BENHAM MUNICIPAL TRUST, 485BPOS, 1996-09-03

BENHAM MUNICIPAL TRUST
485BPOS, 1996-09-03

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-----

File No. 2-91229:

Pre-Effective Amendment No.____

Post-Effective Amendment No._18_ X
-----
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
-----

File No. 811-4025:

Amendment No._19_

BENHAM MUNICIPAL TRUST
(Exact Name of Registrant as Specified in Charter)

4500 Main Street, Kansas City, MO 64141-6200
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: 415-965-8300

Douglas A. Paul
General Counsel
1665 Charleston Road, Mountain View, CA 94043
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: Immediately, upon effectiveness
(first offered 8/1/84)

It is proposed that this filing become effective:

__X__ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ on (date) pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485
_____ 75 days after filing pursuant to paragraph (a) (2) of Rule 485
_____ on (date) pursuant to paragraph (a)(2) of Rule 485

- --------------------------------------------------------------------------------
Registrant has elected to register an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. On July 17, 1996, the Registrant filed a Rule
24f-2 Notice on Form 24f-2 with respect to its fiscal year ended May 31, 1996.

<PAGE>
BENHAM MUNICIPAL TRUST
1933 Act Post-Effective Amendment No. 18
1940 Act Amendment No. 19

FORM N-1A
CROSS-REFERENCE SHEET

PART A: PROSPECTUS

ITEM PROSPECTUS CAPTION

1 Cover Page

2 Transaction and Operating Expense Table

3 Financial Highlights, Performance

4 Investment Management, Further Information About the Funds, Investment
Objectives of the Funds, Information About Investment Policies of the
Funds, Risk Factors and Investment Techniques, Other Investment
Practices

5 Investment Management

5A Not Applicable

6 Further Information About the Funds, How to Redeem Shares, Cover Page,
Distributions, Taxes

7 Cover Page, Distribution of Fund Shares, How to Open an Account, Share
Price, Transfer and Administrative Services

8 How to Redeem Shares, Transfer and Administrative Services

9 Not Applicable

PART B: STATEMENT OF ADDITIONAL INFORMATION

ITEM STATEMENT OF ADDITIONAL INFORMATION CAPTION

10 Cover Page

11 Table of Contents

12 Not Applicable

13 Investment Policies and Techniques, Investment Restrictions, Portfolio
Transactions

14 Trustee and Officers

15 Additional Purchase and Redemption Information, Trustees and Officers

16 Investment Advisory Services, Administrative and Transfer Agent
Services, Expense Limitation Agreement, About the Trust

17 Portfolio Transactions

18 About the Trust

19 Additional Purchase and Redemption Information, Valuation of Portfolio
Securities

20 Taxes

21 Additional Purchase and Redemption Information

22 Performance

23 Cover Page

<PAGE>
BENHAM
Municipal Funds

Prospectus
SEPTEMBER 3,
1996

BENHAM MUNICIPAL TRUST
- --------------------------------------------------------------------------------

The BENHAM ARIZONA MUNICIPAL INTERMEDIATE-TERM FUND, BENHAM FLORIDA
MUNICIPAL MONEY MARKET FUND, BENHAM FLORIDA MUNICIPAL INTERMEDIATE-TERM FUND,
BENHAM NATIONAL TAX-FREE MONEY MARKET FUND, BENHAM NATIONAL TAX-FREE
INTERMEDIATE-TERM FUND and BENHAM NATIONAL TAX-FREE LONG-TERM FUND (the "Funds")
are series of the Benham Municipal Trust, a member of the Twentieth Century
family of funds, a family that includes 66 no-load mutual funds covering a
variety of investment opportunities. Six of the funds are described in this
Prospectus. Their investment objectives are listed on the inside cover of this
Prospectus. The other funds are described in separate prospectuses.

NO-LOAD MUTUAL FUNDS

Twentieth Century offers retail investors a full line of no-load funds,
investments that have no sales charges or commissions. The Funds offered by this
Prospectus have no 12b-1 plan or other deferred sales charges.

INVESTMENTS IN THE FUNDS ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER AGENCY. THERE IS NO ASSURANCE THAT THE MONEY MARKET
FUNDS WILL BE ABLE TO MAINTAIN A $1.00 SHARE PRICE.

This Prospectus gives you information about the Funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated September 3, 1996 and filed with the Securities and Exchange
Commission ("SEC"). It is incorporated in this Prospectus by reference. To
obtain a copy without charge, call or write:

Twentieth Century Mutual Funds
4500 Main Street o P.O. Box 419200
Kansas City, MO 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: http://www.twentieth-century.com

- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

INVESTMENT OBJECTIVES OF THE FUNDS
- --------------------------------------------------------------------------------

BENHAM ARIZONA MUNICIPAL
INTERMEDIATE-TERM FUND

seeks to obtain as high a level of current income exempt from Arizona and
regular federal income tax as is consistent with prudent investment management
and conservation of shareholders' capital.

