BENHAM MUNICIPAL TRUST, N-30D, 1996-07-25

BENHAM MUNICIPAL TRUST
N-30D, 1996-07-25

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BENHAM
ARIZONA MUNICIPAL
INTERMEDIATE-TERM
FUND

Annual Report
May 31,1996

[picture of the Arizona state flag]

[company logo] The Benham Group
Part of the Twentieth Century Family of Mutual Funds

<PAGE>

CONTENTS

U.S. ECONOMIC REVIEW.................................. 1

MUNICIPAL MARKET SUMMARY.............................. 2

MUNICIPAL CREDIT ANALYSIS............................. 3

PERFORMANCE & COMPOSITION
Performance Information............................... 4
Performance Comparisons & Total Return Breakdown...... 5
Portfolio Information................................. 6

MANAGEMENT DISCUSSION................................. 7

INVESTMENT FUNDAMENTALS
Definitions........................................... 9
The Yield Curve.......................................10
Muni Risk Factors.....................................11
Portfolio Sensitivity Measurements....................12
Bond Pricing..........................................13
Portfolio Structures & Taxable Distributions..........14

AUDITED FINANCIAL INFORMATION
Financial Highlights..................................16
Financial Statements and Notes........................17
Schedule of Investments...............................24

<PAGE>

U.S. ECONOMIC REVIEW
JAMES M. BENHAM [photo of James
Chairman, Benham Funds M. Benham]

After a weak 1995, the U.S. economy reversed its course during the first half of
1996. The U.S. economy grew at an anemic 1.3% rate in 1995--declining
manufacturing activity, slowing corporate spending and weak retail sales
restrained economic output and seemed to suggest a possible recession in 1996.
Federal budget battles, which led to two government shutdowns, furthered the
cause of economic weakness. The Federal Reserve (the Fed), which had lowered
short-term interest rates from 6.00% to 5.50% in 1995, cut rates further (to
5.25%) in January 1996 in an attempt to stimulate economic growth.

[bar graph in left margin of page. graph data described below]

Resurgent economic growth arrived sooner than expected--the U.S. economy perked
up with a 2.2% annual growth rate in the first quarter of 1996. The economic
rebound was led by strong employment growth, including the largest monthly jobs
increase in more than eight years in February (see the accompanying graph). This
healthy employment growth sent the U.S. bond market into a tailspin and led to
changing expectations in the U.S. financial markets, where further Fed interest
rate cuts had been anticipated. The economy appeared to pick up additional
momentum in the second quarter as robust employment gains continued, retail
sales improved, auto sales surged and a resilient housing market produced steady
gains.

The recent flurry of economic activity sparked concerns about rising inflation,
but there has been little evidence to support this view. U.S. inflation was just
2.5% in 1995, the lowest annual rate since 1986. The inflation rate continues to
be relatively benign in 1996, but there have been signs of increasing wage
pressures--in June, the Labor Department reported the largest average hourly
earnings increase in more than 30 years.

Accelerating U.S. economic growth will likely lead the Fed to raise short-term
interest rates in the second half of the year. However, there are still some
signals that suggest caution--layoffs are at historically high levels, capital
expenditures are slowing, and personal bankruptcies and loan delinquencies are
higher. As a result, we expect U.S. economic growth to remain moderate for the
remainder of 1996, with both growth and inflation around 3%.

U.S. Nonfarm Payroll Employment
(seasonally adjusted, in thousands)
[graph data]

Monthly Change Three-Month Moving Avg.
J-95 101 113
A 298 197
S 124 174
O 126 183
N 150 133
D 237 171
J-96 -66 107
F 509 227
M 158 200
A 191 286
M 365 238
J 239 265

Source: Bloomberg Financial Markets

MARKET SUMMARY
MUNICIPAL SECURITIES
by Dave MacEwen, Vice President & Senior Municipal Portfolio Manager

NOTE: WE SUGGEST THAT YOU REVIEW THE INVESTMENT FUNDAMENTALS AND U.S. ECONOMIC
REVIEW SECTIONS BEFORE YOU READ THIS SECTION. TERMS MARKED WITH AN ASTERISK (*)
ARE DEFINED IN THE INVESTMENT FUNDAMENTALS SECTION.

Though 1995 saw the strongest U.S. bond returns in a decade, the first quarter
of 1996 marked a major shift in bond market expectations. A surprising economic
recovery led by unexpectedly strong employment growth (discussed on page 1)
caused investors to fear that inflation--the great eroder of bond returns--would
rear its ugly head. As a result, bond prices fell and bond yields rose steadily
during the first five months of 1996.

[mountain graph on left side of page. graph data described below]

Municipal bonds (munis) followed the downward trend of the broader bond market.
The bear-market mentality that prevailed caused the muni yield curve* to rise
dramatically from January to May (see the accompanying graph).

Though muni prices fell, munis outperformed Treasuries during the first five
months of the year. Munis generally react less dramatically than Treasuries to
changes in interest rate expectations and tend to outperform Treasuries when
interest rates climb. Also, the muni market has been largely shielded from the
activities of large international hedge funds, which have significantly impacted
the Treasury market in recent years.

Other factors also supported muni prices during the period. Flat tax fears,
which had a negative effect on the muni yield curve in 1995, faded considerably
in 1996 as Washington's "Republican Revolution" lost momentum. Additionally,
high volumes of muni refundings, prompted by low interest rates over the last
few years, have freed billions of dollars for reinvestment in munis, while new
muni issuance has remained at historically low levels. This combination of low
supply and strong demand helped stabilize muni prices in comparison to
Treasuries.

Muni issuance is expected to remain sluggish in the near term, which should help
limit market gyrations. However, if the flat tax initiative should resurface
during the ongoing presidential campaign, it could trigger some instability in
the muni market. In addition, the economic environment is extremely
uncertain--further signs of economic strength could add fuel to inflation
concerns, while faltering economic growth would likely benefit all fixed-income
securities.

Shifting Municipal Yield Curves
[graph data]

Years to maturity 5/31/95 1/31/96 5/31/96
"1" 3.96% 3.44% 3.8%
"2" 4.13 3.69 4.15
"3" 4.28 3.89 4.37
4.38 3.99 4.52
"5" 4.48 4.09 4.64
4.58 4.19 4.74
"7" 4.68 4.29 4.84
4.78 4.39 4.94
4.88 4.49 5.04
"10" 4.98 4.59 5.14
5.064 4.678 5.23
5.148 4.766 5.32
5.232 4.854 5.41
5.316 4.942 5.5
"15" 5.4 5.03 5.59
5.43 5.052 5.624
5.46 5.074 5.658
5.49 5.096 5.692
5.52 5.118 5.726
"20" 5.55 5.14 5.76
5.566 5.148 5.768
5.582 5.156 5.776
5.598 5.164 5.784
5.614 5.172 5.792
"25" 5.63 5.18 5.8
5.634 5.184 5.804
5.638 5.188 5.808
5.642 5.192 5.812
5.646 5.196 5.816
"30" 5.65 5.2 5.82

Source: Bloomberg Financial Markets

MUNICIPAL CREDIT ANALYSIS
ARIZONA ECONOMIC AND CREDIT REVIEW
by Steve Permut, Manager of Municipal Credit Analysis, and the Benham
Municipal Credit Analysis Team: Joe Crowley,
Scott Lord and Bill McClintock.

Arizona's economy grew steadily in 1995 and in the first half of 1996, though at
a more moderate pace than in the boom year of 1994. The state posted the
fourth-best job growth in the nation in 1995 and boasts an unemployment rate
below the national average. Strong increases in residential property values are
driving growth in the state's construction sector. The graph below, indicating
taxable sales and the number of building permits, mirrors Arizona's economic
fortunes. Economic growth has been good for the state's budget--corporate tax
revenues are up 2.3%, while sales tax revenues are up 7%.

The state's positive economic environment and demonstrated fiscal soundness are
contributing to an improvement in Arizona credit quality. Phoenix and Tucson
have recently received credit rating upgrades. We anticipate an improvement in
credit ratings for Maricopa County, a primary component of the state's economy
that appears to have worked through the problems of the early 1990s.

[mountain graph on right side of page. graph data described below]

The Arizona state legislature took positive steps to safeguard the credit
quality of municipal debt in early 1996. A state court ruled illegal the
attempts of Arizona schools to skirt borrowing restrictions through the issuance
of zero-coupon bonds. The legislature and governor addressed this issue during
the 1996 legislative session, however, easing bondholders' concerns.

Looking forward, a long-term credit quality consideration for the state will be
its large capital needs. Arizona's growing population is straining the state's
infrastructure, particularly affecting its schools. Future credit quality will
depend to a large extent on the state's and localities' ability to manage
capital plans and debt issuance.

We have maintained a high level of credit quality in the Benham Arizona
Intermediate-Term Fund since its inception. As of May 31, 1996, 89.7% of the
securities in the Fund`s portfolio were rated AAA or AA. For more information
about credit quality and credit ratings, see page 11.

Arizona Taxable Sales
and Building Permits
[graph data]
<TABLE>
<CAPTION>

'87 '88 '89 '90 '91 '92 '93 '94 '95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Taxable Sales
(left scale, in
billions of $) 4.107 3.582 3.412 3.367 3.176 3.407 3.691 4.494 4.685

Building Permits
(right scale, in
thousands of units) 39.6 32.5 23.3 22.9 23.4 31.4 38.3 51 52.6
</TABLE>

Source: Arizona Department of Revenue

PERFORMANCE & COMPOSITION
CURRENT YIELD*
As of May 31, 1996

30-DAY TAX-EQUIVALENT YIELDS
30-DAY ----------------------------------------------------
SEC 31.02% 33.90% 34.59% 39.33%
YIELD TAX BRACKET TAX BRACKET TAX BRACKET TAX BRACKET
----------------------------------------------------
4.42% 6.41% 6.69% 6.76% 7.29%

YIELDS are a way of showing the rate of income the Fund earns on its investments
as a percentage of its share price. The 30-DAY SEC YIELD represents net
investment income earned by the Fund over a 30-day period, expressed as an
annualized percentage rate based on the Fund's share price at the end of the
30-day period. The SEC yield should be regarded as an estimate of the Fund's
rate of investment income, and it may not equal the Fund's actual income
distribution rate, the income paid to a shareholder's account, or the income
reported in the Fund's financial statements.

30-DAY TAX-EQUIVALENT YIELDS show the taxable yields that investors in the
following combined Arizona and federal income tax brackets would have to earn
before taxes to equal the Fund's tax-free 30-Day SEC Yield:

31.02% -- joint taxable income of $50,001 to $94,250
33.90% -- joint taxable income of $94,251 to $100,000
34.59% -- joint taxable income of $100,001 to $143,600
39.33% -- joint taxable income of $143,601 to $256,500

All income dividends distributed by the Fund during the fiscal year ended May
31, 1996, are exempt from Arizona and federal income taxes, but a portion of the
Fund's dividends may be subject to the federal alternative minimum tax (AMT).
The long-term capital gain distributed on December 14, 1995, is taxable at both
the state and federal levels.

NAV AND AVERAGE ANNUAL TOTAL RETURNS*
For Periods Ended May 31, 1996

AVERAGE ANNUAL TOTAL RETURNS
NET ASSET VALUE RANGE -----------------------------------------
(6/1/95-5/31/96) 1 YEAR 5 YEARS LIFE OF FUND
-----------------------------------------
$10.27-$10.76 4.65% N/A 6.65%

NET ASSET VALUE (NAV) RANGE indicates the Fund's share price movements over the
stated period and can be used to gauge the stability of the Fund's share price.

TOTAL RETURN figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Fund and assume that all of the Fund's
distributions are reinvested. AVERAGE ANNUAL TOTAL RETURNS illustrate the
annually compounded returns that would have produced the Fund's cumulative total
returns if the Fund's performance had been constant over the entire period.
Average annual total returns smooth out variations in a fund's return; they are
not the same as year-by-year results.

The Fund commenced operations on April 11, 1994.

* Yields and total returns are based on historical Fund performance and do not
guarantee future results. The Fund's share price, yields and total returns
will vary, so that shares, when redeemed, may be worth more or less than their
original cost.

PERFORMANCE & COMPOSITION
SEC PERFORMANCE COMPARISON

Comparative Performance of $10,000 Invested on 4/29/94 in the Fund and
in the Lehman Brothers, Inc. Five-Year General Obligation Bond Index

[mountain graph]

[graph data] Index Fund

4/29/94 $10,000 $10,000
5/31/94 10,056 10,092
6/30/94 10,033 10,064
7/29/94 10,142 10,234
8/31/94 10,191 10,280
9/30/94 10,114 10,202
10/31/94 10,058 10,083
11/30/94 9,993 9,973
12/30/94 10,081 10,098
1/31/95 10,178 10,268
2/28/95 10,326 10,443
3/31/95 10,490 10,562
4/28/95 10,518 10,625
5/31/95 10,749 10,852
6/30/95 10,757 10,855
7/31/95 10,908 10,985
8/31/95 11,018 11,085
9/30/95 11,051 11,130
10/31/95 11,097 11,233
11/30/95 11,192 11,343
12/31/95 11,253 11,426
1/31/96 11,387 11,574
2/29/96 11,349 11,541
3/31/96 11,288 11,365
4/30/96 11,271 11,378
5/31/96 11,258 11,357

Past performance does not guarantee future results.

This graph compares the Fund's performance with a broad-based market index, the
Lehman Brothers, Inc. Five-Year General Obligation Bond Index, over the life of
the Fund. Although the investment characteristics of the Index are similar to
those of the Fund, the securities owned by the Fund and those composing the
Index are likely to be different, and securities that the Fund and the Index
have in common are likely to have different weightings in the respective
portfolios. Investors cannot invest directly in the Index.

PLEASE NOTE: The line representing the Fund`s total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the Index`s total return lines does not.

LIPPER PERFORMANCE COMPARISON

Lipper Analytical Services (Lipper) is an independent mutual fund ranking
service located in Summit, NJ. Rankings are based on average annual total
returns for the periods ended 5/31/96 for the funds in Lipper's "Other States
Intermediate Municipal Debt Funds" category.

1 YEAR LIFE OF FUND+

The Fund: 4.65% 6.31%
Category Average: 3.60% 5.29%
The Fund`s Ranking: 1 out of 67 1 out of 55

+ from April 30, 1994, to May 31, 1996

Total returns are based on historical performance and do not guarantee future
results. Please keep in mind that the Fund's expenses were absorbed by Benham
Management Corporation (BMC) during a portion of this period and that the
rankings listed would have been lower if the Fund's returns had been reduced by
those expenses.

ONE-YEAR TOTAL RETURN BREAKDOWN
For the Period Ended May 31, 1996

% From % From % From Asset One-Year
Income + Capital Gains + Depreciation = Total Return

4.96% + 0.06% + (0.37%) = 4.65%

PERFORMANCE & COMPOSITION

KEY PORTFOLIO STATISTICS

5/31/96 11/30/95

Market Value: $24,884,624 $22,508,857
Number of Issues: 34 33
Average Coupon: 5.93% 5.97%
Average Maturity: 7.12 years 7.11 years
Average Duration: 5.42 years 5.34 years

For definitions of these terms, see page 9.

PORTFOLIO COMPOSITION BY RATING
[pie charts]

5/31/96 11/30/95
AAA: 58.7% AAA: 59.9%
AA: 31.0% AA: 30.9%
A: 4.2% A: 4.7%
BBB: 6.1% BBB: 4.5%

Credit ratings reflect the financial strength of the debt issuer and the
likelihood of repayment. For more information about credit quality and credit
ratings, see page 11.

PORTFOLIO COMPOSITION BY MARKET SECTOR
[pie charts]

5/31/96 11/30/95
GO: 42.1% GO: 34.6%
Electric: 14.7% Electric: 17.0%
Transportation: 12.6% Prerefunded: 10.1%
Prerefunded: 6.9% Transportation: 10.0%
Water/Sewer: 6.2% Water/Sewer: 9.6%
Other: 17.5% Other: 18.7%

For definitions of these security types, see page 9.

PORTFOLIO COMPOSITION BY MATURITY
[bar chart]

<TABLE>
<CAPTION>
Less than 1 Year 1-3 Years 3-5 Years 5-7 Years 7-10 Years greater than 10 Years
<S> <C> <C> <C> <C> <C> <C>
5/31/96 2.8% 1.3% 34.5% 20.2% 31.6% 9.6%
11/30/95 0.9% 2.3% 16.8% 34.3% 33.2% 12.5%
</TABLE>

The Fund invests primarily in intermediate-term Arizona municipal obligations
with maturities of four or more years. The Fund's weighted average portfolio
maturity is typically five to ten years, with seven years considered a "neutral"
position.

The composition of the Fund's portfolio may change over time.

MANAGEMENT DISCUSSION
QUESTIONS AND ANSWERS
with Colleen Denzler, Senior Portfolio Manager

NOTE: WE SUGGEST THAT YOU REVIEW THE INVESTMENT FUNDAMENTALS, U.S. ECONOMIC
REVIEW, MUNICIPAL CREDIT ANALYSIS AND MARKET SUMMARY SECTIONS BEFORE READING
THIS DISCUSSION. TERMS MARKED WTH AN ASTERISK (*) ARE DEFINED IN THE INVESTMENT
FUNDAMENTALS SECTION BEGINNING ON PAGE 9.

Q: How did the Fund perform?

A: The Fund benefited from the bond rally that lasted through early 1996
and performed very well compared to its peer group. The Fund's 4.65%
total return for the fiscal year ended May 31, 1996, was the highest
return of the 67 funds in Lipper's "Other States Intermediate Municipal
Debt Funds" category. Its 6.31% average annual total return from April
30, 1994 (the day closest to the Fund's inception for which there is
Lipper data), to May 31, 1996, also gave the Fund a first-place finish
against the 55 funds in its Lipper group (see page 5). Keep in mind
that a portion of the Fund's expenses were absorbed by Benham
Management Corporation (BMC) during the period and that the ranking
listed would have been lower if the Fund's returns had been reduced by
those expenses.+

Q: Why did the Fund outperform its category average?

A: We believe the Fund outperformed its average because it was structured
to take advantage of the 1995 bond rally. We employed what is known as
a barbell portfolio* structure, which tends to perform best when the
yield curve* is moving steep to flat, as it did during the rally. In
addition, we aggressively extended the Fund's average maturity* and
duration* after flat tax fears began to recede in August 1995. We
replaced shorter-term munis, which had appreciated in value, with munis
that had maturities of 10 years or more. These longer-term securities
had lagged the performance of shorter-term munis and were trading at
relatively attractive prices.

In addition, we should acknowledge the contribution of our credit
research staff, which made many accurate assessments of specific credit
situations in Arizona. Arizona is a complex, dynamic state, and
thorough research is vital. Finding Arizona municipal securities that
we feel are undervalued in places where others may have overlooked has
enhanced our ability to stay in front of what we call the "upgrade
curve" (the chance for securities to appreciate in value relative to
their current prices due to a credit upgrade).

+ Benham Management Corporation absorbed the Fund's expenses through December
31, 1995. Beginning January 1, 1996, the Fund began absorbing expenses at a
rate of an additional .10% of average daily net assets each month and will
continue until the Fund reaches its contractual expense cap of .67%.

MANAGEMENT DISCUSSION
QUESTIONS AND ANSWERS
(Continued from the previous page)

Q: How did you respond to the shift in bond market expectations that
occurred during the first quarter of 1996?

A: As the economy began to show signs of strength, we shortened the Fund's
duration to a more neutral position. Since early February, we have been
moving toward a bullet portfolio structure,* which tends to perform
better if the muni yield curve steepens or remains unchanged, as we
believe it will. We also increased our holdings of premium bonds,*
which tend to outperform in a down market because they typically have
shorter durations than par* or discount bonds* with comparable
maturities. These securities performed very well as the muni yield
curve steepened. The combination of these factors helped the Fund
maintain its 1995 gains and mitigate losses relative to its peer group
as the bond market mentality shifted from bullish to bearish.

Q: What is the outlook for munis for the remainder of 1996?

A: The outlook for munis is somewhat unclear due to uncertainty in the
U.S. financial markets (see page 1). On the positive side, flat tax
fears, which caused instability in the muni market in 1995, have
receded into the background. Low levels of new muni issuance--which we
expect to continue--coupled with strong demand for munis should help
support prices and dampen market volatility. However, if the flat tax
issue resurfaces during this year`s presidential election campaign, it
could generate market volatility. Also, if U.S. economic growth should
accelerate in the latter half of the year, inflation fears could drag
on bonds in general.

Q: What are your plans for the Fund over the next six months?

A: Until we can get a clearer picture of the strength and direction of the
economy, we will probably maintain the Fund's neutral stance. This
position will allow us to lengthen or shorten the Fund's average
maturity and duration if there is another shift in the bond market. We
will also look to add value to the Fund by utilizing our strong credit
research staff to identify undervalued securities.

INVESTMENT FUNDAMENTALS
DEFINITIONS

COMMON MUNICIPAL SECURITIES (MUNIS)

AMT Paper--instruments with income subject to the federal alternative minimum
tax.

General Obligation (GO) bonds--securities backed by the taxing power of the
issuer.

Municipal Commercial Paper (CP)--high-grade short-term securities backed
by a line of credit from a bank.

Municipal Notes--securities with maturities of two years or less.

Prerefunded Bonds--securities refinanced by the issuer because of their premium
coupons (higher-than-market interest rates). These bonds tend to have higher
credit ratings because they are backed by Treasury securities.

Revenue Bonds--securities backed by revenues from sales taxes or from a specific
project, system or facility (such as a hospital, electric utility or water
system).

Variable-Rate Demand Notes (VRDNs)--securities that track market interest rates
and stabilize their market values using periodic (daily or weekly) interest rate
adjustments.

PORTFOLIO STATISTICS

Market Value--the market value of a fund's investments on a given date.

Number of Issues--the number of different securities issuances held by a fund on
a given date.

Average Coupon--a weighted average of all coupons held in a fund's portfolio.

Average Maturity--a weighted average of all bond maturities in a fund's
portfolio (see also page 12).

Average Duration--a weighted average of all bond durations in a fund's portfolio
(see also page 12).

INVESTMENT TERMS

Basis Points--a basis point equals one one-hundredth of a percentage point (or
0.01%). Therefore, 100 basis points equals one percentage point (or 1%). Basis
points are used to clearly describe interest rate changes. For example, if a
news report indicates that interest rates rose 1%, does that mean 1% of the
previous rate or one percentage point? It is more accurate to state that
interest rates rose by 100 basis points.

Coupon--the stated interest rate of a security.

Discount Bonds--bonds with interest coupons that are lower than prevailing
interest rates (see also page 13).

Par Bonds--bonds that trade or are priced at their face value.

Premium Bonds--bonds with interest coupons that are higher than prevailing
interest rates (see also page 13).

INVESTMENT FUNDAMENTALS
THE YIELD CURVE

One of the fundamental tenets of investing is the relationship between risks and
returns--the greater the risks, the greater the chances of earning higher
returns over time. The downside is the correspondingly higher potential for
short-term losses--an investment that generates a high return probably has a
greater likelihood of significant fluctuations in value or return, especially in
the short run.

Bonds are no exception. The riskiest bonds--those with the greatest exposure to
interest rate movements and price fluctuations--generally have the highest
yields and returns over time but can experience severe short-term losses. On the
other hand, bonds with less exposure to interest rate movements and less price
fluctuation generally have lower yields and returns but are more stable.

The yield curve is a graphic representation of the relationship between bond
risks and returns at a point in time. Yield curve graphs plot bond maturities
(which represent risk since longer maturities increase risk) along the
horizontal axis and rising yields (which represent return) on the vertical axis.
Therefore, the lower left corners of yield curve graphs have the lowest risks
and the lowest potential returns, while the upper right corners have the highest
risks and the highest potential returns.

Yield curves can have several different shapes, depending on interest rate
levels and the economic environment:

Normal (Upward Sloping) Yield Curve--a yield curve that shows a normal risk/
return relationship--short-term securities have lower yields than long-term
securities. Most normal yield curves start in the lower left corner of the graph
and rise to the upper right corner.

Steep Yield Curve--a normal yield curve that shows a large gap between
short-term yields and long-term yields. This typically occurs when the bond
market is responding to inflation fears (causing high long-term bond yields) and
the Fed hasn't raised short-term interest rates enough (or the economy hasn't
slowed down enough) to quell those fears.

Flat Yield Curve--a yield curve that shows short-term securities having almost
the same yields as long-term securities. This typically occurs after the Fed has
raised short-term interest rates several times (to fight inflation when the
economy is strong) or when the bond market expects the Fed to lower short-term
interest rates (in a weaker economic environment).

Inverted Yield Curve--a yield curve that shows short-term securities having
higher yields than long-term securities. This typically develops from a flat
yield curve if the Fed continues to raise short-term interest rates (when the
economy is strong) or if it fails to lower short-term rates when the market
expects it to do so (in a weaker economic environment).

