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February 10, 1998
DEAR SHAREHOLDERS:
We are pleased to present to you the Annual Report of the Burnham Fund for 1997.
NEW AND NOTEWORTHY IN 1997
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THE BURNHAM FUND ON THE WORLD WIDE WEB. In 1997 The Burnham Fund registered
under its own domain name and expanded the information and materials available
to visitors on the website. The Fund's internet address is
http://www.burnhamfunds.com. On the site, shareholders and interested investors
may review the Fund's performance, send e-mail messages to management, download
prospectuses and quarterly reports, or request hard copy. For shareholders and
investors inter-ested in IRA products, including the new Roth IRA, booklets and
applications may be easily downloaded at your, or your investment consultant's
convenience.
Burnham Fund Automated Phone Service Line. In the fall of 1997, The Burnham Fund
initiated an automated shareholder service line. Shareholders may quickly
retrieve information including daily net asset value, account balances, dividend
information and fund literature. The number is 1-800-462-2392.
REVIEW OF 1997
- --------------------------------------------------------------------------------
BURNHAM FUND DATA. On December 31, 1997, The Fund's net asset value per share
for Class A, B and C shares was $30.04, $30.75 and $30.09, respectively, which
represent total returns for the year of 24.7%, 23.6% and 23.6%, respectively.
This compares to an increase in Morningstar's Large Cap Blend Index of 26.3%.*
For the year, The Burnham Fund Class A, B and C shares paid $2.08, $1.82 and
$1.85 respectively in taxable dividends per share. Of this amount, $0.45, $0.19
and $0.22 per share, respectively, were from ordinary income and $1.63, $1.63
and $1.63 per share, respectively, were from capital gains. The fourth quarter
dividend, $0.12, $0.04 and $0.08 per share, respectively, from ordinary income,
and the annual capital gains distribution were paid on January 9, 1998, and are
considered taxable for 1997.
1997 was the third year of strong market performance by any measure. The Dow
Jones Industrial Average increased 24.9%*, the S&P 500 Index advanced 33.4%*,
the NASDAQ Composite rose 22.4%*, and the Lehman Brothers Govt/Corp Bond Index
rose 9.8%.* The economy was penned by many professionals as being "nearly
perfect." Consumer confidence and industrial production levels hit 30-year highs
while inflation remained low, ending the year at a 2.1% rate. Interest rates
rose in the first quarter of the year, but then declined steadily following a
one-quarter percent increase in short-term interest rates by the Federal Reserve
in March. Despite concerns about Asia and profit margin pressure, it appears
that earnings for the S&P 500 attained about a 10% increase over 1996. The
quality of earnings, absent the effect of inflation, is very high. In terms of
market measures, the yield on the S&P 500 continued to drop, ending the year at
1.8%, a ten-year low. The multiple on the index at year end, before
extraordinary items, was about 22 times, also at an historically high rate
reflecting optimism about future earnings growth. Volatility in the indices
became a matter of course; 30% of market trading days saw swings of the Dow
Jones Industrial Averages of more than +/-1.0%.
Besides favorable economic conditions, many of 1995 and 1996's positive
investment themes continued into 1997. The dollar volume of US and International
mergers and acquisitions exceeded $1.5 trillion. Consolidation in several
industries occurred, which led to rising valuations and reduction of the supply
of common
* These indices are unmanaged and include dividends reinvested.
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stock. Mega-mergers were announced in many sectors, but predominantly among
regional banks, brokerage and mutual fund complexes, technology, transportation,
energy and telecommunications. Similarly, reorganizations in the way of
spin-offs were announced; for example, Pepsi (Restaurants), Ford Motor (The
Associates) and US West (US West Media Group). Washington also provided a
positive climate for the year. The Federal Government reported earlier than
expected budget surpluses which were derived from rising income tax receipts
from individual and corporate returns. The Taxpayer Relief Act was passed, an
important piece of legislation that serves to expand and increase individual
retirement and educational savings options for many Americans, in addition to
reducing taxes on personal investments including real estate. Finally, mutual
fund purchases by individual investors continued at a record pace, and over 950
new funds began operations.
1998 OUTLOOK
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We enter 1998 with optimism. The numerous investment characteristics cited above
that led to positive investment returns over the past three years remain in
place as the new year begins: high inflow of cash into equity mutual funds,
contracting supply of common stock due to mergers, reorganizations and corporate
buybacks, a strong economy accompanied by low inflation and low interest rates,
and an accommodating environment in Washington. To this mix we note that
individual consumers may further enjoy the fruits of a benevolent economy:
personal balance sheets may improve in 1998 as a mini-boom is under way in home
mortgage refinancing. This will lead to increased family cash flow available for
spending or investment.