Minimum initial investment: $5,000.

BENHAM FLORIDA MUNICIPAL
MONEY MARKET FUND

is a money market fund which seeks to obtain as high a level of current income
exempt from regular federal income tax as is consistent with prudent investment
management and conservation of shareholders' capital. The Fund intends to invest
so as to qualify its shares for an exemption from the Florida intangible
personal property tax (the "Florida Intangibles Tax"). THERE CAN BE NO ASSURANCE
THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE PER SHARE.

Minimum initial investment: $2,500.

BENHAM FLORIDA MUNICIPAL
INTERMEDIATE-TERM FUND

seeks to obtain as high a level of current income exempt from regular federal
income tax as is consistent with prudent investment management and conservation
of shareholders' capital. The Fund intends to invest so as to qualify its shares
for an exemption from the Florida Intangibles Tax.

Minimum initial investment: $5,000.

BENHAM NATIONAL TAX-FREE
MONEY MARKET FUND

is a money market fund which seeks as high a level of interest income exempt
from regular federal income tax as is consistent with prudent investment
management, while seeking to conserve shareholders' capital. THERE CAN BE NO
ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE PER
SHARE.

Minimum initial investment: $2,500.

BENHAM NATIONAL TAX-FREE
INTERMEDIATE-TERM FUND AND
BENHAM NATIONAL TAX-FREE
LONG-TERM FUND

seek as high a level of interest income exempt from regular federal income taxes
as is consistent with prudent investment management, while seeking to conserve
shareholders' capital.

Minimum initial investment: $5,000.

AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT.

For ease of reference, the Funds sometimes will be referred to in this
Prospectus by their investment category or fund type. The Benham National
Tax-Free Money Market, Benham National Tax-Free Intermediate-Term and Benham
National Tax-Free Long-Term Funds are referred to as the "National Funds". The
Benham Florida Municipal Money Market and Benham Florida Municipal
Intermediate-Term Funds are referred to as the "Florida Funds". The Benham
National Tax-Free Money Market and the Benham Florida Municipal Money Market
Funds are called the "Money Market Funds". Finally, the remaining non-money
market Funds are referred to as the "Variable Price Funds."

THE ARIZONA MUNICIPAL INTERMEDIATE-TERM FUND AND THE FLORIDA FUNDS
CONCENTRATE THEIR INVESTMENTS GEOGRAPHICALLY BY INVESTING IN SECURITIES ISSUED
BY AGENCIES, INSTRUMENTALITIES AND MUNICIPALITIES OF THE STATES OF ARIZONA AND
FLORIDA, RESPECTIVELY. BECAUSE OF THIS CONCENTRATION, THEY MAY BE RISKIER THAN
SIMILAR MUTUAL FUNDS WITH NO GEOGRAPHIC CONCENTRATION.

There is no assurance that the Funds will achieve their respective investment
objectives.
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR FOR THE FUNDS, AND YOU SHOULD NOT RELY ON ANY
OTHER INFORMATION OR REPRESENTATION.

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

Transaction and Operating Expense Table........... 4
Financial Highlights.............................. 5

INFORMATION REGARDING THE FUNDS

INVESTMENT POLICIES OF THE FUNDS...................11
Benham Arizona Municipal
Intermediate-Term Fund.......................11
Benham Florida Municipal Money Market
Fund and Benham Florida Municipal
Intermediate-Term Fund.......................12
Benham National Tax-Free Money Market
Fund, Benham National Tax-Free
Intermediate-Term Fund and Benham
National Tax-Free Long-Term Fund.............14
Portfolio Investment Quality and Maturity
Guidelines...................................14
RISK FACTORS AND INVESTMENT TECHNIQUES.............15
Basic Fixed Income Investment Risks.............15
Municipal Securities............................16
TAX-EXEMPT SECURITIES..............................18
OTHER INVESTMENT PRACTICES,
THEIR CHARACTERISTICS AND RISKS.................18
Portfolio Turnover..............................18
When-Issued and Forward Commitment
Agreements...................................19
Interest Rate Futures Contracts and
Options Thereon..............................19
Restricted and Illiquid Securities..............20
Cash Management.................................20
Other Techniques................................20
PERFORMANCE ADVERTISING............................20

