volatility or market price
of any medium or lower grade corporate debt securities in the Fund's portfolio
and thus could have an effect on the net asset value of the Fund if other types
of securities did not show offsetting changes in value. The secondary market
value of corporate debt securities structured as zero coupon securities or
payment in kind securities may be more volatile in response to changes in
interest rates than debt securities which pay interest periodically in cash.
Because such securities do not pay current interest, but rather, income is
accreted, to the extent that the Fund does not have available cash to meet
distribution requirements with respect to such income, it could be required to
dispose of portfolio securities that it otherwise would not. Such disposition
could be at a disadvantageous price. Failure to satisfy distribution
requirements could result in the Fund failing to qualify as a pass-through
entity under the Internal Revenue Code of 1986, as amended (the "Code").
Investment in such securities also involves certain other tax considerations.
The Adviser values the Fund's investments pursuant to guidelines adopted and
periodically reviewed by the Board of Directors. See "Net Asset Value, Dividend,
Capital Gains Distributions and Taxes" in the Prospectus. To the extent that
there is no established retail market for some of the medium or low grade
corporate debt securities in which the Fund may invest, there may be thin or no
trading in such securities and the ability of the Adviser to accurately value
such securities may be
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adversely affected. Further, it may be more difficult for the Fund to sell such
securities in a timely manner and at their stated value than would be the case
for securities for which an established retail market does exist. During periods
of reduced market liquidity and in the absence of readily available market
quotations for medium and lower grade corporate debt securities held in the
Fund's portfolio, the responsibility of the Adviser to value the Fund's
securities becomes more difficult and the Adviser's judgment may play a greater
role in the valuation of the Fund's securities due to a reduced availability of
reliable objective data. To the extent that the Fund purchases illiquid
corporate debt securities which are restricted as to resale, the Fund may incur
additional risks and costs. Illiquid and restricted securities may be
particularly difficult to value and disposition may require greater effort and
expense than more liquid securities. Further, the Fund may be required to incur
costs in connection with the registration of restricted securities in order to
dispose of such securities, although under Rule 144A under the Securities Act of
1933 certain securities may be determined to be liquid pursuant to procedures
adopted by the Fund's Board of Directors under applicable guidelines.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions, under which
the Fund may not:
1. Borrow money, except from banks as a temporary measure for extraordinary
or emergency purposes, and then not in an amount in excess of 10% of the value
of the Fund's total assets, inclusive of the amount borrowed. The Fund has not
borrowed money and does not currently intend to borrow money to an extent
exceeding 5% of its total assets. If the value of the Fund's assets (including
the amount borrowed), less its liabilities not including any borrowing, becomes
at any time less than 300% of the amount of any outstanding bank debt, the Fund,
within three business days, will reduce its bank debt to the extent necessary to
meet the required 300% asset coverage. Such a reduction is required by the
provisions of the Investment Company Act of 1940, as amended (the "1940 Act").
This may require sales at a time when it is disadvantageous to do so. The amount
of any borrowing will be limited by any applicable margin limitations imposed by
Federal Reserve Board regulations.
2. Engage in short sales, other than short sales "against the box". Short
sales occur "against the box" when the Fund contemporaneously owns the
underlying securities or securities substantially identical to, or convertible
into, securities equivalent in kind and amount to those sold short.
3. Make loans of money to other persons, except that this restriction shall
not prohibit (a) the purchase of a portion of an issue of publicly distributed
debt securities, (b) the loan of portfolio securities and (c) the entry into
repurchase agreements or the sale of securities coupled with a simultaneous
agreement to repurchase them from the buyer. Under current interpretations of
the staff of the Securities and Exchange Commission (the "Commission"), and
subject to changes in such interpretations, the Fund may enter into such
repurchase or resale agreements having a duration of more than seven days only
to an extent which, when added to all other illiquid assets, would not exceed
10% of the Fund's total assets. Other than the purchase of publicly distributed
debt securities, the Fund has not engaged in such investments or entered into
repurchase or resale agreements having a duration of more than seven days and
does not currently intend to do so.
4. Issue any senior securities, except insofar as bank borrowings might be
considered as the issuance of senior securities.
5. Invest in companies for the purpose of exercising control or management
of such companies.
6. Invest in the securities of other investment companies, unless acquired
in connection with a plan of reorganization.
7. Invest in the securities of any issuer if, at the time of the Fund's
purchase or holding thereof, any of the officers or directors of the Fund or of
the Adviser owns beneficially more than 1/2 of 1%, and such officers and
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directors owning more than 1/2 of 1% together own beneficially more than 5%, of
the issuer's securities.
8. Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions. For
purposes of this restriction, the making of margin deposits in connection with
transactions in options is not deemed to be a purchase of securities on margin.
9. Purchase and sell limited partnership interests, real estate, commodities
or commodity contracts except in connection with a merger, consolidation or
reorganization of a corporation or other organization in which the Fund has an
investment, or in satisfaction of a debt. Any limited partnership interests,
real estate, commodities or commodity contracts so acquired will be disposed of
as soon as reasonably practicable consistent with the best interests of the
Fund's shareholders.
10. Write or purchase options or warrants or lend portfolio securities in
excess of the limitations specified, respectively, under "Warrants," "Options"
and "Lending Portfolio Securities," above.
