<PAGE>
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August 8, 1996
Dear Shareholder:
We are pleased to present to you the Semi-Annual Report of The Burnham Fund Inc.
for the six-month period ending June 30, 1996.
On June 30, 1996, the Fund's net asset value per share for Class A, B and C
shares was $23.57, $24.02 and $23.52, respectively, which represent increases
for the second quarter of 2.29%, 2.12% and 2.08%, respectively. For the second
quarter, the unmanaged Standard & Poor's 500 index rose 4.49% (including the
reinvestment of all income) and the unmanaged Lehman Brothers
Government/Corporate Bond Index increased by 0.47%. The average growth and
income fund rose 3.38% for the same period according to Morningstar, Inc.
As of June 30, 1996 the Fund's assets were invested as follows: 76.6% invested
in common stocks; 3.7% in convertible corporate bonds; 16.9% in corporate bonds
and 2.8% in cash and cash equivalents.
The Burnham Fund paid dividends from net investment income in the amount of
$0.13, $0.06, and $0.05, respectively, in respect of its Class A, B and C shares
for the second quarter of 1996 on July 9, 1996 to shareholders of record on June
28, 1996.
Investment Strategy: The Summer Correction
In June, and on into July we witnessed an abrupt "correction" in the long string
of quarterly gains for equity indices. We believe the market correction is
attributable to a number of forces that became evident in the second quarter of
1996. First, the rising markets spawned a flurry of IPOs, many of which were
highly speculative in nature. Such activity often presages an "overheated"
market condition. Second, the monthly record-setting pace of net purchases of
equity mutual funds, particularly the "emerging growth" and "small
capitalization growth" funds, began to wane in June. This condition indicated to
us that liquidity in the equity markets, especially in the over-the-counter
markets, would be impacted as investors redirected assets to more conservative
investments. Third, the economy continued to show signs of strength in the
consumer sector. Unemployment rates continued to fall and wage growth
accelerated. Investors became concerned that inflation would pick up from its
long-term slumber. Consequently, market-driven interest rates began to rise in
anticipation that the Federal Reserve might increase interest rates over the
summer. Inflation rates thus far have remained low and the Fed has held pat. The
increases in market-driven interest rates may have a negative comparative impact
on future consumer expenditures and corporate spending and income statement
patterns. Lastly, the majority of reported corporate earnings remain healthy,
but disappointing results relative to analysts' expectations have been reported
by several very visible companies (particularly in high technology). These
reports are accompanied by management warnings of tough comparisons to come.
Their warnings relate to the inability to maintain last year's high unit volume
growth in the face of potentially slower growth on the horizon, an increase in
the fierceness of current price competition and the recent recovery of the US
dollar negatively impacting the translation of international revenues.
Second Half 1996 Outlook
We are still positive on the economic environment in general. We believe that
the United States is in a period of prolonged economic growth, with a relatively
low interest rate environment and benign inflation for some time to come. But
with signs of a near-term economic pause possibly at hand (or more systematic
problems to come that will be raised in election campaigning such as deficit
reduction, entitlement spending cuts and tax reform) investors have for the
moment curtailed their investing
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patterns. This caution has caused market liquidity to ease, resulting in a
contraction of price/earnings multiples. Whether we are in a bear market or a
correction in a bull market, a trading range is being established at more
reasonable multiple levels, and the speculative nature of the
small-capitalization market may have been somewhat tempered.
Investment Management Actions
Since the second quarter's end, we have been more defensive. During this
volatile period we are paying close attention to equity valuation and the
potential for negative earnings surprises. During the quarter, positions that
were trimmed back or eliminated because of difficult earnings comparisons or
fundamental changes include Humana, USWest Media, TIG Holdings, Walt Disney,
Chrysler and McDonald's. New positions include, among others, Manor Care Inc.,
New Plan Realty Trust, Lucent Technologies, Boeing and Sears Roebuck. A diverse
portfolio of predominantly large-cap companies with a record of sustainable
earnings growth and dividend payouts, strong management, conservative balance
sheets, stock buyback plans and attractive valuations remain the focus of our
investment style.
Many of the investment themes from our letters of year end and the first quarter
remain intact: moderate economic growth, corporate restructurings, increased
competitiveness of US companies, and the benign conditions that generally
prevail during Presidential election years. We are looking toward opportunities
to add to the portfolio quality names that may be unusually depressed in this
period of volatility.
The Burnham Fund on the Internet
We are pleased to announce that The Burnham Fund is now on the World Wide Web.
We invite you to visit our new site, at http://networth.galt.com/burnham, where
you may browse through Fund information including management commentary and
portfolio and performance data, access the Fund's current prospectus, download
the subscription agreement, and contact us directly through a direct e-mail
connection. We are quite proud of the depth of service offered by this new
channel of communication, and we shall continue to expand its capabilities as we
progress.
As always, we thank you for your trust and support, and we look forward to
continuing to serve your financial needs.
Very sincerely yours,
I.W. Burnham, II Jon M. Burnham
Chairman President &
Portfolio Manager
The performance data quoted represents past performance and is not indicative of
future performance. The investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Average total return for Class A shares, assuming
the reinvestment of dividends and excluding the maximum sales charge for the
one, five and ten year periods ended June 30, 1996 were 18.04%, 11.61% and
10.09%, respectively. Such performance assuming the imposition of the Class A
shares' maximum 5% sales charge for the same periods would have been 12.14%,
10.47% and 9.53%, respectively. For Class B and C shares, average total return
for the one year period ended June 30, 1996 and life of class total return for
the period October 18, 1993 (inception date) to June 30, 1996, were 17.62% and
16.75%, and 9.31% and 9.44%, respectively.