HOW TO INVEST WITH TWENTIETH CENTURY AND THE BENHAM GROUP

HOW TO OPEN AN ACCOUNT.............................22
By Mail.........................................22
By Wire.........................................22
By Exchange.....................................22
In Person.......................................23
SUBSEQUENT INVESTMENTS.............................23
By Mail.........................................23
By Telephone....................................23
By Wire.........................................23
In Person.......................................23
AUTOMATIC INVESTMENT PLAN..........................23
HOW TO EXCHANGE FROM
ONE ACCOUNT TO ANOTHER..........................23
By Mail.........................................24
By Telephone....................................24
HOW TO REDEEM SHARES...............................24
By Mail.........................................24
By Telephone....................................24
By Check-A-Month................................24
Other Automatic Redemptions.....................24
REDEMPTION PROCEEDS................................24
By Check........................................24
By Wire and ACH.................................24
REDEMPTION OF SHARES IN
LOW-BALANCE ACCOUNTS............................25
SIGNATURE GUARANTEE................................25
SPECIAL INVESTOR SERVICES..........................25
Automated Information Line......................25
CheckWriting....................................25
Open Order Service..............................26
Tax-Qualified Retirement Plans..................26
IMPORTANT POLICIES REGARDING
YOUR INVESTMENTS................................27
REPORTS TO SHAREHOLDERS............................28
EMPLOYER-SPONSORED RETIREMENT PLANS
AND INSTITUTIONAL ACCOUNTS......................28

ADDITIONAL INFORMATION YOU SHOULD KNOW

SHARE PRICE........................................29
When Share Price is Determined..................29
How Share Price is Determined...................29
Where to Find Information About
Share Price..................................30
DISTRIBUTIONS......................................30
TAXES 30
Tax-Deferred Accounts...........................30
Taxable Accounts................................30
Special Tax Information.........................32
MANAGEMENT.........................................33
Investment Management...........................33
Code of Ethics..................................34
Transfer and Administrative Services............34
Distribution of Fund Shares.....................35
Expenses........................................35
FURTHER INFORMATION ABOUT THE FUNDS................35

<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE TABLE
- ------------------------------------------------------------------------------------------------------------------------------------

Arizona Florida Florida National National National
Municipal Municipal Municipal Tax-Free Tax-Free Tax-Free
Intermediate- Money Market Intermediate- Money Market Intermediate- Long-Term
SHAREHOLDER TRANSACTION EXPENSES: Term Fund Fund Term Fund Fund Term Fund Fund
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed
on Purchases none none none none none none
Maximum Sales Load Imposed
on Reinvested Dividends none none none none none none
Deferred Sales Load none none none none none none
Redemption Fee(1) none none none none none none
Exchange Fee none none none none none none
ANNUAL FUND OPERATING EXPENSES:(2)
(as a percentage of net assets)
Management Fees .29% .34% .23% .38% .38% .35%
12b-1 Fees none none none none none none
Other Expenses .38% .27% .44% .29% .29% .32%
Total Fund Operating Expenses .67% .61% .67% .67% .67% .67%

Example:
You would pay the following
expenses on a $1,000 invest- 1 year $ 7 $ 6 $ 7 $ 7 $ 7 $ 7
ment, assuming a 5% annual 3 years 21 20 21 21 21 21
return and redemption at 5 years 37 34 37 37 37 37
the end of each time period: 10 years 83 76 83 83 83 83
</TABLE>

(1)Redemption proceeds sent by wire are subject to a $10 processing fee.

(2)Benham Management Corporation (the "Manager") has agreed to limit each Fund's
total operating expenses to specified percentages of each Fund's average
daily net assets. The agreement provides that the Manager may recover amounts
absorbed on behalf of the Fund during the preceding 11 months if, and to the
extent that, for any given month, Fund expenses were less than the expense
limit in effect at that time. The current expense limit for the Florida
Municipal Money Market Fund is .61% of average daily net assets. The current
expense limit for the remaining Funds is .67% of average daily net assets.
These expense limitations are subject to annual renewal in June. If the
expense limitations were not in effect, each Fund's Management Fee, Other
Expenses and Total Fund Operating Expenses would be as follows, respectively:
Arizona Fund, .44%, .38% and .82%; Florida Money Market Fund, .44%, .27% and
.71%; Florida Intermediate-Term Fund, .44%, .44% and .88%; National Tax-Free
Money Market Fund, .44%, .29% and .73%; National Tax-Free Intermediate-Term
Fund, .44%, .29% and .73%; and National Tax-Free Long-Term Fund, .44%, .32%
and .76%.

(3)The expenses incurred on the Florida Municipal Money Market Fund are
scheduled to be waived through December, 1996. Starting in January of 1997,
the Florida Money Market Fund will begin adding .10% per month until its
expense cap of .61% is reached.