However, we identify several dark clouds that may cause unease and uncertainty
for the markets. First, it is difficult to predict what effect that the Asian
crisis will have on US corporate earnings and the economy as a whole. Companies
with significant Asian-derived revenue may experience an earnings slowdown due
to currency translation and loss of business. Already these effects have been
felt by a few prominent technology and capital equipment companies. Contrarily,
as the year progresses, these companies may benefit from lower costs associated
with weak local currencies. Manufacturing facilities and labor may be contracted
at lower rates. Also impacted have been money center banks, which are writing
down fourth quarter trading losses and reserving for possible credit problems
that may lie ahead. We believe that the bulk of the impact on these banks is
behind us, as they recoup some written-down credits, and purchase loans at
bankruptcy levels. Looking ahead, the US may become flooded with cheaper foreign
goods, the effect of which is twofold. US manufacturers may experience a more
difficult pricing environment at a time when hourly wages are rising during a
period of historically low unemployment. Good for the consumer, but possibly a
squeeze on corporate profit margins. On the other hand, tough pricing and profit
pressures imply that the Fed will be less likely to increase interest rates
although the US domestic economy is strong. Secondly, this latest scandal
surrounding the Clinton Administration may affect investor sentiment if it
escalates. Unlike the state of affairs during Watergate, this time around the
Vice President is a known entity, the economy is healthy, and investors seem to
recover from shocks with more fortitude. Finally, it is our hope that the Iraq
conflict is resolved diplomatically, but the possibility exists that the US may
use military measures near term.
2
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We believe 1998 may be a challenging year, one in which investment fundamentals
are positive, yet questions may arise about the sustainability of declining
interest rates and the past three years' earnings growth trends. Stock selection
and investment discipline will be essential. In light of the above factors, we
continue to favor companies with earnings growth potential of at least 15% to
20% per year for five years, product leadership, strong management with a
shareholder-value orientation, superior financial underpinnings, and a healthy
dividend history (when pertinent). We also search for companies whose stock
appears undervalued in the market relative to its past, or those which may
benefit from restructuring actions. We also favor companies with relatively
little exposure to Asia. Such industries would include consumer staples,
regional banking, health care, and real estate investment trusts. We remain
overweighted in energy, despite recent weakness in the commodity due to warm
weather in the US and reduced demand from Asia, all of which are short term
factors. We favor the stronger, large capitalized international oil and service
companies. The technology sector still offers opportunity for investment,
especially with multiples having contracted during the second half of 1997. In
selecting technology investments, we favor companies with exciting new products
and services, strong earnings growth, and limited Asian exposure.
We appreciate your confidence in The Burnham Fund, and look forward to serving
your investment needs in the year ahead.
Very truly yours,
/s/ I. W. BURNHAM, II /s/ JON M. BURNHAM
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 December 31, 1997 were 24.74%, 14.42% and
12.89%, respectively. Such performance assuming the imposition of the Class A
shares' maximum 5% sales charge for the same periods would have been 18.50%,
13.25% and 12.31%, respectively. For Class B and C shares, average total return
for the one year period ended December 31, 1997 and life of class total return
for the period October 18, 1993 (inception date) to December 31, 1997 were
23.60% and 14.14% and 23.59% and 13.93%, respectively. Class B shares bear a
maximum contingent deferred sales charge at a rate of 5% if they are redeemed
within the first six years of purchase. Such performance assuming the imposition
of the contingent deferred sales charge of 4% for the one year period ended
December 31, 1997 and life of class were 19.60% and 13.47%, respectively. Class
C shares bear a maximum contingent deferred sales charge at a rate of 1% if they
are redeemed within the first year of purchase.
3
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COMPARISON OF PERFORMANCE TO
CERTAIN MARKET INDICES
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Although the Fund's investment objectives do not include matching or exceeding
the performance of any securities-related index, the line graph set forth on the
following page may be viewed as useful in that it enables an investor to compare
the performance of the Fund to certain securities-related market indices. The
line graph includes performance information relating to the Standard & Poor's
500 Index, a broad-based stock market index which is comprised of a large,
unmanaged "basket" of stocks.
Since the Fund is a managed investment vehicle, and its investment policies
permit it to invest in debt securities, convertible securities, warrants and
options, the Fund may be able to reduce the volatility and downside risk
inherent in an investment in an index comprised exclusively of equity
securities. In addition, the line graph sets forth information regarding the
Lehman Government/Corporate Bond Index, an index reflecting the broad-based bond
market, as well as the average quarterly return of 3-month US Treasury Bills.
Because the Fund maintained a portion of its portfolio in fixed-income
investments during 1997, the information pertaining to these market indices may
be useful in providing a comparison of the Fund's performance to that of the
bond market in general. In making any of these comparisons, it should be
understood that the performance of a market index is not adjusted to reflect the
brokerage expenses that would be incurred in purchasing and selling the
securities comprising the index, and does not include the management fees and
other expenses that are generally incurred in investing through mutual funds.
The performance information set forth on the line graph is based on a $10,000
investment made as of December 31, 1987, and reflects changes in value through
the 10-year period to December 31, 1997. Performance for The Burnham Fund Class
A shares is based on the imposition of a maximum initial sales charge of 5%.