2
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INVESTMENT PERSPECTIVE
Equity Portfolio Distribution
by Industry Classification
June 30, 1996
<TABLE>
<CAPTION>
% Total
Equity Portfolio
----------------
<S> <C>
Energy -- Oil & Gas................... 17.68%
Communications Services............... 8.91%
Computers & Software.................. 8.09%
Insurance............................. 7.51%
Pharmaceuticals....................... 6.21%
Real Estate........................... 4.61%
Banking............................... 4.45%
Automotive............................ 4.16%
Hotels................................ 4.08%
Aerospace............................. 3.78%
Others................................ 30.52%
----------------
Total Equities........................ 100.00%
----------------
----------------
</TABLE>
Total Portfolio Distribution by Asset Class
June 30, 1996
[SEE APPENDIX TO GRAPHIC AND IMAGE MATERIAL]
Top 25% Portfolio Holdings
June 30, 1996
<TABLE>
<CAPTION>
Number of Shares/ % of
Principal Amount Value Net Assets
----------------- ----------- ----------
<S> <C> <C> <C>
Exxon Corporation................................ 45,000 $ 3,909,375 3.44%
Chrysler Corp. .................................. 50,000 $ 3,100,000 2.73%
Travelers Corp. ................................. 65,000 $ 2,965,625 2.61%
The Bank of New York Co., Inc.,
7.5% conv. sub. deb. 8/15/01................... $1,000,000 $ 2,630,000 2.32%
Thermo Electron Corp. ........................... 60,000 $ 2,497,500 2.20%
AT&T Corp........................................ 40,000 $ 2,480,000 2.18%
Xerox Corp. ..................................... 45,000 $ 2,407,500 2.12%
American Home Products Corp. .................... 40,000 $ 2,405,000 2.12%
ITT Corp. (New).................................. 35,000 $ 2,318,750 2.04%
Goodrich (B.F.) Co. ............................. 60,000 $ 2,242,500 1.97%
Mobil Corp....................................... 20,000 $ 2,242,500 1.97%
----------
Total Top 25% Portfolio Holdings................. 25.70%
----------
----------
</TABLE>
Cumulative Return
of a Hypothetical $10,000 Investment*
from inception (June 16, 1975)
through June 30, 1996
SEE APPENDIX TO GRAPHIC AND IMAGE MATERIAL
* All performance analyses shown herein represent past performance and are not
indicative of future performance. All dividends and distributions from income
and capital gains have been continually reinvested. Performance does not
include the imposition of the maximum 5% sales charge. Performance for other
classes of the Fund will be greater or less than the data shown in the graph
and tables based on differences in sales charges and fees paid by shareholders
investment in the different classes of the Fund.
Average Annual Total Return
Period ending June 30, 1996
<TABLE>
<S> <C>
One Year................. 18.04%
Five Years............... 11.61%
Ten Years................ 10.09%
Fifteen Years............ 12.57%
Twenty Years............. 12.86%
</TABLE>
3
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STATEMENT OF NET ASSETS
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
- --------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 76.62%
AEROSPACE 2.89%
Boeing Co.............................. 12,000 $ 1,045,500
Goodrich (B.F.) Co..................... 60,000 2,242,500
------------
3,288,000
------------
AUTOMOTIVE 3.19%
Chrysler Corp.......................... 50,000 3,100,000
General Motors Corp.................... 10,000 523,750
--------------
--------------
3,623,750
--------------
BANKING 3.41%
The Bank of New York Co., Inc.......... 20,000 1,025,000
Citicorp............................... 20,000 1,652,500
Wells Fargo & Co....................... 5,000 1,194,375
--------------
--------------
3,871,875
--------------
BUILDING PRODUCTS 1.16%
AMRE Inc............................... 60,000a 1,312,500
--------------
--------------
CHEMICALS 1.43%
Monsanto Co............................ 50,000 1,625,000
--------------
--------------
COMMUNICATIONS SERVICES 6.82%
AT&T Corp.............................. 40,000 2,480,000
ECI Telecom Ltd........................ 55,000 1,275,312
GTE Corp............................... 40,000 1,790,000
Loral Space Communications Ltd......... 25,000a 340,625
Lucent Technologies Inc................ 30,000 1,136,250
U.S. West Media Group.................. 40,000a 730,000
--------------
--------------
7,752,187
--------------
COMPUTER PRODUCTS & SOFTWARE 6.20%
Hewlett Packard Co..................... 20,000 1,992,500
Interleaf Inc.......................... 80,000a 520,000
International Business Machines
Corp................................. 10,000 990,000
Microsoft Corp......................... 10,000a 1,200,625
Phoenix Technologies Ltd............... 70,000a 1,163,750
Safeguard Scientifics Inc.............. 15,000a 1,170,000
--------------
--------------
7,036,875
--------------
CONSUMER/COMMERCIAL FINANCING 0.20%
Associates First Capital Corp.