Each Fund pays the Manager management fees equal to an annualized percentage
of each Fund's average daily net assets. Other expenses include administrative
and transfer agent fees paid to Twentieth Century Services, Inc.

The purpose of the above table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the shares of the Funds. The example set forth
above assumes reinvestment of all dividends and distributions and uses a 5%
annual rate of return as required by SEC regulations.

NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
BENHAM ARIZONA MUNICIPAL INTERMEDIATE-TERM FUND

The Financial Highlights for each of the periods presented have been
audited by KPMG Peat Marwick LLP, independent auditors. Their report on these
Financial Highlights appears in each Fund's annual report to shareholders which
is incorporated by reference into the Statement of Additional Information. The
annual report contains additional performance information and will be made
available upon request and without charge.

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 dividend and capital gain distributions and are not annualized.

** Annualized.
</TABLE>
5

- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
BENHAM FLORIDA MUNICIPAL MONEY MARKET FUND

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.............................. $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)
----- ----- -----
Total Distributions.............................................. (.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 dividend distributions and are not annualized.

** Annualized.
</TABLE>
6

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.............................. $10.30 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 dividend and capital gain distributions and are not annualized.

** Annualized.
</TABLE>
7

For a Share Outstanding Throughout the Years Ended May 31

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 PERIOD.. $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)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Distributions (.0319) (.0295) (.0191) (.0210) (.0340) (.0499) (.0556) (.0568) (.0410) (.0431)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE AT
END OF PERIOD........ $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 Period
(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>

For a Share Outstanding Throughout the Years Ended May 31

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 PERIOD.. $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 PERIOD...... $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 Period
(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 dividend and capital gain distributions.

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

- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
BENHAM NATIONAL TAX-FREE LONG-TERM FUND

For a Share Outstanding Throughout the Years Ended May 31

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 PERIOD.. $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 PERIOD........ $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 Period
(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 dividend and capital gain distributions.

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

</TABLE>
10

INFORMATION REGARDING THE FUNDS
- --------------------------------------------------------------------------------

INVESTMENT POLICIES
OF THE FUNDS

The Funds have adopted certain investment restrictions that are set
forth in the Statement of Additional Information. Those restrictions, as well
as the investment objectives of the Funds identified on the inside front
cover page of this Prospectus and any other investment policies which are
designated as "fundamental" in this Prospectus or in the Statement of
Additional Information, cannot be changed without shareholder approval. The
Funds have implemented additional investment policies and practices to guide
their activities in the pursuit of their respective investment objectives.
These policies and practices, which are described throughout this Prospectus,
are not designated as fundamental policies and may be changed without
shareholder approval.

The descriptions that follow are designed to help you determine whether
a Fund fits your investment objectives. You may want to pursue more than one
objective by investing in other funds in the Twentieth Century family of
funds.

For an explanation of the securities ratings referred to in the
following discussion, see "Other Information" in the Statement of Additional
Information.

BENHAM ARIZONA MUNICIPAL
INTERMEDIATE-TERM FUND

The Benham Arizona Municipal Intermediate-Term Fund (the "Arizona Fund")
seeks to obtain as high a level of current income exempt from Arizona and
regular federal income tax as is consistent with prudent investment
management and conservation of shareholders' capital. The Arizona Fund
requires a minimum investment of $5,000.

The Arizona Fund is designed for individuals in upper tax brackets
seeking income free from Arizona state and regular federal income taxes,
although the Arizona Fund may generate some taxable income. Because of this
emphasis on tax-exempt income, the Arizona Fund does not constitute a
balanced investment.

The Arizona Fund is a "non-diversified company" as defined in the
Investment Company Act of 1940 (the "1940 Act"). However, the Arizona Fund
intends to meet federal tax requirements for qualification as a regulated
investment company, as described in the Fund's Statement of Additional
Information.

The Arizona Fund intends to remain fully invested in municipal
obligations (obligations issued by or on behalf of a state, its political
subdivisions, agencies, and instrumentalities). As a fundamental policy, the
Arizona Fund will invest at least 80% of its net assets in obligations with
interest exempt from the regular federal income tax, excluding the federal
alternative minimum tax (the "AMT").

In addition, the Arizona Fund will invest at least 65% of its net assets
in Arizona municipal obligations (obligations issued by or on behalf of the
state of Arizona, its political subdivisions, agencies, and
instrumentalities).

The remaining 35% of net assets may be invested in (1) obligations
issued by other states and their political subdivisions, (2) obligations
issued by U.S. territories or possessions such as Puerto Rico, and (3) U.S.
government securities. Under exceptional market or economic conditions, the
Fund may invest more than 35% of its net assets in these securities.