11. Pledge, mortgage or hypothecate its assets, except when necessary to
secure borrowings of money, but then not in an amount in excess of 15% of the
value of the Fund's net assets. However, the Fund's Board of Directors (the
"Board" or the "Board of Directors") currently has a policy, which is subject to
change without shareholder approval, not to pledge, mortgage or hypothecate its
assets in excess of 10% of its net assets at market value. The Fund does not
currently intend to pledge its assets. For purposes of this restriction,
collateral or escrow arrangements with respect to the writing of options are not
deemed to be pledges of assets.
12. Underwrite the securities of other issuers, or acquire restricted
securities which the Fund may not be free to sell to the public without
registration of the securities under the Securities Act of 1933, as amended (the
"1933 Act"), if such acquisition would cause the Fund to have more than 10% of
the value of its total assets invested in such securities. It shall be a
condition of any such investment that the issuer of the securities purchased by
the Fund will, upon specified circumstances, file a registration statement
relating to the securities and the seller or issuer will pay the cost of such
registration statement. However, at the present time, the Board of Directors has
a policy which is subject to change at any time without shareholder approval
which limits such investments to 5% of the value of the Fund's net assets.
13. Invest more than 5% of the value of its total assets in the equity
securities of any one issuer.
14. Invest in more than 10% of the outstanding voting securities of any one
issuer or in more than 10% of any class of securities of any one issuer (except
government obligations).
15. Invest more than 5% of the value of its total assets in securities of
companies which (with their predecessors) have not had at least three years of
continuous operations. The Board of Directors has adopted a policy which is
subject to change at any time, that this restriction includes equity securities
which, at the time of purchase, the Fund believes will not be resalable within a
reasonable period of time at prices reasonably related to the market for such
securities.
In addition to the restrictions listed above, it is the policy of the Board
of Directors (subject to change without shareholder approval) not to invest in
interests in oil, gas or other mineral exploration or development programs.
Except with respect to the 300% asset coverage required in the case of
borrowing, whenever any investment restriction states a maximum percentage of
the Fund's assets which may be invested in any security or other property, it is
intended that such maximum percentage limitations shall be determined at the
time of the acquisition of such security or property and shall not be violated
by subsequent increases in the value thereof relative to other assets held by
the Fund.
The Fund's fundamental investment restrictions may be changed only by the
approval of the holders of a majority of the Fund's outstanding voting
securities (defined in the 1940 Act as the lesser of: (1) 67% or more
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of the Fund's voting securities present at a meeting if the holders of more than
50% of the Fund's outstanding voting securities are present or represented by
proxy, or (2) more than 50% of the Fund's outstanding voting securities). As
indicated above, certain restrictions are not fundamental and are subject to
change by the Board of Directors without shareholder approval.
PURCHASE AND REDEMPTION OF SHARES
Reference is made to the materials in the Prospectus under the headings
"Purchase of Shares" and "Redemption of Shares," which describe the methods of
purchase and redemption of shares and discuss the calculation of the Offering
Price, for shares of the respective classes. The Fund receives the full net
asset value per share and the Distributor receives any initial sales charge or
CDSC. The Distributor may reallow a portion of any initial sales charge to
dealers, as set forth under "Purchase of Shares -- Initial Sales Charges (Class
A Shares)" in the Prospectus.
The redemption price of the Fund's shares may, under certain circumstances,
be paid in whole or in part in portfolio securities if deemed advisable by the
Board of Directors. Any securities thus paid to the shareholder would be valued
as described under "Net Asset Value, Dividends, Capital Gains Distributions and
Taxes." The subsequent sale of such securities of the shareholder may require
payment of a brokerage commission.
REINVESTMENT PRIVILEGE (CLASS B & C SHARES). A shareholder who has made a
partial or complete redemption of Class B or Class C shares shares may reinvest
all or part of the redemption proceeds and receive a pro rata credit towards the
purchase of Class B or Class C shares of the amount of any CDSC paid, provided
such reinvestment is made within 30 days after the redemption. Such reinvestment
will be made at the net asset value next determined after receipt of the
reinvestment order.
This privilege may be exercised only once by a shareholder. If the
shareholder has realized a gain on the redemption, the transaction is taxable
and reinvestment will not alter any capital gains tax payable. If there has been
a loss on the redemption, some or all of the loss may not be allowed as a tax
deduction depending on the amount reinvested.
For purposes of determining the amount of CDSC payable on any subsequent
redemptions, the purchase payment made through exercise of the reinvestment
privilege will be deemed to have been made at the time of the initial purchase
(rather than at the time the reinvestment was effected).
NET ASSET VALUE, DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES
The following supplements the material in the Prospectus under the same
heading.
NET ASSET VALUE. As described in the Prospectus, the net asset value of shares
of each class of the Fund is computed once daily as of the close of trading on
the NYSE Monday through Friday (excluding days on which the NYSE is closed). The
NYSE is closed on the following holidays: New Year's Day, Washington's Birthday,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
Determination of the Fund's total assets is made in accordance with
generally accepted accounting principles, ordinarily valuing each listed
security in the Fund's portfolio at its last sale price on the day of valuation
on the principal exchange on which it is traded, or if there was no sale on such
day, at the mean of the last reported bid and asked prices (rounded down to the
lower eighth). Each security traded in the over-the-counter market (including
securities listed on exchanges the primary market for which is believed to be
over-the-counter) is valued at the mean of the last reported bid and asked
prices (rounded down to the lower eighth). When the Fund sells short against a
security which it has a right to acquire, it will value its liability at the
asked price for that security. Investments for which market quotations are not
readily available and investments which the Fund might not be able to sell
without registration of the securities under the 1933 Act are valued on the
basis of fair value as determined in good faith by the Board of Directors.