Cl. A................................ 6,000 225,750
--------------
--------------
CONSUMER PRODUCTS 0.91%
General Electric Co.................... 12,000 1,038,000
--------------
--------------
DATA PROCESSING SYSTEMS 1.42%
Electronic Data Systems Corp........... 30,000 1,612,500
--------------
--------------
ELECTRONICS 0.68%
Teradyne Inc........................... 45,000a 776,250
--------------
--------------
STATEMENT OF NET ASSETS (CONTINUED)
June 30, 1996 (Unaudited)
NUMBER OF VALUE
SHARES/UNITS (NOTE 1)
- --------------------------------------------------------------------
ENERGY - OIL AND GAS 13.55%
Amoco Corp............................. 25,000 $ 1,809,375
Baker Hughs Inc........................ 20,000 657,500
British Petroleum PLC ADS.............. 10,000 1,068,750
Exxon Corporation...................... 45,000 3,909,375
Mobil Corporation...................... 20,000 2,242,500
Nuevo Energy Co........................ 35,000a 1,128,750
Royal Dutch Petroleum Co. ADR.......... 10,000 1,537,500
Texaco Inc............................. 25,000 2,096,875
Union Pacific Resources
Group Inc............................ 35,000 936,250
--------------
--------------
15,386,875
--------------
ENGINEERING/
INDUSTRIAL PRODUCTION 2.29%
Thermo Electron Corp................... 60,000a 2,497,500
Thermolyte Corp. units................. 10,000a,b,c 100,000
--------------
--------------
2,597,500
--------------
HEALTHCARE FACILITIES 2.04%
Manor Care Inc......................... 25,000 984,375
Meditrust SBI.......................... 40,000 1,335,000
--------------
--------------
2,319,375
--------------
HOTELS 3.12%
Circus Circus Enterprises Inc.......... 30,000a 1,230,000
ITT Corp. (New)........................ 35,000a 2,318,750
--------------
--------------
3,548,750
--------------
INSURANCE 5.76%
Allstate Corp.......................... 45,000 2,053,125
American Annuity Group Inc............. 50,000 650,000
TIG Holdings Inc....................... 30,000 870,000
Travelers Group Inc.................... 65,000 2,965,625
--------------
--------------
6,538,750
--------------
MEDICAL SUPPLIES 1.83%
Baxter International Inc............... 25,000 1,181,250
PLC Systems Inc........................ 40,000a 895,000
--------------
--------------
2,076,250
--------------
OFFICE EQUIPMENT 2.12%
Xerox Corp............................. 45,000 2,407,500
--------------
--------------
OPTICAL EYE CARE 0.58%
Sterling Vision Inc.................... 80,000a 655,000
--------------
--------------
PERSONAL CARE PRODUCTS 0.55%
Gillette Co............................ 10,000 623,750
--------------
--------------
PHARMACEUTICALS 4.76%
American Home Products Corp............ 40,000 2,405,000
Pfizer Inc............................. 20,000 1,427,500
Schering Plough Corp................... 25,000 1,568,750
--------------
--------------
5,401,250
--------------
</TABLE>
See notes to financial statements.
4
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STATEMENT OF NET ASSETS (CONTINUED)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
NUMBER OF SHARES
OR PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------------------------------------------------------------------
<S> <C> <C> <C>
PLASTICS 1.58%
Raychem Corp........................... 25,000 $ 1,796,875
--------------
--------------
RAILROADS 0.92%
Union Pacific Corp..................... 15,000 1,048,125
--------------
--------------
REAL ESTATE REIT 3.54%
Franchise Finance Corp.
of America........................... 70,000 1,610,000
National Golf Properties Inc........... 60,000 1,455,000
New Plan Realty Trust.................. 45,000 950,625
--------------
--------------
4,015,625
--------------
RETAIL STORES 0.86%
Sears Roebuck & Co..................... 20,000 972,500
--------------
--------------
SEMICONDUCTORS 1.94%
Intel Corp............................. 30,000 2,203,125
--------------
--------------
TELEPHONE COMPANIES 1.30%
SBC Communications Inc................. 30,000 1,477,500
--------------
--------------
TRAVEL RELATED &
FINANCIAL SERVICES 1.57%
American Express Co.................... 40,000 1,785,000
--------------
--------------
TOTAL COMMON STOCKS
(COST: $69,235,102).................. 87,016,437
--------------
--------------
CORPORATE CONVERTIBLE BONDS 3.67%
BANKING 2.32%
The Bank of New York Company, Inc.,
7 1/2% conv. sub. deb. 8/15/01.......... $1,000,000 2,630,000
--------------
--------------
DATA PROCESSING 0.94%
EMC Corp.,
4 1/4% conv. sub. deb. 1/01/01.......... 1,000,000 1,070,000
--------------
--------------
STEEL 0.41%
USX Marathon Group,
7% conv. sub. deb. 6/15/17........... 500,000 470,000
--------------
--------------
TOTAL CORPORATE CONVERTIBLE
BONDS (COST: $2,490,937)............. 4,170,000
--------------
--------------
STATEMENT OF NET ASSETS (CONTINUED)
June 30, 1996 (Unaudited)
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------------------------------------------------------------------
CORPORATE BONDS 16.95%
BANKING 1.79%
Chase Manhattan Corp.,
7 7/8% sub. notes 8/01/04............ $1,000,000 $ 1,005,151
Morgan (J.P.) & Co., Inc.,
7 5/8% sub. notes 11/15/98........... 1,000,000 1,024,036
--------------
--------------
2,029,187
--------------
BUILDING PRODUCTS 1.78%
USG Corp., 8% sr. notes
12/15/96............................. 500,000 503,498
USG Corp., 8% sr. notes 3/15/97........ 1,500,000 1,514,545
--------------
--------------
2,018,043
--------------
CHEMICALS 1.29%
du Pont (E.I.) de Nemours & Co.,
6% deb. 12/01/01..................... 1,000,000 963,750
du Pont (E.I.) de Nemours & Co.,