Performance for other classes of the Fund will be greater or less than the line
graph shown based on differences in sales charges and fees paid by shareholders
investing in the difference classes of the Fund. Average annualized total
returns for Classes B and C shares for the one year and life of class (inception
date: October 18, 1993), assuming the composition of contingent deferred sales
charges were 19.66% and 13.47%, and 23.59% and 13.93%, respectively.
PERFORMANCE ANALYSIS SECTION
- --------------------------------------------------------------------------------
Jon M. Burnham, Portfolio Manager of the Fund, believed that equities had a more
positive total return potential than fixed income securities for 1997. For the
four quarters of 1997, consecutively, the fund returned 1.0%, 14.2%, 6.7% and
1.3%. In comparison, The S&P 500 (fully invested, including dividend
reinvestment, and which is unmanaged) returned 2.7%, 17.5%, 7.5% and 2.9%. The
Lehman Government/Corporate Bond Index returned (0.9%), 3.7%, 3.5% and 3.2% for
the year. The Morningstar Growth and Income Index rose 1.4%, 14.7%, 8.7% and
1.1% for the four quarters of 1997. Management of the Fund attributes
differentials in performance to its performance in the third and fourth
quarters, a volatile period during which several sectors of the portfolio, which
are overweighted relative to its peers, were particularly affected by profit
taking due to investor concern about Asian risk. These sectors included
money-center banks, semiconductors, oil and oil service companies. The Fund's
management in the recent two years has favored representation in the Real Estate
Investment Trust sector for its high dividend flow and capital appreciation
potential, as opposed to the low current yields of fixed income instruments.
This group underperformed the S&P 500 by approximately 19% in 1997.
4
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE FUND TO CERTAIN MARKET INDICES
AVERAGE ANNUALIZED
TOTAL RETURN OF
THE BURNHAM FUND
1 YEAR 5 YEARS 10 YEARS
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18.50% 13.25% 12.31%
[GRAPH -- PLOTTED FOR 3-MONTH PERIODS, FROM DECEMBER 1987
THROUGH DECEMBER 1997]
<TABLE>
<CAPTION>
AVERAGE
LEHMAN 3-MONTH
THE BURNHAM S&P GOVT. BOND US TREASURY
FUND 500 INDEX INDEX BILL RATE
- ----------- --------- --------- -----------
<S> <C> <C> <C> <C>
9,500 10,000 10,000 10,000
9,982 10,569 10,584 10,141
10,224 11,274 10,962 10,295
10,380 11,312 11,070 10,471
10,628 11,660 11,277 10,668 Value at end of period
11,211 12,486 11,385 10,889 S&P 500 Index
11,826 13,588 11,509 11,115 $52,699
12,510 15,043 12,435 11,328
13,049 15,354 12,551 11,540
12,602 14,893 13,005 11,759
12,824 15,828 12,856 11,983
12,338 13,652 13,319 12,213
12,817 14,875 13,399 12,438
13,548 17,036 14,083 12,616
13,435 16,997 14,463 12,797
14,113 17,907 14,681 12,976
15,121 19,408 15,525 13,140
14,914 18,918 16,353 13,269
14,924 19,278 16,108 13,395
15,632 19,882 16,762 13,507
16,286 20,883 17,580 13,609
16,837 21,800 17,592 13,707 The Burnham Fund
17,204 21,904 18,412 13,807 $31,938
17,967 22,468 18,966 13,910
17,811 22,991 19,594 14,010
16,935 22,120 19,537 14,111
16,938 22,212 18,923 14,245
17,573 23,296 18,689 14,389 Lehman Brothers Corp/
17,494 23,293 18,782 14,550 Govt Bond Index
18,451 25,561 18,852 14,732 $24,599
19,715 28,000 19,790 14,943
20,775 30,226 21,073 15,145
21,771 32,046 21,475 15,357
22,750 33,765 22,476 15,538
23,271 35,278 21,950 15,732
23,866 36,369 22,053 15,930 Average 3-Month U.S.