Securities primarily traded as a unit
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will be valued at the unit price. 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.
TAX STATUS. The Fund intends to pay dividends representing its realized income
and gains within certain time periods specified in the Code. By doing so and by
meeting certain requirements including diversification of assets, the Fund
intends to qualify as a regulated investment company under Subchapter M of the
Code. Since the Fund will distribute annually its investment company taxable
income, net capital gains, and capital gains net income, it will not be subject
to income or excise taxes otherwise applicable to undistributed income of a
regulated investment company. If the Fund were to fail to distribute all its
income and gains in a timely manner, it would be subject to income tax and, in
certain circumstances, a 4% excise tax.
TAXATION OF SHAREHOLDERS. Dividends from net investment income and distributions
from short-term capital gains are taxable to shareholders as ordinary income
whether such dividends are paid in cash or in additional shares of the Fund.
Distributions from net long-term capital gains are taxable to shareholders as
long-term capital gains regardless of the length of time the shares in respect
of which such distributions are received have been held.
Distributions reflecting the Fund's qualifying dividend income from domestic
corporations will generally qualify for the 70% dividends received deduction
available to corporate shareholders if the Fund does not sell the underlying
stock before satisfying a 46-day holding period requirement (91 days for certain
preferred stock) and the shareholder holds the Fund shares for at least 46 days.
For this purpose, the holding period is reduced for periods during which the
Fund reduces its risk of loss from holding the stock (e.g., by entering into
options contracts).
Individuals and other non-exempt payees will be subject to a 31% backup
Federal withholding tax on dividends and other distributions from the Fund, as
well as on the proceeds of redemptions of Fund shares, if the Fund is not
provided with the shareholder's correct taxpayer identification number and
certification that the shareholder is not subject to such backup withholding, or
if the Internal Revenue Service notifies the Fund that the shareholder has
failed to report properly interest or dividends. For most individuals, the
taxpayer identification number is the taxpayer's social security number.
TAX TREATMENT OF CERTAIN TRANSACTIONS. In general, if the Fund enters into
combinations of investment positions by virtue of which its risk of loss from
holding an investment position is reduced on account of one (or more) other
positions, losses or deductions realized on one position may be deferred to the
extent of any unrecognized gain on another position and long-term capital gains
or short-term capital losses may be recharacterized, respectively, as short-term
gains and long-term losses. Investments in foreign currency denominated
instruments or securities may generate, in whole or in part, ordinary income or
loss.
The Federal income tax treatment of gains and losses realized from options
transactions entered into by the Fund will be as follows: Gain or loss from a
closing transaction with respect to options sold by the Fund, or gain from the
lapse of any such option, will be treated as short-term capital gain or loss;
gain or loss from the sale or exchange of put or call options that the Fund
purchases, and loss attributable to the lapse of such options, will be treated
as capital gain or loss. (The capital gain or loss will be long or short-term
depending upon whether or not the affected option has been held for more than
one year.) For this purpose, an unexercised option will be deemed to have been
sold on the date it expired.
Any listed stock index option held by the Fund at the close of its taxable
year will be treated as sold for its fair market value on the last business day
of such taxable year. Sixty percent of any gain or loss with respect to such
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deemed sales, as well as the gain or loss from the termination during the
taxable year of the Fund's obligation (or rights) with respect to such options
by offsetting, by exercise or being exercised, by assignment or being assigned,
by lapse, or otherwise, will be treated as long-term capital gain or loss and
the remaining forty percent will be treated as short-term capital gain or loss.
In addition to the Federal income tax consequences described above relating
to an investment in the Fund, there may be other Federal, state, local or
foreign tax considerations that depend upon the circumstances of each particular
investor. Prospective shareholders are therefore urged to consult their tax
advisors with respect to the effects of this investment on their specific
situations.
INVESTMENT MANAGEMENT AND OTHER
SERVICES
THE INVESTMENT ADVISER. The Fund's investment adviser is Burnham Asset
Management Corporation, an affiliate of Burnham Securities Inc., the Fund's
principal distributor. Its address is 1325 Avenue of the Americas, New York, New
York 10019.
FUND OPERATIONS AND ADMINISTRATION. Subject to the supervision of the Board of
Directors, the Fund's administration and day-to-day operations are run by a
staff, trained in accounting and shareholder services, which is provided by the
Adviser and the Distributor, with compensation as established by the Investment
Advisory Contract (as defined below) between the Fund and the Adviser. Such
personnel are responsible for all internal accounting services, as well as the
overall review of the administrative services provided by the State Street Bank
and Trust Company ("State Street"), including but not limited to bookkeeping,
pricing of Fund securities, pricing sales and redemptions of the Fund's shares,
communication with shareholders, responding to shareholder and broker inquiries,
maintenance of records, coordination of portfolio activities, preparation of
shareholder reporting and regulatory requirements (including quarterly reports,
annual reports, proxy material, prospectuses and transmission of information for
newspaper and statistical services) and periodic reports and portfolio analysis
for the Board and the Adviser.