INVESTMENT FUNDAMENTALS
MUNI RISK FACTORS

CREDIT QUALITY AND CREDIT RATINGS

Bond credit quality (the issuer's financial strength and the likelihood of
timely payment of interest and principal) is a key factor in bond investment
analysis. Credit ratings issued by independent rating and research companies
such as Standard & Poor's help quantify credit quality--the stronger the issuer,
the higher the credit rating. In turn, credit quality and ratings greatly
influence bond prices and yields--high ratings mean higher prices and less
current income (yield) as compensation for risk. But credit ratings are
subjective. They reflect the opinions of the rating agencies that issue them and
are not absolute standards of quality, as the Orange County, California,
bankruptcy made painfully clear. In that case, highly rated munis issued by a
wealthy county still suffered defaults. Furthermore, in addition to the credit
risk, there is still market risk. High credit ratings do not guarantee good
investment performance. They do not reflect the price stability of a muni when
economic or market conditions change.

CALLABILITY

Many munis are callable, which means they can be redeemed by the issuer before
maturity. When interest rates fall, municipalities find it financially rewarding
to refinance the bonds they've issued because they can reduce their monthly
interest payments. The municipalities exercise their "call" options to refinance
the bonds. Calls are bad for muni investors--calls reduce the life of a
municipal portfolio and force the portfolio manager to reinvest in
lower-yielding munis. The durations of munis effectively shorten as rates fall.

Calls also boost supply and help drive down muni prices. Call options can only
be exercised on specific "call dates," which don't always coincide with periods
of low interest rates when refinancing is desirable. As a result, municipalities
will issue new bonds when interest rates are low and use the proceeds to buy
Treasuries, which offset the old bonds (now known as "prerefunded bonds") on
their balance sheets until the bonds can be retired on the call date. When the
call date arrives, the Treasuries mature, and the prerefunded bonds are retired.
During this process, there is a period of time when both the newly issued bonds
and the prerefunded bonds remain outstanding. This situation doubles the
municipal bond supply, which can depress prices.

DURATION EXTENSION

Duration extension occurs when interest rates increase significantly. Higher
interest rates reduce calls, which is good for municipal investors, but the
lower level of calls causes the durations of munis to extend longer, which is
bad when rates are rising. Muni funds become more susceptible to price declines
at a time when greater price stability would be desirable. By contrast, Treasury
durations generally shorten slightly when interest rates experience a large
increase. Because of their higher coupons, premium bonds experience less
duration extension than par or discount bonds.

INVESTMENT FUNDAMENTALS
PORTFOLIO SENSITIVITY MEASUREMENTS

DURATION

Duration measures the price sensitivity of a bond or bond fund to changes in
interest rates. Specifically, duration represents the approximate percentage
change in the price of a bond or bond fund if interest rates move up or down by
100 basis points (a basis point equals 0.01%). For example, as of May 31, 1996,
the Arizona Municipal Intermediate-Term Fund's duration was 5.42 years. If
interest rates were to rise by 100 basis points, the Fund's share price would be
expected to decline by 5.42%. Conversely, if interest rates were to fall by 100
basis points, the Fund's share price would be expected to increase by 5.42%.

The longer the duration, the more bond or bond fund prices will move in response
to interest rate changes. Therefore, portfolio managers generally lengthen
durations when interest rates fall (to maximize the effects of bond price
increases) and shorten durations when interest rates rise (to minimize the
effects of bond price declines), taking into account the objectives of the
portfolio.

Duration, measured in years, also approximates (but understates) the weighted
average life of a bond or bond portfolio. To calculate duration, the future
interest and principal payments are added together and weighted in proportion to
their time value (early payments are valued more than later payments because
early payments can be reinvested and compound additional returns).

AVERAGE MATURITY

Average maturity is another measurement of the interest rate sensitivity of a
bond portfolio. Average maturity measures the average amount of time that will
pass until a bond portfolio receives its principal payments from matured bonds.
The longer a portfolio's average maturity, the more interest rate exposure and
interest rate sensitivity it has. For example, a portfolio with a ten-year
average maturity has much more potential exposure to interest rate changes than
a portfolio with a one-year average maturity.

Portfolio managers generally lengthen average maturities when interest rates
fall (to maximize exposure and capture as much price appreciation as possible)
and reduce average maturities when interest rates rise (to minimize exposure and
avoid as much price depreciation as possible), as long as this strategy is
compatible with the objectives of the portfolio. Reducing the average maturity
in a rising interest rate environment allows the portfolio manager to more
quickly reinvest matured assets in higher-yielding securities.

INVESTMENT FUNDAMENTALS
BOND PRICING

PREMIUM AND DISCOUNT BONDS

Municipal bonds are generally priced at a premium or at a discount. Premium
bonds are bonds that trade or are priced above par (face value), typically
because their interest coupons are higher than the prevailing market interest
rate. Discount bonds are bonds that trade or are priced below par, typically
because their interest coupons are lower than the prevailing market interest
rate.

A bond may be both a premium bond and a discount bond during its life, depending
on changing market conditions. As market rates rise and bond prices fall, the
price of a premium bond can fall below par, and the bond becomes a discount
bond. Conversely, as market rates fall and bond prices rise, the price of a
discount bond can rise above par, and the bond becomes a premium bond.

Premium munis tend to have more price stability than discount munis--premium
munis depreciate less when interest rates rise (they experience less duration
extension), but they appreciate less when interest rates fall (they experience
more calls). Discount munis behave more like long-term Treasury securities.

TAX TREATMENT OF DISCOUNT BONDS

In 1993, new rules were passed regarding the tax treatment of long-term gains on
discount munis. In the past, any gain earned from the market discount was
treated as a capital gain, which is taxed at a maximum rate of 28%. However, the
newer law requires that any gain attributable to the market discount must be
treated as taxable ordinary income, which is taxed at the same rate as an
individual's tax bracket (up to 39.6%). Minimal market discounts (according to a
formula based on the price of the bond and the maturity date) are not subject to
the new law.

This tax treatment has made discount bonds less attractive in the muni market
because most municipal investors prefer to avoid incurring taxable income.
Discount munis also tend to have relatively low prices to make up for the
expected tax liability. As a result, when the price of a muni falls to the point
where it is traded at a market discount, the combination of reduced desirability
and added tax liability tends to lead to further price declines.

INVESTMENT FUNDAMENTALS
PORTFOLIO STRUCTURES & TAXABLE DISTRIBUTIONS

BOND PORTFOLIO STRUCTURES

Barbell Structure--a structure that overweights a portfolio in short- and
long-term securities and underweights intermediate-term securities. This
structure tends to outperform a bullet structure when the yield curve is moving
from steep to flat (short-term rates are rising faster than long-term rates, or
long-term rates are falling faster than short-term rates). In a rising interest
rate environment, the short-term securities capture the higher yields with
little price depreciation. In a declining interest rate environment, the
short-term securities provide a relatively steady yield, while the long bonds
provide more price appreciation than intermediate-term securities.

Bullet Structure--a structure that clusters a portfolio's bond maturities around
a single maturity (usually an intermediate-term maturity). This structure tends
to outperform a barbell structure when the yield curve is moving from flat to
steep (long-term rates are rising faster than short-term rates, or short-term
rates are falling faster than long-term rates). In a rising interest rate
environment, intermediate-term securities experience less price depreciation
than long-term securities. In a declining interest rate environment,
intermediate-term securities provide significantly more price appreciation than
short-term securities.

Ladder Structure--a balanced structure that staggers bond maturities so they
occur at regular intervals. This structure tends to be effective when interest
rates are relatively stable, and it provides a regular schedule of maturing
securities.

TAXABLE DISTRIBUTIONS

It's important to remember for your tax planning that tax-free funds often
generate taxable year-end distributions. These distributions typically result
from short-term and long-term capital gains. The taxable distributions usually
happen under favorable circumstances (the capital gains reflect bond
appreciation), but such distributions understandably attract attention simply
because they are taxable instead of tax free.

Although we manage our Arizona Municipal Intermediate-Term Fund to earn
tax-exempt income, it may realize taxable capital gains as we pursue higher
total returns. By law, the fund must distribute these capital gains to
shareholders each year. Under current tax law, each fund must distribute net
short-term capital gains realized by the fund as taxable ordinary income. Each
fund distributes net long-term capital gains to shareholders as a taxable
capital gains distribution.

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Trustees
Benham Municipal Trust:

We have audited the accompanying statement of assets and liabilities, including
the schedule of investment securities, of Benham Arizona Municipal
Intermediate-Term Fund (one of the series comprising Benham Municipal Trust)
(the Fund) as of May 31, 1996, and the related statements of operations for the
year then ended, the statements of changes in net assets for the two years then
ended, and the financial highlights for each of the periods presented. 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 the 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 May
31, 1996, by correspondence with the custodian. 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 the financial highlights referred
to above present fairly, in all material respects, the financial position of
Benham Arizona Municipal Intermediate-Term Fund as of May 31, 1996, the results
of its operations, the changes in its net assets and its financial highlights
for the periods indicated above, in conformity with generally accepted
accounting principles.

/s/KPMG Peat Marwick LLP
Kansas City, Missouri
July 8, 1996

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
Benham Arizona Municipal Intermediate-Term Fund
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)

1996 1995 1994+
---------- --------- ---------
PER-SHARE DATA
- ---------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD............................... $ 10.35 10.13 10.00
Income from Investment Operations
Net Investment Income.............................................. .5117 .5149 .0684
Net Realized and Unrealized Gains (Losses) on Investments.......... (.0343) .2200 .1300
--------- --------- ---------
Total Income From Investment Operations........................... .4774 .7349 .1984
--------- --------- ---------
Less Distributions
Dividends from Net Investment Income............................... (.5117) (.5149) (.0684)
Distributions from Net Realized Capital Gains...................... (.0057) 0 0
--------- --------- ---------
Total Distributions............................................... (.5174) (.5149) (.0684)
--------- --------- ---------
NET ASSET VALUE AT END OF PERIOD..................................... $ 10.31 10.35 10.13
====== ===== =====
TOTAL RETURN*........................................................ 4.65% 7.52% 1.99%
- ------------

SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Period (in thousands of dollars)................ $ 25,789 19,778 7,187
Ratio of Expenses to Average Daily Net Assets++...................... .14% 0% 0%
Ratio of Expenses to Average Daily Net Assets
(Before Reimbursement)++.......................................... .82% 1.01% 2.33%**
Ratio of Net Investment Income to Average Daily Net Assets++......... 4.85% 5.16% 5.08%**
Ratio of Net Investment Income to Average Net Daily Assets
(Before Reimbursement)++.......................................... 4.17% 4.15% 2.75%**
Portfolio Turnover Rate.............................................. 35.78% 33.22% 18.14%

- -------------------
+ From April 11, 1994 (commencement of operations), through May 31, 1994.

++ The ratios for the year ended May 31, 1996, include expenses paid through expense offset arrangements.

* Total return figures assume reinvestment of dividends and capital gain distributions and are not annualized.
** Annualized.
</TABLE>

See the accompanying notes to financial statements.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
Benham Arizona Municipal Intermediate-Term Fund
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1996

ASSETS
<S> <C>
Investment securities at value (cost of $24,578,446)............................. $24,884,624
Cash............................................................................. 708,552
Interest receivable.............................................................. 581,493
Receivable for fund shares sold.................................................. 103,417
Prepaid expenses and other assets................................................ 2,866
----------
Total assets.................................................................... 26,280,952
----------

LIABILITIES
Payable for securities purchased................................................. 457,456
Dividends payable................................................................ 22,392
Fees payable to affiliates (Note 2............................................... 9,904
Accrued expenses and other liabilities........................................... 2,232
----------
Total liabilities............................................................... 491,984
----------
NET ASSETS......................................................................... $25,788,968
==========
Net assets consist of:
Capital paid in.................................................................. $25,496,046
Distributions in excess of realized gains........................................ (13,256)
Net unrealized appreciation on investments (Note 4).............................. 306,178
----------
Net assets......................................................................... $25,788,968
==========
Shares of beneficial interest outstanding (unlimited number of shares authorized).. 2,500,336
==========
Net asset value, offering price and redemption price per share..................... $10.31
======
- -------------------
</TABLE>

See the accompanying notes to financial statements.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
Benham Arizona Municipal Intermediate-Term Fund
STATEMENT OF OPERATIONS
For the Year Ended May 31, 1996
<S> <C>
INVESTMENT INCOME
Interest income.................................................................. $1,162,752
---------
EXPENSES (NOTE 2)
Investment advisory fees......................................................... 103,148
Administrative fees.............................................................. 22,435
Transfer agency fees............................................................. 20,460
Printing and postage............................................................. 15,263
Custodian fees................................................................... 8,417
Auditing and legal fees.......................................................... 7,125
Registration and filing fees..................................................... 4,479
Directors' fees and expenses..................................................... 2,185
Other operating expenses......................................................... 7,247
---------
Total expenses.................................................................. 190,759
---------
Amount waived (Note 2)............................................................. (157,428)
Custodian earnings credits (Note 5)................................................ (1,112)
---------
Net expenses..................................................................... 32,219
---------
Net investment income........................................................... 1,130,533
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 4)
Net realized gain on investments................................................... 88,040
Change in net unrealized depreciation on investments............................... (276,781)
---------
Net realized and unrealized loss on investments.................................. (188,741)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................... $941,792
=========
- -------------------
</TABLE>

See the accompanying notes to financial statements.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
Benham Arizona Municipal Intermediate-Term Fund
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended May 31, 1996 and 1995
1996 1995
---------- ----------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income............................................................ $ 1,130,533 714,639
Net realized gain (loss) on investments.......................................... 88,040 (88,545)
Net change in unrealized appreciation (depreciation) of investments.............. (276,781) 539,999
---------- ---------
Change in net assets derived from investment activities......................... 941,792 1,166,093
---------- ---------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income............................................................ (1,130,533) (714,639)
Net realized gain on investments................................................. (12,741) 0
---------- ---------
Total distributions to shareholders............................................. (1,143,274) (714,639)
---------- ---------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from sales of shares.................................................... 11,716,512 30,665,555
Net asset value of dividends reinvested.......................................... 884,795 533,368
Cost of shares redeemed.......................................................... (6,389,076) (19,058,695)
---------- ---------
Change in net assets derived from capital share transactions.................... 6 ,212,231 12,140,228
---------- ---------
Net increase in net assets...................................................... 6,010,749 12,591,682
---------- ---------
NET ASSETS:
Beginning of year................................................................ 19,778,219 7,186,537
---------- ---------
End of year...................................................................... $25,788,968 19,778,219
========== =========
- -------------------
</TABLE>

See the accompanying notes to financial statements.

BENHAM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996

(1) SIGNIFICANT ACCOUNTING POLICIES

Benham Municipal Trust (the Trust), is registered under the Investment Company
Act of 1940 as an open-end management investment company. Benham Arizona
Municipal Intermediate-Term Fund (the Fund) is one of the eight funds composing
the Trust. The Fund is non-diversified under the 1940 Act and seeks as high a
level of current income exempt from federal income taxes as is consistent with
prudent investment management and conservation of shareholders' capital. The
Fund concentrates its investment in a single state and therefore may have more
exposure to credit risk related to the state of Arizona than a fund with a
broader geographical diversification. Significant accounting policies followed
by the Fund are summarized below.

VALUATION OF INVESTMENT SECURITIES--Securities held by the Fund are valued at
current market value as determined by an independent pricing service. Securities
for which market quotations are not readily available are stated at fair value
as determined in good faith by the Board of Trustees. Security transactions are
recorded on the date the order to buy or sell is executed. Realized gains and
losses on securities transactions are determined on the basis of identified
cost.

INCOME TAXES--The Fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code. By doing so, the Fund will not
be subject to federal or state income or franchise taxes to the extent that it
distributes its net investment income and net realized capital gains to
shareholders. Accordingly, no provision for income taxes has been made for
federal and state taxes.

The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes due to differences in the recognition of income and
expense items for financial statement and tax purposes. Also, the fiscal year in
which amounts are distributed may differ from the year they are recorded by the
Fund.

SHARE VALUATION--The Fund's net asset value per share is computed each business
day by dividing the value of the Fund's total assets, less its liabilities, by
the total number of shares outstanding at the beginning of each business day.
The Fund's net asset value fluctuates daily in response to changes in the market
value of its investments.

INVESTMENT INCOME, PREMIUM AND DISCOUNT--Interest income and expenses are
accrued daily. Premium on securities purchased is

amortized daily using the effective interest rate method. Market discount is
recognized as income upon the sale or maturity of the security. Original issue
discount for municipal securities is accrued daily using the effective interest
rate method.

DIVIDENDS AND OTHER DISTRIBUTIONS--The Fund's dividends are declared daily,
accrued throughout the month, and distributed on the last business day of the
month. Net realized long-term capital gains, if any, are distributed annually.
Distributions are paid in cash or reinvested as additional shares.

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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from those estimates.

(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Benham Management Corporation (BMC) is a wholly owned subsidiary of Twentieth
Century Companies, Inc. (TCC). BMC's former parent company, Benham Management
International, Inc., merged into TCC on June 1, 1995. The Fund pays BMC a
monthly investment advisory fee based on its pro rata share of the dollar amount
derived from applying the Trust's average daily net assets to the following
annualized investment advisory fee schedule.

.50% of the first $100 million
.45% of the next $100 million
.40% of the next $100 million
.35% of the next $100 million
.30% of the next $100 million
.25% of the next $1 billion
.24% of the next $1 billion
.23% of the next $1 billion
.22% of the next $1 billion
.21% of the next $1 billion
.20% of the next $1 billion
.19% of average daily net assets over $6.5 billion

BMC provides the Trust with all investment advice. Twentieth Century Services,
Inc. pays all compensation of Trust officers and trustees who are officers or
directors of TCC or any of its subsidiaries. In addition, promotion and
distribution expenses are paid by BMC.

The Trust has an Administrative Services and Transfer Agency Agreement with
Benham Financial Services, Inc. (BFS), a wholly owned subsidiary of TCC. Under
the agreement, BFS provides substantially all administrative service and
transfer agency services necessary to operate the Fund. Fees for these services
are based on transaction volume, number of accounts and the average net assets
of all funds in The Benham Group.

The Trust has an additional agreement with BMC pursuant to which BMC established
a contractual expense guarantee that limits Fund expenses (excluding
extraordinary expenses such as brokerage commissions and taxes and the impact of
custodian earnings credits) to .69% of average daily net assets. The agreement
provides further that BMC may recover amounts (representing expenses in excess
of the Fund's expense guarantee rate) absorbed during the preceding 11 months,
if, and to the extent that, for any given month, the Fund's expenses are less
than the expense guarantee rate in effect at that time. The expense guarantee
rate is renegotiated annually in June. Effective June 1, 1996, the expense
guarantee has changed to .67%. Additionally, BMC voluntarily agreed to absorb
all expenses of the Fund through December 31, 1995. Beginning January 1, 1996,
the Fund began to absorb expenses at a rate of .10% of average daily net assets
and each month an additional .10% will be added until the Fund reaches the
contractual expense cap.

The payables to affiliates as of May 31, 1996, based on the above agreements,
were as follows:

Investment Advisor ........................................ $3,978
Administrative Services ................................... 2,090
Transfer Agent ............................................ 3,836
--------
$ 9,904
========

The Trust has a distribution agreement with Benham Distributors, Inc. (BDI),
which is responsible for promoting sales of and distributing the Trust's shares.
BDI is a wholly owned subsidiary of TCC.

(3) SHARE TRANSACTIONS

Share transactions for the Fund for the years ended May 31, 1996 and 1995, were
as follows:

1996 1995
------- ------
Shares sold................................... 1,117,476 3,037,823
Reinvestment of dividends..................... 84,549 52,967
-------- ---------
1,202,025 3,090,790
Less shares redeemed.......................... (611,773) (1,889,940)
-------- ---------
Net increase in shares........................ 590,252 1,200,850
======== =========

(4) INVESTMENT SECURITIES--PURCHASES, SALES AND
MATURITIES

Portfolio activity, excluding short-term securities, for the year ended May 31,
1996, was as follows:

Purchases ........................................... $14,141,878
===========
Sale proceeds ....................................... $ 8,190,431
===========

As of May 31, 1996, unrealized appreciation (depreciation) was as follows:

Appreciated securities .................................. $ 447,780
Depreciated securities .................................. (141,602)
---------
Net unrealized appreciation ............................. $ 306,178
=========

The cost of securities for financial reporting and federal income tax purposes
is the same.

(5) EXPENSE OFFSET ARRANGEMENTS

The Fund's Statement of Operations reflects custodian earnings credits. These
amounts are used to offset the custody fees payable by the Fund to the custodian
bank. The credits are earned when the Fund maintains a balance of uninvested
cash at the custodian bank. Beginning with the year ended May 31, 1996, the
ratios of expenses to average daily net assets shown in the Financial Highlights
are calculated as if these credits had not been earned.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
Benham Arizona Municipal Intermediate-Term Fund
Schedule of Investment Securities
May 31, 1996

Value Rating
Face Value Issue Coupon Maturity (Note 1) Moody's/S&P
- ---------------------------------------------------------------------------------- ------- -------- -------- -----------
<S> <C> <C> <C> <C>
$1,000,000 Arizona State Transportation Board Highway Rev........................ 5.250% 07/01/09 $ 980,040 Aa/ AAA
1,000,000 City of Mesa Utility Systems Rev., (FGIC)............................. 6.250 07/01/04 1,085,350 Aaa/ AAA
900,000 Coconino-Yavapai County's Sedona Unified School District No. 9 GO,(FGIC) 5.600 07/01/06 924,966 Aaa/ AAA
545,000 Gilbert GO, Series 1994 C, (MBIA) 6.000 07/01/02 579,864 Aaa/ AAA
500,000 Guam Power Auth. Rev., Series 1994 A.................................. 5.200 10/01/97 506,970 NR/ BBB
500,000 Maricopa County GO, (FGIC)............................................ 6.250 07/01/03 540,740 Aaa/ AAA
500,000 Maricopa County Industrial Development Auth. Hospital Facility Rev.
(Samaritan Health Services), (MBIA)................................ 7.150 12/01/04 571,655 Aaa/ AAA
1,000,000 Maricopa County Public Financing Corporation
Certificates of Participation, Series 1994......................... 5.625 06/01/00 1,015,530 Baa/ BBB
500,000 Maricopa County Unified School District No. 4 Mesa GO, (AMBAC)........ 6.900 07/01/00 542,055 Aaa/ AAA
500,000 Maricopa County Unified School District No. 4 Mesa GO, (FGIC)........ 5.200 07/01/06 500,480 Aaa/ AAA
1,000,000 Maricopa County Unified School District No. 41
Gilbert GO, Series 1998 F, Prerefunded at Par, (FGIC).............. 6.200 07/01/02 1,070,170 Aaa/ AAA
600,000 Maricopa County School District No. 80 Chandler GO, (FGIC)............ 5.900 07/01/01 632,886 Aaa/ AAA
500,000 Mesa GO, (AMBAC)...................................................... 6.000 07/01/01 529,645 Aaa/ AAA
300,000 Phoenix Airport Rev., Series 1994 C, (MBIA)........................... 5.500 07/01/01 308,406 Aaa/ AAA
1,000,000 Phoenix GO, Series A.................................................. 4.850 07/01/09 930,610 Aa1/ AA+
1,300,000 Phoenix GO, Series 1994............................................... 5.100 07/01/05 1,306,045 Aa1/ AA+
635,000 Phoenix Civic Improvement Corporation Wastewater
Rev. Prerefunded at 102% of Par.................................... 6.125 07/01/03 688,867 NR/ AAA
500,000 Phoenix Civic Improvement Corporation Water Systems Rev............... 6.000 07/01/02 528,205 A1/ AA-
550,000 Phoenix GO, Series 1992............................................... 6.000 07/01/01 583,627 Aa1/ AA+
350,000 Phoenix Street and Highway Rev., Series 1992.......................... 6.250 07/01/06 373,390 A1/ AA
500,000 Phoenix Street and Highway Rev., Series 1992.......................... 5.950 07/01/00 524,370 A1/ AA
1,000,000 Pima County GO, Series 1992........................................... 6.550 07/01/01 1,081,100 Aa/ A+
1,000,000 Pima County Sewer Rev., Series 1991, (FGIC)........................... 6.200 07/01/00 1,059,860 Aaa/ AAA
350,000 Pima County Sunnyside Unified School District No. 12 GO, (AMBAC)...... 5.300 07/01/04 357,480 Aaa/ AAA
</TABLE>

SCHEDULE OF INVESTMENT SECURITIES-BENHAM ARIZONA MUNICIPAL INTERMEDIATE-TERM FUND (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
Value Rating
Face Value Issue Coupon Maturity (Note 1) Moody's/S&P
- ---------------------------------------------------------------------------------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
$1,000,000 Pima County Unified School District No. 10
Amphitheater GO, (MBIA)............................................ 7.000% 07/01/05 $ 1,134,760 Aaa/ AAA
415,000 Pinal County Unified School District No. 43 Apache
Junction GO, Series A, (FGIC)***................................... 6.800 07/01/08 469,249 Aaa/ AAA
500,000 Pinal County Industrial Development Auth. Pollution Control Rev., VRDN 3.800 06/03/96* 500,000 P1/ A1+
1,000,000 Puerto Rico Electric Power Auth., Series 1995 W Rev., (MBIA).......... 6.000 07/01/03 1,067,890 Aaa/ AAA
1,000,000 Salt River Agricultural Improvement and Power District
(Salt River Project) Series B...................................... 6.500 01/01/04 1,093,990 Aa/ AA
480,000 Scottsdale GO, Series 1994............................................ 7.500 07/01/02 547,781 Aa1/ AA+
500,000 Scottsdale Desert Ranch Improvement District Special
Assessment, (AMBAC)................................................ 5.600 01/01/01 519,280 Aaa/ AAA
1,000,000 Tucson Street and Highway Rev......................................... 5.700 07/01/01 1,040,810 A1/ A+
710,000 University of Arizona Rev............................................. 6.000 06/01/01 751,513 A1/ AA
500,000 Yavapai County Camp Verde Unified School District
No. 28 GO Series 1995, (FGIC)...................................... 6.100 07/01/04 537,040 Aaa/ AAA
- ----------- -----------
$23,635,000 Total Investment Securities (cost $24,578,446)-96.49%...................................... 24,884,624**
- ----------- -----------
Cash and Other Assets Less Liabilities-3.51%............................................... 904,344
-----------
Total Net Assets-100.00%................................................................... $25,788,968
===========
NR = Not Rated
- -------------------
</TABLE>

* These variable interest rate securities have maturities greater than one year
but are redeemable upon demand. For purposes of calculating the Fund's
weighted average maturity, the length to maturity of these investments is
considered to be the greater of the period until the interest rate is
adjusted or until the principal can be recovered by demand.