6 3/4% notes 10/15/02................ 500,000 496,790
--------------
--------------
1,460,540
--------------
COMMUNICATION SERVICES 0.89%
Storer Communications Inc.,
10% sub. deb. 5/15/03................ 1,000,000 1,007,500
--------------
--------------
ENERGY - OIL & GAS 0.85%
Maxus Energy Corp.,
9 3/8% notes 11/01/03................ 1,000,000 965,000
--------------
--------------
FINANCIAL SERVICES 6.40%
Ford Motor Credit Corp.,
9 1/4% notes 6/15/98................. 1,000,000 1,050,631
General Electric Capital Corp.,
8% notes 1/15/98..................... 1,000,000 1,024,905
General Motors Acceptance Corp.,
7 3/4% notes 1/15/99................. 1,000,000 1,027,739
MGM Grand Hotel Finance Corp.,
11 3/4% gtd. notes 5/01/99........... 1,000,000 1,057,500
Texaco Capital Inc.,
9% gtd. notes 11/15/97............... 1,000,000 1,036,123
Texaco Capital Inc.,
8.65% gtd. notes 1/30/98............. 2,000,000 2,070,444
--------------
--------------
7,267,342
--------------
HOTELS 1.69%
Marriott Corp.,
8 1/8% sr. notes "C" 12/01/96........ 450,000 448,457
Marriott Corp.,
8 7/8% sr. notes "D" 5/01/97......... 115,000 114,999
Marriott Corp.,
9 7/8% sr. notes "E" 11/01/97........ 850,000 851,813
Marriott Corp., 9 3/8% deb.
6/15/07.............................. 500,000 502,707
--------------
--------------
1,917,976
--------------
</TABLE>
See notes to financial statements.
5
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STATEMENT OF NET ASSETS (CONCLUDED)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------------------------------------------------------------------
<S> <C> <C> <C>
PHARMACEUTICALS 1.82%
Johnson & Johnson,
7 3/8% euronotes
11/09/97.............................$ 1,000,000$ 1,014,688
Lilly (Eli) & Co.,
8 1/8% notes 12/01/01................ 1,000,000 1,058,418
--------------
--------------
2,073,106
--------------
UTILITIES 0.44%
AES Corp.,
9 3/4% sr. sub. notes 6/15/00........ 500,000 505,000
--------------
--------------
TOTAL CORPORATE BONDS
(COST: $18,841,664).................. 19,243,696
--------------
--------------
COMMERCIAL PAPER 2.80%
Associates Corp. of NA,
5.30% 7/01/96........................ 3,177,000 3,177,000
--------------
--------------
TOTAL COMMERCIAL PAPER
(COST: $3,177,000)................... 3,177,000
--------------
--------------
TOTAL INVESTMENTS
(COST: $93,744,704) 100.04% $ 113,607,133
CASH AND OTHER ASSETS,
LESS LIABILITIES (0.04) (43,841)
--------------- --------------
--------------
Net Assets 100.00% $ 113,563,292
--------------
--------------
</TABLE>
a Non-income producing security.
b A unit consists of one share of common stock of Thermolyte Corp. and one
redemption right.
Federal Income Tax Basis of Investment Securities
For Federal income tax purposes, the tax basis of investment securities
owned at June 30, 1996 was $93,744,704. The aggregate gross unrealized
appreciation for all securities in which there was an excess of value over tax
cost was $22,832,753 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was $2,970,324.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- ------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost: $93,744,704)
(Note 1).............................................. $ 113,607,133
Cash in bank............................................ 903
Dividends and interest receivable....................... 588,398
Prepaid expenses........................................ 60,861
Receivable from Investment Advisor...................... 295
----------------
Total assets.......................................... 114,257,590
----------------
LIABILITIES:
Payable for investment securities
purchased............................................. 445,010
Payable for investment advisory
fees (Note 6)......................................... 58,184
Payable for distribution and
service fees (Note 7)................................. 25,414
Accrued expenses and other payables..................... 165,690
----------------
Total liabilities..................................... 694,298
----------------
NET ASSETS................................................ $ 113,563,292
----------------
----------------
CLASS A SHARES
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
(Note 2): ($112,654,999/4,779,454.428 shares
outstanding)............................................ $ 23.57
----------------
----------------
CALCULATION OF MAXIMUM OFFERING PRICE
SALES CHARGE - 5% OF PUBLIC OFFERING PRICE:
(Note 2): ($23.57 net asset value plus 5.0%
of public offering price)............................... $ 24.81
----------------
----------------
CLASS B SHARES
NET ASSET VALUE AND OFFERING PRICE PER SHARE:
(Note 2): ($905,211/37,684.791 shares
outstanding)............................................ $ 24.02
----------------
----------------
CLASS C SHARES
NET ASSET VALUE AND OFFERING PRICE PER SHARE:
(Note 2): ($3,086/131.194 shares
of capital stock outstanding)........................... $ 23.52
----------------
----------------
Redemption price per share varies with the length
of time Class B and C shares are held. (Note 7)
NET ASSETS CONSISTED OF:
Capital paid-in......................................... $ 89,025,273
Undistributed net investment
income................................................ 714,008
Accumulated net realized gains
on investments........................................ 3,961,582
Net unrealized appreciation of
investments........................................... 19,862,429
----------------
$ 113,563,292
----------------
----------------
</TABLE>
See notes to financial statements.