25,603 39,402 22,444 16,131 Treasury Bill Rate
25,849 40,461 23,131 16,333 $16,962
29,532 47,526 22,932 16,535
31,521 51,085 23,764 16,750
31,937 52,699 24,598 16,961
</TABLE>
5
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INVESTMENT PERSPECTIVE
EQUITY PORTFOLIO DISTRIBUTION
by Industry Classification
December 31, 1997
% Total
Equity Portfolio
Energy - Oil & Gas ......................................... 13.74%
Real Estate Investment Trust ............................... 10.15%
Computer Products & Software ............................... 9.08%
Insurance & Financial Services ............................. 9.06%
Pharmaceuticals ............................................ 8.18%
Banking .................................................... 7.11%
Oil Drilling ............................................... 5.25%
Automotive ................................................. 3.98%
Telecommunication Network Services ......................... 4.50%
Semiconductors ............................................. 3.30%
Other ...................................................... 25.64%
------
Total Equities ............................................. 100.00%
------
------
TOTAL PORTFOLIO DISTRIBUTION BY ASSET CLASS
December 31, 1997
[PIE CHART]
TOP 25% PORTFOLIO HOLDINGS
December 31, 1997
<TABLE>
<CAPTION>
Number of % of
Shares Value Net Assets
----------- ----------- -----
<S> <C> <C> <C>
Travelers Group Inc ............................ 120,000 $6,465,000 4.68%
The Bank of New York Co., Inc. ................. 100,000 $5,781,250 4.18%
Exxon Corporation .............................. 90,000 $5,506,875 3.99%
Diamond Offshore Drilling Inc. ................. 100,000 $4,812,500 3.48%
Allstate Corp. ................................. 45,000 $4,089,375 2.96%
American Express Co. ........................... 45,000 $4,016,250 2.91%
Pfizer Inc. .................................... 50,000 $3,728,125 2.70%
Intel Corp. .................................... 50,000 $3,510,938 2.54%
----------- -----
Top 25% Portfolio Holdings ..................... $37,910,313 27.44%
----------- -----
----------- -----
</TABLE>
CUMULATIVE RETURN
OF A HYPOTHETICAL $10,000 INVESTMENT*
from inception (June 16, 1975)
through December 31, 1997
THE BURNHAM FUND -- CLASS A
Value of hypothetical investment
on December 31, 1997: $179,941
LIFE OF FUND
Cumulative Percent Return:
1,699.41%
Annual Compound Rate of Return:
13.65%
[GRAPH -- PLOTTED ANNUALLY FROM 1975 THROUGH 1997]
9,792
12,130
11,656
13,167
16,265
21,777
21,219
25,928
29,066
31,166
41,190
50,169
53,524
59,883
73,520
72,216
85,194
91,758
99,000
98,584
128,000
144,252
145,638
166,355
177,598
$10,000 investment on June 16, 1975
(inception date).
* 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 ended December 31, 1997
One Year........................ 24.74%
Five Years...................... 14.42%
Ten Years....................... 12.89%
Fifteen Years................... 13.79%
Twenty Years.................... 14.66%
6
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
The Burnham Fund Inc.:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Burnham Fund Inc. as of December 31, 1997, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Burnham Fund Inc. as of December 31, 1997, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted accounting
principles.
New York, New York Coopers & Lybrand L.L.P.
January 30, 1998
7
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STATEMENT OF NET ASSETS
December 31, 1997
Number of Value
Shares (Note 1)
- ----------------------------------------------------------------------------
Common Stocks 89.58%
Aerospace 2.75%
Boeing Co............................. 25,000 $ 1,223,438
General Motors Corp., Class H......... 30,000 1,108,125
Gulfstream Aerospace Corp. ........... 50,000 1,462,500
------------
3,794,063
------------
Automotive 3.56%
Chrysler Corp. ....................... 50,000 1,759,375
Ford Motor Co. ....................... 65,000 3,164,688
------------
4,924,063
------------
Banking 6.37%
The Bank of New York Co., Inc. ....... 100,000 5,781,250
Citicorp. ............................ 15,000 1,896,563
Fleet Financial Group Inc. ........... 15,000 1,124,063
------------
8,801,876
------------
Chemicals 1.06%
Monsanto Co. ......................... 35,000 1,470,000
------------
Computer Products &
Software 8.14%
Cisco Systems Inc. ................... 15,000a 837,187
EMC Corp. ............................ 20,000 548,750
Hewlett Packard Co. .................. 35,000 2,187,500
International Business Machines Corp.. 25,000 2,614,062
Microsoft Corp. ...................... 20,000a 2,584,375
Phoenix Technologies Ltd. ............ 65,000a 792,188
Siebel Systems Inc. .................. 40,000a 1,676,250
------------
11,240,312
------------
Conglomerates 0.90%
Textron Inc. ......................... 20,000 1,250,000
------------
Consumer Products 2.77%
Blyth Industries Inc. ................ 30,000 898,125
General Electric Co. ................ 40,000 2,935,000
------------
3,833,125
------------
Data Processing 0.44%
Automatic Data Processing............. 10,000 613,750
------------
Energy - Oil and Gas 12.31%
Amoco Corp. .......................... 25,000 2,128,125
British Petroleum PLC ADS............. 20,000 1,593,750
Exxon Corporation..................... 90,000 5,506,875
Mobil Corporation..................... 40,000 2,887,500