The Arizona Fund is authorized, under normal conditions to invest as
much as 100% of its net assets in municipal obligations for which the
interest is a tax preference item for purposes of the AMT. If you are or
become subject to the AMT, a portion of your income distributions that are
exempt from the regular federal income tax may not be exempt from the AMT.
Interest from AMT bonds is considered to be exempt from federal income tax
for purposes of the 80% policy noted above.

Because the Arizona Fund invests primarily in Arizona municipal
securities, its yield and share price are affected by political and economic
conditions and developments within Arizona. The following summary is derived
from official statements of the state of Arizona as well as from other
publicly-available documents. This summary has not been independently
verified by the Arizona Fund and does not purport to be a complete
description of the conditions and developments in Arizona that may affect the
Arizona Fund. For further information about the risks associated with
investing in Arizona obligations, please see the Arizona Fund's Statement of
Additional Information.

Arizona has been, and is projected to continue to be, one of the
faster-growing areas in the United States. During the last several decades,
the state has outpaced most other regions of the country in population and
personal income growth, gross state product, and job creation, although
growth has slowed somewhat in recent years. During the last 25 years, the
state's emphasis on the mining and agricultural employment sectors has
diminished, and significant job growth has occurred in the areas of
aerospace, information technology, construction, finance, insurance, and real
estate.

Under its constitution, the state of Arizona is not permitted to issue
general obligation bonds secured by the full faith and credit of the state.
However, certain agencies and instrumentalities of the state are authorized
to issue bonds secured by revenues from specific projects and activities, and
state and local government units may enter into lease transactions. The
particular source of payments and security for an Arizona municipal
obligation is detailed in the instruments themselves and in related offering
materials.

Limitations imposed under Arizona law on taxation and bond indebtedness
may affect the ability of the issuers to generate revenues to satisfy their
debt obligations. Arizona is required by law to maintain a balanced budget.
In the past, the state has issued a combination of spending reductions and
tax increases to avoid potential budgetary shortfalls and may require to do
so again.

For further information about the risks associated with investing in
Arizona obligations, please see the Statement of Additional Information.

BENHAM FLORIDA MUNICIPAL
MONEY MARKET FUND AND
BENHAM FLORIDA MUNICIPAL INTERMEDIATE-TERM FUND

The Florida Funds seek to obtain as high a level of current income
exempt from regular federal income tax as is consistent with prudent
investment management and conservation of shareholders' capital. In addition,
Fund shares are intended to be exempt from the Florida intangibles tax. The
minimum investment for the Benham Florida Municipal Money Market Fund (the
"Florida Money Market Fund") and the Benham Florida Municipal
Intermediate-Term Fund (the "Florida Intermediate-Term Fund") are $2,500 and
$5,000, respectively.

The Florida Funds are designed for individuals in upper tax brackets
seeking income free from regular federal income tax, although the Florida
Funds may generate some taxable income. The Florida Funds also provide an
investment that is intended to be exempt from the Florida intangibles tax.
Because of this emphasis on tax-exempt income, the Florida Funds by
themselves do not constitute a balanced investment plan.

Each Florida Fund is a "non-diversified company" as defined in the 1940
Act. However, each Fund intends to meet federal tax requirements for
qualification as a regulated investment company.

Each Florida Fund intends to remain fully invested in municipal
obligations (obligations issued by or on behalf of a state, its political
subdivisions, agencies, and instrumentalities). As a fundamental policy, each
Florida Fund will invest at least 80% of its total assets in obligations with

interest exempt from regular federal income tax, not including the AMT.

In addition, each Florida Fund will invest at least 65% of its net
assets in Florida municipal obligations (obligations issued by or on behalf
of Florida, its political subdivisions, agencies, and instrumentalities, or
U.S. possessions or territories such as Puerto Rico). The remaining 35% of
net assets may be invested in (1) obligations issued by other states and
their political subdivisions and (2) U.S. government securities. Under
exceptional market or economic conditions, each Florida Fund may invest more
than 35% of its net assets in these securities.

Each Florida Fund is authorized under normal conditions to invest as
much as 100% of its net assets in municipal obligations for which the
interest is a tax preference item for purposes of the AMT. If you are or
become subject to the AMT, a portion of your income distributions that are
exempt from the regular federal income tax may not be exempt from the AMT.
Interest from AMT bonds is considered to be exempt from federal income tax
purposes of the 80% policy noted above.

As discussed more fully on page 32, the Florida Funds may need to sell
certain investments near the end of each calendar year so that on January 1
of each year, its portfolio consists only of investments that are exempt from
the Florida intangibles tax. As a result, a Fund could incur additional costs
or taxable income or gains.