** The Fund had 1.2% invested in private activity municipal securities. The
interest from these securities is treated as a tax-preference item in
calculating the federal alternative minimum tax liability.

***This security was purchased on a when-issued basis with a total cost of
$457,456.

PORTFOLIO COMPOSITION BY MARKET SECTOR

General Obligation....... 42% Education............ 5%
Electric................. 15 Other................ 12
Transportation........... 13 ---
Prerefunded.............. 7 TOTAL............... 100%
Water/Sewer.............. 6 ===

TRUSTEES

James M. Benham
Albert A. Eisenstat
Ronald J. Gilson
Myron S. Scholes
Kenneth E. Scott
Ezra Solomon
Isaac Stein
James E. Stowers III
Jeanne D. Wohlers

OFFICERS

James M. Benham
Chairman of the Board

Bruce R. Fitzpatrick
Vice President

Maryanne Roepke
Treasurer and
Chief Financial Officer

Douglas A. Paul
Vice President, Secretary
and General Counsel

Ann N. McCoid
Controller

[company logo] The Benham Group
Part of the Twentieth Century Family of Mutual Funds

1665 Charleston Road
Mountain View, CA 94043

1-800-321-8321

Not authorized for distribution unless preceded or
accompanies by a current fund prospectus.

Benham Distributors, Inc. 7/96 Q065
<PAGE>
BENHAM
MUNICIPAL TRUST

Annual Report * May 31, 1996

[picture of the Florida state flag]

Florida Municipal Money Market Fund
Florida Municipal Intermediate-Term Fund

[company logo] The Benham Group
Part of the Twentieth Century Family of Mutual Funds

<PAGE>

CONTENTS

U.S. ECONOMIC REVIEW.................................. 1

MUNICIPAL MARKET SUMMARY.............................. 2

MUNICIPAL CREDIT ANALYSIS............................. 3

MONEY MARKET FUND
Performance Information............................... 4
Portfolio Information................................. 5
Management Discussion................................. 6
Financial Highlights..................................20
Financial Statements and Notes........................22
Schedule of Investments...............................30

INTERMEDIATE-TERM FUND
Performance Information............................... 8
Performance Comparison & Total Return Breakdown....... 9
Portfolio Information.................................10
Management Discussion ................................11
Financial Highlights..................................21
Financial Statements and Notes........................22
Schedule of Investments...............................34

INVESTMENT FUNDAMENTALS
Definitions...........................................13
The Yield Curve.......................................14
Muni Risk Factors.....................................15
Portfolio Sensitivity Measurements ................16
Bond Pricing..........................................17
Portfolio Structures & Taxable Distributions..........18

<PAGE>

U.S. ECONOMIC REVIEW
JAMES M. BENHAM [photo of James M.
Chairman, Benham Funds Benham]

[bar graph on left side of page. graph data described below]

[graph data]
U.S. Nonfarm Payroll Employment
(seasonally adjusted, in thousands)

Monthly Change Three-Month Moving Avg.
J-95 101 J-95 113
A 298 A 197
S 124 S 174
O 126 O 183
N 150 N 133
D 237 D 171
J-96 -66 J-96 107
F 509 F 227
M 158 M 200
A 191 A 286
M 365 M 238
J 239 J 265

Source: Bloomberg Financial Markets

MARKET SUMMARY
MUNICIPAL SECURITIES
by Dave MacEwen, Vice President & Senior Municipal Portfolio Manager

[mountain graph on left side of page. graph data described below]

[graph data]
Shifting Municipal Yield Curves

Source: Bloomberg Financial Markets

MUNICIPAL CREDIT ANALYSIS
FLORIDA ECONOMIC AND CREDIT REVIEW
by Steve Permut, Manager of Municipal Credit Analysis, and the Benham Municipal
Credit Analysis Team: Joe Crowley, Scott Lord and Bill McClintock.

Florida's economy grew steadily in 1995 and in the first half of 1996, though at
a more modest pace than in the boom year of 1994. Employment growth through the
third quarter of 1995 was a healthy 3.3%. State job growth is expected to
moderate somewhat in 1996 to 2.6%, still above the national rate of 1.4%.
Services, trade and construction industries continued to be among the fastest
growing sectors of the Florida economy in 1995.

An increase in personal income and relatively stable interest rates boosted
individual purchasing power. Sales tax revenues, Florida's primary revenue
source, rose by 4.1% in 1995 (see the accompanying graph). Moving forward,
however, consumer spending, which drives economic growth, may be slowed by high
consumer debt levels.

[mountain graph on right side of page. graph data described below]

Florida's economy continues to benefit from international trade and tourism,
with the state attracting an estimated 41 million tourists in 1995. Florida is
geographically well positioned to benefit from the growth of the emerging
markets of the Caribbean and Central and South America.

Florida's credit quality is high and stable in the near term. The state and its
municipalities follow generally conservative fiscal practices. Important
challenges that the state will face going forward include cutbacks in defense
spending, rapid population growth and the need for significant infrastructure
improvements. School district financing in particular will likely require large
capital outlays.

These long-term capital needs run counter to a wave of anti-tax sentiment
sweeping the state. Voters have shown a reluctance to approve new government
spending in recent years. In the last year, for example, Florida voters defeated
numerous ballot measures proposing tax increases for everything from schools to
sports facilities. As a result, many schools have had to revise their capital
planning, putting pressure on school districts' operating budgets.

For more information about credit quality and credit ratings, see page 15.

[graph data]
Florida Taxable Sales (in billions)
and Per Capita Income

Taxable Sales (left scale) Per capita income (right scale)
"1993" $148.9 "1993" $20865
"1994" 162.8 "1994" 21662
"1995" 171.8 "1995" 22858
"1996e" 180.2 "1996e" 23639

Source: Bureau of Economic and Business Research, University of Florida

MONEY MARKET FUND

CURRENT YIELD*
As of May 31, 1996

7-DAY TAX-EQUIVALENT YIELDS
7-DAY 7-DAY ----------------------------------------------------
CURRENT EFFECTIVE 28% 31% 36% 39.6%
YIELD YIELD TAX BRACKET TAX BRACKET TAX BRACKET TAX BRACKET
----------------------------------------------------
3.80% 3.86% 5.28% 5.51% 5.94% 6.29%

The 7-DAY CURRENT YIELD is calculated based on the income generated by an
investment in the Fund over a seven-day period and is expressed as an annual
percentage rate. The 7-DAY EFFECTIVE YIELD is calculated similarly, although
this figure is slightly higher than the Fund's 7-day Current Yield because of
the effects of compounding. The 7-Day Effective Yield assumes that income earned
from the Fund's investments is reinvested and generating additional income.

The 7-DAY TAX-EQUIVALENT YIELDS show the taxable yields that investors in the
following federal income tax brackets would have to earn before taxes to equal
the Fund's tax-free 7-Day Current Yield. NOTE: These yields do not take into
account Florida's intangible property tax.

28% -- joint taxable income of $39,001 to $94,250
31% -- joint taxable income of $94,251 to $143,600
36% -- joint taxable income of $143,601 to $256,500
39.6% -- joint taxable income of $256,501 or more

NAV AND AVERAGE ANNUAL TOTAL RETURNS*
For Periods Ended May 31, 1996

AVERAGE ANNUAL TOTAL RETURNS
NET ASSET VALUE ---------------------------------------
(6/1/95-5/31/96) 1 YEAR 5 YEARS LIFE OF FUND
---------------------------------------
$1.00 3.86% N/A 3.73%

The Fund commenced operations on April 11, 1994.

*Yields and total returns are based on historical Fund performance and do not
guarantee future results. The Fund's yields and total returns will vary. The
U.S. government neither insures nor guarantees investments in the Fund. The
Fund is managed to maintain a stable $1.00 share price, but, as with all money
market funds, there is no assurance that the Fund will be able to do so.

MONEY MARKET FUND

KEY PORTFOLIO STATISTICS

5/31/96 11/30/95
Market Value: $98,779,263 $67,867,476
Number of Issues: 55 42
Average Maturity: 50 days 45 days

For definitions of these terms, see page 13.

PORTFOLIO COMPOSITION BY RATING
[pie charts]

5/31/96 11/30/95
SP1 21% SP1 29%
SP@ 3% SP1+ 71%
SP1+ 76%

"SP1+" and "SP1" are Standard & Poor's highest credit ratings for short-term
municipal securities. Some of the Fund's securities do not carry SP1+ or SP1
ratings, but they have received equivalent ratings from Moody's or other rating
services. For display purposes, we have converted the equivalent ratings to SP1+
or SP1. Credit ratings reflect the financial strength of the debt issuer and the
likelihood of repayment. For more information about credit quality and credit
ratings, see page 15. For more information about the securities rated "SP2," see
page 7.

PORTFOLIO COMPOSITION BY MARKET SECTOR
[pie charts]

5/31/96 11/30/95
VRDNs: 58% VRDNs: 63%
Commercial Paper: 21% Bonds less than 1 Year: 21%
Bonds less than 1 Year: 18% Commercial Paper: 16%
Other: 3%

For definitions of these security types, see page 13.

PORTFOLIO COMPOSITION BY MATURITY
[bar chart]

0-7 Days 8-90 Days 91-180 Days 181-397 Days
5/31/96 60% 16% 20% 4%
11/30/95 62.6% 21.4% 4.5% 11.5%

The Fund's dollar-weighted average portfolio maturity will not exceed 90 days.
The Fund generally maintains an average maturity between 30 and 90 days, with 50
days considered a "neutral" position.

The composition of the Fund's portfolio may change over time.

MONEY MARKET FUND
MANAGEMENT DISCUSSION

A question and answer session with Bryan Karcher, Associate Portfolio Manager.
Bryan is part of the team of Portfolio Managers that assists Senior Municipal
Portfolio Manager Dave MacEwen in the day-to-day operations of Benham Municipal
Trust.

NOTE: WE SUGGEST THAT YOU REVIEW THE INVESTMENT FUNDAMENTALS, U.S. ECONOMIC
REVIEW, MUNICIPAL CREDIT ANALYSIS AND MARKET SUMMARY SECTIONS BEFORE READING
THIS DISCUSSION. TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE INVESTMENT
FUNDAMENTALS SECTION BEGINNING ON PAGE 13.

Q: How did the Fund perform?

A: The Fund continued to outperform its peers, ranking #1 out of 157
state-specific money market funds in IBC/Donoghue, Inc.'s Money Fund
Report throughout 1995, as well as each of the first five months of
1996 (based on monthly yields reported by the Money Fund Report). For
the fiscal year ended May 31, 1996, the Fund's total return was 3.86%.

The Fund's returns were enhanced by the fact that Benham Management
Corporation (BMC) absorbed the Fund's operating expenses and waived its
management fees. While the absence of these fees helped the Fund
achieve its #1 Money Fund Report ranking, the Fund's yield would have
remained competitive even if BMC had not reimbursed all expenses. For
example, subtracting 65 basis points* (the Fund's expense cap during
the fiscal year) for fees and expenses from the Fund's May 1996 monthly
yield of 3.80% (reported in the June 21, 1996, issue of the Money Fund
Report) would have resulted in an adjusted yield of 3.15%, just above
the 3.14% average yield reported for "Tax-Free State-Specific Funds" in
the June Money Fund Report.

Q: Will BMC continue to absorb the Fund's expenses?

A: BMC will continue to reimburse the Fund's expenses through January 31,
1997, when the Fund will begin absorbing expenses at a rate of 10
additional basis points per month until reaching 53 basis points.

Q: How was the Fund positioned during the six-month period?

A: As anticipated, Fund assets increased significantly in December.
Contrary to national money market investment trends, Florida money
markets typically experience considerable asset growth in December as
Florida residents seek to reduce their liability under the state's
intangibles tax. Because short-term municipal rates typically spike up
at year end, shareholders benefited from the increased

MONEY MARKET FUND
MANAGEMENT DISCUSSION
(Continued from the previous page)

amount of capital coming into the Fund. We used much of the new money
to purchase highly liquid daily and weekly variable rate demand notes
(VRDNs*) to have cash on hand for redemptions expected in January. This
increased the proportion of VRDNs in the portfolio and reduced the
Fund's average maturity to 23 days in late December.

We began to extend the Fund's average maturity in January, prior to the
latest Fed rate cut. Market sentiment at that time was that further
short-term rate reductions were likely. Therefore, we lengthened to 51
days by mid-March, achieving a fairly neutral position relative to the
Fund's peer group. Interest rate sentiment began to change in March,
however, because of stronger-than-expected economic data. As a result,
we allowed the Fund's average maturity to shorten through April and
early May, keeping it shorter than that of its peers.

In May, we extended the Fund's average maturity to lock in more
attractive rates through June and July. This is a period when coupon
payments and maturing securities create a flood of cash, which drives
short-term municipal yields lower. To bridge the June-July gap, we
purchased commercial paper* while reducing holdings in VRDNs.

Q: The Fund holds a small percentage of securities rated "SP2." Why are
securities of that quality in the Fund's portfolio?

A: Standard & Poor's recently downgraded Fuji Bank, which provides the
letter of credit for a weekly VRDN that represents 2% of the Fund`s
holdings. However, Fuji Bank has retained its top rating from Moody`s
and other rating agencies, qualifying the security as "tier 1"
according to SEC guidelines. Moreover, our internal credit analysis
team believes that the issuer of this security is financially sound.
The security is also very liquid because of its seven-day maturity.

Q: What investment strategy do you intend to follow over the next six
months?

A: In general, we expect to maintain a neutral position and will likely
refrain from any aggressive extension as long as uncertainty over the
direction of short-term interest rates prevails. In the near term, the
Fund is positioned to ride out the historically expensive June-July
period. The Fund is slightly long, with an average maturity of 50 days
and with a relatively heavy weighting in commercial paper and a
corresponding underweighting in VRDNs.

INTERMEDIATE-TERM FUND

CURRENT YIELD*
As of May 31, 1996

30-DAY TAX-EQUIVALENT YIELDS
30-DAY ----------------------------------------------------
SEC 28% 31% 36% 39.6%
YIELD TAX BRACKET TAX BRACKET TAX BRACKET TAX BRACKET
----------------------------------------------------
4.50% 6.25% 6.52% 7.03% 7.45%

30-DAY TAX-EQUIVALENT YIELDS show the taxable yields that investors in the
following federal income tax brackets would have to earn before taxes to equal
the Fund's tax-free 30-Day SEC Yield. NOTE: These yields do not take into
account Florida's intangible property tax.

All income dividends distributed by the Fund during the fiscal year ended May
31, 1996, are exempt from federal income taxes, but a portion of the Fund's
dividends may be subject to the federal alternative minimum tax (AMT). The
long-term capital gain distributed on December 14, 1995, is taxable at both the
state and federal levels.

NAV AND AVERAGE ANNUAL TOTAL RETURNS*
For Periods Ended May 31, 1996

AVERAGE ANNUAL TOTAL RETURNS
NET ASSET VALUE RANGE ----------------------------------------
(6/1/95-5/31/96) 1 YEAR 5 YEARS LIFE OF FUND
----------------------------------------
$10.15-$10.64 4.34% N/A 6.30%

NET ASSET VALUE (NAV) RANGE indicates the Fund's share price movements over the
stated period and can be used to gauge the stability of the Fund's share price.

The Fund commenced operations on April 11, 1994.

*Yields and total returns are based on historical Fund performance and do not
guarantee future results. The Fund's share price, yields and total returns will
vary, so that shares, when redeemed, may be worth more or less than their
original cost.

INTERMEDIATE-TERM FUND

SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 4/29/94 in the Fund and
in the Lehman Brothers, Inc. Five-Year General Obligation Bond Index

[mountain graph]
Index Fund
4/29/94 $10,000 $10,000
5/31/94 10,056 10,093
6/30/94 10,033 10,054
7/29/94 10,142 10,195
8/31/94 10,191 10,252
9/30/94 10,114 10,173
10/31/94 10,058 10,045
11/30/94 9,993 9,876
12/30/94 10,081 10,032
1/31/95 10,178 10,212
2/28/95 10,326 10,471
3/31/95 10,490 10,539
4/28/95 10,518 10,592
5/31/95 10,749 10,830
6/30/95 10,757 10,811
7/31/95 10,908 10,930
8/31/95 11,018 11,021
9/30/95 11,051 11,069
10/31/95 11,097 11,195
11/30/95 11,192 11,297
12/31/95 11,253 11,386
1/31/96 11,387 11,513
2/29/96 11,349 11,481
3/31/96 11,288 11,328
4/30/96 11,271 11,310
5/31/96 11,258 11,300

Past performance does not guarantee future results.

LIPPER PERFORMANCE COMPARISON

Lipper Analytical Services (Lipper) is an independent mutual fund ranking
service located in Summit, NJ. Rankings are based on AVERAGE ANNUAL TOTAL
RETURNS for the periods ended 5/31/96 for the funds in Lipper's "Florida
Intermediate Municipal Funds" category.

1 YEAR LIFE OF FUND+
The Fund: 4.34% 6.09%
Category Average: 3.59% 5.54%
The Fund`s Ranking: 4 out of 20 3 out of 16

+ from April 30, 1994, to May 31, 1996

Total returns are based on historical performance and do not guarantee future
results. Please keep in mind that a portion of the Fund's expenses were absorbed
by Benham Management Corporation during this period and that the rankings listed
would have been lower if the Fund's returns had been reduced by those expenses.

ONE-YEAR TOTAL RETURN BREAKDOWN
For the Period Ended May 31, 1996

% FROM % FROM % FROM ASSET ONE-YEAR
INCOME + CAPITAL GAINS + DEPRECIATION = TOTAL RETURN

5.14% + 0.32% + (1.12%) = 4.34%

INTERMEDIATE-TERM FUND

KEY PORTFOLIO STATISTICS
5/31/96 11/30/95
Market Value: $9,970,405 $10,415,530
Number of Issues: 26 25
Average Coupon: 5.95% 6.03%
Average Maturity: 7.89 years 7.71 years
Average Duration: 5.47 years 5.31 years

For definitions of these terms, see page 13.

PORTFOLIO COMPOSITION BY RATING
[pie charts]

5/31/96 11/30/95
AA 28% AA 30%
AAA 72% AAA 70%

Credit ratings reflect the financial strength of the debt issuer and the
likelihood of repayment. For more information about credit quality and credit
ratings, see page 15.

PORTFOLIO COMPOSITION BY MARKET SECTOR
[pie charts]

5/31/96 11/30/95
Water/Sewer: 20% Water/Sewer: 20%
GO: 14% Prerefunded: 15%
Housing: 13% GO: 14%
Electric: 12% Electric: 10%
Special Tax: 12% Special Tax: 9%
Prerefunded: 6% Other: 32%
Other: 23%

For definitions of these security types, see page 13.

PORTFOLIO COMPOSITION BY MATURITY
[bar chart]
<TABLE>
<CAPTION>
1-3 Years 3-5 Years 5-7 Years 7-10 Years greater than 10 Years

The Fund invests primarily in intermediate-term Florida municipal obligations
with maturities of four or more years. The Fund's weighted average portfolio
maturity is typically five to ten years, with seven years considered a "neutral"
position.

The composition of the Fund's portfolio may change over time.

INTERMEDIATE-TERM FUND
MANAGEMENT DISCUSSION
with Dave MacEwen, Vice President and Senior Municipal Portfolio Manager

NOTE: WE SUGGEST THAT YOU REVIEW THE INVESTMENT FUNDAMENTALS, U.S. ECONOMIC
REVIEW, MUNICIPAL CREDIT ANALYSIS AND MARKET SUMMARY SECTIONS BEFORE READING
THIS DISCUSSION. TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE INVESTMENT
FUNDAMENTALS SECTION BEGINNING ON PAGE 13.

Q: How did the Fund perform?

A: The Fund benefited from the bond rally that lasted through early 1996
and performed well compared to its peer group. The Fund's 4.34% total
return for the fiscal year ended May 31, 1996, ranked it in the top
fifth of the 20 funds in Lipper's "Florida Intermediate Municipal
Funds" category. (See the Lipper Performance Comparison on page 9.)
Keep in mind that a portion of the Fund's expenses were absorbed by
Benham Management Corporation (BMC) during this period and that the
ranking listed would have been lower if the Fund's returns had been
reduced by those expenses.+

Q: Why did the Fund outperform its category average?

A: The Fund outperformed its average because we positioned it to take
advantage of the 1995 bond rally. We employed what is known as a
barbell portfolio structure,* which tends to perform best when the
yield curve* is moving from steep to flat, as it did during the rally.
In addition, we aggressively extended the Fund`s average maturity* and
duration* after flat tax fears began to recede in August 1995. We
replaced shorter-term munis that had appreciated in value with munis
having maturities of 10 years or more. These longer-term securities had
lagged the performance of the shorter-term munis and were trading at
relatively attractive prices.

In addition, we should acknowledge the contribution of our credit
research staff, which made many accurate assessments of specific credit
situations in Florida. Florida is a complex, dynamic state requiring
thorough research and analysis; finding Florida municipal securities
that we feel are undervalued has enhanced our ability to stay in front
of what we call the "upgrade curve" (the chance for securities to
appreciate in value relative to their current prices as a result of a
credit upgrade).

+ Benham Management Corporation absorbed the Fund's expenses through December
31, 1995. Beginning January 1, 1996, the Fund began absorbing expenses at a
rate of an additional .10% of average daily net assets each month, and will
continue until the Fund reaches its contractual expense cap of .67%.

INTERMEDIATE-TERM FUND
MANAGEMENT DISCUSSION
(Continued from the previous page)

Q: How did you respond to the shift in bond market expectations that
occurred during the first quarter of 1996?

A: As the economy began to show signs of strength, we shortened the Fund`s
duration to a more neutral position. We increased our holdings of
premium bonds,* which tend to outperform in a down market because they
typically have shorter durations than par* or discount bonds* with
comparable maturities. These securities performed very well as the muni
yield curve steepened. We have also been moving toward a bullet
portfolio structure,* which tends to perform better if the muni yield
curve steepens or remains unchanged. The combination of these factors
helped the Fund maintain its 1995 gains and mitigate losses relative to
its peer group as the bond market mentality shifted from bullish to
bearish.

Q: At the end of the fiscal year, 72% of the Fund's securities were in
AAA-rated munis. Why such a high level?

A: Investors searching for higher yields increased demand for lower-rated
munis over the past year, causing the yield advantage of lower-rated
munis to diminish. In addition, the lack of muni issuance in 1995
continued into 1996 and caused bond insurers to lower their premiums to
capture more business. This allowed us to increase the Fund's credit
quality while sacrificing very little yield in the process.

Q: What is the outlook for munis for the remainder of 1996?

A: It is somewhat uncertain. On the positive side, flat tax fears, which
caused instability in the muni market in 1995, have receded. Low levels
of new muni issuance--which we expect to continue--coupled with strong
demand for munis should help support prices and dampen market
volatility. However, if the flat tax issue resurfaces during this
year`s presidential election campaign, it could generate market
volatility. Also, if U.S. economic growth should accelerate in the
latter half of the year, inflation fears could drag on bonds in
general.

Q: What are your plans for the Fund going forward?

INVESTMENT FUNDAMENTALS
DEFINITIONS

COMMON MUNICIPAL SECURITIES (MUNIS)

AMT Paper--instruments with income subject to the federal alternative minimum
tax.

General Obligation (GO) bonds--securities backed by the taxing power of the
issuer.

Municipal Commercial Paper (CP)--high-grade short-term securities backed
by a line of credit from a bank.

Municipal Notes--securities with maturities of two years or less.

Revenue Bonds--securities backed by revenues from sales taxes or from a specific
project, system or facility (such as a hospital, electric utility or water
system).

Variable-Rate Demand Notes (VRDNs)--securities that track market interest rates
and stabilize their market values using periodic (daily or weekly) interest rate
adjustments.

PORTFOLIO STATISTICS

Market Value--the market value of a fund's investments on a given date.