6
<PAGE>
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STATEMENT OF OPERATIONS
Six months ended June 30, 1996 (Unaudited)
- ------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME:
Dividends............................................. $ 1,025,715
Interest.............................................. 1,040,308
----------------
Total income........................................ 2,066,023
----------------
EXPENSES:
Investment advisory fees (Note 6)..................... 355,028
Distribution fee (Class A)(Note 7).................... 141,031
Distribution fee (Class B)(Note 7).................... 2,928
Distribution fee (Class C)(Note 7).................... 11
Service fees (Class B & C)(Note 7).................... 980
Transfer agent fees................................... 99,781
Professional fees..................................... 99,691
Reports to shareholders............................... 25,480
Directors' fees and expenses.......................... 36,400
Custodian fees........................................ 24,934
Miscellaneous expense................................. 36,218
----------------
Total expenses before reimbursement................. 822,482
Less: Expenses voluntarily reimbursed
by Investment Adviser (Note 6).................... (295)
----------------
Total expenses after reimbursement.................. 822,187
----------------
Net investment income............................. 1,243,836
----------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain from securities and options
transactions (excluding short-term
money market instruments)
Proceeds from sales..................$ 40,466,170
Cost of securities sold.............. (36,404,247)
------------
Net realized gain from securities and
options transactions ............................... 4,061,923
----------------
Increase in unrealized appreciation
of investments
Beginning of period..................$ 17,560,175
End of period........................ 19,862,429
------------
Increase in unrealized appreciation................... 2,302,254
----------------
Net realized and unrealized gain
on investments........................................ 6,364,177
----------------
Net increase in net assets resulting from
operations............................................ $ 7,608,013
----------------
----------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, December 31,
1996 1995
---------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income .................................... $ 1,243,836 $ 3,515,912
Net realized gain from security
and option transactions ................................ 4,061,923 4,434,390
Increase in unrealized
appreciation of investments ............................ 2,302,254 15,328,646
------------- -------------
Net increase in net
assets resulting
from operations ...................................... 7,608,013 23,278,948
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
(NOTE 1):
From net investment income:
Class A Shares ......................................... (1,407,977) (3,774,236)
Class B Shares ......................................... (4,069) (10,282)
Class C Shares ......................................... (21) (83)
From realized gains from security and option transactions:
Class A Shares ......................................... (4,155,874) (2,856,113)
Class B Shares ......................................... (23,246) (10,070)
Class C Shares ......................................... (108) (67)
------------- -------------
Total distributions to
shareholders ......................................... (5,591,295) (6,650,851)
------------- -------------
CAPITAL SHARE TRANSACTIONS
(NOTE 2):
Net proceeds from sale
of shares .............................................. 847,389 1,318,615
Net asset value of shares issued
to shareholders in reinvestment
of dividends ........................................... 4,820,002 5,722,758
------------- -------------
5,667,391 7,041,373
Cost of shares redeemed .................................. (6,801,369) (13,140,548)
------------- -------------
Decrease in net assets derived
from capital share
transactions ......................................... (1,133,978) (6,099,175)
------------- -------------
Increase in net
assets for the period ................................ 882,740 10,528,922
------------- -------------
NET ASSETS:
Beginning of period ........................................ 112,680,552 102,151,630
------------- -------------
End of period (including
undistributed net investment
income of $714,011 and $882,239,
respectively) ............................................ $ 113,563,292 $ 112,680,552
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements.
7
<PAGE>
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NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
NOTE 1 _ Significant Accounting Policies
The Burnham Fund Inc. ("Fund") is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified, open-end investment
company.
The Fund offers three classes of shares. Class A shares are sold with a
front-end sales charge of up to 5.0%. Class B shares are sold with a contingent
deferred sales charge of 5.0% which declines to zero for purchases held more
than six years. Class C shares are sold with a contingent deferred sales charge
of 1%, which declines to zero if held for more than one year.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. Security valuation - Investments in securities traded, or in options
purchased, on a national securities exchange are valued at the last reported
sales price on the primary exchange on which they are traded on the last
business day of the period. Securities traded in the over-the-counter market
(including securities listed on exchanges whose primary market is believed to be
over-the-counter) and listed securities for which no sale was reported on that
date are valued at the mean between the last reported bid and asked prices.
Short-term money market instruments which have a maturity of more than 60 days
are valued at prices based on market quotations for securities of similar type,
yield and maturity. Short-term money market instruments which have a maturity of
60 days or less are valued at amortized cost which approximates value.
B. Repurchase agreements - Securities held as collateral for repurchase
agreements are held by the Federal Reserve Bank and are designated as being held
for the Fund's behalf by its custodian under the book-entry system. The Fund
monitors the adequacy of the collateral (U.S. Government securities) daily and
can require the seller to provide additional collateral in the event the market
value of the securities pledged falls below 102% of the carrying value of the
repurchase agreement.