Royal Dutch Petroleum Co. ADR......... 40,000 2,167,500
Texaco Inc. .......................... 50,000 2,718,750
------------
17,002,500
------------
Number of Value
Shares (Note 1)
- ----------------------------------------------------------------------------
Engineering/
Industrial Production 1.68%
Thermo Electron Corp ................. 50,000 $ 2,225,000
Thermolyte Corp. units (Note 4)....... 10,000ab 100,000
------------
2,325,000
------------
Farm Equipment 0.88%
Case Corporation...................... 20,000 1,208,750
------------
Healthcare Facilities 1.45%
Rehabcare Group Inc. ................. 75,000 2,006,250
------------
Insurance & Financial Services 8.12%
Allstate Corp. ....................... 45,000 4,089,375
TIG Holdings, Inc. ................... 20,000 663,750
Travelers Group Inc. ................. 120,000 6,465,000
------------
11,218,125
------------
Media Broadcasting 0.85%
CBS Corporation 40,000 1,177,500
------------
Medical Supplies 1.48%
Baxter International Inc. ............ 25,000 1,260,937
Medtronic Inc. ....................... 15,000 784,688
------------
2,045,625
------------
Oil Drilling 4.70%
Diamond Offshore Drilling Inc. ....... 100,000 4,812,500
Transocean Offshore Inc. ............. 35,000 1,686,562
------------
6,499,062
------------
Pasta Producer 1.09%
American Italian Pasta Co. ........... 60,000a 1,500,000
------------
Personal Care Products 1.45%
Gillette Co. ......................... 20,000 2,008,750
------------
Pharmaceuticals 7.33%
Lilly (Eli) & Co. .................... 15,000 1,044,375
Merck & Co., Inc. .................... 27,000 2,868,750
Pfizer Inc. .......................... 50,000 3,728,125
Warner Lambert Inc. .................. 20,000 2,480,000
------------
10,121,250
------------
Real Estate Investment
Trusts 9.09%
Chateau Communities Inc. ............. 50,000 1,575,000
Developers Diversified Realty Corp. .. 30,000 1,147,500
Franchise Finance Corp. of America.... 80,000 2,160,000
Golf Trust Co. of America Inc. ....... 65,000 1,885,000
Meditrust SBI......................... 84,000 3,076,500
National Golf Properties Inc. ........ 40,000 1,312,500
Vornado Realty Trust.................. 30,000 1,408,125
------------
12,564,625
------------
See notes to financial statements.
8
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STATEMENT OF NET ASSETS
December 31, 1997
Number of Value
Shares (Note 1)
- ----------------------------------------------------------------------------
Securities Brokerage 0.76%
The Charles Schwab Corporation........ 25,000 $ 1,048,437
------------
Semiconductors 2.96%
Intel Corp. .......................... 50,000 3,510,938
Motorola, Inc. ....................... 10,000 571,875
------------
4,082,813
------------
Telecommunications
Equipment 2.49%
ECI Telecom Ltd. ..................... 25,000 639,062
Lucent Technologies Inc. ............. 35,000 2,795,625
------------
3,434,687
------------
Telecommunications Network
and Services 4.04%
GTE Corp.............................. 40,000 2,090,000
MCI Communication Corp. .............. 30,000 1,285,312
SBC Communications Inc. .............. 30,000 2,197,500
------------
5,572,812
------------
Travel Related &
Financial Services 2.91%
American Express Co. ................. 45,000 4,016,250
------------
Total Common Stocks
(identified cost: $77,692,210)....... 123,759,625
------------
Convertible Preferred
Securities 2.86%
Food Products 0.56%
Chiquita Brands International Inc.,
conv. preferred Cl. `A'............. 15,000 767,812
------------
Passenger Cruise Lines 1.23%
Royal Caribbean Cruises,
conv. preferred Cl. `A'.............. 20,000 1,701,250
------------
Utilities 1.07%
AES Trust I, conv. preferred
Series `A'........................... 6,000 430,500
AES Trust II, $2.75 conv. preferred
Series `B' TECONS.................... 20,000c 1,045,000
------------
1,475,500
------------
Total Convertible Preferred
Securities (identified
cost: $3,080,925)...................... 3,944,562
------------
Principal Value
Amount (Note 1)
- ----------------------------------------------------------------------------
Corporate Bonds 2.40%
Financial Services 1.46%
Ford Motor Credit Corp.,
9 1/4% notes 6/15/98................. $1,000,000 $ 1,014,638
General Electric Capital Corp.,
8% notes 1/15/98..................... 1,000,000 1,000,512
------------
2,015,150
------------
Hotels 0.94%
Marriott Corp., 93/8% deb. 6/15/07.... 1,265,000 1,301,761
------------
Total Corporate Bonds
(identified cost: $3,272,686)......... 3,316,911
------------
Commercial Paper 6.81%
Associates First Capital Corp.,
6.55% 01/02/98....................... 6,700,000 6,700,000
General Electric Capital Corp.,
5.65% 01/02/98....................... 2,707,000 2,707,000
------------
Total Commercial Paper
(identified cost: $9,407,000......... 9,407,000
------------
Total Investments
(identified cost: $93,452,821) 101.65% 140,428,098
Cash and Other Assets,
less Liabilities (1.65%) (2,276,866)
--------- ------------
Net Assets 100.00% $138,151,232
--------- ------------
--------- ------------
- --------------------------------------------------------------------------------
a Non-income producing security.
b A unit consists of one share of common stock of Thermolyte Corp.
and one redemption right.
c "TECONS" are term convertible securities with a liquidation amount of $50 per
security and are convertible into the common stock of the AES Corporation.