Number of Issues--the number of different securities issuances held by a fund on
a given date.

Average Coupon--a weighted average of all coupons held in a fund's portfolio
(see also below).

Average Maturity--a weighted average of all bond maturities in a fund's
portfolio (see also page 16).

Average Duration--a weighted average of all bond durations in a fund's portfolio
(see also page 16).

INVESTMENT TERMS

Coupon--the stated interest rate on a bond.

Discount Bonds--bonds with interest coupons that are lower than prevailing
interest rates (see also page 17).

Par Bonds--bonds that trade or are priced at their face value.

Premium Bonds--bonds with interest coupons that are higher than prevailing
interest rates (see also page 17).

INVESTMENT FUNDAMENTALS
THE YIELD CURVE

Yield curves can have several different shapes, depending on interest rate
levels and the economic environment:

Steep Yield Curve--a normal yield curve that shows a large difference between
short-term yields and long-term yields. This typically occurs when the bond
market is responding to inflation fears (causing high long-term bond yields) and
the Fed hasn't raised short-term interest rates enough (or the economy hasn't
slowed down enough) to quell those fears.

INVESTMENT FUNDAMENTALS
MUNI RISK FACTORS

CREDIT QUALITY AND CREDIT RATINGS

CALLABILITY

DURATION EXTENSION

INVESTMENT FUNDAMENTALS
PORTFOLIO SENSITIVITY MEASUREMENTS

DURATION

Duration measures the price sensitivity of a bond or bond fund to changes in
interest rates. Specifically, duration represents the approximate percentage
change in the price of a bond or bond fund if interest rates move up or down by
100 basis points (a basis point equals 0.01%). For example, as of May 31, 1996,
the Florida Municipal Intermediate-Term Fund's duration was approximately five
and one-half years. If interest rates were to rise by 100 basis points, the
Fund's share price would be expected to decline by 5.5%. Conversely, if interest
rates were to fall by 100 basis points, the Fund's share price would be expected
to increase by 5.5%.

AVERAGE MATURITY

INVESTMENT FUNDAMENTALS
BOND PRICING

PREMIUM AND DISCOUNT BONDS

TAX TREATMENT OF DISCOUNT BONDS

INVESTMENT FUNDAMENTALS
PORTFOLIO STRUCTURES & TAXABLE DISTRIBUTIONS

BOND PORTFOLIO STRUCTURES

Barbell Structure--a structure that overweights a portfolio in short- and
long-term securities and underweights intermediate-term securities. This
structure tends to outperform a bullet structure when the yield curve is moving
from steep to flat (short-term rates are rising faster than long-term rates, or
long-term rates are falling faster than short-term rates). In a rising interest
rate environment, the short-term securities capture the higher yields with
little price depreciation. In a declining interest rate environment, the
short-term securities provide a relatively steady yield, while the long bonds
produce more price appreciation than intermediate-term securities.

TAXABLE DISTRIBUTIONS

Although we manage our Florida Municipal Funds to earn tax-exempt income, they
may realize taxable capital gains as we pursue higher total returns. By law, the
funds must distribute these capital gains to shareholders each year. Under
current tax law, each fund must distribute net short-term capital gains realized
by the fund as taxable ordinary income. Each fund distributes net long-term
capital gains to shareholders as a taxable capital gains distribution.

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Trustees
Benham Municipal Trust:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investment securities, of Benham Florida Municipal Money Market
Fund and Benham Florida Municipal Intermediate-Term Fund (two of the series
comprising Benham Municipal Trust) (the Funds) as of May 31, 1996 and the
related statements of operations for the year then ended, the statements of
changes in net assets for the two years then ended, and the financial highlights
for each of the periods presented. These financial statements and financial
highlights are the responsibility of the Funds' 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 the 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 May
31, 1996, 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 the financial highlights referred
to above present fairly, in all material respects, the financial position of
Benham Florida Municipal Money Market Fund and Benham Florida Municipal
Intermediate-Term Fund as of May 31, 1996, the results of their operations, the
changes in their net assets and the financial highlights for the periods
indicated above, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Kansas City, Missouri
July 8, 1996

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout Years Ended May 31 (except as noted)

- ------------------------------------------------------------------------------------------------------------------------------------
BENHAM FLORIDA MUNICIPAL MONEY MARKET FUND
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994+
------- ------- -------
PER-SHARE DATA
- --------------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period................................................. $ 1.00 1.00 1.00
Income from Investment Operations
Net Investment Income................................................................ .0386 .0371 .0040
Net Realized and Unrealized Gains on Investments..................................... 0 0 0
-------- -------- --------
Total Income From Investment Operations............................................. .0386 .0371 .0040
-------- -------- --------
Less Distributions
Dividends from Net Investment Income................................................. (.0386) (.0371) (.0040)
-------- -------- --------
NET ASSET VALUE AT END OF PERIOD....................................................... $ 1.00 1.00 1.00
===== ==== ====
TOTAL RETURN*.......................................................................... 3.86% 3.71% .40%
- ------------
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Period (in thousands of dollars).................................. $ 99,993 45,147 5,565
Ratio of Expenses to Average Daily Net Assets++........................................ .01% 0% 0%
Ratio of Expenses to Average Daily Net Assets (Before Reimbursement)++................. .71% .88% 1.58%**
Ratio of Net Investment Income to Average Daily Net Assets++........................... 3.75% 3.93% 2.99%**
Ratio of Net Investment Income to Average Daily Net Assets (Before Reimbursement)++.... 3.05% 3.05% 1.41%**

- -------------------

+ From April 11, 1994 (commencement of operations), through May 31, 1994.

++ The ratios for the year ended May 31, 1996, include expenses paid through expense offset arrangements.

* Total return figures assume reinvestment of dividends and are not annualized.

** Annualized
</TABLE>

See the accompanying notes to financial statements.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)

- ------------------------------------------------------------------------------------------------------------------------------------
BENHAM FLORIDA MUNICIPAL INTERMEDIATE-TERM FUND
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994+
------- ------- -------
PER-SHARE DATA
- --------------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period................................................. $10.30 10.11 10.00
Income from Investment Operations
Net Investment Income................................................................ .5235 .5203 .0684
Net Realized and Unrealized Gains (Losses) on Investments............................ (.0804) .1900 .1100
-------- -------- --------
Total Income From Investment Operations............................................. .4431 .7103 .1784
-------- -------- --------
Less Distributions
Dividends from Net Investment Income................................................. (.5235) (.5203) (.0684)
Distributions from Net Realized Capital Gains........................................ (.0396) 0 0
-------- -------- --------
Total Distributions................................................................. (.5631) (.5203) (.0684)
-------- -------- --------
NET ASSET VALUE AT END OF PERIOD....................................................... $10.18 10.30 10.11
===== ===== =====
TOTAL RETURN*.......................................................................... 4.34% 7.31% 1.79%
- ------------
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Period (in thousands of dollars).................................. $ 10,319 9,532 5,892
Ratio of Expenses to Average Daily Net Assets++........................................ .13% 0% 0%
Ratio of Expenses to Average Daily Net Assets (Before Reimbursement)++................. .88% 1.09% 1.92%**
Ratio of Net Investment Income to Average Daily Net Assets++........................... 5.05% 5.23% 5.02%**
Ratio of Net Investment Income to Average Daily Net Assets (Before Reimbursement)++.... 4.30% 4.14% 3.10%**
Portfolio Turnover Rate................................................................ 66.39% 36.63% 5.71%

- -------------------

+ From April 11, 1994 (commencement of operations), through May 31, 1994.

++ The ratios for the year ended May 31, 1996, include expenses paid through expense offset arrangements.

* Total return figures assume reinvestment of dividends and capital gain distributions and are not annualized.

** Annualized.
</TABLE>

See the accompanying notes to financial statements.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
STATEMENTS OF ASSETS AND LIABILITIES
May 31, 1996

Benham Florida Benham Florida
Municipal Municipal
Money Market Fund Intermediate-Term Fund
---------------- ---------------
<S> <C> <C>
ASSETS
Investment securities at value (cost of $98,779,263 and $9,840,698,
respectively).............................................................. $98,779,263 9,970,405
Cash.......................................................................... 391,341 212,609
Interest receivable........................................................... 554,051 148,133
Receivable for fund shares sold............................................... 291,498 545
Receivable from affiliates (Note 2)........................................... 3,031 0
Prepaid expenses and other assets............................................. 3,729 3,326
----------- ---------
Total assets................................................................ 100,022,913 10,335,018
----------- ---------
LIABILITIES
Dividends payable............................................................. 10,047 12,376
Payable to affiliates (Note 2)................................................ 0 3,393
Accrued expenses and other liabilities........................................ 19,802 416
----------- ---------
Total liabilities........................................................... 29,849 16,185
----------- ---------
NET ASSETS...................................................................... $99,993,064 10,318,833
=========== =========
Net assets consist of:
Capital paid in............................................................... $99,993,064 10,150,056
Undistributed accumulated net realized gain on investments.................... 0 39,070
Net unrealized appreciation on investments (Note 4)........................... 0 129,707
----------- ---------
Net assets...................................................................... $99,993,064 10,318,833
=========== =========
Shares of beneficial interest outstanding (unlimited number of shares authorized) 99,993,064 1,013,294
=========== =========
Net asset value, offering price and redemption price per share.................. $1.00 10.18
===== =====
- -------------------
See the accompanying notes to financial statements.
</TABLE>

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
STATEMENTS OF OPERATIONS
For the Year Ended May 31, 1996

Benham Florida Benham Florida
Municipal Municipal
Money Market Fund Intermediate-Term Fund
----------------- ----------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income............................................................... $2,956,034 546,569
--------- ---------
EXPENSES (NOTE 2)
Investment advisory fees...................................................... 348,352 46,704
Administrative fees........................................................... 75,901 10,158
Transfer agency fees.......................................................... 34,748 10,832
Printing and postage.......................................................... 26,403 4,596
Custodian fees................................................................ 18,238 7,562
Auditing and legal fees....................................................... 18,051 4,367
Registration and filing fees.................................................. 20,564 2,020
Directors' fees and expenses.................................................. 3,187 1,879
Other operating expenses...................................................... 10,379 4,951
--------- ---------
Total expenses.............................................................. 555,823 93,069
--------- ---------
Amount waived (Note 2).......................................................... (551,652) (78,970)
Custodian earnings credits (Note 5)............................................. (4,171) (496)
--------- ---------
Net expenses.................................................................. 0 13,603
--------- ---------
Net investment income....................................................... 2,956,034 532,966
--------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 4)
Net realized gain on investments................................................ 0 60,069
Change in net unrealized depreciation on investment............................. 0 (154,774)
--------- ---------
Net realized and unrealized loss on investments................................. 0 (94,705)
--------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $2,956,034 438,261
========= =========
- -------------------
</TABLE>

See the accompanying notes to financial statements.

BENHAM MUNICIPAL TRUST
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended May 31, 1996 and 1995

Benham Florida Benham Florida
Municipal Municipal
Money Market Fund Intermediate-Term Fund
----------------- ----------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income.................................................... $ 2,956,034 895,550 532,966 339,183
Net realized gain on investments......................................... 0 0 60,069 22,636
Net change in unrealized appreciation (depreciation) of investments...... 0 0 (154,774) 246,083
---------- ---------- ---------- ---------
Change in net assets derived from investment activities................. 2,956,034 895,550 438,261 607,902
---------- ---------- ---------- ---------

FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (2,956,034) (895,550) (532,966) (339,183)
Net realized gain on investments......................................... 0 0 (43,635) (1,502)
---------- ---------- ---------- ---------
Total distributions to shareholders..................................... (2,956,034) (895,550) (576,601) (340,685)
---------- ---------- ---------- ---------

FROM CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from sales of shares............................................ 196,163,359 83,301,805 7,316,860 17,938,226
Net asset value of dividends reinvested.................................. 2,887,312 868,437 403,119 249,153
Cost of shares redeemed.................................................. (144,204,430) (44,588,140) (6,794,465)(14,815,000)
---------- ---------- ---------- ---------
Change in net assets derived from capital share transactions............ 54,846,241 39,582,102 925,514 3,372,379
---------- ---------- ---------- ---------
Net increase in net assets.............................................. 54,846,241 39,582,102 787,174 3,639,596

NET ASSETS:
Beginning of year........................................................ 45,146,823 5,564,721 9,531,659 5,892,063
---------- ---------- ---------- ---------
End of year.............................................................. $99,993,064 45,146,823 10,318,833 9,531,659
========== ========== ========== =========
- -------------------
</TABLE>

See the accompanying notes to financial statements.

BENHAM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996

(1) SIGNIFICANT ACCOUNTING POLICIES

Benham Municipal Trust (the Trust) is registered under the Investment Company
Act of 1940 as an open-end management investment company. Benham Florida
Municipal Money Market Fund and Benham Florida Municipal Intermediate-Term Fund
(the Funds) are two of the eight Funds composing the Trust. The Funds are
non-diversified under the 1940 Act and seek as high a level of current income
exempt from federal income taxes as is consistent with prudent investment
management and conservation of shareholders' capital. The Funds concentrate
their investments in a single state and therefore may have more exposure to
credit risk related to the State of Florida than a fund with a broader
geographical diversification. Significant accounting policies followed by the
Funds are summarized below.

VALUATION OF INVESTMENT SECURITIES--Pursuant to SEC Rule 2a-7 under the 1940
Act, securities held by the Money Market Fund are valued at amortized cost,
which approximates current market value. Securities held by the
Intermediate-Term Fund are valued at current market value as determined by an
independent pricing service. Securities for which market quotations are not
readily available are stated at fair value as determined in good faith by the
Board of Trustees. Securities transactions are recorded on the date the order to
buy or sell is executed. Realized gains and losses on securities transactions
are determined on the basis of identified cost.

there is no guarantee it will be able to do so. The Intermediate-Term Fund's net
asset value fluctuates daily in response to changes in the market value of its
investments.

INVESTMENT INCOME, PREMIUM AND DISCOUNT--Interest income and expenses are
accrued daily. Premium on securities purchased is amortized daily using the
effective interest rate method for the Intermediate-Term Fund. Market discount
is recognized upon the sale or maturity of the security for the
Intermediate-Term Fund. Original issue discount for municipal securities is
accrued daily using the effective interest rate method for the Intermediate-Term
Fund. Premium and discount are accrued daily on a straight-line basis through
maturity or call date for securities held by the Money Market Fund.

DIVIDENDS AND OTHER DISTRIBUTIONS--With respect to the Money Market Fund,
dividends are declared and credited daily and distributed on the last business
day of the month. The Intermediate-Term Fund's dividends are declared daily,
accrued throughout the month and distributed on the last business day of the
month. Net realized long-term capital gains, if any, are distributed annually.
Distributions are paid in cash or reinvested as additional shares.

2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Benham Management Corporation (BMC) is a wholly owned subsidiary of Twentieth
Century Companies, Inc. (TCC). BMC's former parent company, Benham Management
International, Inc., merged into TCC on June 1, 1995. Each Fund pays BMC a
monthly investment advisory fee based on its pro rata share of the dollar amount
derived from applying the Trust's average daily net assets to the following
annualized investment advisory fee schedule.

.23% of the next $1 billion
.22% of the next $1 billion
.21% of the next $1 billion
.20% of the next $1 billion
.19% of average daily net assets over $6.5 billion

BMC provides the Trust with all investment advice. Twentieth Century Services,
Inc. pays all compensation of Fund officers and trustees who are officers or
directors of TCC or any of its subsidiaries. In addition, promotion and
distribution expenses are paid by BMC.

The Trust has an Administrative Services and Transfer Agency Agreement with
Benham Financial Services, Inc. (BFS), a wholly owned subsidiary of TCC. Under
the agreement, BFS provides substantially all administrative service and
transfer agency services necessary to operate the Funds. Fees for these services
are based on transaction volume, number of accounts and the average net assets
of all funds in The Benham Group.

The Trust has an additional agreement with BMC pursuant to which BMC established
a contractual expense guarantee that limits Fund expenses (excluding
extraordinary expenses such as brokerage commissions and taxes and the impact of
custodian earnings credits) to .65% of average daily net assets for the Money
Market Fund and .69% for the Intermediate-Term Fund. The agreement provides
further that BMC may recover amounts (representing expenses in excess of the
Fund's expense guarantee rate) absorbed during the preceding 11 months, if, and
to the extent that, for any given month, the Fund's expenses are less than the
expense guarantee rate in effect at that time. BMC voluntarily agreed to absorb
all expenses for the Intermediate-Term Fund through December 31, 1995, and all
expenses of the Money Market Fund through January 31, 1997. Beginning January 1,
1996, the Intermediate-Term Fund began absorbing expenses at a rate of .10% of
average daily net assets and each month an additional .10% was added until the
Fund reached the contractual expense rate. The expense guarantee rate is
renegotiated annually in June. Effective June 1, 1996, the expense guarantees
were changed to .61% for the Money Market Fund and .67% for the
Intermediate-Term Fund.

The payables (receivables) to (from) affiliates as of May 31, 1996, based on the
above agreements, were as follows:

Benham Florida Benham Florida
Municipal Municipal
Money Market Intermediate-Term
Fund Fund
------------------ -------------------
Investment Advisor................. $ (19,573) 1,058
Administrative Services............ 7,981 837
Transfer Agent..................... 8,561 1,498
-------- --------
$ (3,031) 3,393
======== ========

The Trust has a distribution agreement with Benham Distributors, Inc. (BDI),
which is responsible for promoting sales of and distributing the Trust's shares.
BDI is a wholly owned subsidiary of TCC.

(3) SHARE TRANSACTIONS

Share transactions for the Funds for the years ended May 31, 1996, and 1995,
were as follows:

Benham Florida Benham Florida
Municipal Municipal
Money Market Intermediate-Term
Fund Fund
--------------- -------------
1996 1995 1996 1995
------ ------ ------ -----
Shares sold.................... 196,163,359 83,301,805 703,119 1,808,828

Reinvestment of dividends...... 2,887,312 868,437 38,875 24,888
----------- ---------- ------- ---------
199,050,671 84,170,242 741,994 1,833,716
Less shares redeemed........... (144,204,430)(44,588,140) (654,017) (1,491,047)
----------- ---------- ------- ---------

Net increase in shares......... 54,846,241 39,582,102 87,977 342,669
========== ========== ====== ========

(4) INVESTMENT SECURITIES--PURCHASES, SALES AND
MATURITIES

Portfolio activity, excluding short-term securities, for the year ended May 31,
1996, was as follows:
Benham Florida
Municipal
Intermediate-Term
Fund
-------------
Purchases................................................. $7,676,131
==========
Sales proceeds............................................ $6,949,320
==========

As of May 31, 1996, unrealized appreciation (depreciation) was as follows:

Benham Florida
Municipal
Intermediate-Term
Fund
-------------
Appreciated securities.................................... $ 168,377
Depreciated securities.................................... (38,670)
----------
Net unrealized appreciation............................... $ 129,707
==========

The cost of securities for financial reporting and federal income tax purposes
is the same.

(5) EXPENSE OFFSET ARRANGEMENTS

Each Fund's Statement of Operations reflects custodian earnings credits. These
amounts are used to offset the custody fees payable by the Fund to the custodian
bank. The credits are earned when the Fund maintains a balance of uninvested
cash at the custodian bank. Beginning with the year ended May 31, 1996, the
ratios of expenses to average daily net assets shown in the Financial Highlights
are calculated as if these credits had not been earned.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
Benham Florida Municipal Money Market Fund
Schedule of Investment Securities
May 31, 1996

Value Rating
Face Value Issue Coupon Maturity (Note 1) Moody's/S&P
- -------------------------------------------------------------------------------- ------ -------- ------ -----------
<S> <C> <C> <C> <C>
$ 500,000 Acme Improvement District Utility System Rev., (AMBAC).............. 3.500% 10/01/96 $ 500,187 Aaa/ AAA
1,000,000 Broward County Housing Finance Auth. Multi-Family
Housing Rev., (Margate Project), VRDN, (LOC: Chemical Bank)...... 3.700 06/05/96* 1,000,000 NR/ A1
2,500,000 Broward County Housing Finance Auth. Multi-Family
Housing Rev., (Palmaire Housing), VRDN,
(SB: Continental Casualty Co.)................................... 3.800 06/05/96* 2,500,000 NR/ A1
1,400,000 Broward County Housing Finance Auth. Multi-Family Housing
Rev., (Welleby Apartments), VRDN, (LOC: Barclay's Bank).......... 3.700 06/05/96* 1,400,000 VMIG1/ NR
1,300,000 Broward County Industrial Development Rev.,
(MDR Fitness Project), VRDN, (LOC: Sun Bank Miami N.A.)......... 3.750 06/05/96* 1,300,000 Aa3/NR
1,745,000 Collier County Housing Finance Auth. Multi-Family
Housing Rev., VRDN, (LOC: PNC Bank Kentucky, Inc.)............... 3.950 06/05/96* 1,745,000 NR/A1
1,910,000 Coral Springs Industrial Development Rev. (Royal Plastics
Group Project), VRDN, (LOC: Suntrust Bank South Florida, N.A.)... 3.750 06/05/96* 1,910,000 Aa3/NR
3,300,000 Dade County Aviation Rev., Series A, VRDN, (LOC: Fuji Bank)......... 4.000 06/05/96* 3,300,000 VMIG1/ A2
1,000,000 Dade County Aviation Rev., Series D, (AMBAC)........................ 4.000 10/01/96 1,001,830 Aaa/ AAA
1,795,000 Dade County Metro GO, (Dade Fire and Resource Service), (FGIC)...... 3.600 04/01/97 1,799,479 Aaa/ AAA
2,000,000 Dade County School District GO, (MBIA).............................. 6.875 08/01/96 2,009,975 Aaa/ AAA
750,000 Dade County Industrial Development Auth. Rev., (DNS
Mfg, #237), VRDN,( LOC: Barnett Bank of South Florida N.A.)...... 3.850 06/05/96* 750,000 VMIG1/ A1
1,795,000 Dade County Industrial Development Auth. Rev., (IVAX
Labs), VRDN, (LOC: Bank of Tokyo - Mitsubishi, Ltd.)............. 4.000 06/05/96* 1,795,000 VMIG1/ NR
1,000,000 Dade County Industrial Development Auth. Rev.,
(Stephen M. Greene), VRDN, (LOC: Sun Bank Miami N.A.)............ 3.700 06/05/96* 1,000,000 VMIG1/ NR
3,950,000 Dade County Special Obligation Capital Asset Acquisition
Rev., VRDN, (LOC: Sanwa Bank Ltd.)............................... 4.000 06/05/96* 3,950,000 VMIG1/ A1
3,900,000 Escambia County Industrial Development Rev., (Gelman Science Inc. Project),
VRDN, (LOC: National Bank of Detroit)............................ 3.650 06/05/96* 3,900,000 NR/ A1+
</TABLE>

<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENT SECURITIES - Benham Florida Municipal Money Market Fund (Continued)
====================================================================================================================================
Value Rating
Face Value Issue Coupon Maturity (Note 1) Moody's/S&P
- -------------------------------------------------------------------------------- ------ -------- ------ -----------
<S> <C> <C> <C> <C>
$3,200,000 Florida Housing Finance Agency Multi-Family Housing Rev., Series EEE,
(Carlton Arms Project), VRDN (LOC: Kredietbank N.V.)............. 3.550% 06/05/96* $3,200,000 NR/ A1+
1,020,000 Florida Housing Finance Agency Multi-Family Housing Rev.,
1989 Series E, (Fairmont Oaks Project), VRDN, (LOC: CoAmerica Bank) 3.700 06/05/96* 1,020,000 NR/ A1
5,650,000 Florida Housing Finance Auth. Rev., (Ashley Lakes Project),
VRDN, (LOC: Barclay's Bank)...................................... 3.750 06/05/96* 5,650,000 VMIG1/ NR
2,800,000 Florida Housing Finance Auth. Rev., (Beville-Oxford),
VRDN, (SB: Continental Casualty Co.)............................. 3.800 06/05/96* 2,800,000 NR/ A1
2,400,000 Florida Housing Finance Auth. Rev., (Country Club
Apartments), VRDN, (LOC: Northern Trust Corp.)................... 4.150 06/03/96* 2,400,000 VMIG1/ NR
2,500,000 Florida Housing Finance Auth. Rev., (Lee County
Forestwood Apartments), VRDN, (FNMA Collateral Agreement )....... 3.700 06/05/96* 2,500,000 NR/ A1+
1,650,000 Florida Housing Finance Auth. Rev., (South Pointe
Project), VRDN, (LOC: Chemical Bank)............................. 3.600 06/05/96* 1,650,000 NR/ A1
1,000,000 Florida Housing Finance Auth. Rev., (Sun Pointe Cove
Apartments Project), VRDN, (FNMA Collateral Agreement)........... 3.700 06/05/96* 1,000,000 NR/ A1+
2,000,000 Florida Housing Finance Auth. Rev., (Village Place
Project), VRDN, (LOC: Chemical Bank)............................. 3.600 06/05/96* 2,000,000 NR/ A1
800,000 Florida State Board of Education GO, Series A,
Prerefunded at 102% of Par....................................... 7.800 06/01/96 816,071 Aaa/ AA
500,000 Florida State Board of Education Capital Outlay GO,
Series C, Prerefunded at 102% of Par............................. 7.125 06/01/96 509,999 Aaa/ AAA
250,000 Hernando County School District GO, (MBIA).......................... 5.000 08/01/96 250,564 Aaa/ AAA
3,000,000 Hillsborough County Aviation Florida,
(LOC: National Westminster Bank)................................. 3.700 08/16/96 3,000,000 Pl/ A1+
1,465,000 Hillsborough County Port District Rev., (Tampa Port Auth.), (FSA)... 4.500 06/01/97 1,476,645 Aaa/ AAA
295,000 Homestead Florida Special Assessment, (MBIA)........................ 4.200 09/01/96 295,402 Aaa/ AAA
3,500,000 Indian River County Hospital District Rev., (LOC: Kredietbank N.V.). 3.650 08/19/96 3,500,000 VMIG1/ A1+
1,000,000 Indian River County Industrial Development Rev., (Florida
Convales), VRDN, (LOC: Toronto Dominion Bank).................... 3.800 06/03/96* 1,000,000 P1/ NR
2,000,000 Jacksonville Electric Commercial Paper (Morgan Guaranty
Trust Credit Agreement).......................................... 3.600 08/23/96 2,000,000 P1/ A1+
1,400,000 Jacksonville Electric Commercial Paper (Credit Suisse Liquidity).... 3.650 09/11/96 1,400,000 P1/ A1+
</TABLE>