The Investment Advisory Contract between the Fund and the Adviser (the
"Investment Advisory Contract") requires the Adviser to furnish research and
statistical services, advice, reports and recommendations for the Fund's
portfolio. The Adviser also acts as the Fund's financial agent, and furnishes
the Fund with office space, other facilities and administrative and clerical
services and personnel as indicated above.
The Investment Advisory Contract requires that the Adviser give equitable
treatment to the Fund under the circumstances in supplying information,
recommendations and other services, but provides that the Adviser is not
required to give the Fund preferential treatment as compared with the treatment
given any other client.
For its services, the Adviser receives a monthly fee at an annual rate of
5/8 of 1% of the Fund's average daily net asset values. The advisory fee
voluntarily will be reduced (but not below zero), if necessary, to comply with
certain state securities regulations which currently limit the annual expenses
of the Fund, including the advisory fee but excluding taxes, brokerage, interest
and certain distribution, custodial and extraordinary expenses to 2.5% of the
first $30,000,000 of the Fund's average net assets, 2% of the next $70,000,000
and 1.5% of the remaining average net assets. For the year ended December 31,
1994, the Fund incurred investment advisory fees in the amount of $679,613. The
Fund's expenses did not exceed the expense limitation. During the year ended
December 31, 1993, the Fund paid investment advisory fees in the amount of
$746,518. During the year ended December 31, 1992, the Fund paid investment
advisory fees in the amount of $738,350. The Investment Advisory Contract was
amended, effective July 1, 1993, to change the method of computing the monthly
payments of the advisory fee from one based on month-end net asset value to
average daily net asset value. The Adviser has voluntarily agreed to reimburse
expenses of the Class B and Class C shares in order to limit expenses to an
annual rate of 2.38% and 1.50%,
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respectively. Accordingly, the Adviser has reimbursed the Class B and Class C
shares $5,424 and $14,135, respectively. The Adviser reserves the right to
discontinue this policy at any time.
Under the Investment Advisory Contract, the Fund pays all of its own
expenses other than such as are the responsibility of the Adviser (including
office space and compensation of directors, officers and employees who are
affiliated with the Adviser or the Distributor). Expenses payable by the Fund
include, but are not limited to, the following: the fees of directors who are
not affiliated with the Adviser or the Distributor, the fees of its custodian,
transfer agent, independent accountants and legal counsel; franchise, income and
similar taxes imposed on the Fund as a corporation; expenses of preparing,
printing and mailing shareholder communications; and other expenses of operating
the Fund as a corporation.
The Investment Advisory Contract was initially approved by the shareholders
on August 9, 1989, and by the Board of Directors on June 7, 1989, and will
continue in effect until terminated if approved annually by a majority of the
Board, including a majority of the directors who are not "interested persons"
(as defined in the 1940 Act) of the Adviser, or of the Fund, by votes cast in
person at a meeting called for the purpose of voting on such approval. The Board
of Directors last approved the Investment Advisory Contract on June 23, 1994. On
60 days' written notice, the Investment Advisory Contract is terminable by
either party thereto, and, in the case of the Fund, by the Board or by the vote
of the holders of a majority of the Fund's outstanding voting securities, as
defined previously. The Investment Advisory Contract will terminate
automatically in the event of any assignment.
The Investment Advisory Contract provides that the Adviser shall be liable
for willful misfeasance, bad faith, gross negligence, or reckless disregard of
its obligations under the contract and provides that the Adviser, subject to the
foregoing, shall not be liable for any action taken or omitted on advice of
counsel obtained in good faith, provided such counsel is satisfactory to the
Fund.
DISTRIBUTOR. Under the Distribution Contract between the Fund and the
Distributor, as amended (the "Distribution Contract"), the Distributor acts as
the principal distributor of the Fund's shares. The initial sales charges and
CDSCs received by the Distributor are described in the Prospectus under
"Purchase of Shares" and "Redemption of Shares". The Distributor also is
compensated under the Rule 12b-1 distribution plans as described in the
Prospectus under "Distribution -- Distribution Plans", and as described more
fully below.
DISTRIBUTION PLANS. The Fund has adopted a distribution plan for each of the
Class A shares, Class B shares and Class C shares of the Fund (a "Plan") in
accordance with Rule 12b-1 under the Act, to compensate the Distributor for the
services it provides and for the expenses it bears under the Distribution
Contract.
A report of the amounts so expended must be made to the Board and reviewed
by the Board at least quarterly. In addition, each Plan provides that it may not
be amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Plan without shareholder approval and that other
material amendments to the Plan must be approved by a majority of the Board,
including a majority of the Board who are neither "interested persons" of the
Fund (as defined in the Act) nor have any direct or indirect financial interest
in the operation of the Plan (the "Qualified Directors"), by vote cast in person
at a meeting called for the purpose of considering such amendments.