Because the Florida Funds invest primarily in Florida municipal
securities, Fund yields and share prices are affected by political and
economic conditions and developments within the state of Florida. The
following summary is derived from independent municipal credit reports but
has not been independently verified by the Florida Funds and does not purport
to be a complete description of the conditions and developments in Florida
that may affect the Florida Funds.

Historically, the Florida economy has been dependent upon agriculture
and seasonal tourism. These industries are vulnerable to widespread crop
failures, severe weather conditions and other agriculture-related problems,
and trends and difficulties in the tourism industry. In recent years, the
economy has broadened into a service and trade economy with substantial
insurance, banking, and export participation as well as a tourism industry
that operates less seasonally.

Population growth was significant in the 1980s and is expected to
continue but at reduced rates. The retiree component of the population is
expected to continue to be a major factor. The population growth and
expanding economy have brought pressures for more infrastructure, educational
facilities, and other needs. Therefore, construction is very important to the
Florida economy but is vulnerable to declines in economic and population
growth and has been weak in recent years.

In August 1992, Hurricane Andrew struck southern Florida, with
consequent hurricane damage estimated to be $20-30 billion, about $10.2
billion of which was insured. Although the state and federal governments have
pledged funds to help rebuild the area, the impact of this event on the
fiscal resources of the state and on local government is difficult to assess.

Florida is heavily dependent upon sales tax revenues, making the state's
general fund vulnerable to recession and presenting difficulties in expanding
the tax base in an economy increasingly geared to services. This dependence
on sales tax has resulted in budgetary shortfalls in the past; Florida has
reacted to preserve an adequate financial position primarily through
expenditure reductions and by doubling the intangibles tax.

For further information about the risks associated with investing in
Florida obligations, please see the Florida Funds' Statement of Additional
Information.

BENHAM NATIONAL TAX-FREE
MONEY MARKET FUND,
BENHAM NATIONAL TAX-FREE INTERMEDIATE-TERM FUND AND
BENHAM NATIONAL TAX-FREE
LONG-TERM FUND

The National Funds seek as high a level of current income exempt from
regular federal income taxes as is consistent with prudent investment
management and conservation of shareholders' capital. The minimum investment
for Benham National Tax-Free Money Market Fund (the "National Money Market
Fund") is $2,500. The minimum investment for the Benham National Tax-Free
Intermediate-Term Fund (the "National Intermediate-Term Fund") and the Benham
National Tax-Free Long-Term Fund (the "National Long-Term Fund") is $5,000.

Each National Fund is a "diversified company" as defined in the 1940
Act. This means that, with respect to 75% of its total assets, each National
Fund will not invest more that 5% of its total assets in the securities of a
single issurer. This policy is fundamental.

Each National Fund intends to remain fully invested in municipal
obligations, although for temporary defensive purposes, each may invest a
portion if its assets in U.S. government securities, the interest income on
which is subject to federal income tax. Each National Fund may invest up to
20% of its total assets in securities issued by U.S. territories or
possessions, such as Puerto Rico, provided that the interest on these
securities is exempt from the regular federal income tax.

The National Tax-Free Intermediate-Term and National Tax-Free Long-Term
Funds may invest up to 25% of their total assets in municipal obligations for
which the interest is a tax preference item for purposes of the AMT.

PORTFOLIO INVESTMENT QUALITY
AND MATURITY GUIDELINES

The Money Market Funds may be appropriate for investors seeking share
price stability who can accept the lower yields that short-term obligations
typically provide. To offer investors the potential for higher yields, the
Variable Price Funds invest in obligations with longer maturities.

MONEY MARKET FUNDS

In selecting investments for the Money Market Funds, the Manager adheres
to regulatory guidelines concerning the quality and maturity of money market
fund investments as well as to internal guidelines designed to minimize
credit risk. In particular, each Fund:

(1) Buys only U.S. dollar-denominated obligations with remaining
maturities of 13 months or less (and variable- and floating-rate
obligations with demand features that effectively shorten their
maturities to 13 months or less);

(2) Maintains a dollar-weighted average maturity of 60 days or less (90
days or less for the Florida Money Market Fund); and

(3) Restricts its investments to high-quality obligations determined by
the Manager, pursuant to procedures established by the board of
trustees, to present minimal credit risks.

To be considered high-quality, an obligation must be:

(1) A U.S. government obligation; or

(2) Rated (or issued by an issuer rated with respect to a class of
comparable short-term obligations) in one of the two highest rating
categories for short-term obligations by at least two nationally
recognized statistical rating agencies ("rating agencies")(or one if
only one has rated the obligation); or

(3) An unrated obligation judged by the Manager, pursuant to guidelines
established by the board of trustees, to be of quality comparable to
the securities listed above.