<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENT SECURITIES - Benham Florida Municipal Money Market Fund (Continued)
====================================================================================================================================
Value Rating
Face Value Issue Coupon Maturity (Note 1) Moody's/S&P
- -------------------------------------------------------------------------------- ------ -------- ------ -----------
<S> <C> <C> <C> <C>
$2,000,000 Jacksonville Electric Commercial Paper (Morgan Guaranty
Trust Credit Agreement).......................................... 3.600% 09/06/96 $2,000,000 P1/ A1+
2,950,000 Jacksonville Electric Auth. Rev., Series D3 Commercial
Paper (Credit Suisse Liquidity).................................. 3.600 09/11/96 2,950,000 P1/ A1+
3,045,000 Jacksonville Electric Auth. Rev., Prerefunded at 101.5% of Par...... 7.700 10/01/96 3,134,366 P1/A1+
1,320,000 Jacksonville Electric Auth. Rev..................................... 6.600 10/01/96 1,332,100 Aa1/ AA
1,070,000 Martin County Industrial Development Auth. Rev., (R. F. Labs Project),
VRDN, (LOC: Suntrust Bank Central Florida, N.A.)................. 3.750 06/05/96* 1,070,000 Aa3/ NR
2,000,000 Martin County Solid Waste Disposal Rev. (Florida
Power and Light Comp. Project), VRDN............................. 4.100 06/03/96* 2,000,000 VMIG1/ A1+
2,000,000 City of Naples Hospital Rev., (Naples Community
Hospital), VRDN, (LOC: Mellon Bank N.A.)......................... 3.750 06/06/96* 2,000,000 NR/ A1
200,000 Ocean Highway and Port Auth. Rev., VRDN,
(LOC: ABN Amro Bank, N.A.)....................................... 3.600 06/05/96* 200,000 VMIG1/ A1+
2,000,000 Ocean Highway and Port Auth. Rev., Series 1990,
VRDN, (LOC: ABN Amro Bank, N.A.)................................. 3.600 06/05/96* 2,000,000 VMIG1/ A1+
1,000,000 Orange County, Florida, School District Tax Anticipation Notes...... 4.500 10/16/96 1,002,522 NR/ SP1+
2,000,000 Ormond Beach Water and Sewer Rev., Prerefunded at 102% of Par....... 7.800 09/01/96 2,061,552 Aaa/ AAA
915,000 Pinellas County Second GTD Entitlement Rev., (FSA).................. 3.600 02/01/97 917,170 Aaa/ AAA
600,000 Pinellas County Florida Transportation Improvement Rev., (FGIC)..... 5.000 08/01/96 601,401 Aaa/ AAA
1,965,000 Putnam County Development Auth. Rev., (PCR Seminole),
(Guaranteed: National Rural Utilities Cooperative Finance Corp.). 3.250 09/15/96 1,965,000 MIG1/ A1+
1,000,000 Putnam County Development Auth. Rev.,
(Seminole Electric), VRDN, (Guaranteed: National Rural
Utilities Cooperative Finance Corp.)............................. 3.550 06/05/96* 1,000,000 MIG1/ A1+
1,900,000 Saint Lucie County Solid Waste Disposal Rev.,
(Florida Power & Light Comp. Proj.), VRDN........................ 4.100 06/03/96* 1,900,000 VMIG1/ A1+
2,000,000 Sunshine State Government Finance Commercial Paper
(LOC: Union Bank of Switzerland, National
Westminster Bank, Morgan Guaranty Trust)......................... 3.550 09/10/96 2,000,000 VMIG1/ NR
2,000,000 Sunshine State Government Finance Commercial Paper (LOC: Union
Bank of Switzerland, National Westminster Bank,
Morgan Guaranty Trust)........................................... 3.650 08/20/96 2,000,000 VMIG1/ NR
</TABLE>

32
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENT SECURITIES - Benham Florida Municipal Money Market Fund (Continued)
====================================================================================================================================
Value Rating
Face Value Issue Coupon Maturity (Note 1) Moody's/S&P
- -------------------------------------------------------------------------------- ------ -------- ------ -----------
<S> <C> <C> <C> <C>
$ 315,000 Tallahassee Airport Rev. Refunding, (AMBAC)......................... 3.950% 10/01/96 $ 315,000 Aaa/ AAA
2,000,000 West Orange County Hospital Rev., (Series A-1),
Commerical Paper (LOC: Rabobank Nederland)....................... 3.550 08/14/96 2,000,000 VMIG1/ NR
- ---------- ----------
$98,555,000 Total Investment Securities (cost $98,779,263)-98.79%....................................... 98,779,263**
==========
Cash and Other Assets Less Liabilities-1.21%................................................ 1,213,801
----------
Total Net Assets-100.00%.................................................................... $99,993,064
==========
NR = Not Rated
- -------------------
* These variable interest rate securities have maturities greater than one year but are redeemable upon demand. For purposes of
calculating the Fund's weighted average maturity, the length to maturity of these investments is considered to be the greater of
the period until the interest rate is adjusted or until the principal can be recovered by demand.

**The Florida Municipal Money Market Fund has 31% invested in private activity municipal securities. The interest from these
securities is treated as a tax-preference item in calculating the federal alternative minimum tax liability.

PORTFOLIO COMPOSITION BY MARKET SECTOR

VRDN........................... 58% Other ......................... 3%
Commercial Paper............... 21 -----
Bonds less than one year....... 18
TOTAL.......................... 100%
=====
</TABLE>

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
Benham Florida Municipal Intermediate-Term Fund
Schedule of Investment Securities
May 31, 1996

Value Rating
Face Value Issue Coupon Maturity (Note 1) Moody's/S&P
- -------------------------------------------------------------------------------- ------ -------- ------ -----------
<S> <C> <C> <C> <C>
$ 300,000 Boca Raton Water and Sewer Rev...................................... 6.400% 10/01/02 $ 315,816 Aa/ AA-
150,000 Broward County Educational Auth. Rev. (Nova
Southeastern University), (Connie Lee)........................... 5.400 04/01/02 153,678 NR/ AAA
300,000 Broward County School District GO................................... 6.750 02/16/00 321,234 A1/ AA-
500,000 Duval County School District GO, (AMBAC)............................ 6.250 08/01/05 536,970 Aaa/ AAA
500,000 East County Waste Control District Rev., Series 1994 (Asset Guarantee) 5.375 11/01/01 509,965 NR/ AA
260,000 Enterprise Community Development Auth. Water
and Sewer Rev. (Osceola County), (MBIA).......................... 5.400 05/01/04 265,951 Aaa/ AAA
500,000 Escambia County Housing Finance Auth. Single
Family Mortgage Rev., (GNMA)..................................... 6.000 04/01/02 512,035 Aaa/ AAA
305,000 Florida Department of General Services Rev.,
Prerefunded at 102% of Par....................................... 7.750 09/01/98 334,201 Aaa/ AAA
450,000 Florida Housing Finance Agency Rev. (Williamsburg
Village Apartments PJ-E), (AMBAC)................................ 5.600 12/01/07 451,134 Aaa/ AAA
350,000 Florida Housing Agency Multi-Family Housing Rev..................... 5.350 06/01/00 351,827 NR/ AA
250,000 Gainesville Florida Utilities System Rev., Series A................. 5.750 10/01/09 255,947 Aa/ AA
400,000 Hillsborough County Port District Special Rev., (FSA)............... 6.500 06/01/04 435,864 Aaa/ AAA
295,000 Homestead Hurricane Andrew Claims Assistance Program Rev., (MBIA)... 5.000 03/01/01 298,269 Aaa/ AAA
400,000 Indian Trace Community Development Auth. Rev.
(District Water Management), Series 1995 A, (MBIA)............... 5.250 05/01/03 406,120 Aaa/ AAA
500,000 Jacksonville Electric Auth. Special Obligation (St.
John's River Power Project), 4th Series.......................... 6.500 10/01/01 540,290 Aa1/ AA
400,000 Jacksonville Excise Tax Rev., (FGIC)................................ 6.700 10/01/06 433,780 Aaa/ AAA
250,000 Jacksonville Excise Tax Rev., Series A, (FGIC)...................... 5.125 10/01/08 244,003 Aaa/ AAA
500,000 Jacksonville Sales Tax Rev. (River City Renaissance Project), (FGIC) 6.000 10/01/03 533,660 Aaa/ AAA
300,000 Lee County Florida School Board Certificates of
Participation, Series A, (FSA)................................... 5.400 08/01/04 305,526 Aaa/ AAA
</TABLE>

<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENT SECURITIES - Benham Florida Municipal Intermediate-Term
Fund (Continued)
====================================================================================================================================
Value Rating
Face Value Issue Coupon Maturity (Note 1) Moody's/S&P
- -------------------------------------------------------------------------------- ------ -------- ------ -----------
<S> <C> <C> <C> <C>
$ 450,000 Orlando and Orange County Expressway Auth. Rev.
(Florida Expressway), (FGIC)..................................... 6.500% 07/01/11 $ 494,478 Aaa/ AAA
500,000 Orlando Utility Commission Water and Electric Rev................... 5.700 10/01/04 523,055 Aa1/ AA
200,000 Reedy Creek Improvement District Utility Rev., Series
1991, Prerefunded at 101% of Par, (MBIA)......................... 6.250 10/01/01 215,774 Aaa/ AAA
400,000 South Miami Florida Health Facility Auth. Hospital Rev., (MBIA)..... 5.150 10/01/08 387,796 Aaa/ AAA
400,000 St. Cloud Utility Rev. Refunding, (MBIA)............................ 6.400 08/01/06 429,020 Aaa/ AAA
175,000 Tampa Palms Community Development Special
Assessment Refunding, (MBIA)..................................... 4.900 05/01/99 176,792 Aaa/ AAA
500,000 Volusia County School District GO, (FGIC)........................... 6.200 08/01/03 537,220 Aaa/ AAA
- ---------- ----------
$9,535,000 Total Investment Securities (cost $9,840,698)-96.62%........................................ 9,970,405*
==========
Cash and Other Assets Less Liabilities-3.38%................................................ 348,428
----------
Total Net Assets-100.00%.................................................................... $10,318,833
==========
NR = Not Rated

- -------------------
* The Florida Municipal Intermediate-Term Fund has 14% invested in private activity municipal securities. The interest from these
securities is treated as a tax-preference item in calculating the federal alternative minimum tax liability.

PORTFOLIO COMPOSITION BY MARKET SECTOR

Water/Sewer.................... 20% Sales Tax....................... 5%
General Obligation............. 14 Hospital........................ 4
Housing........................ 13 Other........................... 14
Electric....................... 12 ------
Special Tax.................... 12 TOTAL...........................100%
Prerefunded.................... 6 ======

</TABLE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

TRUSTEES

James M. Benham
Albert A. Eisenstat
Ronald J. Gilson
Myron S. Scholes
Kenneth E. Scott
Ezra Solomon
Isaac Stein
James E. Stowers, III
Jeanne D. Wohlers

OFFICERS

James M. Benham
Chairman of the Board

Bruce R. Fitzpatrick
Vice President

Maryanne Roepke
Treasurer and
Chief Financial Officer

Douglas A. Paul
Vice President, Secretary
and General Counsel

Ann N. McCoid
Controller

[company logo] The Benham Group
Part of the Twentieth Century Family of Mutual Funds

1665 Charleston Road
Mountain View, CA 94043

1-800-321-8321

Not authorized for distribution unless preceded or
accompanies by a current fund prospectus.

Benham Distributors, Inc. 7/96 Q063

<PAGE>
BENHAM
MUNICIPAL TRUST

Annual Report * May 31, 1996

[picture of the American flag]

National Tax-Free Money Market Fund
National Tax-Free Intermediate-Term Fund
National Tax-Free Long-Term Fund

[company logo] The Benham Group
Part of the Twentieth Century Family of Mutual Funds

<PAGE>

CONTENTS

U.S. ECONOMIC REVIEW................................... 1

MUNICIPAL MARKET SUMMARY............................... 2

MUNICIPAL CREDIT ANALYSIS.............................. 3

MONEY MARKET FUND
Performance Information................................ 4
Portfolio Information.................................. 5
Management Discussion & Performance Comparison......... 6
Financial Highlights...................................26
Financial Statements and Notes.........................29
Schedule of Investments................................37

INTERMEDIATE-TERM FUND
Performance Information................................ 8
Performance Comparisons & Total Return Breakdown....... 9
Portfolio Information..................................10
Management Discussion & Top Bond Holdings..............11
Financial Highlights...................................27
Financial Statements and Notes.........................29
Schedule of Investments................................42

LONG-TERM FUND
Performance Information................................13
Performance Comparisons & Total Return Breakdown.......14
Portfolio Information..................................15
Management Discussion & Top Bond Holdings..............16
Financial Highlights...................................28
Financial Statements and Notes.........................29
Schedule of Investments................................46

INVESTMENT FUNDAMENTALS
Definitions............................................18
The Yield Curve........................................19
Muni Risk Factors......................................20
Portfolio Sensitivity Measurements.....................21
Bond Pricing...........................................22
Portfolio Structures & Taxable Distributions...........23

<PAGE>

U.S. ECONOMIC REVIEW
JAMES M. BENHAM [photo of James
Chairman, Benham Funds M. Benham]

[bar graph on left side of page. graph data described below]

[graph data]
U.S. Nonfarm Payroll Employment
(seasonally adjusted, in thousands)

Monthly Change Three-Month Moving Avg.
J-95 101 J-95 113
A 298 A 197
S 124 S 174
O 126 O 183
N 150 N 133
D 237 D 171
J-96 -66 J-96 107
F 509 F 227
M 158 M 200
A 191 A 286
M 365 M 238
J 239 J 265

Source: Bloomberg Financial Markets

MARKET SUMMARY
MUNICIPAL SECURITIES
by Dave MacEwen, Vice President & Senior Municipal Portfolio Manager

[mountain graph on left side of page. graph data described below]

[graph data]
Shifting Municipal Yield Curves

Source: Bloomberg Financial Markets

MUNICIPAL CREDIT ANALYSIS
NATIONAL ECONOMIC AND CREDIT REVIEW
by Steve Permut, Manager of Municipal Credit Analysis, and the Benham Municipal
Credit Analysis Team: Joe Crowley, Scott Lord and Bill McClintock.

U.S. economic growth rebounded during the first half of 1996. Retail sales
improved steadily, home sales remained robust and surging employment growth
brought the national unemployment rate down to a six-year low of 5.3% in June.
These favorable economic trends led to further improvements in municipal credit
quality. Credit upgrades outpaced downgrades by more than a 2-to-1 margin during
the first quarter of 1996. This contrasts with the first quarter of 1995, when
downgrades outnumbered upgrades.

Regionally, the Rocky Mountain states continued to display the strongest
economic growth in the nation, and this strength has now extended to the west
coast (see the map below). California has fully recovered from its economic
downturn in the early 1990s, and the state's economy is now growing at a faster
rate than the nation as a whole. The southeastern part of the country also
remains strong, while the Midwest is growing at a relatively steady pace. The
only lagging regions are the Northeast and Great Lakes areas and Louisiana, but
even these regions have seen improved economic conditions in 1996.

The stronger economic environment has been favorable for general obligation (GO)
bonds, which have benefited from increased tax revenues. However, pending
federal policy decisions related to health and welfare may pose longer-term
concerns for state and local governments. Among other specific sectors, health
care issues have continued to suffer credit pressures due to a widespread trend
toward managed care. Competition and deregulation have also begun to impact the
credit quality of many public power issues.

It's important to note that this type of analysis provides only a glimpse of
broad trends within the municipal market. While sector analysis remains an
important element in municipal research, growing market complexity and issue
disparities point to a continuing need for thorough case-by-case credit
analysis.

[map of the United states highlighting the different Credit Quality Trends among
the states]

Credit Quality Trends

Improving
Stable
Declining

MONEY MARKET FUND

CURRENT YIELD*
As of May 31, 1996

7-DAY TAX-EQUIVALENT YIELDS
7-DAY 7-DAY ---------------------------------------------------
CURRENT EFFECTIVE 28% 31% 36% 39.6%
YIELD YIELD TAX BRACKET TAX BRACKET TAX BRACKET TAX BRACKET
---------------------------------------------------
3.17% 3.22% 4.40% 4.59% 4.95% 5.25%

The 7-DAY CURRENT YIELD is calculated based on the income generated by an
investment in the Fund over a seven-day period and is expressed as an annual
percentage rate. The 7-DAY EFFECTIVE YIELD is calculated similarly, although
this figure is slightly higher than the Fund's 7-Day Current Yield because of
the effects of compounding. The 7-Day Effective Yield assumes that income earned
from the Fund's investments is reinvested and generating additional income.

The 7-DAY TAX-EQUIVALENT YIELDS show the taxable yields that investors in the
following federal income tax brackets would have to earn before taxes to equal
the Fund's tax-free 7-Day Current Yield:

All income dividends distributed by the Fund during the fiscal year ended May
31, 1996, are exempt from federal income taxes.

NAV AND AVERAGE ANNUAL TOTAL RETURNS*

For Periods Ended May 31, 1996

AVERAGE ANNUAL TOTAL RETURNS
NET ASSET VALUE -----------------------------------------------
(6/1/95-5/31/96) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------------
$1.00 3.19% 2.69% 2.73% 3.88%

The Fund commenced operations on July 31, 1984.

MONEY MARKET FUND

KEY PORTFOLIO STATISTICS
5/31/96 11/30/95

Market Value: $90,155,958 $93,159,029
Number of Issues: 58 61
Average Maturity: 42 days 47 days

For definitions of these terms, see page 18.

PORTFOLIO COMPOSITION BY CREDIT RATING
[pie charts]

5/31/96 11/30/95
SP1: 17% SP1: 33%
SP1+: 83% SP1+: 67%

PORTFOLIO COMPOSITION BY SECURITY TYPE
[pie charts]

5/31/96 11/30/95
VRDNs: 56% VRDNs: 70%
Commercial Paper: 20% Commercial Paper: 11%
Bonds less than 1 Year: 12% Bonds less than 1 Year: 10%
Municipal Notes: 9% Municipal Notes: 9%
Other: 3%

For definitions of these security types, see page 18.

PORTFOLIO COMPOSITION BY MATURITY
[pie charts]

5/31/96 11/30/95
1-7 Days: 56% 1-7 Days: 70%
8-90 Days: 31% 8-90 Days: 12%
91-180 Days: 7% 91-180 Days: 4%
181-397 Days: 6% 181-397 Days: 14%

The Fund generally maintains an average maturity between 30 and 60 days, with 45
days considered a "neutral" position.

The composition of the Fund's portfolio may change over time.

MONEY MARKET FUND

MANAGEMENT DISCUSSION
A question and answer session with Bryan Karcher, Associate Portfolio Manager.
Bryan is part of the team of Portfolio Managers that assists Senior Municipal
Portfolio Manager Dave MacEwen in the day-to-day operations of Benham Municipal
Trust.

NOTE: TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE INVESTMENT
FUNDAMENTALS SECTION BEGINNING ON PAGE 18.

Q: How did the Fund perform?

A: The Fund continued to produce above-average returns compared to its
peers. For the fiscal year ended May 31, 1996, the Fund's total return
was 3.19%, exceeding the 3.14% average return for the 131 funds in
Lipper`s "Tax-Exempt Money Market Funds" category over the same period
(see the Lipper Performance Comparison below).

Q: How have money market rates changed over the past six months?

A: Rates generally trended lower through mid-February as a result of a
short-term interest rate reduction by the Fed on January 31. Money
market rates staged a modest comeback later in the period as the
economy appeared to strengthen.

Municipal money market rates were also influenced by seasonal technical
(supply and demand) factors. Yields typically rise in December when
municipal money market funds experience heavier-than-normal redemptions
as a result of consumer spending during the holiday season, corporate
tax payments and corporations selling munis and investing in Treasuries
to enhance their portfolios at year's end. This situation reverses in
early January--corporations typically repurchase the munis they sold in
December, and fund managers reinvest capital received from coupon
payments and securities (continued on next page)

LIPPER PERFORMANCE COMPARISON

1 YEAR 3 YEARS 5 YEARS 10 YEARS

The Fund: 3.19% 2.69% 2.73% 3.88%
Category Average: 3.14% 2.66% 2.75% 3.81%
The Fund`s Ranking: 54 out of 131 45 out of 106 43 out of 89 16 out of 55

Total returns are based on historical performance and do not guarantee future
results.

MONEY MARKET FUND

MANAGEMENT DISCUSSION
(Continued from the previous page)

maturing in January. Rates typically return to normal around the middle
of January, though they trended slightly lower this year because of
expectations for further Fed rate cuts. Yields on one-day and seven-day
VRDNs* tend to rise in mid-April when money markets routinely
experience capital outflows as individuals draw down their balances to
meet tax obligations.

Q: How was the Fund positioned over the past six months?

A: Changing expectations of Fed interest rate policy and technical factors
each impacted the Fund's positioning. We purchased daily and weekly
VRDNs to take advantage of the December spike in rates while generally
avoiding longer-term money market securities in January when yields
were low. As a result, the Fund's average maturity declined to about 35
days in late January. In anticipation of further Fed rate cuts, we
actively began to lengthen the Fund's average maturity in February and
March, extending out as far as 56 days. By mid-March, new economic data
began to change the prevailing outlook on interest rates. In this new
environment, we allowed the Fund's average maturity to shorten through
April and early May, by and large keeping the Fund's maturity shorter
than that of its peer group.

We altered the Fund's composition slightly in May, boosting its
proportion of commercial paper* while reducing its holdings in VRDNs.
This strategy enabled the Fund to lock in attractive interest rates
through June and July, when increased cash from maturing securities
drives short-term municipal yields lower.

Q: What are your plans for the Fund over the next six months?

A: In general, we are holding off on extending the Fund's average maturity
until we have a clearer picture of the economy and the Fed's intentions
for short-term interest rates. In the near term, the Fund is positioned
to ride out a flood of cash into the market from maturities occurring
in June and July. We are currently overweighted in commercial paper to
bridge that gap, with a corresponding underweighting in VRDNs. Most of
this commercial paper will mature in August and September, when yields
have historically returned to more attractive levels relative to
Treasuries.

INTERMEDIATE-TERM FUND

CURRENT YIELD*
As of May 31, 1996

The 30-DAY TAX-EQUIVALENT YIELDS show the taxable yields that investors in the
following federal income tax brackets would have to earn before taxes to equal
the Fund's tax-free 30-Day SEC Yield:

All income dividends distributed by the Fund during the fiscal year ended May
31, 1996, are exempt from federal income taxes.

NAV AND AVERAGE ANNUAL TOTAL RETURNS*
For Periods Ended May 31, 1996

AVERAGE ANNUAL TOTAL RETURNS
NET ASSET VALUE RANGE ----------------------------------------------
(6/1/95-5/31/96) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
$10.62-$11.13 4.38% 4.56% 6.42% 6.87%

NET ASSET VALUE (NAV) RANGE indicates the Fund's share price movements over the
stated period and can be used to gauge the stability of the Fund's share price.

The Fund commenced operations on July 31, 1984.

*Yields and total returns are based on historical Fund performance and do not
guarantee future results. The Fund's share price, yields and total returns will
vary, so that shares, when redeemed, may be worth more or less than their
original cost.