Each Plan is subject to annual approval by a majority of the Board,
including a majority of the Qualified Directors, by vote cast in person at a
meeting called for the purpose of voting on the Plan. Each Plan is terminable at
any time by vote of a majority of the Qualified Directors or by vote of a
majority of the shares of the applicable class. Pursuant to each Plan, any new
directors who are not "interested persons" must be nominated by existing
directors who are not "interested persons." Each Plan will continue from year to
year, provided that such continuance is approved annually by a vote of the Board
in the manner described above.
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If a Plan is terminated (or not renewed) with respect to any one or more
classes, another Plan may continue in effect with respect to any class as to
which it has not been terminated (or has been renewed).
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
direct or indirect financial interest in the operation of the Plan. None of the
Fund's directors who is not an interested person of the Fund has a direct or
indirect financial interest in the operation of any Plan.
Benefits from the Plans may accrue to the Fund and its shareholders from the
growth in assets due to increased sales of shares to the public pursuant to the
Plans. Increases in net assets from sales pursuant to the Plans may benefit
shareholders by reducing per share expenses, permitting increased investment
flexibility and diversification of assets, and facilitating economies of scale
(e.g., block purchases) in securities transactions.
The Plan for the Class A shares was approved by the Board, including a
majority of the Qualified Directors, at Board of Directors meetings held on June
19, 1990, June 26, 1991 and April 21, 1993. The Plan for the Class B shares was
approved at the April 21, 1993 Board meeting. The Plans for Class A,B and C
shares were most recently approved as adopted at a meeting of the Board of
Directors held on April 26, 1995. Prior to approving the adoption of the Plans,
the Board requested and received from the Distributor all the information which
it deemed necessary to arrive at an informed determination as to whether the
Plans should be adopted. In making its determination to adopt the Plans, the
Board considered, among other factors: trends in pricing structures for funds
distributed through dealer networks and determined that the ability to
compensate third party broker-dealers for promoting and selling the Fund's
shares would likely increase sales, enhance the Fund's ability to maintain
accounts and therefore improve asset retention. The Board also concluded that
third party marketing efforts under the Plans, if successful, could increase the
Fund's ability to maintain a stable level of net assets, which could in turn
contribute to the stability of the Fund's portfolio positions and afford greater
flexibility in pursuing the Fund's investment objectives. The Board, and in
particular, the Qualified Directors, recognized that they are able to monitor
the nature, manner and amount of expenditures under the Plans by reviewing, on a
quarterly basis, reports of the Distributor's expenditures, and that, at any
time, they could terminate the Plans and thereby end all obligations of the Fund
to make payments thereunder, if they deemed it appropriate under the
circumstances. Based upon its review, the Board, including each of the Qualified
Directors, determined that adoption of the Plans would be in the best interest
of the Fund, and that there was a reasonable likelihood that adoption of the
Plans would benefit the Fund and its shareholders. In the Board's quarterly
review of the Plans, they will consider their continued appropriateness and the
level of compensation provided therein.
Although there is no legal obligation for the Fund to pay expenses incurred
by the Distributor in excess of payments made to the Distributor under the
Plans, if for any reason the Plans are terminated, the Board will consider at
that time the manner in which to treat such expenses. Any cumulative expenses
incurred by the Distributor but not yet recovered through distribution fees may
or may not be recovered through future distribution fees. If the Distributor's
actual distribution expenditures in a given year are less than Rule 12b-1
payments it receives from the Fund 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 could be viewed as "profit" to the Distributor for that year.
Under the Distribution Contract, the Distributor bears the cost of the
expenses of printing all sales literature and prospectuses required for the
Distributor's purposes; however, the Distributor may apply amounts retained from
sales commissions, CDSCs and distribution fees towards such expenses. The costs
of printing the Fund's reports to shareholders and maintaining a current
prospectus, and related accounting and legal fees, are paid by the Fund. The
Distributor earned $200,001, $117,277
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and $185,901 in brokerage commissions from Fund transactions and $12,363,
$43,208 and $36,375 in sales commissions from the distribution of Fund shares
for the years ended December 31, 1994, 1993 and 1992.
The Distribution Contract was approved initially by the Board of Directors
on June 7, 1989, was amended as of July 1, 1993, and will continue in effect
from year to year if approved at least annually by the Board or by the vote of a
majority of the outstanding voting securities of the Fund, as well as, in either
case, by the vote of a majority of those directors who are not parties to the
Distribution Contract or interested persons of either such party. The Board of
Directors last approved the Distribution Contract, as amended, on June 23, 1994.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT. State Street Bank and Trust
Company, P.O. Box 8505, Boston, Massachusetts 02266-8505. State Street serves as
custodian ("Custodian") of the Fund's securities and cash and as transfer agent
and dividend paying agent for the Fund. Compensation for such services is based
on schedules of charges agreed on by the Fund and State Street from time to
time.
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., 1301 Avenue of the Americas,
New York, New York, has been selected as independent accountants for the Fund
for its fiscal year ending December 31, 1995. In addition to reporting annually
on the financial statements of the Fund, the Fund's accountants will provide
assistance and consultation with respect to the preparation of certain filings
of the Fund with the Commission. The selection of independent accountants is
subject to annual ratification by the Board of Directors.