C. Option Writing - When the Fund writes a covered call option, the amount
received is included in the Statement of Assets and Liabilities as an asset and
an equivalent liability. The liability is subsequently marked to market to
reflect the current value of the option written. When a call option expires or
when the Fund enters into a closing purchase transaction, the Fund will
recognize a gain (or loss) without regard to any unrealized gain or loss on the
underlying security. When a call option is exercised, the proceeds from the
delivery of the underlying security are increased by the amount originally
received and the resulting gain or loss is recorded by the Fund.
Transactions in written options for the six months ended June 30, 1996 were as
follows:
<TABLE>
<CAPTION>
Number of
Options Premiums
- ----------------------------------------------------------
<S> <C> <C>
Options written at December 31, 1995 -0- $ -0-
Options written -0- -0-
Options canceled in closing
purchase transactions -0- -0-
------- -------
Options outstanding at
June 30, 1996 -0- $ -0-
------- -------
------- -------
</TABLE>
D. Federal income taxes - It is the Fund's policy to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code.
By so qualifying, the Fund will not be subject to Federal income taxes to the
extent that its net investment income and net realized capital gains are
distributed.
E. Other - Security transactions are accounted for on the date the securities
are purchased or sold. Interest income is recorded on the accrual basis and
dividend income on the ex-dividend date. Dividends and distributions to
shareholders are recorded on the ex-dividend dates. The Fund may periodically
make reclassifications among certain of its capital accounts as a result of the
timing and characteristics of certain income and capital gains distributions
determined annually in accordance with Federal tax regulations which may differ
from generally accepted accounting principles.
F. Expenses - Expenses that are attributable to a specific class of shares will
be charged to that class. Fund-level expenses will be allocated daily based upon
the relative percentage of net assets of each class of shares.
NOTE 2 - Capital Stock
At June 30, 1996, there were 40,000,000 shares of capital stock ($0.10 par
value) authorized, divided into four classes designated Class A, B, C and D
shares. At June 30, 1996, Class D shares were not issued.
8
<PAGE>
<PAGE>
[LOGO]
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
Transactions in capital stock for the six months ended June 30, 1996 and
year ended December 31, 1995 for Class A, B and C shares were as follows:
<TABLE>
<CAPTION>
Six months
ended Year ended
June 30, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
CLASS A SHARES
Shares sold ............................ 27,581 52,477
Shares issued to shareholders
in reinvestment of distributions 214,521 285,586
-------- --------
241,102 338,063
Shares redeemed ........................ (293,979) (626,658)
-------- --------
Net decrease ........................... (52,877) (288,595)
-------- --------
-------- --------
CLASS B SHARES
Shares sold ............................ 9,859 10,326
Shares issued to shareholders
in reinvestment of distributions 1,173 1,022
-------- --------
11,032 11,328
Shares redeemed ........................ (379) (1,348)
-------- --------
Net increase ........................... 10,653 9,980
-------- --------
-------- --------
CLASS C SHARES
Shares sold ............................ -0- -0-
Shares issued to shareholders
in reinvestment of distributions 6 7
-------- --------
6 7
Shares redeemed ........................ -0- -0-
-------- --------
Net increase ........................... 6 7
-------- --------
-------- --------
</TABLE>
NOTE 3 - Purchase and Sales of Securities
The aggregate cost of purchases and the proceeds from sales of securities
or maturities for the six months ended June 30, 1996 were:
<TABLE>
<CAPTION>
PROCEEDS
COST OF FROM SALES
PURCHASES OR MATURITIES
------------ ---------------
<S> <C> <C>
Short-term money
market instruments.......................$ 194,397,000 $ 192,761,000
U.S. Government obligations................ -0- -0-
Common stocks and other securities.........$ 33,766,265 $ 40,466,170
</TABLE>
NOTE 4 - Restricted Securities
A restricted security is a security which has not been registered with the
U.S. Securities and Exchange Commission pursuant to the Securities Act of 1933.
The Fund may purchase restricted securities through a private offering and they
cannot be sold without prior registration under the Securities Act of 1933
unless such sale is pursuant to an exemption therefrom. Subsequent costs of
registration of such securities are borne by the issuer. A secondary market
exists for certain privately placed securities. At June 30, 1996, the Fund held
a restricted security with a value aggregating $100,000, representing less than
0.1% of the Fund's net assets. Currently, a market does not exist for the
security listed below:
<TABLE>
<CAPTION>
Units Company Acquired Cost Value
- ---------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
10,000 Thermolyte Corp. 03/16/1995 $100,000 $100,000
</TABLE>
This security has been valued in good faith by management and the Board of
Directors of the Fund.
NOTE 5 - Off Balance Sheet Risk in Financial Instruments
The Fund may from time to time trade in financial instruments with
off-balance sheet risk in the normal course of its investing activities to
assist in managing exposure to various market risks. These financial instruments
include written as well as purchased options, and may involve, to a varying
degree, elements of risk in excess of the amounts recognized for financial
statement purposes. The notional or contractual amounts of these instruments
represent the investment the Fund has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
NOTE 6 - Investment Advisory Fees and Other Transactions
The Investment Adviser provides research and statistical services and makes
investment recommendations to the Fund. With its affiliate, Burnham Securities
Incorporated (the "Distributor"), the Investment Adviser supplies a staff
trained in accounting and shareholder services to aid in the Fund's
administration and day-to-day operations.