INTERMEDIATE-TERM FUND
SEC PERFORMANCE COMPARISON

[mountain graph]
Comparative Performance of $10,000 Invested on 5/31/86 in the Fund and
in the Lehman Brothers, Inc. Five-Year Municipal General Obligation Index

[graph data]
Index Fund
5/31/86 $10,000 $10,000
6/30/86 10,102 10,159
7/31/86 10,097 10,166
8/31/86 10,343 10,463
9/30/86 10,475 10,523
10/31/86 10,654 10,754
11/30/86 10,785 10,865
12/31/86 10,751 10,811
1/31/87 10,959 11,064
2/28/87 11,059 11,135
3/31/87 10,996 11,067
4/30/87 10,670 10,570
5/31/87 10,670 10,603
6/30/87 10,895 10,824
7/31/87 11,021 11,024
8/31/87 11,042 11,005
9/30/87 10,671 10,603
10/31/87 10,828 10,704
11/30/87 10,958 10,918
12/31/87 11,079 11,055
1/31/88 11,351 11,390
2/29/88 11,466 11,485
3/31/88 11,422 11,400
4/30/88 11,527 11,488
5/31/88 11,388 11,425
6/30/88 11,471 11,484
7/31/88 11,523 11,543
8/31/88 11,489 11,540
9/30/88 11,601 11,659
10/31/88 11,702 11,793
11/30/88 11,640 11,713
12/31/88 11,672 11,788
1/31/89 11,839 11,925
2/28/89 11,714 11,813
3/31/89 11,639 11,756
4/30/89 11,839 11,958
5/31/89 12,054 12,161
6/30/89 12,186 12,259
7/31/89 12,364 12,435
8/31/89 12,316 12,363
9/30/89 12,322 12,350
10/31/89 12,333 12,454
11/30/89 12,489 12,653
12/31/89 12,591 12,765
1/31/90 12,597 12,797
2/28/90 12,691 12,856
3/31/90 12,652 12,806
4/30/90 12,611 12,745
5/31/90 12,841 13,006
6/30/90 12,935 13,121
7/31/90 13,089 13,295
8/31/90 13,044 13,115
9/30/90 13,072 13,151
10/31/90 13,264 13,410
11/30/90 13,455 13,623
12/31/90 13,506 13,639
1/31/91 13,704 13,882
2/28/91 13,828 13,986
3/31/91 13,796 13,968
4/30/91 13,969 14,138
5/31/91 14,040 14,233
6/30/91 14,038 14,198
7/31/91 14,178 14,313
8/31/91 14,361 14,506
9/30/91 14,537 14,729
10/31/91 14,648 14,839
11/30/91 14,694 14,859
12/31/91 15,024 15,227
1/31/92 15,053 15,237
2/29/92 15,062 15,182
3/31/92 15,012 15,122
4/30/92 15,144 15,246
5/31/92 15,280 15,412
6/30/92 15,500 15,672
7/31/92 15,906 16,166
8/31/92 15,787 15,921
9/30/92 15,886 16,077
10/31/92 15,835 15,918
11/30/92 16,026 16,179
12/31/92 16,138 16,322
1/31/93 16,312 16,567
2/28/93 16,738 17,119
3/31/93 16,548 16,806
4/30/93 16,654 16,964
5/31/93 16,713 16,993
6/30/93 16,939 17,267
7/31/93 16,951 17,207
8/31/93 17,181 17,575
9/30/93 17,305 17,799
10/31/93 17,331 17,832
11/30/93 17,280 17,682
12/31/93 17,517 17,982
1/31/94 17,682 18,197
2/28/94 17,351 17,740
3/31/94 16,964 17,303
4/29/94 17,136 17,370
5/31/94 17,232 17,491
6/30/94 17,192 17,442
7/29/94 17,379 17,672
8/31/94 17,463 17,731
9/30/94 17,332 17,549
10/31/94 17,235 17,353
11/30/94 17,124 17,119
12/30/94 17,275 17,353
1/31/95 17,441 17,633
2/28/95 17,694 17,973
3/31/95 17,975 18,134
4/28/95 18,024 18,220
5/31/95 18,418 18,610
6/30/95 18,433 18,612
7/31/95 18,691 18,809
8/31/95 18,880 18,954
9/30/95 18,937 19,027
10/31/95 19,016 19,214
11/30/95 19,178 19,413
12/31/95 19,283 19,558
1/31/96 19,513 19,783
2/29/96 19,446 19,732
3/31/96 19,343 19,463
4/30/96 19,314 19,455
5/31/96 19,291 19,425

Past performance does not guarantee future results.

This graph compares the Fund's performance with a broad-based market index, the
Lehman Brothers, Inc. Five-Year Municipal General Obligation Index, over the
past 10 years. Although the investment characteristics of the Index are similar
to those of the Fund, the securities owned by the Fund and those composing the
Index are likely to be different, and securities that the Fund and the Index
have in common are likely to have different weightings in the respective
portfolios. Investors cannot invest directly in the Index.

PLEASE NOTE: The line representing the Fund's total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the Index's total return line does not.

LIPPER PERFORMANCE COMPARISON

1 YEAR 3 YEARS 5 YEARS 10 YEARS

The Fund: 4.38% 4.56% 6.42% 6.87%
Category Average: 3.86% 4.59% 6.36% 6.97%
The Fund`s Ranking: 25 out of 134 30 out of 69 13 out of 31 8 out of 14

Total returns are based on historical performance and do not guarantee future
results.

ONE-YEAR TOTAL RETURN BREAKDOWN
For the Period Ended May 31, 1996

% From % From Asset One-Year
Income + Depreciation = Total Return

4.83% + (0.45%) = 4.38%

INTERMEDIATE-TERM FUND

KEY PORTFOLIO STATISTICS

5/31/96 11/30/95

Market Value: $61,449,665 $63,190,196
Number of Issues: 54 53
Average Coupon: 6.03% 6.02%
Average Maturity: 7.15 years 7.30 years
Average Duration: 5.44 years 5.45 years

For definitions of these terms, see page 18.

PORTFOLIO COMPOSITION BY CREDIT RATING
[pie charts]

5/31/96 11/30/95
A: 19.1% A: 20.5%
AA: 18.7% AA: 18.2%
AAA: 62.2% AAA: 61.3%

Credit ratings reflect the financial strength of the debt issuer and the
likelihood of repayment. For more information about credit quality and credit
ratings, see page 20.

PORTFOLIO COMPOSITION BY MARKET SECTOR
[pie charts]

5/31/96 11/30/95
GO: 21.0% GO: 21.2%
Hospital: 19.4% Electric: 19.4%
Electric: 16.7% Hospital: 17.9%
COPs: 10.1% Prerefunded: 8.5%
Water/Sewer: 9.7% COPs: 8.4%
Other: 23.1% Other: 24.6%

For definitions of these security types, see page 18.

PORTFOLIO COMPOSITION BY MATURITY DATE
[pie charts]

5/31/96 11/30/95
1-3 Years: 13% 1-3 Years: 6%
3-5 Years: 20% 3-5 Years: 27%
5-7 Years: 14% 5-7 Years: 16%
7-10 Years: 22% 7-10 Years: 25%
less than 10 Years: 31% less than 10 Years: 26%

The Fund invests primarily in intermediate-term municipal obligations. The
Fund's weighted average portfolio maturity is typically five to ten years, with
seven years considered a "neutral" position.

The composition of the Fund's portfolio may change over time.

INTERMEDIATE-TERM FUND

MANAGEMENT DISCUSSION
A question and answer session with Joel Silva, Municipal Portfolio Manager. Joel
is part of the team of Portfolio Managers that assists Senior Municipal
Portfolio Manager Dave MacEwen in the day-to-day operations of Benham Municipal
Trust.

NOTE: TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE INVESTMENT
FUNDAMENTALS SECTION BEGINNING ON PAGE 18.

Q: How did the Fund perform?

A: The Fund weathered the recent rising interest rate environment and
outperformed its peer group average. For the fiscal year ended May 31,
1996, the Fund's total return was 4.38%--52 basis points* higher than
the 3.86% average return of the 134 funds in Lipper's "Intermediate
Municipal Debt Funds" category over the same period (see the Lipper
Performance Comparison on page 9).

Q: Why did the Fund outperform its category average?

A: In the middle of 1995, we increased the Fund's holdings of noncallable
bonds, which perform better than callable bonds in a rising bond market
(see Callability on page 20). These securities performed even better
than we anticipated, and we sold many of them near the end of the year
at a substantial profit. In addition, the Fund's barbell structure*
performed especially well throughout the second half of 1995 as the
muni yield curve* flattened.

Q: The Fund's holdings in California munis increased significantly over
the last six months (see the table below). Were these securities
particularly attractive?

A: Yes. We purchased additional California issues when we felt that prices
on California munis had bottomed in the wake of the Orange County
bankruptcy. We were able to purchase munis unrelated to Orange County
at very attractive prices, and we expect these securities to perform
well going forward.

TOP BOND HOLDINGS BY STATE

AS OF 5/31/96 AS OF 11/30/95

Texas 18.58% Texas 16.37%
California 18.05% California 12.94%
Washington 12.48% Washington 12.68%
Illinois 6.10% Ohio 6.83%
Wisconsin 5.05% Illinois 6.18%
Oklahoma 4.47% Georgia 5.21%

For a complete breakdown of the Fund's holdings by state, see the Schedule of
Investments beginning on page 42.

INTERMEDIATE-TERM FUND

MANAGEMENT DISCUSSION
(Continued from the previous page)

Q: Do the weightings of the Fund's holdings by state typically fluctuate?

A: Yes. We tend to trade actively in and out of various states because
seasonal supply and demand factors within the states often provide
opportunities for us to buy securities cheaply at certain times of the
year and then sell them when rising demand drives their prices higher.

Q: How is the Fund currently structured?

A: Because there is considerable uncertainty in the markets about
inflation trends in the near term, we have moved the Fund's duration
and average maturity to a neutral position--that is, in line with those
of its peer group averages. At the end of May, we began shifting from a
barbell to a bullet structure,* which will tend to perform better if
the muni yield curve steepens or remains unchanged.

Q: What is the outlook for munis for the rest of 1996?

A: It is somewhat uncertain. On the positive side, flat tax fears, which
caused so much instability in the muni market in 1995, have largely
faded. Low levels of new muni issuance--which we expect to
continue--coupled with strong demand for munis should also help support
prices. On the other hand, it is possible that the flat tax issue could
resurface as the presidential campaign moves forward. And if U.S.
economic growth should accelerate in the latter half of the year,
inflation fears could drag on bonds in general.

Q: With the current uncertainty about the economic outlook, what are your
plans for the Fund going forward?

A: In the near term, we plan to maintain our neutral positioning, standing
ready to either lengthen or shorten our duration and average maturity
if we see more definitive signs of either economic weakness or
strength. We will look to add value to the Fund by taking advantage of
seasonal price fluctuations in various states and by utilizing our
strong credit research team to search out securities with undervalued
credit ratings. We may also look to buy more noncallable bonds, whose
prices have declined significantly since the beginning of the year.

LONG-TERM FUND

CURRENT YIELD*
As of May 31, 1996

30-DAY TAX-EQUIVALENT YIELDS
30-DAY ---------------------------------------------------
SEC 28% 31% 36% 39.6%
YIELD TAX BRACKET TAX BRACKET TAX BRACKET TAX BRACKET
---------------------------------------------------
4.92% 6.83% 7.13% 7.69% 8.15%

The 30-DAY TAX-EQUIVALENT YIELDS show the taxable yields that investors in the
following federal income tax brackets would have to earn before taxes to equal
the Fund's tax-free 30-Day SEC Yield:

All income dividends distributed by the Fund during the fiscal year ended May
31, 1996, are exempt from federal income taxes.

NAV AND AVERAGE ANNUAL TOTAL RETURNS*
For Periods Ended May 31, 1996

AVERAGE ANNUAL TOTAL RETURNS
NET ASSET VALUE RANGE ---------------------------------------------
(6/1/95-5/31/96) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------
$11.18-$12.03 3.75% 4.49% 7.62% 7.23%

NET ASSET VALUE (NAV) RANGE indicates the Fund's share price movements over the
stated period and can be used to gauge the stability of the Fund's share price.

The Fund commenced operations on July 31, 1984.

*Yields and total returns are based on historical Fund performance and do not
guarantee future results. The Fund's share price, yields and total returns will
vary, so that shares, when redeemed, may be worth more or less than their
original cost.

LONG-TERM FUND
SEC PERFORMANCE COMPARISON

[mountain graph]
Comparative Performance of $10,000 Invested on 5/31/86 in the Fund and
in the Lehman Brothers, Inc. Long-Term Municipal Bond Index

[graph data]
Index Fund
5/31/86 $10,000 $10,000
6/30/86 10,086 10,067
7/31/86 10,166 10,157
8/31/86 10,698 10,609
9/30/86 10,673 10,606
10/31/86 10,856 10,822
11/30/86 11,116 11,070
12/31/86 11,102 11,010
1/31/87 11,475 11,330
2/28/87 11,507 11,406
3/31/87 11,337 11,298
4/30/87 10,701 10,369
5/31/87 10,583 10,239
6/30/87 10,246 10,422
7/31/87 10,341 10,515
8/31/87 10,387 10,513
9/30/87 9,963 9,970
10/31/87 9,962 9,871
11/30/87 10,281 10,105
12/31/87 10,414 10,267
1/31/88 10,830 10,723
2/29/88 10,958 10,838
3/31/88 10,801 10,615
4/30/88 10,886 10,695
5/31/88 10,897 10,681
6/30/88 11,110 10,854
7/31/88 11,184 10,927
8/31/88 11,228 10,958
9/30/88 11,483 11,135
10/31/88 11,744 11,359
11/30/88 11,618 11,248
12/31/88 11,820 11,420
1/31/89 12,098 11,619
2/28/89 11,929 11,490
3/31/89 11,939 11,486
4/30/89 12,289 11,753
5/31/89 12,573 12,023
6/30/89 12,765 12,176
7/31/89 12,934 12,354
8/31/89 12,737 12,160
9/30/89 12,698 12,023
10/31/89 12,866 12,180
11/30/89 13,139 12,436
12/31/89 13,236 12,520
1/31/90 13,103 12,366
2/28/90 13,250 12,519
3/31/90 13,264 12,506
4/30/90 13,102 12,266
5/31/90 13,472 12,721
6/30/90 13,604 12,823
7/31/90 13,844 13,107
8/31/90 13,515 12,685
9/30/90 13,494 12,656
10/31/90 13,780 12,972
11/30/90 14,129 13,272
12/31/90 14,191 13,354
1/31/91 14,382 13,551
2/28/91 14,482 13,568
3/31/91 14,517 13,586
4/30/91 14,742 13,789
5/31/91 14,916 13,926
6/30/91 14,887 13,842
7/31/91 15,118 14,034
8/31/91 15,335 14,220
9/30/91 15,557 14,463
10/31/91 15,720 14,627
11/30/91 15,739 14,618
12/31/91 16,114 15,079
1/31/92 16,104 15,007
2/29/92 16,130 15,035
3/31/92 16,170 14,978
4/30/92 16,324 15,118
5/31/92 16,563 15,377
6/30/92 16,884 15,713
7/31/92 17,503 16,389
8/31/92 17,268 16,065
9/30/92 17,345 16,095
10/31/92 17,055 15,754
11/30/92 17,535 16,217
12/31/92 17,763 16,468
1/31/93 17,930 16,670
2/28/93 18,764 17,550
3/31/93 18,538 17,211
4/30/93 18,792 17,523
5/31/93 18,947 17,623
6/30/93 19,303 17,945
7/31/93 19,322 17,874
8/31/93 19,817 18,403
9/30/93 20,075 18,675
10/31/93 20,113 18,659
11/30/93 19,869 18,426
12/31/93 20,382 18,816
1/31/94 20,623 19,035
2/28/94 19,940 18,452
3/31/94 18,750 17,671
4/29/94 18,894 17,685
5/31/94 19,115 17,895
6/30/94 18,886 17,783
7/29/94 19,371 18,166
8/31/94 19,412 18,156
9/30/94 18,961 17,881
10/31/94 18,379 17,529
11/30/94 17,894 17,256
12/30/94 18,529 17,659
1/31/95 19,345 18,146
2/28/95 20,132 18,640
3/31/95 20,373 18,797
4/28/95 20,363 18,779
5/31/95 21,231 19,379
6/30/95 20,840 19,143
7/31/95 20,946 19,284
8/31/95 21,242 19,475
9/30/95 21,407 19,627
10/31/95 21,925 20,010
11/30/95 22,491 20,476
12/31/95 22,842 20,784
1/31/96 22,940 20,828
2/29/96 22,660 20,631
3/31/96 22,246 20,206
4/30/96 22,157 20,086
5/31/96 22,168 20,106

Past performance does not guarantee future results.

This graph compares the Fund's performance with a broad-based market index, the
Lehman Brothers, Inc. Long-Term Municipal Bond Index, over the past 10 years.
Although the investment characteristics of the Index are similar to those of the
Fund, the securities owned by the Fund and those composing the Index are likely
to be different, and securities that the Fund and the Index have in common are
likely to have different weightings in the respective portfolios. Investors
cannot invest directly in the Index.

LIPPER PERFORMANCE COMPARISON

1 YEAR 3 YEARS 5 YEARS 10 YEARS

The Fund: 3.75% 4.49% 7.62% 7.23%
Category Average: 3.49% 4.43% 7.07% 7.62%
The Fund`s Ranking: 93 out of 227 62 out of 139 17 out of 100 41 out of 58

Total returns are based on historical performance and do not guarantee future
results.

ONE-YEAR TOTAL RETURN BREAKDOWN
For the Period Ended May 31, 1996

% From % From Asset One-Year
Income + Depreciation = Total Return

5.39% + (1.64%) = 3.75%

LONG-TERM FUND

KEY PORTFOLIO STATISTICS

5/31/96 11/30/95

Market Value: $49,493,391 $53,046,914
Number of Issues: 36 38
Average Coupon: 6.15% 6.14%
Average Maturity: 17.28 years 18.70 years
Average Duration: 8.04 years 8.86 years

For definitions of these terms, see page 18.

PORTFOLIO COMPOSITION BY CREDIT RATING
[pie charts]

5/31/96 11/30/95
A: 8.6% A: 10.4%
AA: 33.9% AA: 36.9%
AAA: 57.5% AAA: 52.7%

Credit ratings reflect the financial strength of the debt issuer and the
likelihood of repayment. For more information about credit quality and credit
ratings, see page 20.

PORTFOLIO COMPOSITION BY MARKET SECTOR
[pie charts]

5/31/96 11/30/95
Electric: 19.7% Electric: 18.2%
Water/Sewer: 17.2% Water/Sewer: 13.9%
Hospital: 15.7% Hospital: 11.9%
Prerefunded: 11.2% Housing: 10.5%
Housing: 10.8% Prerefunded: 9.5%
Other: 25.4% Other: 36.0%

For definitions of these security types, see page 18.

PORTFOLIO COMPOSITION BY MATURITY DATE
[pie charts]

5/31/96 11/30/95
less than 1 Year: 3% less than 1 Year: 0%
1-5 Years: 6% 1-5 Years: 4%
5-10 Years: 2% 5-10 Years: 5%
10-20 Years: 57% 10-20 Years: 50%
20-30 Years: 32% 20-30 Years: 41%

The Fund invests primarily in long-term municipal obligations. The Fund's
weighted average portfolio maturity is typically ten or more years.

The composition of the Fund's portfolio may change over time.

LONG-TERM FUND

MANAGEMENT DISCUSSION
with Dave MacEwen, Vice President & Senior Municipal Portfolio Manager

NOTE: TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE INVESTMENT
FUNDAMENTALS SECTION BEGINNING ON PAGE 18.

Q: How did the Fund perform?

A: The Fund weathered the recent rising interest rate environment and
continued to outperform its peer group average. For the fiscal year
ended May 31, 1996, the Fund's total return was 3.75%--26 basis points*
higher than the 3.49% average return for the 227 funds in Lipper's
"General Municipal Debt Funds" category over the same period (see the
Lipper Performance Comparison on page 14).

Q: Why did the Fund outperform its category average?

A: A significant portion of the Fund's gains were garnered during 1995's
bull market, when it was more aggressively positioned in terms of
duration* and average maturity* than many of its peers.

Q: What changes did you make in the Fund's structure over the fiscal year?

A: In the middle of 1995, we significantly increased the Fund's holdings
of noncallable bonds, which perform better than callable bonds in a
rising bond market (see Callability on page 20). These securities
performed even better than we anticipated, and we sold many of them
near the end of the year at a substantial profit.

In February and April, we shortened the Fund's duration, bringing it
closer to that of its benchmark. By May, the duration was slightly
short of the benchmark because we sold some long-duration bonds in
order to remove some of the barbell structure* that had performed so
well as (continued on next page)

TOP BOND HOLDINGS BY STATE

AS OF 5/31/96 AS OF 11/30/95

Illinois 18.73% Illinois 16.10%
Washington 14.22% Florida 13.88%
Texas 8.08% Washington 12.90%
Massachusetts 7.66% California 10.21%
South Carolina 7.48% Texas 8.56%
Florida 6.22% Massachusetts 7.38%

For a complete breakdown of the Fund's holdings by state, see the Schedule of
Investments beginning on page 46.

LONG TERM FUND

MANAGEMENT DISCUSSION
(Continued from the previous page)

the muni yield curve flattened. We also bought some premium
bonds with very attractive yields before their prices were driven up by
increased demand.

Q: You significantly decreased holdings in California and Florida munis
(see the table on page 16). Why?

A: We purchased the California and Florida securities in late 1995 at very
attractive prices, and they happened to be some of our longest duration
bonds. They performed well, and when we wanted to shorten our duration,
we sold them at a profit.

Q: What is the outlook for munis for the rest of 1996?

Q: With the current uncertainty about the economic outlook, what are your
plans for the Fund going forward?

A: In the near term, we plan to maintain our current positioning, standing
ready to either lengthen or shorten our duration and average maturity
if we see more definitive signs of either economic weakness or
strength. We will probably maintain our current bullet structure*
because it should perform well if the muni yield curve steepens. We
will look to add value to the Fund by adding quality lower-rated bonds,
which offer better yields. We may also look to buy more noncallable
bonds, whose prices have declined significantly since the beginning of
the year.
17

INVESTMENT FUNDAMENTALS
DEFINITIONS

COMMON MUNICIPAL SECURITIES (MUNIS)

AMT Paper--instruments with income subject to the federal alternative minimum
tax.

Certificates of Participation (COPs)--securities issued to finance public
property improvements (such as city halls and police stations).

General Obligation (GO) bonds--securities backed by the taxing power of the
issuer.

Municipal Commercial Paper (CP)--high-grade short-term securities backed by a
line of credit from a bank.

Municipal Notes--securities with maturities of two years or less.

Revenue Bonds--securities backed by revenues from sales taxes or from a specific
project, system or facility (such as a hospital, electric utility or water
system).

Variable-Rate Demand Notes (VRDNs)--securities that track market interest rates
and stabilize their market values using periodic (daily or weekly) interest
rate adjustments.

PORTFOLIO STATISTICS

Market Value--the market value of a fund's investments on a given date.

Number of Issues--the number of different securities issuances held by a fund on
a given date.

Average Coupon--a weighted average of all coupons held in a fund's portfolio
(see also below).

Average Maturity--a weighted average of all bond maturities in a fund's
portfolio (see also page 21).

Average Duration--a weighted average of all bond durations in a fund's portfolio
(see also page 21).

INVESTMENT TERMS

Coupon--the stated interest rate on a bond.

Discount Bonds--bonds with interest coupons that are lower than prevailing
interest rates (see also page 22).

Par Bonds--bonds that trade or are priced at their face value.

Premium Bonds--bonds with interest coupons that are higher than prevailing
interest rates (see also page 22).

INVESTMENT FUNDAMENTALS
THE YIELD CURVE

Yield curves can have several different shapes, depending on interest rate
levels and the economic environment:

INVESTMENT FUNDAMENTALS
MUNI RISK FACTORS

CREDIT QUALITY AND CREDIT RATINGS

CALLABILITY

DURATION EXTENSION

INVESTMENT FUNDAMENTALS
PORTFOLIO SENSITIVITY MEASUREMENTS

DURATION

Duration measures the price sensitivity of a bond or bond fund to changes in
interest rates. Specifically, duration represents the approximate percentage
change in the price of a bond or bond fund if interest rates move up or down by
100 basis points (a basis point equals 0.01%). For example, as of May 31, 1996,
the Intermediate-Term Fund's duration was approximately 5.5 years. If interest
rates were to rise by 100 basis points, the Fund's share price would be expected
to decline by 5.5%. Conversely, if interest rates were to fall by 100 basis
points, the Fund's share price would be expected to increase by 5.5%.

The longer the duration, the more bond or bond fund prices will move in response
to interest rate changes. Therefore, portfolio managers generally want durations
to be as long as possible when interest rates fall (to maximize bond price
increases) and as short as possible when interest rates rise (to minimize bond
price declines), taking into account the objectives of the portfolio.

AVERAGE MATURITY

INVESTMENT FUNDAMENTALS
BOND PRICING

PREMIUM AND DISCOUNT BONDS

TAX TREATMENT OF DISCOUNT BONDS

INVESTMENT FUNDAMENTALS
PORTFOLIO STRUCTURES & TAXABLE DISTRIBUTIONS

BOND PORTFOLIO STRUCTURES

Barbell Structure--a structure that overweights a portfolio in short- and
long-term securities and underweights intermediate-term securities. This
structure tends to outperform a bullet structure when the yield curve is moving
from steep to flat (short-term rates are rising faster than long-term rates, or
long-term rates are falling faster than short-term rates). In a rising interest
rate environment, the short-term securities capture the higher yields with
little price depreciation. In a declining interest rate environment, the
short-term securities provide a relatively steady yield, while the long bonds
produce more price appreciation than intermediate-term securities.