DIRECTORS AND OFFICERS OF THE FUND
The overall direction and supervision of the Fund is the responsibility of
the Board of Directors, which has the primary duty of seeing that the Fund's
general investment policy and programs are carried out and that the Fund's
portfolio is properly administered. The directors and officers of the Fund and
their principal occupations during at least the past five years are:
I.W. BURNHAM, II*, President, Chief Executive Officer and Director, 1325 Avenue
of the Americas, New York, New York. Honorary Chairman of the Board of Burnham
Asset Management Corporation and Burnham Securities Inc. Former Director of
Contel Inc.
JON M. BURNHAM*, Executive Vice President and Director, 1325 Avenue of the
Americas, New York, New York. Chairman, Chief Executive Officer and Director of
Burnham Asset Management Corporation and Burnham Securities Inc. Former Senior
Vice President-Sales Division of Smith Barney, Harris & Upham & Co. Inc. Son of
I.W. Burnham, II.
CLAIRE B. BENENSON, Director, 870 United Nations Plaza, New York, New York.
Consultant on Financial Conferences; Director of Zweig Cash Fund Inc.; Trustee
of Zweig Series Trust. Former Director of Financial Conferences and Chairman,
Department of Business and Financial Affairs, The New School for Social
Research.
LAWRENCE N. BRANDT, Director, 2510 Rockcreek Drive, N.W., Washington, D.C.
President of Lawrence N. Brandt, Inc. (Builders & Developers).
RICHARD E. DEEMS, Director, 959 Eighth Avenue, New York, New York. Director and
Member of the Executive and Finance Committees of The Hearst Corporation;
Publishing Consultant to the Hearst Magazines Division of The Hearst
Corporation; Director of Zweig Cash Fund Inc., ISS International Service System,
Inc. and Oriole Homes Corporation; Trustee of Zweig Series Trust.
ALVIN P. GUTMAN, Director, 612 GSB Building, Bala-Cynwyd, Pennsylvania. Chairman
of the Board of Pressman-Gutman Co., Inc. (textile converters).
WILLIAM W. KARATZ, Director, 1 Battery Park Plaza, New York, New York. Of
counsel to, and formerly a partner in, the law firm of Winthrop, Stimson, Putnam
& Roberts.
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* Every director who is an "interested person" of the Fund, as such term is
defined in the 1940 Act, is indicated by an asterisk.
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JOHN C. MCDONALD, Director, 54 Comstock Hill Road, New Canaan, Connecticut.
President of MBX Inc. (telecommunications). Former Director and Executive Vice
President-Technology, Contel Corporation (telecommunications). Director of
Transwitch Corporation (semiconductors).
CRUSE W. MOSS, Director, 2015 Washtenaw Avenue, Ann Arbor, Michigan. Chairman of
the Board and Chief Executive Officer of General Automotive Corporation.
DONALD B. ROMANS, Director, 233 East Wacker Drive, Chicago, Illinois. President
of Romans and Company (Private Investors and Financial Consultants); Director of
Zweig Cash Fund Inc.; Trustee of Zweig Series Trust. Former Consultant to and
Executive Vice President and Chief Financial Officer of Bally Manufacturing
Corporation.
ROBERT F. SHAPIRO, Director, 375 Park Avenue, New York, New York. President of
RFS & Associates, Inc. (investment and consulting firm). Former Co-Chairman of
Wertheim Schroder & Co., Inc. and Director of Schroders P.L.C., London; prior
thereto, President of Wertheim & Co., Inc. and Partner of Wertheim & Co.;
Director of TJX Companies, Inc., Independent General Partner of Equitable
Capital Partners L.P. and Equitable General Partners (Retirement Fund), L.P.;
Chairman, New Street Capital Corp. and Director of American Buildings Company.
ROBERT M. SHAVICK, Director, 601 Bayport Way, Longboat Key, Florida. Legal
Consultant; Member, Panel of Arbitrators, American Arbitration Association, New
York 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, Circuit and County Courts, Florida.
DAVID H. SOLMS, Director, Coventry House #709, Coventry and Valley Roads,
Melrose Park, Pennsylvania. Retired. Former consultant to GMAC Mortgage
Corporation, and former President of the Investment Adviser to Mortgage and
Realty Trust.
ROBERT S. WEINBERG, Director, 5585 Pershing Avenue, St. Louis, Missouri.
President of R.S. Weinberg & Associates (management consultants) and former
Professor of Marketing Management, John M. Olin School of Business, Washington
University in St. Louis, Mo.
ROBERT J. WILBUR, Director, 5141 S.E. Brandywine Way, Stuart, Florida. Retired.
Former Vice President and General Manager of the Nassau Branch of Morgan
Guaranty Trust Company.
MICHAEL E. BARNA, Vice President, Chief Financial Officer, Treasurer and
Secretary, 1325 Avenue of the Americas, New York, New York. Vice President and
Assistant Secretary of Burnham Asset Management Corporation.
RONALD M. GEFFEN, Vice President, 1325 Avenue of the Americas, New York, New
York. Vice President of Burnham Asset Management Corporation and Burnham
Securities Inc.
DEBRA B. HYMAN, Vice President, 1325 Avenue of the Americas, New York, New York.
Vice President of Burnham Asset Management Corporation and Burnham Securities
Inc. Daughter of Jon M. Burnham and granddaughter of I.W. Burnham, II.