VARIABLE PRICE FUNDS

The Variable Price Funds differ in their maturity criteria as follows:

The Arizona Fund invests primarily in intermediate-term Arizona
municipal obligations with maturities of four or more years. The weighted
average portfolio maturity is five to ten years.

The Florida Intermediate-Term Fund invests primarily in
intermediate-term Florida municipal obligations with maturities of four or
more years. The weighted average portfolio maturity is five to ten years.

The National Intermediate-Term Fund invests primarily in municipal
obligations with maturities of four or more years. Its weighted average
maturity ranges from five to ten years.

The National Long-Term Fund invests primarily in long-term municipal
obligations. It maintains a weighted average maturity of ten or more years.

In terms of credit quality, each Variable Price Fund restricts its
investments to

(1) Municipal bonds rated, when acquired, within the four highest
categories designated by a rating agency;

(2) Municipal notes (including variable-rate demand obligations) and
tax-exempt commercial paper rated, when acquired, within the two
highest categories designated by a rating agency; and

(3) Unrated obligations judged by the Manager, under the direction of the
board of trustees, to be of comparable quality.

RISK FACTORS AND
INVESTMENT TECHNIQUES

Each Fund described in this Prospectus offers a range of potential for
income and total return based on its maturity criteria. The market value of
the investments of each Fund will change over time in response to a number of
factors, which are summarized in the following paragraphs.

BASIC FIXED INCOME
INVESTMENT RISKS
INTEREST RATE RISK

One feature the Funds have in common is their susceptibility to changing
interest rates. For both Money Market Funds, interest rate changes affect the
level of income the Funds generate for shareholders. For the Variable Price
Funds, changing interest rates affect not only the level of income the Funds
generate for shareholders, but their share prices as well. In general, when
interest rates rise, the Variable Price Funds' share prices decline; when
interest rates decline, their share prices rise.

This pattern is due to the time value of money. A bond's worth is
determined by the present value of its future cash flows. Consequently,
changing interest rates have a greater effect on the present value of a
long-term bond than a short-term bond.

CREDIT RISK

In selecting investments for each Fund, the Manager carefully considers
the creditworthiness of parties and their reliability for the timely payment
of interest and repayment of principal.

In many cases, these parties include not only the issuer of the
obligation, but a bank or other financial intermediary who offers a letter of
credit or other form of guarantee on the obligation.

LIQUIDITY RISK

A security's ratings reflects the opinions of the rating agencies that
issue them and are not absolute standards of quality. Because of the cost of
obtaining credit ratings, some issuers forego them. Under the direction of
the board of trustees, the Manager may buy unrated bonds for the Funds if
these securities are judged to be of a quality consistent with the Funds'
investment policies. Similarly, on behalf of the Variable Price Funds, the
Manager may purchase securities whose ratings are not consistent with the
Funds' rating criteria but which the Manager judges, under the direction of
the board of trustees, to present credit risks consistent with the Funds'
quality standards.

The Arizona and Florida Intermediate-Term Funds may invest up to 15% of
its net assets in unrated securities. Each of the other Funds described in
this Prospectus may invest up to 10% of its assets in unrated securities.
Unrated securities may be less liquid than rated securities.

The Variable Price Funds may invest in securities rated Baa or BBB- (the
lowest investment grade category). The National Intermediate-Term and
National Long-Term Funds will limit their investment in securities rated Baa
or BBB- to 25% of the Fund's total assets. Such securities are medium-grade
investment obligations that may have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to a
weakened capacity for such obligations to make principal and interest
payments.

CONCENTRATION RISK

Each of the Funds described in this Prospectus may invest 25% or more of
its total assets in obligations that generate income from similar types of
projects (in particular, projects in health care, electric, water/sewer,
education, and transportation). Political or economic developments affecting
a single issuer or industry or similar types of projects may have a
significant effect on Fund performance.

CALL RISK

Many municipal obligations are issued with a call feature (features
include a date on which the issuer has reserved the right to redeem the
obligation prior to maturity). An obligation may be called for redemption
before the Manager would otherwise choose to eliminate it from a Fund's
holdings. A call may also reduce an obligation's yield to maturity.

MUNICIPAL SECURITIES

Municipal securities are issued to raise money for a variety of public
purposes, including general financing for state and local governments as well
as financing for specific projects and public facilities. Municipal
securities may be backed by the full taxing power of a municipality, the
revenues from a specific project, or the credit of a private organization.
The following discussion provides a brief description of some securities the
Funds may buy. The Funds are not limited by this discussion, and they may buy
other types of securities and enter into other types of transactions that
meet their respective quality, maturity, and liquidity requirements.