TAXABLE DISTRIBUTIONS

Although we manage our tax-free and municipal funds to earn tax-exempt income,
they may realize taxable capital gains as we pursue higher total returns. By
law, the funds must distribute these capital gains to shareholders each year.
Under current tax law, each fund must distribute net short-term capital gains
realized by the fund as taxable ordinary income. Each fund distributes net
long-term capital gains to shareholders as a taxable capital gains distribution.

[THIS PAGE INTENTIONALLY LEFT BLANK]

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Trustees
Benham Municipal Trust:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investment securities, of Benham National Tax-Free Money Market
Fund, Benham National Tax-Free Intermediate-Term Fund and Benham National
Tax-Free Long-Term Fund (three of the series comprising Benham Municipal Trust)
(the Funds) as of May 31, 1996 and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years then ended, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Funds' 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 the 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 May
31, 1996, 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 the financial highlights referred
to above present fairly, in all material respects, the financial position of
Benham National Tax-Free Money Market Fund, Benham National Tax-Free
Intermediate-Term Fund and Benham National Tax-Free Long-Term Fund as of May 31,
1996, the results of their operations, the changes in their net assets and the
financial highlights for the periods indicated above, in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP
Kansas City, Missouri
July 8, 1996

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended May 31

- ------------------------------------------------------------------------------------------------------------------------------------
Benham National Tax-Free Money Market Fund
- ------------------------------------------------------------------------------------------------------------------------------------

1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- ------- ------- -----
PER-SHARE DATA
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING
OF YEAR....................... $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Income From Investment Operations
Net Investment Income......... .0319 .0295 .0191 .0210 .0340 .0499 .0556 .0568 .0484 .0431
Net Realized and Unrealized
Losses on Investments....... 0 0 0 0 0 0 0 0 (.0074) 0
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Income From
Investment Operations..... .0319 .0295 .0191 .0210 .0340 .0499 .0556 .0568 .0410 .0431
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends from Net
Investment Income........... (.0319) (.0295) (.0191) (.0210) (.0340) (.0499) (.0556) (.0568) (.0410) (.0431)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE AT END
OF YEAR .................... $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
===== ==== ==== ==== ==== ==== ==== ==== ==== ====
TOTAL RETURN*................... 3.19% 2.95% 1.92% 2.12% 3.48% 5.13% 5.68% 5.80% 4.19% 4.37%
- ------------
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Year
(in thousands of dollars)....$ 91,118 92,034 109,818 109,875 111,112 111,224 92,975 93,897 70,976 80,081
Ratio of Expenses to
Average Daily Net Assets+..... .65% .66% .67% .68% .57% .50% .50% .50% .31% .25%
Ratio of Net Investment Income
to Average Daily Net Assets+.. 3.12% 2.88% 1.89% 2.10% 3.40% 4.99% 5.56% 5.68% 4.10% 4.31%

- -------------------

* Total return figures assume reinvestment of dividends.

+ The ratios for the year ended May 31, 1996, include expenses paid through expense offset arrangements.
</TABLE>

See the accompanying notes to financial statements.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended May 31
- ------------------------------------------------------------------------------------------------------------------------------------
Benham National Tax-Free Intermediate-Term Fund
- ------------------------------------------------------------------------------------------------------------------------------------

1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- ------- ------- -----
PER-SHARE DATA
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING
OF YEAR....................... $10.71 10.60 10.90 10.48 10.33 10.03 9.97 9.98 9.87 9.91
Income from Investment Operations
Net Investment Income......... .5151 .5039 .5106 .5189 .5639 .6062 .6132 .6312 .6331 .6412
Net Realized and Unrealized Gains
(Losses) on Investments..... (.0500) .1467 (.1856) .5278 .2721 .3103 .0600 (.0100) .1100 (.0400)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Income From
Investment Operations..... .4651 .6506 .3250 1.0467 .8360 .9165 .6732 .6212 .7431 .6012
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends from Net
Investment Income........... (.5151) (.5039) (.5106) (.5189) (.5639) (.6062) (.6132) (.6312) (.6331) (.6412)
Distributions from Net Realized
Capital Gains............... 0 (.0367) (.1144) (.1078) (.1221) (.0103) 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions......... (.5151) (.5406) (.6250) (.6267) (.6860) (.6165) (.6132) (.6312) (.6331) (.6412)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE AT END
OF YEAR.....................$ 10.66 10.71 10.60 10.90 10.48 10.33 10.03 9.97 9.98 9.87
======= ===== ===== ===== ===== ===== ===== ==== ==== ====
TOTAL RETURN*................... 4.38% 6.40% 2.93% 10.26% 8.28% 9.43% 6.95% 6.44% 7.75% 6.03%
- ------------
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Year
(in thousands of dollars)...$ 62,900 64,904 70,925 67,550 44,315 34,196 24,628 21,337 20,121 19,548
Ratio of Expenses to
Average Daily Net Assets+..... .70% .66% .67% .72% .65% .50% .50% .50% .50% .50%
Ratio of Net Investment Income
to Average Daily Net Assets+.. 4.73% 4.82% 4.61% 4.81% 5.38% 5.97% 6.12% 6.36% 6.34% 6.27%
Portfolio Turnover Rate......... 45.98% 47.48% 46.11% 36.31% 84.96% 54.98% 142.06% 49.07% 54.31% 26.31%

- -------------------

* Total return figures assume reinvestment of dividends and capital gain distributions.

+ The ratios for the year ended May 31, 1996, include expenses paid through expense offset arrangements.
</TABLE>

See the accompanying notes to financial statements.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended May 31
- ------------------------------------------------------------------------------------------------------------------------------------
Benham National Tax-Free Long-Term Fund
- ------------------------------------------------------------------------------------------------------------------------------------

1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- ------- ------- -----
PER-SHARE DATA
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING
OF YEAR.......................$ 11.47 11.26 11.92 11.26 11.05 10.87 11.02 10.51 10.79 11.37
Income From Investment Operations
Net Investment Income......... .6083 .6213 .6221 .6280 .6685 .7166 .7187 .7655 .7731 .8389
Net Realized and Unrealized Gains
(Losses) on Investments..... (.1800) .2651 (.4154) .9243 .4333 .2610 (.1000) .5100 (.2800) (.5800)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Income From
Investment Operations..... .4283 .8864 .2067 1.5523 1.1018 .9776 .6187 1.2755 .4931 .2589
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends from Net
Investment Income........... (.6083) (.6213) (.6221) (.6280) (.6685) (.7166) (.7187) (.7655) (.7731) (.8389)
Distributions from Net Realized
Capital Gains............... 0 (.0551) (.2446) (.2643) (.2233) (.0810) (.0500) 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions......... (.6083) (.6764) (.8667) (.8923) (.8918) (.7976) (.7687) (.7655) (.7731) (.8389)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE AT END
OF YEAR.....................$ 11.29 11.47 11.26 11.92 11.26 11.05 10.87 11.02 10.51 10.79
====== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN*................... 3.75% 8.29% 1.54% 14.61% 10.42% 9.48% 5.80% 12.56% 4.32% 2.39%
- ------------
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Year
(in thousands of dollars)...$ 51,382 47,314 57,330 54,241 42,146 35,137 43,682 33,406 25,217 23,982
Ratio of Expenses to
Average Daily Net Assets+..... .70% .66% .67% .72% .65% .50% .50% .50% .50% .50%
Ratio of Net Investment Income
to Average Daily Net Assets+.. 5.22% 5.59% 5.16% 5.40% 6.00% 6.57% 6.58% 7.14% 7.27% 7.11%
Portfolio Turnover Rate......... 49.17% 34.09% 39.37% 105.14% 148.26% 150.07% 214.76% 69.49% 76.11% 102.45%

- -------------------

* Total return figures assume reinvestment of dividends and capital gain distributions.

+ The ratios for the year ended May 31, 1996, include expenses paid through expense offset arrangements.
</TABLE>

See the accompanying notes to financial statements.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
STATEMENTS OF ASSETS AND LIABILITIES
May 31, 1996

BENHAM NATIONAL BENHAM NATIONAL BENHAM NATIONAL
TAX-FREE TAX-FREE TAX-FREE
MONEY MARKET INTERMEDIATE-TERM LONG-TERM
FUND FUND FUND
--------------- ----------------- ---------------
ASSETS
<S> <C> <C> <C>
Investment securities at value (cost of $90,155,958,................... $90,155,958 61,449,665 49,493,391
$59,729,612, and $47,780,947, respectively)
Cash................................................................... 511,194 0 70,146
Interest receivable.................................................... 702,181 1,137,292 938,811
Receivable for fund shares sold........................................ 455,680 46,825 33,657
Prepaid expenses and other assets...................................... 1,838 725 647
Receivable for securities sold......................................... 0 892,134 945,576
----------- ----------- ----------
Total assets......................................................... 91,826,851 63,526,641 51,482,228
----------- ----------- ----------
LIABILITIES
Payable for securities purchased....................................... 635,148 451,944 0
Payable for fund shares redeemed....................................... 15,580 3,333 13,355
Dividends payable...................................................... 10,555 60,683 55,043
Fees payable to affiliates (Note 2).................................... 47,125 36,199 29,934
Accrued expenses and other liabilities................................. 811 74,383 2,153
----------- ----------- ----------
Total liabilities.................................................... 709,219 626,542 100,485
----------- ----------- ----------
NET ASSETS................................................................ $91,117,632 62,900,099 51,381,743
----------- ----------- ----------
Net assets consist of:
Capital paid in........................................................ 91,117,632 61,617,703 50,097,219
Accumulated net realized loss on investments........................... 0 (437,657) (427,920)
Net unrealized appreciation on investments (Note 4).................... 0 1,720,053 1,712,444
----------- ----------- ----------
Net assets................................................................ $91,117,632 62,900,099 51,381,743
=========== =========== ==========
Shares of beneficial interest outstanding (unlimited number
of shares authorized).................................................. 91,117,632 5,901,282 4,549,849
=========== =========== ==========
Net asset value, offering price and redemption price per share............ $1.00 10.66 11.29
===== ===== =====
</TABLE>

See the accompanying notes to financial statements.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
STATEMENTS OF OPERATIONS
For the Year Ended May 31, 1996

BENHAM NATIONAL BENHAM NATIONAL BENHAM NATIONAL
TAX-FREE TAX-FREE TAX-FREE
MONEY MARKET INTERMEDIATE-TERM LONG-TERM
FUND FUND FUND
--------------- ----------------- ---------------
INVESTMENT INCOME
<S> <C> <C> <C>
Interest income........................................................ $3,466,489 3,491,064 3,058,675
---------- ---------- ---------
EXPENSES (NOTE 2)
Investment advisory fees............................................... 408,080 285,247 228,945
Administrative fees.................................................... 88,675 61,997 49,774
Transfer agency fees................................................... 66,117 45,624 41,782
Printing and postage................................................... 27,845 18,456 15,328
Custodian fees......................................................... 19,261 10,938 10,114
Auditing and legal fees................................................ 23,394 16,920 13,686
Registration and filing fees........................................... 22,284 18,135 21,277
Directors' fees and expenses........................................... 3,351 2,900 2,702
Other operating expenses............................................... 16,718 10,661 7,811
---------- ---------- ---------
Total expenses....................................................... 675,725 470,878 391,419
---------- ---------- ---------
Amount waived (Note 2).................................................... (76,481) (23,199) (31,698)
Custodian earnings credits (Note 5)....................................... (10,934) (4,059) (3,025)
---------- ---------- ---------
Net expenses........................................................... 588,310 443,620 356,696
---------- ---------- ---------
Net investment income............................................... 2,878,179 3,047,444 2,701,979
---------- ---------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 4)
Net realized gain on investments.......................................... 0 346,493 735,144
Change in net unrealized depreciation on investments...................... 0 (671,581) (1,549,360)
---------- ---------- ---------
Net realized and unrealized loss on investments........................... 0 (325,088) (814,216)
---------- ---------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................... $2,878,179 2,722,356 1,887,763
========== ========== =========
- -------------------
</TABLE>

See the accompanying notes to financial statements.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended May 31, 1996 and 1995

Benham Benham Benham
National Tax-Free National Tax-Free National Tax-Free
Money Market Fund Intermediate-Term Fund Long-Term Fund
------------------ ---------------------- -----------------
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- -------
FROM INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net investment income........................... $2,878,179 2,867,825 3,047,444 3,200,704 2,701,979 2,803,820
Net realized gain (loss) on investments......... 0 0 346,493 (784,150) 735,144 (1,163,064)
Net change in unrealized appreciation
(depreciation) of investments................. 0 0 (671,581) 1,520,540 (1,549,360) 2,008,820
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets derived
from investment activities.................. 2,878,179 2,867,825 2,722,356 3,937,094 1,887,763 3,649,576
----------- ----------- ----------- ----------- ----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income........................... (2,878,179) (2,867,825) (3,047,444) (3,200,704) (2,701,979) (2,803,820)
Net realized gain on investments................ 0 0 0 (227,528) 0 (244,076)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions to shareholders........... (2,878,179) (2,867,825) (3,047,444) (3,428,232) (2,701,979) (3,047,896)
----------- ----------- ----------- ----------- ----------- -----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from sales of shares................... 93,328,673 85,655,933 12,956,225 16,491,110 64,939,756 46,320,152
Net asset value of dividends reinvested......... 2,751,052 2,711,200 2,324,043 2,600,390 2,023,443 2,233,888
Cost of shares redeemed......................... (96,996,191) (106,151,286) (16,958,622) (25,621,380) (62,081,385) (59,171,786)
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets derived from
capital share transactions.................. (916,466) (17,784,153) (1,678,354) (6,529,880) 4,881,814 (10,617,746)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets......... (916,466) (17,784,153) (2,003,442) (6,021,018) 4,067,598 (10,016,066)
NET ASSETS:
Beginning of year............................... 92,034,098 109,818,251 64,903,541 70,924,559 47,314,145 57,330,211
----------- ----------- ----------- ----------- ----------- -----------
End of year..................................... $91,117,632 92,034,098 62,900,099 64,903,541 51,381,743 47,314,145
=========== =========== =========== =========== =========== ===========
- -------------------
</TABLE>

See the accompanying notes to financial statements.

BENHAM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996

(1) SIGNIFICANT ACCOUNTING POLICIES

Benham Municipal Trust (the Trust), is registered under the Investment Company
Act of 1940 as an open-end management investment company. Benham National
Tax-Free Money Market Fund, Benham National Tax-Free Intermediate-Term Fund, and
Benham National Tax-Free Lkng-Term Fund (the Funds) are three of the eight funds
composing the Trust. The Funds are diversified under the 1940 Act and seek as
high a level of current income exempt from federal income taxes as is consistent
with prudent investment management and conservation of shareholders' capital.
The Funds may concentrate their investments in certain states and therefore may
have more exposure to credit risk related to those states than funds that have
broader geographical diversification. Significant accounting policies followed
by the Funds are summarized below.

VALUATION OF INVESTMENT SECURITIES--Pursuant to SEC Rule 2a-7 under the 1940
Act, securities held by the Money Market Fund are valued at amortized cost,
which approximates current market value. Securities held by the
Intermediate-Term and Long-Term Funds (collectively the "Variable-Price Funds")
are valued at current market value as determined by an independent pricing
service. Securities for which market quotations are not readily available are
stated at fair value as determined in good faith by the Board of Trustees.
Securities transactions are recorded on the date the order to buy or sell is
executed. Realized gains and losses on securities transactions are determined on
the basis of identified cost.

INCOME TAXES--Each Fund of the Trust intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. By doing so,
each Fund will not be subject to federal or state income or franchise taxes to
the extent that it distributes its net investment income and net realized
capital gains to shareholders. Accordingly, no provision for income taxes has
been made for federal or state taxes. As of May 31, 1996, the Intermediate-Term
Fund and Long-Term Fund had capital loss carryovers of $420,126 and $427,920,
respectively. No future capital gain distributions will be made by either Fund
until the loss carryover has been offset or has expired. For the
Intermediate-Term Fund, the capital loss carryovers of $382,614 and $37,512
expire May 31, 2003 and May 31, 2004, respectively. For the Long-Term Fund, the
capital loss carryovers of $330,926 and $96,994 expire May 31, 2003 and May 31,
2004, respectively. On the Statement of Assets and Liabilities for the Money
Market Fund, as a result of permanent book-to-tax differences, undistributed net
investment

income has been decreased by $242,901 with a corresponding adjustment to
accumulated net realized loss on investments.

SHARE VALUATION--Each Fund's net asset value per share is computed each business
day by dividing the value of the Fund's total assets, less its liabilities, by
the total number of shares outstanding at the beginning of each business day. It
is the Trust's policy to maintain a constant net asset value of $1.00 per share
for the Money Market Fund, although there is no guarantee it will be able to do
so. The Variable-Price Funds' net asset values fluctuate daily in response to
changes in the market value of their investments.

INVESTMENT INCOME, PREMIUM AND DISCOUNT--Interest income and expenses are
accrued daily. Premium on securities purchased is amortized daily using the
effective interest rate method for the Variable-Price Funds. Market discount is
recognized as income upon the sale or maturity of the security for the
Variable-Price Funds. Original issue discount for municipal securities is
accrued daily using the effective interest rate method for the Variable-Price
Funds. Premium and discount are accrued daily on a straight-line basis through
maturity or call date for securities held by the Money Market Fund.

DIVIDENDS AND OTHER DISTRIBUTIONS--With respect to the Money Market Fund,
dividends are declared and credited daily and distributed on the last business
day of the month. The Variable-Price Funds' dividends are declared daily,
accrued throughout the month, and distributed on the last business day of the
month. Net realized long-term capital gains, if any, are distributed annually.
Distributions are paid in cash or reinvested as additional shares.

(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Benham Management Corporation (BMC) is a wholly owned subsidiary of Twentieth
Century Companies, Inc. (TCC). BMC's former parent company, Benham Management
International, Inc., merged into TCC on June 1, 1995. Each Fund pays BMC a
monthly investment advisory fee based on its pro rata share of the dollar amount
derived from applying the Trust's average daily net assets to the following
annualized investment advisory fee schedule.

The Trust has an Administrative Services and Transfer Agency Agreement with
Benham Financial Services, Inc. (BFS), a wholly owned subsidiary of TCC. Under
the agreement, BFS provides substantially all administrative service and
transfer agency services necessary to operate each of the Funds. Fees for these
services are based on transaction volume, number of accounts and the average net
assets of all funds in The Benham Group.

guarantee rate is renegotiated annually in June. Effective June 1, 1996, the
expense guarantees were changed to .67% for the Funds.

As of May 31, 1996, the Long-Term Fund had invested $400,000 in shares of the
Money Market Fund. The terms of the transaction were identical to those with
nonrelated entities except that, to avoid duplicative investment advisory fees
and administrative fees, the Long-Term Fund did not pay BMC investment advisory
fees or BFS administrative fees with respect to assets invested in shares of the
Money Market Fund.

The payables to affiliates as of May 31, 1996, based on the above agreements,
were as follows:

National Tax-Free National Tax-Free National Tax-Free
Money Market Intermediate-Term Long-Term
Fund Fund Fund
-------------- ------------ ------------
Investment Advisor $ 22,672 19,451 15,472
Administrative Services 7,310 5,141 4,256
Transfer Agent 17,143 11,607 10,206
-------- -------- --------
$ 47,125 36,199 29,934
======== ======== ========

The Trust has a distribution agreement with Benham Distributors, Inc. (BDI),
which is responsible for promoting sales of and distributing the Trust's shares.
BDI is a wholly owned subsidiary of TCC.

(3) SHARE TRANSACTIONS

Share transactions for each of the Funds for the years ended May 31, 1996 and
1995, were as follows:

<TABLE>
<CAPTION>
National Tax-Free National Tax-Free National Tax-Free
Money Market Intermediate-Term Long-Term
Fund Fund Fund
------------------ ----------------- -----------------
1996 1995 1996 1995 1996 1995
-------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares sold....93,328,673 85,655,933 1,196,927 1,583,041 5,611,693 4,226,181
Reinvestment
of dividends 2,751,052 2,711,200 214,867 249,260 175,401 202,482
---------- ---------- -------- -------- -------- --------
96,079,725 88,367,133 1,411,794 1,832,301 5,787,094 4,428,663
Less shares
redeemed......(96,996,191) (106,151,286) (1,570,164) (2,465,987) (5,361,215)(5,395,725)
---------- ---------- --------- --------- --------- ---------
Net increase
(decrease) in
shares........ (916,466) (17,784,153) (158,370) (633,686) 425,879 (967,062)
========== ========== ========= ========= ========= ========
</TABLE>

(4) INVESTMENT SECURITIES--PURCHASES, SALES AND
MATURITIES

Portfolio activity, excluding short-term securities, for the year ended May 31,
1996, was as follows:

National Tax-Free National Tax-Free
Intermediate-Term Long-Term
Fund Fund
----------------- -----------------
Purchases........................... $29,355,236 30,625,706
=========== ==========
Sales proceeds...................... $31,036,227 24,607,175
=========== ==========

As of May 31, 1996, unrealized appreciation (depreciation) was as follows:

National Tax-Free National Tax-Free
Intermediate-Term Long-Term
Fund Fund
---------------- ----------------
Appreciated securities.............. $ 1,884,028 2,543,119
Depreciated securities.............. (163,975) (830,675)
----------- ----------
Net unrealized appreciation......... $ 1,720,053 1,712,444
=========== ==========

The cost of securities for financial reporting and federal income tax purposes
is the same.

(5) EXPENSE OFFSET ARRANGEMENTS

Each Fund's Statement of Operations reflects custodian earnings credits. These
amounts are used to offset the custody fees payable by the Funds to the
custodian bank. The credits are earned when the Fund maintains a balance of
uninvested cash at the custodian bank. Beginning with the year ended May 31,
1996, the ratios of expenses to average daily net assets shown in the Financial
Highlights are calculated as if these credits had not been earned.