Federal Income Tax Basis of Investment Securities
- -------------------------------------------------
For Federal income tax purposes, the tax basis of investment securities owned at
December 31, 1997 was $93,336,030. The aggregate gross unrealized appreciation
for all securities in which there was an excess of value over tax cost was
$47,333,268 and aggregate gross unrealized depreciation for all securities in
which there was excess of tax cost over value was $241,200.
See notes to financial statements.
9
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[BURNHAM FUND LOGO]
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
Assets:
Investment in securities, at value (identified
cost: $93,452,821)(Note 1)....................... $140,428,098
Cash in bank........................................ 244
Dividends and interest receivable................... 198,427
Receivable for capital stock sold................... 18,330
Receivable from investment advisor.................. 732
------------
Total assets...................................... 140,645,831
------------
Liabilities:
Payable for capital stock redeemed.................. 8,785
Payable for investment securities purchased......... 2,314,250
Payable for investment advisory fees (Note 6)....... 73,061
Payable for distribution and
service fees (Note 7)............................. 1,427
Accrued expenses and other payables................. 97,076
-------------
Total liabilities................................. 2,494,599
-------------
Net Assets............................................ $138,151,232
-------------
-------------
Class A Shares
Net asset value and redemption price per share
(Note 2): ($136,443,491/4,541,503.689 shares
outstanding) ...................................... $ 30.04
-------------
-------------
Calculation of Maximum Offering Price
Sales charge - 5% of public offering price:
(Note 2): ($30.04 net asset value plus 5.0%
of public offering price) ......................... $ 31.62
-------------
-------------
Class B Shares
Net asset value and offering price per share:
(Note 2): ($1,611,828/52,413.270 shares
outstanding) ....................................... $ 30.75
-------------
-------------
Class C Shares
Net asset value and offering price per share:
(Note 2): ($95,913/3,187.988 shares
of capital stock outstanding) ...................... $ 30.09
-------------
-------------
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 ..................................... $ 82,944,585
Undistributed net investment
income ............................................ 593,535
Accumulated net realized gains
on investments .................................... 7,637,835
Net unrealized appreciation of
investments ......................................... 46,975,277
-------------
$138,151,232
-------------
-------------
STATEMENT OF OPERATIONS
Year ended December 31, 1997
Investment income:
Income:
Dividends ......................................... $ 2,384,042
Interest .......................................... 1,149,339
----------
Total income ................................... 3,533,381
----------
Expenses:
Investment advisory fees (Note 6) ................. 811,886
Distribution fee (Class A)(Note 7) ................ 50,360
Distribution fee (Class B)(Note 7) ................ 10,286
Distribution fee (Class C)(Note 7) ................ 271
Service fees (Class B & C)(Note 7) ................ 3,518
Transfer agent fees ............................... 198,921
Professional fees ................................. 63,900
Reports to shareholders ........................... 53,066
Directors| fees and expenses ...................... 67,588
Custodian fees .................................... 50,005
Registration fees and expenses .................... 63,774
Insurance expense ................................. 53,193
Miscellaneous expense ............................. 19,744
----------
Total expenses before reimbursement ............. 1,446,512
Less: Expenses voluntarily reimbursed
by Investment Adviser (Note 6) .................. (386)
----------
Total expenses after reimbursement ................ 1,446,126
----------
Net investment income ........................... 2,087,255
----------
Net Realized and Unrealized Gain on Investments:
Realized gain from securities and options
transactions (excluding short-term
money market instruments)
Proceeds from sales ................ $82,564,609
Cost of securities sold ............ (74,968,940)
----------
Net realized gain from securities
transactions ...................................... 7,595,669
----------
Increase in unrealized appreciation
of investments
Beginning of year .................. $28,230,141
End of year ........................ 46,975,277
----------
Increase in unrealized appreciation ................. 18,745,136
----------
Net realized and unrealized gain
on investments .................................... 26,340,805
----------
Net increase in net assets resulting
from operations ................................... $ 28,428,060
----------
----------
See notes to financial statements.