The Investment Adviser receives an investment advisory fee paid monthly at
an annual rate of 5/8 of 1% of the Fund's average daily net asset values. In
addition, if in any year the Fund's operating expenses, including investment
advisory fees but excluding interest, taxes and brokerage commissions, exceed
2.5% of the first $30 million of the Fund's average net assets, 2.0% of the next
$70 million and 1.5% of the remaining average net assets, the fees to be paid to
the Investment Adviser will be reduced to the extent that such expenses exceed
such limitation. For the six months ended June 30, 1996, the Fund incurred fees
in the amount of
9
<PAGE>
<PAGE>
[LOGO]
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
$355,028. The advisory fees and the expenses of the Fund as defined above did
not exceed the maximum allowable limitation. The Investment Adviser has
voluntarily agreed to reimburse expenses of Class B and C shares in order to
limit such expenses to an annual rate of 2.3% and 2.3%, respectively.
Accordingly, the Investment Adviser has reimbursed Class B and C shares $56 and
$239, respectively.
NOTE 7 - Distribution Services Agreement
The Distributor serves as principal distributor of Fund shares. The Fund
has adopted a Distribution Service Agreement (the "Agreement") pursuant to Rule
12b-1 under the 1940 Act for Classes A, B and C shares. Under the agreement, the
Fund pays a distribution fee to the Distributor at an annual rate of 0.25%,
0.75% and 0.75%, respectively, of the Fund's average daily net assets
attributable to each respective class. For the six months ended June 30, 1996,
Class A, B and C shares incurred fees of $141,031, $2,928, and $11,
respectively. Class B and C shares of the Fund will also pay a service fee at an
annual rate of 0.25% of the average daily net assets of Class B and C shares.
The service fee will be used by the Distributor to compensate broker-dealers and
other NASD members for rendering continuing, ongoing service to Class B and C
shareholders. Service fees incurred for Class B and C shares for the six months
ended June 30, 1996 were $976 and $4, respectively. For the six months ended
June 30, 1996, the Distributor earned $49,050 in brokerage commissions from Fund
transactions and $7,862 in sales commissions from the distribution of Class A
shares.
A contingent deferred sales charge ("CDSC") at a maximum rate of 5% is
imposed on Class B shares if an investor redeems within six years of the
purchase date. A CDSC is imposed on Class C shares at a rate of 1% if shares are
redeemed within 12 months from the date of purchase. A CDSC will be imposed on
the proceeds of the redemptions of Class A 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 12 months and .50 of 1% if the redemption occurs within the next 12
months. No CDSC will be imposed on Class A, B and C shares derived from
reinvestment of dividends or capital gain distributions, or on amounts which
represent an increase in the value of the shareholders account resulting from
capital appreciation above the amount paid for Class A, B and C shares purchased
during the CDSC period. Any sales charge imposed on redemptions is paid to the
Distributor. For the six months ended June 30, 1996, there were $379 in CDSC
charges paid to the Distributor.
Certain directors and officers of the Fund are also directors, officers
and/or employees of the Investment Adviser and/or Distributor. None of the
directors so affiliated received compensation for his services as director of
the Fund. Similarly, none of the Fund's officers received compensation from the
Fund.
NOTE 8 - Dividends and Distributions Subsequent to end of Reporting Period
The Fund announced a per-share dividend to shareholders of record June 28,
1996. The dividend had an ex-dividend date of July 1, 1996 and was payable July
9, 1996.
The distribution was as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
From net investment income ........................ $0.13 $0.06 $0.05
------ ------ ----
Total distributions paid .......................... $0.13 $0.06 $0.05
------ ------ ----
------ ------ ----
</TABLE>
NOTE 9 - Management's Use of Estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and expenses
during the reporting period.
Actual results could differ from those estimates.
10
<PAGE>
<PAGE>
[LOGO]
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
NOTE 10 - Financial Highlights
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------------------------------------------- ------------------------------------
Six months ended Six months ended Year ended
June 30, Year ended December 31, June 30, December 31,
1996 1995 1994 1993 1992 1991 1996 1995 1994 1993*'D'
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $23.19 $19.88 $21.86 $21.95 $22.16 $20.01 $23.45 $19.94 $21.84 $22.17
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.26 0.71 0.75 0.81 0.88 1.07 0.07 0.41 0.49 0.13
Net Gains or Losses
on Securities
(both realized and
unrealized).......... 1.27 3.91 (1.15) 1.11 0.69 2.36 1.48 4.10 (1.04) (0.46)
---------------------------------------------------------------------------------------------------------
Total from Investment 1.53 4.62 (0.40) 1.92 1.57 3.43 1.55 4.51 (0.55) (0.33)
Less Distributions
Dividends (from net
income............... (0.29) (0.75) (0.87) (0.90) (1.12) (1.06) (0.12) (0.44) (0.64) -0-
Distributions from
Capital Gains (from
securities and options
transactions)........ (0.86) (0.56) (0.71) (1.11) (0.66) (0.22) (0.86) (0.56) (0.71) -0-
---------------------------------------------------------------------------------------------------------
Total Distributions... (1.15) (1.31) (1.58) (2.01) (1.78) (1.28) (0.98) (1.00) (1.35) -0-