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
Benham National Tax-Free Money Market Fund
Schedule of Investment Securities
May 31, 1996

VALUE RATING
STATE FACE VALUE ISSUE COUPON MATURITY (NOTE 1) MOODY'S/S&P
- ------------ ---------- -------------------------------------------------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alaska-1.91% $ 1,740,000 Alaska Industrial Development and Export Auth.
Rev., VRDN, (Anchorage Fueling Project),
(LOC: Industrial Bank of Japan)................ 4.350% 06/05/96* $1,740,000 VMIG1/NR
Arizona-0.56% 500,000 Arizona State University Rev., Prerefunded at 102%
of par........................................ 7.000 07/01/96 511,196 Aaa/AA
California-4.40% 1,000,000 California Student Loan Program Rev., Series A,
VRDN, (LOC: Dresdner Bank, AG)................. 3.550 06/06/96* 1,000,000 VMIG1/NR
1,000,000 Costa Mesa Certificates of Participation, VRDN,
(LOC: Chemical Bank)........................... 3.850 06/05/96* 1,000,000 Aa3/A1
1,000,000 Los Angeles County Tax and Rev. Anticipation
Notes (LOC: Credit Suisse, Morgan Guaranty
Trust, Swiss Bank, Union Bank of Switzerland,
West Deutsche Landesbank, Bank of America...... 4.500 07/01/96 1,000,554 MIG1/A1
1,000,000 Modesto High School District GO, Escrowed to
Maturity, (MBIA)............................... 7.000 08/01/96 1,005,297 Aaa/AAA
Colorado-3.84% 3,500,000 Denver Multi-Family Housing Rev.,
Series A, (Cottonwood Creek Project), VRDN,
(LOC: GE Capital Corp.)........................ 4.100 06/04/96* 3,500,000 NR/A1+
District of
Columbia-6.58% 1,000,000 District of Columbia Rev., (American University),
VRDN, (LOC: National Westminster Bank)........ 3.550 06/05/96* 1,000,000 VMIG1/NR
2,000,000 District of Columbia Rev., (Abraham and Laura Lisner
Project), VRDN, (LOC: Nationsbank of Georgia).. 3.700 06/05/96* 2,000,000 VMIG1/NR
3,000,000 District of Columbia Rev., Series A, (Columbia Women's
Hospital Project), VRDN, (LOC: Bank of Tokyo).. 3.850 06/05/96* 3,000,000 VMIG1/NR
</TABLE>

SCHEDULE OF INVESTMENT SECURITIES - Benham National Tax-Free Money Market Fund (Continued)
====================================================================================================================================
VALUE RATING
STATE FACE VALUE ISSUE COUPON MATURITY (NOTE 1) MOODY'S/S&P
- ------------ ---------- -------------------------------------------------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Florida-19.79% $ 2,250,000 Broward County Housing Finance Auth. Multi-Family
Housing Rev., Series A, (Palmaire-Oxford),
VRDN, (SB: Contintental Casualty Co.).......... 3.800% 06/05/96* $2,250,000 NR/A1
1,000,000 Dade County Special Obligation, (Capital Asset
Aquisition), VRDN, (LOC: Sanwa Bank Ltd.)...... 4.000 06/05/96* 1,000,000 VMIG1/A1
750,000 Dade County Water and Sewer System Rev., (FGIC).. 4.500 10/01/96 752,081 Aaa/AAA
1,000,000 Florida Housing Finance Agency., (Village Place
Project), VRDN, (LOC: Chemical Bank)........... 3.700 06/05/96* 1,000,000 NR/A1
1,000,000 Florida Housing Finance Agency Rev., (Oaks at
Mill Creek), VRDN, (LOC: Chemical Bank)........ 3.600 06/05/96* 1,000,000 NR/A1
2,000,000 Florida Housing Finance Agency Rev.,
(Country Club Apartments), VRDN,
(LOC: Northern Trust Corp.).................... 4.150 06/03/96* 2,000,000 VMIG1/NR
1,000,000 Florida Housing Finance Agency Rev., Series EEE,
VRDN, (LOC: Kredietbank N.V.).................. 3.550 06/05/96* 1,000,000 NR/A1+
500,000 Jacksonville Electricity Auth. Rev., (
Series Two 1987A-2)............................ 6.600 10/01/96 504,962 Aa1/AA
2,000,000 Jacksonville Electric Rev. Commercial Paper,
(Standby Morgan Guaranty Trust)................ 3.600 08/23/96 2,000,000 P1/A1+
1,000,000 Orange County Health Facility Auth. Rev.,
(Adventist Health System/Sunbelt), VRDN,
(LOC: Rabobank Nederland)...................... 3.550 06/06/96* 1,000,000 NR/A1+
1,525,000 Putnam County Development Auth. Pollution
Control Rev., (Seminole Electric), VRDN,
(Guaranteed: Natural Rural Utilities
Cooperative Finance Corp.)..................... 3.550 06/05/96* 1,525,000 MIGI/A1+
2,000,000 Sunshine State Florida Government Finance
Commercial Paper (LOC: Morgan Guaranty
Trust, National Westminster Bank, Union Bank
of Switzerland, ).............................. 3.650 08/23/96 2,000,000 VMIG1/NR
2,000,000 West Orange Florida Hospital Rev. Series A-2
Commercial Paper, (LOC: Rabobank Nederland).... 3.550 08/14/96 2,000,000 VMIG1/NR
</TABLE>

SCHEDULE OF INVESTMENT SECURITIES - Benham National Tax-Free Money Market Fund (Continued)
====================================================================================================================================
VALUE RATING
STATE FACE VALUE ISSUE COUPON MATURITY (NOTE 1) MOODY'S/S&P
- ------------ ---------- -------------------------------------------------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Georgia-6.15% $ 1,800,000 Cobb County Multi-Family Housing Rev., (Pittco Frey
Association), VRDN, (LOC: Societe Generale).... 3.550% 06/05/96* $1,800,000 VMIG1/NR
2,000,000 Cobb County Multi-Family Housing Rev., (Post Mill
Project), VRDN, (FNMA Collateral).............. 3.500 06/05/96* 2,000,000 NR/A1+
1,800,000 Cobb County Multi-Family Housing Rev., (Terrell Mill
Series I-144A), VRDN, (LOC: GE Capital Corp.).. 3.850 06/05/96* 1,800,000 NR/A1+
Hawaii-1.43% 1,300,000 Hawaii State Housing Finance and Development
Corporation Rev., (Affordable Rental Housing),
(LOC: Barclay's Bank).......................... 3.700 06/05/96* 1,300,000 VMIG1/NR
Illinois-1.78% 1,625,000 Bartlett Multi-Family Housing Rev. Series A,
(Barlett Square Apartment), VRDN,
(LOC: LaSalle National Bank)................... 3.650 06/06/96* 1,625,000 NR/A1+
Indiana-4.94% 1,000,000 Ball State University Rev., Series H, (Student Fees),
(FGIC)......................................... 4.700 07/01/96 1,000,635 Aaa/AAA
1,000,000 Huntington Economic Development Rev., (Allied
Signal Inc. Project), VRDN..................... 3.750 06/05/96* 1,000,000 NR/A1
1,500,000 Jasper County Pollution Control Rev., Series A,
Commercial Paper, (Northern Indiana Public
Service), (LOC: Barclay's Bank)................ 3.650 08/08/96 1,500,000 P1/A1+
1,000,000 Jasper County Pollution Control Rev., Series C,
Commercial Paper, (Northern Indiana Public
Service), (LOC: Barclay's Bank)................ 3.650 08/08/96 1,000,000 P1/A1+
Iowa-1.10% 1,000,000 Iowa School Corporation Warrant Certificates,
Series B, (FSA)................................ 4.250 01/30/97 1,005,468 MIG1/SP1+
Kansas-2.19% 2,000,000 Burlington Pollution Control Rev., Series 1985A,
Commercial Paper, (LOC: Toronto Dominion Bank). 3.650 08/16/96 2,000,000 P1/A1+
Kentucky-1.12% 1,000,000 Kentucky State Property and Buildings Rev., (Project
No. 50), Escrowed to Maturity.................. 6.200 02/01/97 1,018,452 Aaa/A+
Louisiana-0.99% 900,000 Louisiana Public Facility Auth. Rev., (Green Briar
Hospital), VRDN, (LOC: Societe Generale)...... 3.650 06/05/96* 900,000 Aa2/NR
</TABLE>

SCHEDULE OF INVESTMENT SECURITIES - Benham National Tax-Free Money Market Fund (Continued)
====================================================================================================================================
VALUE RATING
STATE FACE VALUE ISSUE COUPON MATURITY (NOTE 1) MOODY'S/S&P
- ------------ ---------- -------------------------------------------------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Maine-2.20% $ 2,000,000 State of Maine Tax Anticipation Notes GO......... 4.500% 06/28/96 $2,001,069 MIG1/SP1+
Maryland-3.62% 3,300,000 Baltimore Industrial Development Auth. Rev., (Capital
Aquisition), VRDN, (LOC: Dai-Ichi Kangyo)..... 3.850 06/05/96* 3,300,000 VMIG1/A1
Massachusetts-2.19% 2,000,000 Massachusetts Bay Transportation Auth.
Rev., (LOC: State Street Bank)................. 3.050 09/01/96 2,000,000 VMIG1/A1+
Minnesota-2.23% 2,000,000 Rosemont Independent School District GO,
Series B, (FGIC/TCRS).......................... 5.500 02/01/97 2,028,720 Aaa/AAA
Missouri-3.84% 1,500,000 Kansas City Industrial Development Auth. Multi-
Family Housing Rev., (Willow Creek IV Apartments),
VRDN, (FNMA Collateral)........................ 3.550 06/05/96* 1,500,000 NR/A1+
2,000,000 Saint Charles County Industrial Development Auth.
Rev., (Sun River Apartments Project), VRDN,
(LOC: Bank of America)......................... 3.600 06/06/96* 2,000,000 VMIG1/NR
Nevada-2.05% 1,110,000 Clark County GO, (FGIC).......................... 7.700 06/01/96 1,110,000 Aaa/AAA
750,000 Clark County Flood Control GO, (AMBAC)........... 5.400 11/01/96 754,560 Aaa/AAA
New York-2.19% 2,000,000 New York City GO, Series B, VRDN, (FGIC)......... 3.800 06/03/96 2,000,000 VMIG1/A1+
Ohio-3.29% 3,000,000 Ohio Air Quality Development Auth. Pollution
Control Rev., Series 1988B..................... 3.700 07/23/96 3,000,000 VMIG1/A1+
Oregon-1.29% 1,175,000 Marion County Solid Waste and Electricity Rev.,
(Ogden Martin System Inc. Project), (AMBAC)... 4.250 10/01/96 1,176,324 Aaa/AAA
Pennsylvania-4.43% 2,400,000 Delaware County Pollution Control Rev.,
Series A, (Philadelphia Electric Project),
Commercial Paper, (FGIC)....................... 3.650 08/20/96 2,400,000 P1/A1+
1,000,000 Delaware County Pollution Control Rev.
Series A (Philadelphia Electric Project),
Commercial Paper, (FGIC)....................... 3.600 08/20/96 1,000,000 P1/A1+
635,000 East Lycoming School District GO, (AMBAC)**...... 4.000 09/15/96 634,937 NR/AAA
South Carolina-0.55% 500,000 York County Pollution Control Rev., Series
1984E-2, (Saluda River), (Guaranteed: National
Rural Utilities Cooperative Finance Corp.)..... 3.100 08/15/96 500,000 MIG1/A1+
</TABLE>

- -------------------
* These variable interest rate securities have maturities greater than one year but are redeemable upon demand. For purposes of
calculating the Fund's weighted average maturity, the length to maturity of these investments is considered to be the greater
of the period until the interest rate is adjusted or until the principal can be recovered by demand.

**This security was purchased on a when-issued basis with a cost of $635,148.

PORTFOLIO COMPOSITION BY MARKET SECTOR

VRDNs.......................... 56% Municipal Notes................. 9%
Commercial Paper............... 20 Other........................... 3
Bonds less than 1 year......... 12 -----
TOTAL...........................100%
=====
</TABLE>

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
Benham National Tax-Free Intermediate-Term Fund
Schedule of Investment Securities
May 31, 1996
VALUE RATING
STATE FACE VALUE ISSUE COUPON MATURITY (NOTE 1) MOODY'S/S&P
- ------------ ---------- -------------------------------------------------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alabama-1.67% $ 1,000,000 Alabama Municipal Electric Power Auth.
Rev., (MBIA)................................... 6.100% 09/01/99 $1,049,800 Aaa/AAA
Alaska-0.84% 500,000 Anchorage Hospital Rev., Series 1991,
(Sisters of Providence)........................ 6.500 10/01/99 525,385 A1/AA-
Arizona-0.74% 410,000 Pinal County GO, (University School District #43),
(FGIC)** ...................................... 6.800 07/01/08 463,595 Aaa/AAA
California-18.05% 1,250,000 California Health Facility Auth. Rev. Refunding,
(Sisters of Providence), (MBIA)................ 6.200 10/01/03 1,345,413 Aaa/AAA
2,170,000 California Housing Finance Agency Rev., (MBIA)... 5.600 08/01/09 2,152,271 Aaa/AAA
1,000,000 California Public Works Board Lease Rev., (AMBAC) 6.000 01/01/05 1,059,390 Aaa/AAA
1,100,000 California Public Works Board Rev., (Various
Universities).................................. 6.150 11/01/09 1,124,112 A1/A-
1,060,000 Ontario Redevelopment Finance Auth. Special
Assessment, (Local Agency Series A), (FSA)..... 5.900 09/02/07 1,100,831 Aaa/AAA
1,100,000 Sacramento Regional Transportation Certificates
of Participation, Series A .................... 6.200 03/01/00 1,152,943 A1/NR
1,000,000 San Bernardino County Certificates of
Participation, (MBIA).......................... 5.750 08/01/06 1,035,730 Aaa/AAA
1,000,000 State of California GO........................... 5.750 10/01/10 1,019,010 A1/A
250,000 Turlock Irrigation District Rev., (MBIA)......... 6.000 01/01/09 262,973 Aaa/AAA
1,080,000 Y/S School Facility Finance Auth. Rev., Series
1990, (MBIA)................................... 5.650 09/01/06 1,102,821 Aaa/AAA
Florida-1.19% 700,000 Broward County School District GO................ 6.750 02/15/00 749,546 A1/AA-
Georgia-3.42% 2,000,000 Fulton County Water and Sewer Rev. Refunding,
(FGIC)......................................... 6.250 01/01/09 2,152,740 Aaa/AAA
Hawaii-1.72% 1,000,000 Hawaii GO, Series A, Escrowed to Maturity, (FGIC) 7.000 06/01/00 1,083,930 Aaa/AAA
</TABLE>

SCHEDULE OF INVESTMENT SECURITIES - Benham National Tax-Free Intermediate-Term Fund (Continued)
====================================================================================================================================
VALUE RATING
STATE FACE VALUE ISSUE COUPON MATURITY (NOTE 1) MOODY'S/S&P
- ------------ ---------- -------------------------------------------------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Illinois-6.10% $ 2,000,000 City of Chicago GO, (Emergency Telephone), (FGIC) 5.250% 01/01/04 $2,016,700 Aaa/AAA
700,000 City of Chicago Metropolitan Water Reclamation
District GO, Prerefunded at 100% of par........ 7.250 01/01/99 747,208 Aaa/AAA
1,000,000 Illinois Education Facility Auth. Rev., Series A,
(Loyola University)............................ 6.300 07/01/98 1,039,000 A1/A+
30,000 Metropolitan Pier and Exposition Auth. Rev.,
(McCormick Place Project), Escrowed to Maturity 5.200 06/15/99 30,645 A/AAA
Indiana-2.31% 500,000 Indiana University Student Fee Rev., Series F.... 7.100 08/01/97 518,590 Aa/AA-
1,000,000 South Montgomery Industrial Building Improvement
Certificates of Participation.................. 4.253* 01/01/98 935,540 Aaa/AAA
Massachusetts-1.61% 1,000,000 Massachusetts GO, Series B, (MBIA)............... 5.400 11/01/07 1,010,570 Aaa/AAA
Michigan-2.34% 1,500,000 Detroit Water Supply System Rev., Series A, (MBIA) 5.300 07/01/09 1,468,500 Aaa/AAA
New Jersey-1.68% 1,000,000 New Jersey Transportation Trust Fund Auth.
Rev., Series A................................. 6.000 06/15/01 1,053,350 Aa/A+
North Carolina-3.34%2,000,000 North Carolina Eastern Municipal Power Agency
Rev., Series 1993, (FSA)....................... 6.000 01/01/06 2,100,200 Aaa/AAA
Ohio-3.33% 1,000,000 Ohio State Building Auth. Rev., Series A,
(Correctional Facility)........................ 6.250 10/01/00 1,061,060 A1/A+
1,000,000 Ohio State Public Facilities Auth. Rev., (Mental
Health Facility)............................... 5.625 12/01/98 1,030,850 A1/A+
Oklahoma-4.47% 2,500,000 Oklahoma Industrial Auth. Health System Rev.
Refunding, Series 1995C, (AMBAC)............... 7.000 08/15/04 2,814,100 Aaa/AAA
Pennsylvania-1.22% 845,000 Philadelphia Water and Wastewater Rev., (FGIC)... 5.000 06/15/12 769,668 Aaa/AAA
South Carolina-1.67%1,000,000 South Carolina Public Service Rev., (AMBAC)...... 6.250 01/01/00 1,052,370 Aaa/AAA
Texas-18.58% 115,000 Austin County GO, Prefunded at par............... 6.750 09/01/00 124,045 Aa/AA
885,000 Austin County GO, Series C....................... 6.750 09/01/01 953,543 Aa/AA
1,500,000 Harris County Health Facility Memorial Hospital
Rev., (Systems Project)........................ 6.600 06/01/99 1,571,205 A/A-
1,500,000 Harris County Health Facility Memorial Hospital Rev. 6.800 06/01/01 1,601,085 A/A-
</TABLE>

SCHEDULE OF INVESTMENT SECURITIES - Benham National Tax-Free Intermediate-Term Fund (Continued)
====================================================================================================================================
VALUE RATING
STATE FACE VALUE ISSUE COUPON MATURITY (NOTE 1) MOODY'S/S&P
- ------------ ---------- -------------------------------------------------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Texas (cont.) $ 1,000,000 Houston Independent School District GO,
(Guaranteed by Texas Permanent School Fund).... 8.375% 08/15/98 $1,086,400 Aaa/AAA
1,500,000 Houston Water and Sewer System Rev., (MBIA)...... 5.600 12/01/02 1,560,810 Aaa/AAA
500,000 North Texas Higher Education Student Loan
Rev., (AMBAC).................................. 6.875 04/01/02 526,100 Aaa/AAA
2,000,000 Texas Municipal Power Agency Rev., (MBIA)........ 5.750 09/01/02 2,094,240 Aaa/AAA
1,000,000 Texas Public Financing Agency GO, Series
1995, (Systems Project)........................ 6.500 10/01/03 1,096,520 Aa/AA
1,000,000 Texas Turnpike Auth. Rev., Series 1990 A,
Prerefunded at 102% of par, (AMBAC)............ 7.000 01/01/99 1,079,510 Aaa/AAA
Utah-4.23% 1,600,000 Utah Housing Finance Agency Single Family
Mortgage Rev................................... 5.650 07/01/06 1,597,120 Aaa/AAA
1,000,000 Utah State MFC University Rev., Series 1991,
(Utah Hospital)................................ 6.600 05/15/00 1,064,860 NR/AA-
Virginia-1.65% 1,000,000 Virginia State Public Building Auth. Rev. Refunding,
Series A....................................... 5.700 08/01/00 1,040,250 Aa/AA
Washington-12.48% 1,000,000 Pierce County School District No. 3 GO, Series B. 5.800 12/01/99 1,039,370 A1/A+
1,000,000 Pierce County School District #320 GO............ 5.750 12/01/02 1,037,820 A/NR
2,000,000 Snohomish County Public Utility District Rev.,
Series 1993, (FGIC)............................ 5.625 01/01/05 2,051,200 Aaa/AAA
1,000,000 Snohomish County School District #15 GO ......... 6.125 12/01/03 1,051,070 A1/AA-
1,000,000 Washington Public Power Supply System Rev.,
(Project #1), (FGIC)........................... 7.100 07/01/01 1,092,790 Aaa/AAA
500,000 Washington Public Power Supply System Rev.,
Series C, (FGIC)............................... 7.000 07/01/01 544,370 Aaa/AAA
1,000,000 Washington State GO, (Motor Vehicle Fuel Tax).... 5.500 09/01/00 1,031,000 Aa/AA
Wisconsin-5.05% 1,000,000 Wisconsin State Health and Educational Facility
Rev., (Aurora Medical Group), (FSA)............ 6.000 11/15/10 1,018,380 Aaa/AAA
</TABLE>

- -------------------

* This security is a zero-coupon municipal bond. Zero-coupon securities are purchased at a substantial discount from their
value at maturity. The yield to maturity at current market value is shown instead of a stated coupon rate.

** This security was purchased on a when-issued basis with a cost of $451,944.

PORTFOLIO COMPOSITION BY MARKET SECTOR

General Obligation............. 21% Prerefunded................. 7%
Hospital....................... 19 Housing..................... 6
Electric....................... 17 Education................... 4
Certificates of Participation.. 10 Other....................... 6
Water/Sewer.................... 10 -----
TOTAL.......................100%
=====
</TABLE>

<TABLE>
<CAPTION>
BENHAM MUNICIPAL TRUST
Benham National Tax-Free Long-Term Fund
Schedule of Investment Securities
May 31, 1996

VALUE RATING
STATE FACE VALUE ISSUE COUPON MATURITY (NOTE 1) MOODY'S/S&P
- ------------ ---------- -------------------------------------------------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alabama-3.28% $ 2,000,000 Alabama Special Care Facility Financing Auth.
Rev., (Daughters of Charity) 5.000% 11/01/25 $1,687,680 Aa/AA
California-2.72% 1,700,000 Los Angeles Wastewater Rev., Series 1993D, (FGIC) 4.700 11/01/19 1,398,879 Aaa/AAA
Florida-6.22% 890,000 Broward County Resource Recovery Facility Rev.,
Series 1984, (South Project) 7.950 12/01/08 980,807 A/A-
1,000,000 Orlando Water and Electric Auth. Rev., Series D 6.750 10/01/17 1,119,930 Aa/AA-
1,000,000 St. Petersburg Health Auth. Rev., (Allegheny
Health), (MBIA) 7.000 12/01/15 1,093,940 Aaa/AAA
Georgia-2.10% 1,000,000 Georgia Municipal Electric Auth. Rev., (MBIA) 6.500 01/01/12 1,081,290 Aaa/AAA
Illinois-18.73% 2,000,000 Cook County GO, (MBIA) 5.000 11/15/23 1,714,460 Aaa/AAA
1,500,000 Illinois Dedicated Tax Rev., (Civic Center Project),
(AMBAC) 6.250 12/15/20 1,564,590 Aaa/AAA
1,500,000 Illinois Development Finance Auth. Pollution
Control Rev., Series B, (Central Illinois
Public Service) 7.600 03/01/14 1,617,690 Aa2/AA
750,000 Illinois Development Finance Auth. Pollution
Control Rev., VRDN, (LOC: Wachovia Bank) 3.650 06/03/96* 750,000 NR/A1+
1,840,000 Illinois Health Facilities Auth. Rev. Refunding,
Series C, (Evangelical Hospital) 6.750 04/15/12 1,902,689 A1/AA-
2,000,000 Springfield Water Rev. 6.500 03/01/15 2,076,900 Aa/AA
Indiana-4.37% 1,000,000 Indiana Municipal Power Agency Rev., Series
A, Prerefunded at 102% of par, (AMBAC) 7.100 01/01/00 1,096,750 Aaa/AAA
1,000,000 Indiana Transportation Financing Auth.
Highway Rev., Series A 7.250 06/01/15 1,148,640 A1/A+
Massachusetts-7.66% 1,000,000 Massachusetts Health and Education Auth.
Rev., Series F, (AMBAC) 6.250 07/01/12 1,062,240 Aaa/AAA
</TABLE>

SCHEDULE OF INVESTMENT SECURITIES - Benham National Tax-Free Long-Term Fund (Continued)
====================================================================================================================================
VALUE RATING
STATE FACE VALUE ISSUE COUPON MATURITY (NOTE 1) MOODY'S/S&P
- ------------ ---------- -------------------------------------------------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Massachusetts
(cont.) $1,115,000 Massachusetts Housing Finance Agency
Rev., Series 1993 A 6.375% 04/01/21 $1,115,245 A1/A+
1,690,000 Massachusetts Housing Finance Agency
Rev., Series 1992 H, (FNMA) 6.750 11/15/12 1,760,591 Aaa/AAA
Pennsylvania-5.08% 3,000,000 Pennsylvania Intergovernmental Special
Tax Rev., (MBIA) 5.000 06/15/22 2,608,950 Aaa/AAA
Rhode Island-4.29% 1,100,000 Rhode Island Clean Water and Safe Drinking
Rev., (AMBAC) 6.700 01/01/15 1,172,490 Aaa/AAA
1,000,000 Rhode Island Depositors Economic Special
Obligation, (MBIA) 6.250 08/01/16 1,030,690 Aaa/AAA
South Carolina-7.48%1,000,000 Columbia Water and Sewer Rev., Prerefunded
at 102% of par 7.100 02/01/01 1,113,970 Aaa/AA
1,500,000 Piedmont Municipal Power Agency Electric
Rev., (FGIC) 6.750 01/01/19 1,652,880 Aaa/AAA
1,000,000 Piedmont Municipal Power Agency Electric
Rev. Refunding, Series 1991 A, (FGIC) 6.500 01/01/16 1,075,730 Aaa/AAA
Texas-8.08% 600,000 Lower Colorado River Auth. Rev. Refunding,
Escrowed to Maturity 5.250 01/01/15 563,058 Aaa/AAA
2,000,000 San Antonio Electric and Gas System Rev., (FGIC) 5.700** 02/01/09 981,420 Aaa/AAA
1,000,000 Tarrant County Health Facility Rev., (MBIA) 6.000 05/15/11 1,036,530 Aaa/AAA
1,460,000 Texas Municipal Power Agency Rev., Series A,
(AMBAC) 6.750 09/01/12 1,569,938 Aaa/AAA
Utah-2.33% 1,000,000 Salt Lake City Hospital Rev. Refunding, Series A,
(Intermountain Health Corporation),
Escrowed to Maturity 8.125 05/15/15 1,196,500 NR/AAA
Virginia-5.59% 1,000,000 Hampton Industrial Development Auth. Rev.,
Series A, (Sentara General Hospital) 6.500 11/01/12 1,025,400 A/A
1,750,000 Virginia State Housing Development Auth. Rev.,
Series F, (Single Family Mortgage) 7.100 01/01/17 1,847,265 Aa1/AA+
</TABLE>

**This security is a zero-coupon municipal bond. Zero-coupon securities are purchased at a substantial discount from their value
at maturity. The yield to maturity at current market value is shown instead of a stated coupon rate.

PORTFOLIO COMPOSITION BY MARKET SECTOR

Electric....................... 20% General Obligation.............. 5%
Water/Sewer.................... 17 Special Tax..................... 5
Hospital....................... 16 Other........................... 9
Housing........................ 11 -----
Prerefunded.................... 11 TOTAL...........................100%
Certificates of Participation.. 6 =====

</TABLE>

TRUSTEES

James M. Benham
Albert A. Eisenstat
Ronald J. Gilson
Myron S. Scholes
Kenneth E. Scott
Ezra Solomon
Isaac Stein
James E. Stowers, III
Jeanne D. Wohlers

OFFICERS

James M. Benham
Chairman of the Board

Bruce R. Fitzpatrick
Vice President

Maryanne Roepke
Treasurer and
Chief Financial Officer

Douglas A. Paul
Vice President, Secretary
and General Counsel

Ann N. McCoid
Controller

[company logo] The Benham Group
Part of the Twentieth Century Family of Mutual Funds

1665 Charleston Road
Mountain View, CA 94043

1-800-321-8321

Not authorized for distribution unless preceded or
accompanies by a current fund prospectus.

Benham Distributors, Inc. 7/96 Q064