FRANK A. PASSANTINO, Vice President and Assistant Secretary, 1325 Avenue of the
Americas, New York, New York. Vice President of Burnham Asset Management
Corporation and Burnham Securities Inc.
LOUIS S. ROSENTHAL, Vice President, 30 South 17th Street, Philadelphia,
Pennsylvania. First Vice President of Prudential Securities Inc. Former Director
of the Fund.
LEON C. SUNSTEIN, JR., Vice President, 1 Penn Center, Philadelphia,
Pennsylvania. President of Leon C. Sunstein Inc. Former Director of the Fund.
MARA D. COHEN, Assistant Treasurer, 1325 Avenue of the Americas, New York, New
York. Vice President of Burnham Asset Management and Burnham Securities Inc.
As of December 31, 1994, the officers and directors of the Fund, as a group,
owned less than 3% of the outstanding shares of the Fund.
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The officers and directors of the Fund affiliated with the Distributor or
the Adviser receive no direct compensation from the Fund for their services to
it. Each director of the Fund who is not so affiliated receives $3,000 per
annum, plus $500 and expenses for each Board of Directors meeting attended. In
addition, the Fund does not offer pension or retirement benefits to directors
and officers of the Fund. During the fiscal year ended December 31, 1994, the
directors of the Fund who were not so affiliated received an aggregate of
$65,600 as directors' fees and expenses.
SERVICES FOR SHAREHOLDERS
The following information supplements the material in the Prospectus under
the heading "Services for Shareholders."
SHAREHOLDER ACCOUNTS. For the convenience of investors, no stock certificates
ordinarily will be issued by the Fund, although stock certificates will be
issued upon the written request of any shareholder. Instead, when an investor
makes his initial purchase of shares, an account will be opened for him on the
books of the Fund and his shares will be held by State Street as Transfer Agent.
With the initial purchase, the investor appoints State Street as his agent to
receive all dividends and distributions and to reinvest them in additional full
and fractional shares of the same class of shares of the Fund. The distribution
or dividends is automatically reinvested, at a price equal to net asset value,
in shares of the class from which the distribution was made, as of the
ex-dividend date. State Street adds these shares to the shareholder's account,
and sends the shareholder a transaction advice. The $250 minimum requirement for
subsequent investments does not apply to reinvestments of dividends or
distributions. Under the automatic investment program, dividends and
distributions from shares of one class may not be reinvested in shares of any
other class. Shares of one class may not be exchanged for shares of any other
class.
Shareholders who do not wish to have their dividends and distributions
automatically reinvested may, at any time, notify State Street to that effect
and, commencing ten business days after receipt by State Street of such notice,
all future dividends and distributions will be paid to the shareholder by check.
PORTFOLIO TURNOVER AND BROKERAGE
PORTFOLIO TURNOVER. There are no fixed limitations regarding the Fund's
portfolio turnover rate. Securities initially satisfying the basic policies and
objectives of the Fund may be disposed of when they are no longer deemed to be
suitable. Brokerage costs to the Fund are commensurate with the rate of
portfolio activity. In computing the portfolio turnover rate, all securities,
the maturities or expiration dates of which at the time of acquisition are one
year or less, are excluded. Subject to this exclusion, the turnover rate is
calculated by dividing (A) the lesser of purchases or sales of portfolio
securities for the fiscal year by (B) the monthly average of the value of
portfolio securities owned by the Fund during the fiscal year. For the years
ended December 31, 1994 and 1993, the Fund's portfolio turnover rates were 87.9%
and 54.1%, respectively.
PLACEMENT OF PORTFOLIO BROKERAGE. As a general matter, purchases and sales of
portfolio securities of the Fund are placed by the Adviser with brokers and
dealers who in its opinion will provide the Fund with the best combination of
price (inclusive of brokerage commissions) and execution for its orders.
However, pursuant to the Investment Advisory Contract, consideration may be
given in the selection of broker-dealers to research provided and payment may be
made of a fee higher than that charged by another broker-dealer which does not
furnish research services or which furnishes research services deemed to be of
lesser value, so long as the criteria of Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "1934 Act") are met. Section 28(e) of the
1934 Act specifies that a person with investment discretion shall not be "deemed
to have acted unlawfully or to have breached a fiduciary duty" solely because
such person has caused the account to pay a higher commission than the lowest
available under certain circumstances. To obtain the benefit of Section 28(e),
the person so exercising investment discretion must make a good faith
determination that the commissions paid are reasonable in relation to the value
of the brokerage and research
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services provided viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he exercises
investment discretion.
Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for research services might exceed commissions
that would be payable for execution services alone, nor generally can the value
of research services to the Fund be measured. Research services furnished might
be useful and of value to the Adviser and its affiliates in serving other
clients as well as the Fund, but on the other hand any research service obtained
by the Adviser or the Distributor from the placement of portfolio brokerage of
other clients might be useful and of value to the Adviser in carrying out its
obligation to the Fund.