10
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[BURNHAM FUND LOGO]
STATEMENT OF CHANGES IN NET ASSETS
Year ended Year ended
December 31, December 31,
1997 1996
- --------------------------------------------------------------------------------
Increase in Net Assets:
From operations:
Net investment income ........... $ 2,087,255 $ 2,427,541
Net realized gain from
security and option
transactions ................... 7,595,669 5,392,607
Increase in unrealized
appreciation of investments ...... 18,745,136 10,669,966
------------- -------------
Net increase in net assets
resulting from operations ....... 28,428,060 18,490,114
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
(NOTE 1):
From net investment income:
Class A Shares .................. (2,041,644) (2,637,095)
Class B Shares .................. (12,430) (6,330)
Class C Shares .................. (122) (27)
From realized gains from security
and option transactions:
Class A Shares .................. (5,310,408) (4,155,898)
Class B Shares .................. (45,808) (23,246)
Class C Shares .................. (152) (108)
------------- -------------
Total distributions to
shareholders .................. (7,410,564) (6,822,704)
------------- -------------
CAPITAL SHARE TRANSACTIONS
(NOTE 2):
Net proceeds from sale
of shares ...................... 2,286,944 1,333,647
Net asset value of shares issued
to shareholders in
reinvestment of dividends ...... 6,428,892 5,845,914
------------- -------------
8,715,836 7,179,561
Cost of shares redeemed ......... (10,050,186) (13,059,437)
------------- -------------
Decrease in net assets derived
from capital share
transactions .................. (1,334,350) (5,879,876)
------------- -------------
Increase in net
assets for the year ........... 19,683,146 5,787,534
------------- -------------
NET ASSETS:
Beginning of year ............. 118,468,086 112,680,552
------------- -------------
End of year (including
undistributed net investment
income of $593,535 and
$2,427,853, respectively) ..... $ 138,151,232 $ 118,468,086
------------- -------------
------------- -------------
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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 management
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 for more
than six years. Class C shares are sold with a contingent deferred sales charge
of 1.0%, 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. Federal income taxes - It is the Fund's intent 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
11
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<PAGE>
[BURNHAM FUND LOGO]
its net investment income and net realized capital gains are distributed.
D. 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. During 1997, the Fund decreased
undistributed net investment income by $1,867,377 and increased accumulated net
realized gains on investments by $1,867,377.
E. 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.
F. 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.
NOTE 2 -- CAPITAL STOCK
At December 31, 1997, 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 December 31, 1997, Class D shares were not issued.
Transactions in capital stock for the year ended 1997 and year ended 1996 for
Class A, B and C shares were as follows:
Year ended Year ended
1997 1996
-----------------------------
CLASS A SHARES
Shares sold ............................ 70,028 44,731
Shares issued to shareholders
in reinvestment of distributions ..... 256,708 257,573
-------- --------
326,736 302,304
Shares redeemed ........................ (363,191) (556,676)
-------- --------
Net decrease ........................... (36,455) (254,372)
-------- --------
-------- --------
CLASS B SHARES
Shares sold ............................ 11,773 12,016
Shares issued to shareholders
in reinvestment of distributions ....... 2,280 1,251
-------- --------
14,053 13,267
Shares redeemed ........................ (1,130) (807)
-------- --------
Net increase ........................... 12,923 12,460
-------- --------
-------- --------
Year ended Year ended
1997 1996
-----------------------------
CLASS C SHARES
Shares sold ............................ 3,071 -0-
Shares issued to shareholders
in reinvestment of distributions...... 10 6
-------- --------
3,081 6
Shares redeemed ........................ (25) -0-
-------- --------
Net increase ........................... 3,056 6
-------- --------
-------- --------
NOTE 3 -- PURCHASE AND SALES OF SECURITIES
The aggregate cost of purchases and the proceeds from sales of securities or
maturities for the year ended December 31, 1997 were:
Proceeds
Cost of from sales
purchases or maturities
---------------------------
Short-term money
market instruments.......... $1,682,403,000 $1,676,771,000
Common stocks and other
securities.................. $72,880,779 $82,564,609
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. A secondary market
exists for certain privately placed securities. At December 31, 1997, 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:
Units Company Acquired Cost Value
- --------------------------------------------------------------------------------
10,000 Thermolyte Corp. 03/16/1995 $100,000 $100,000
This security has been valued in good faith by management.
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 sub-
12
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[BURNHAM FUND LOGO]
ject to risk. The measurement of risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
There were no financial instruments with off-balance sheet risk at the end of
the year owned by the Fund.
NOTE 6 -- INVESTMENT ADVISORY FEES AND OTHER
TRANSACTIONS
Burnham Asset Management Corporation, 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 year ended December 31, 1997, the Fund incurred fees in
the amount of $811,886. 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 C shares $386.
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, subject to certain NASD sales expense limitations
on 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 year ended December 31, 1997, Class A, B and C shares incurred fees of
$50,360, $10,286, and $271, 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 year ended December 31, 1997 were $3,428 and $90,
respectively. For the year ended December 31, 1997, the Distributor earned
$147,149 in brokerage commissions from Fund transactions and $11,564 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 shareholder's 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 year ended December 31, 1997, there were
$1,259 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 distribution to shareholders of record December
31, 1997. The distribution had an ex-distribution date of January 2, 1998 and
was payable January 9, 1998.