---------------------------------------------------------------------------------------------------------
Net Asset Value, End
of Period............ $23.57 $23.19 $19.88 $21.86 $21.95 $22.16 $24.02 $23.45 $19.94 $21.84
---------------------------------------------------------------------------------------------------------
Total Return ......... 14.26%'D' 24.45% (1.77%) 9.35% 7.70% 17.98% 14.19%'D' 23.54% (2.52%) (1.49%)
---------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets (in $millions),
End of Period........ 112.7 112.0 101.8 118.5 117.2 125.4 0.9 0.6 0.3 0.2
---------------------------------------------------------------------------------------------------------
Ratio of Expenses (net)
to Average Net Assets.. 1.4%'D' 1.5% 1.5% 1.5% 1.2% 1.1% 2.2%'D' 2.2% 2.3% 2.2%'D'
---------------------------------------------------------------------------------------------------------
Ratio of Net Income to
Average Net Assets... 2.2%'D' 3.3% 3.7% 3.7% 4.1% 5.0% 1.4%'D' 2.5% 2.9% 3.9%'D'
---------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 60.3%'D' 78.3 87.9% 54.1% 68.5% 120.8% 60.3%'D' 78.3% 87.9% 54.1%
---------------------------------------------------------------------------------------------------------
<CAPTION>
Class C Shares
---------------------------------------------
Six months ended Year ended
June 30, December 31,
1996 1995 1994 1993*+
-------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period................... $23.10 $19.89 $21.87 $22.17
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................... 0.14 0.54 0.72 0.15
Net Gains or Losses on Securities
(both realized and unrealized)........ 1.30 3.91 (1.15) (0.45)
-------------------------------------------
Total from Investment Operations........ 1.44 4.45 (0.43) (0.30)
Less Distributions
Dividends (from net investment income).. (0.16) (0.68) (0.84) -0-
Distributions from Capital Gains (from
securities and options transactions).. (0.86) (0.56) (0.71) -0-
-------------------------------------------
Total Distributions................... (1.02) (1.24) (1.55) -0-
-------------------------------------------
Net Asset Value, End of Period.......... $23.52 $23.10 $19.89 $21.87
-------------------------------------------
Total Return............................ 13.38%'D' 23.51% (1.95%) (1.35%)
-------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets (in $millions), End of Period 0.0** 0.0** 0.0** 0.0**
-------------------------------------------
Ratio of Expenses (net)
to Average Net Assets [1]............. 2.2%'D' 2.3% 1.5% 1.5%'D'
-------------------------------------------
Ratio of Net Income to Average Net Assets 1.4%'D' 2.5% 3.6% 3.5%'D'
-------------------------------------------
Portfolio Turnover Rate................. 60.3%'D' 78.3% 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] Had the Investment Adviser not agreed to reimburse Class B and C shares for
expenses in excess of the expense limitation described in Note 6, the ratios of
expenses for the six months ended June 30, 1996, and years ended December 31,
1995, 1994 and 1993 would have been 2.2%, 3.8%, 4.0% and 30.5% for Class B
shares and 18.0%, 563.5%, 600.5% and 812.2% for Class C shares, respectively.
11
<PAGE>
<PAGE>
[LOGO]
Officers of the Fund
I.W. Burnham, II Chairman
Jon M. Burnham, President
and Chief Executive Officer
Debra B. Hyman, Executive Vice President
Michael E. Barna, First Vice President
Chief Financial Officer, Treasurer and Secretary
Ronald M. Geffen, Vice President
Frank A. Passantino, Vice President and
Assistant Secretary
Louis S. Rosenthal, Vice President
Investment Adviser
Burnham Asset Management Corporation
1325 Avenue of the Americas
New York, New York 10019
Distributor
Burnham Securities Incorporated
1325 Avenue of the Americas
New York, New York 10019
Telephone: 1 (800) 874-FUND
Custodian and Transfer Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Legal Counsel Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Servicing Agent
Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
This report has been prepared for the information of shareholders of The Burnham
Fund Inc. and is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus that includes information
regarding the Fund's objectives, policies, management, records and other
information.
Semi-Annual Report
JUNE 30, 1996
CONTINUITY KNOWLEDGE
[PHOTOGRAPH OF CLOCK] [PHOTOGRAPH OF CHESS PIECE]
[LOGO]
GROWTH INCOME
[PHOTOGRAPH OF STEPS] [PHOTOGRAPH OF COINS]
BURNHAM Securities Inc.
Principal Distributor
<PAGE>
<PAGE>
APPENDIX TO GRAPHIC AND IMAGE MATERIAL
Graph 1 Page 6 of Report 'Total Portfolio Distribution by Asset Class'
The pie chart sets out to describe the asset allocation of The Burnham Fund as
of June 30, 1996. The asset allocation is broken out in the following manner:
Common Stocks - 77%; Corporate & Convertible Bonds - 20%; Cash and Cash
Equivalents - 3%.
Graph 2 Page 6 of Report 'Cumulative Return of a Hypothetical $10,000
Investment'
The line chart describes a hypothetical investment of $10,000 over the
investment period June 16, 1975 (inception date) to June 30, 1996. The
performance figures do not include the imposition of the maximum sales charge of
5%. All dividends and distributions from income and capital gains have been
continually reinvested. The performance in the graph represent past performance
and are not indicative of future performance. The performance at the end of the
period reflects a total hypothetical value of $131,116 representing a cumulative
total return of 1,211.16% and an annualized compound rate of return of 12.98%.
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as........... 'D'
The double dagger symbol shall be expressed as.... 'DD'