As a general matter, it is the Fund's policy to execute purchases and sales
of listed portfolio securities through the Distributor only if, in the judgment
of the Fund and without obligation to seek competitive bidding, the Distributor
is qualified to obtain the best combination of price (inclusive of brokerage
commissions) and execution on the particular transaction. However, under the
Investment Advisory Contract, the Distributor is entitled to charge the Fund
brokerage commissions and derive a profit therefrom, subject to approval of the
amounts so paid by the Fund's "non-interested" directors in the course of their
review of the Fund's advisory and brokerage arrangements. The Board of Directors
may thus permit the payment to the Distributor of brokerage commissions which,
though possibly higher than the lowest otherwise available, nevertheless result
in overall payments to the Distributor and the Adviser which, together, are
deemed reasonable and consistent with their fiduciary responsibilities to the
Fund. The Board has adopted procedures pursuant to Rule 17e-1 under the 1940
Act, in order to ascertain that the brokerage commissions paid to the
Distributor are fair and reasonable in accordance with the criteria set forth in
such Rule.
No transactions may be effected by the Fund with the Distributor acting as
principal for its own account. Over-the-counter purchases and sales normally are
made with principal marketmakers except where, in the opinion of management, the
best executions are available elsewhere. The Distributor may act as broker for
the Fund in over-the-counter trading. In executing transactions for the Fund,
the Distributor treats the Fund in the same manner as any other public customer,
and Fund orders are accorded priority over those received by the Distributor for
its own account or for the account of any of its officers, directors or
employees.
The Fund may from time to time allocate brokerage commissions to firms other
than the Distributor which furnish research and statistical information to the
Adviser. The supplementary research that may be provided by such firms will be
useful in varying degrees and of indeterminable value. Such research may, among
other things, include advice regarding economic factors and trends, advice as to
occasional transactions in specific securities, and similar information relating
to securities. No formula has been established for the allocation of business to
such brokers. The Distributor will not participate in the brokerage commissions
allocated to these firms. Officers and directors of the Fund and of the Adviser
who are also officers or directors of the Distributor receive indirect benefits
from the Fund as a result of its usual and customary brokerage commissions which
the Distributor may receive for acting as broker to the Fund in the purchase and
sale of portfolio securities. The Investment Advisory Contract does not provide
for a reduction of the advisory fee by any portion of the brokerage commissions
generated by portfolio transactions of the Fund which the Distributor may
receive.
During the year ended December 31, 1994, the Fund paid total brokerage
commissions of $276,049. The amount paid to the Distributor for the year ended
December 31, 1994 was $200,001, which represented 72.45% of the total brokerage
commissions paid.
DETERMINATION OF PERFORMANCE
From time to time, the Fund may quote its performance in terms of "total
return" in reports or other
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communications to shareholders, or in advertising material. Total return ("T")
is calculated by finding the average compounded rate of return over the number
of years in a given period ("n") that would equate a hypothetical initial
investment of $1,000 ("P") to the ending redeemable value ("ERV"), according to
the following formula:
P (1 + T)'pp'n = ERV
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 the Fund, assuming
the reinvestment of dividends, for the one, five and ten year periods ended
December 31, 1994, was (4.72)%, 5.39% and 11.45%, respectively. The average
annual returns of the Class B and Class C shares of the Fund, assuming the
reinvestment of dividends for the one year period ended December 31, 1994 and
the life of the class period (October 18, 1993 to December 31, 1993) were
(2.51%) and (1.95)%, and (3.97%) and (3.28%), respectively.
The Fund's performance will vary from time to time depending on market
conditions, the composition of its portfolio and its operating expenses. Actual
results for each class of the Fund's shares will vary depending upon the level
of the class' expenses. Thus, at any point in time, investment yields, current
distributions or total returns may be either higher or lower than past results,
and there is no assurance that any historical performance record will continue.
Furthermore, with respect to Class B shares, the investment results will be
reduced for any investor if a contingent deferred sales charge is imposed on the
redemption of the shares. Consequently, any given performance quotation should
not be considered representative of the Fund's performance for any specified
period in the future.
FINANCIAL STATEMENTS
The audited financial statements of the Fund for the fiscal year ended
December 31, 1994 and the report of the Fund's independent accountants in
connection therewith are included in the Fund's 1994 Annual Report to
Shareholders. The report is incorporated by reference into this Statement of
Additional Information. You can obtain a copy of the Fund's 1994 Annual Report
by writing or calling the Distributor at the address or telephone numbers set
forth on the cover of this Statement of Additional Information.
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TABLE OF CONTENTS
Page
The Burnham Fund.................................1
Investment Techniques............................2
Investment Restrictions..........................6
Purchase and Redemption of Shares................8
Net Asset Value, Dividends, Capital Gains
Distributions and Taxes......................8
Investment Management and Other Services......10
Directors and Officers of the Fund.............13
Services for Shareholders.......................15
Portfolio Turnover and Brokerage................15
Determination of Performance....................16
Financial Statements............................17
STATEMENT OF ADDITIONAL
INFORMATION
April 28, 1995
CONTINUITY KNOWLEDGE
[PHOTOGRAPH OF CLOCK] [PHOTOGRAPH OF CHESS PIECE]
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GROWTH INCOME
[PHOTOGRAPH OF STEPS] [PHOTOGRAPH OF COINS]
BURNHAM Securities Inc.
PRINCIPAL DISTRIBUTOR
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STATEMENT OF DIFFERENCES
The dagger shall be expressed as.................... 'D'
The double dagger shall be expressed as............. 'DD'
Mathematical powers normally expressed as
superscript shall be preceded by.................. 'pp'