The distribution was as follows:
Class A Class B Class C
- -------------------------------------------------------------------
From net investment income........... $0.12 $0.04 $0.08
From long-term capital gains......... $1.63 $1.63 $1.63
----- ----- -----
Total distributions paid............. $1.75 $1.67 $1.71
----- ----- -----
----- ----- -----
13
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 9 - Financial Highlights
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------------- --------------------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993*'DD'
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $25.65 $23.19 $19.88 $21.86 $21.95 $26.31 $23.45 $19.94 $21.84 $22.17
----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.45 0.51 0.71 0.75 0.81 0.13 0.21 0.41 0.49 0.13
Net Gains or Losses on Securities
(both realized and unrealized) 5.54 3.36 3.91 (1.15) 1.11 5.75 3.69 4.10 (1.04) (0.46)
----------------------------------------------------------------------------------------
Total from Investment Operations 5.99 3.87 4.62 (0.40) 1.92 5.88 3.90 4.51 (0.55) (0.33)
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.44) (0.55) (0.75) (0.87) (0.90) (0.28) (0.18) (0.44) (0.64) 0.0
Distributions from Capital Gains (from
securities and options transactions) (1.16) (0.86) (0.56) (0.71) (1.11) (1.16) (0.86) (0.56) (0.71) 0.0
----------------------------------------------------------------------------------------
Total Distributions (1.60) (1.41) (1.31) (1.58) (2.01) (1.44) (1.04) (1.00) (1.35) 0.0
----------------------------------------------------------------------------------------
Net Asset Value, End of Year $30.04 $25.65 $23.19 $19.88 $21.86 $30.75 $26.31 $23.45 $19.94 $21.84
========================================================================================
Total Return 24.74% 17.60% 24.45% (1.77%) 9.35% 23.60% 17.34% 23.54% (2.52%) (1.49%)
----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets (in $millions), End of Year 136.4 117.4 112.0 101.8 118.5 1.6 1.0 0.6 0.3 0.2
----------------------------------------------------------------------------------------
Ratio of Expenses (net)
to Average Net Assets[1] 1.1% 1.3% 1.5% 1.5% 1.5% 2.0% 2.1% 2.2% 2.3% 2.2%'D'
----------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets 1.6% 2.1% 3.3% 3.7% 3.7% 0.7% 1.3% 2.5% 2.9% 3.9%'D'
----------------------------------------------------------------------------------------
Average Commission Rate*** $0.0749 $.0726 -.- -.- -.- $0.0749 $0.0726 -.- -.- -.-
Portfolio Turnover Rate 59.4% 61.5% 78.3% 87.9% 54.1% 59.4% 61.5% 78.3% 87.9% 54.1%
----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
----------------------------------------------------
1997 1996 1995 1994 1993*'DD'
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $25.69 $23.10 $19.89 $21.87 $22.17
--------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.13 0.29 0.54 0.72 0.15
Net Gains or Losses on Securities
(both realized and unrealized) 5.62 3.37 3.91 (1.15) (0.45)
--------------------------------------------------
Total from Investment Operations 5.75 3.66 4.45 (0.43) (0.30)
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.19) (0.21) (0.68) (0.84) 0.0
Distributions from Capital Gains (from
securities and options transactions) (1.16) (0.86) (0.56) (0.71) 0.0
--------------------------------------------------
Total Distributions (1.35) (1.07) (1.24) (1.55) 0.0
--------------------------------------------------
Net Asset Value, End of Year $30.09 $25.69 $23.10 $19.89 $21.87
==================================================
Total Return 23.59% 16.56% 23.51% (1.95%) (1.35%)
--------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets (in $millions), End of Year 0.1 0.0** 0.0** 0.0** 0.0**
--------------------------------------------------
Ratio of Expenses (net)
to Average Net Assets[1] 2.0% 2.2% 2.3% 1.5% 1.5%'D'
--------------------------------------------------
Ratio of Net Income to Average Net Assets 0.5% 1.2% 2.5% 3.6% 3.5%'D'
--------------------------------------------------
Average Commission Rate*** $0.0749 $.0726 -.- -.- -.-
Portfolio Turnover Rate 59.4% 61.5% 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.
*** Disclosure effective for fiscal year 1996 and all periods thereafter.
[1] Had the Investment Adviser not agreed to reimburse Class C shares for
expenses in excess of the expense limitation described in Note 6, the ratios
of expenses to average net assets for the years ended December 31, 1997,
1996, 1995 and 1994 would have been 2.5%, 2.5%, 2.5% and 2.5%, respectively,
for Class C shares.
<PAGE>
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[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
<PAGE>
OFFICERS OF THE FUND
I.W. Burnham, II Chairman
Jon M. Burnham, President
and Chief Executive Officer
Michael E. Barna, Executive Vice President
Chief Financial Officer, Treasurer and Secretary
Debra B. Hyman, Executive Vice President
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 LLP
919 Third Avenue
New York, New York 10022
SERVICING AGENT
Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York 10019
http://www.burnhamfunds.com
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.
ANNUAL REPORT
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
CONTINUITY KNOWLEDGE
BURNHAM
------
FUND
GROWTH INCOME
- --------------------------------------------------------------------------------
Burnham Securities Inc.
PRINCIPAL DISTRIBUTOR
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as............................... 'D'
The double dagger symbol shall be expressed as........................ 'DD'