MUNICIPAL NOTES typically have maturities of 13 months or less and are
used to provide short-term capital or to meet cash flow demands.

GENERAL OBLIGATION BONDS are backed by the taxing power of the issuer.

REVENUE BONDS are backed by the revenues derived from a specific
project, system, or facility. Industrial development bonds are a type of
revenue bond backed by the credit of a private issuer.

VARIABLE- AND FLOATING-RATE DEMAND OBLIGATIONS have interest rate
adjustment formulas designed to stabilize their market values. These
obligations normally have maturities in excess of one year but carry demand
features permitting the holders to demand repayment of principal at any time
or at specified intervals. With respect to the Money Market Funds, such
intervals may not exceed 13 months.

TENDER OPTION BONDS are created by combining an intermediate- or
long-term fixed-rate tax-exempt bond with a tender agreement that gives the
holder the option to tender the bond at face value. Tender option bonds
purchased by the Funds are structured with rates that are reset weekly or at
other regular intervals.

A sponsor may terminate a tender option agreement if, for example, the
issuer of the underlying bond defaults on interest payments, or the
underlying bond is downgraded or becomes taxable. Under such circumstances, a
Fund might then own a bond that does not meet its quality or maturity
criteria.

The Manager monitors the credit quality of bonds underlying the Funds'
tender option bond holdings and will sell or put back a tender option bond if
the rating on the underlying bond falls below the second-highest rating
designated by a rating agency. In addition, each Fund limits its investments
in tender option bonds to 15% of net assets.

MUNICIPAL LEASE OBLIGATIONS are issued by state and local governments to
acquire land and a wide variety of equipment and facilities. These
obligations typically are not fully backed by the issuing municipality's
ability to assess taxes to meet its debt obligations. If the state or local
government does not make appropriations for the following year's lease
payments, the lease may terminate, with the possibility of default on the
lease obligation and loss to investors.

Prior to purchasing a municipal lease obligation (or a participation
interest in such obligations) and on a regular basis thereafter, pursuant to
guidelines adopted by the board of trustees, the Manager evaluates the credit
quality and liquidity of the obligation. In making this evaluation, the
Manager considers various credit factors, such as the necessity of the
project; the issuer's credit quality, future borrowing plans, and sources of
revenue pledged for lease repayment; general economic conditions in the
region where the security is issued; liquidity indictors such as dealer
activity; and with regard to unrated obligations the likelihood such lease
will not be canceled.

ZERO-COUPON MUNICIPAL SECURITIES do not make regular interest payments.
Instead, they are sold at a deep discount to their face value. In calculating
daily dividends, the Funds take into account, as income, a portion of the
difference between these securities' purchase prices and face values. Because
zero-coupon securities do not pay current income, their prices can be very
volatile when interest rates change.

The Variable Price Funds may invest in INVERSE FLOATERS to generate
higher tax-exempt yields than are offered by other instruments. Inverse
floaters bear interest rates that move inversely to market interest rates.
Generally, the interest rate on the inverse floater is computed as the
difference between an above-market fixed rate of interest and a floating rate
determined by reference to a market-based or bond-specific interest rate.

Since inverse floaters are long-term bonds, the value of these
securities may be volatile when market interest rates change. In addition,
there is no guarantee that the Manager will be able to find a ready buyer for
inverse floaters. The Money Market Funds may not invest in inverse floaters.

AMT BONDS typically are tax-exempt "private activity" bonds issued after
August 7, 1986, whose proceeds are directed at least in part to a private,
for-profit organization. Although the interest income from AMT bonds is
exempt from regular federal income tax, that income is a tax preference item
for purposes of the AMT.

In addition, corporate investors should note that all income from a Fund
may be part of an adjustment to AMT under Section 55 of the Internal Revenue
Code and the environmental tax under Internal Revenue Code Section 59A. The
AMT is a special separate tax that applies to certain taxpayers who have
certain adjustments to income or tax preference items. The Arizona

and Florida Funds are authorized to invest as much as 100% of their assets
in AMT bonds.

TAX-EXEMPT SECURITIES

Historically, interest paid on securities issued by states, cities,
counties, school districts and other political subdivisions of the United
States has been exempt from federal income taxes. Legislation since 1985,
however, affects the tax treatment of certain types of municipal bonds issued
after certain dates and, in some cases, subjects the income from certain
bonds to differing tax treatment depending on the tax status of its
recipient.

The Funds should be expected to invest some portion of their assets in
bonds which, in the hands of some holders, would be subject to the AMT, as
long as management determines it is in the best interest of shareholders
generally to invest in such securities. (See "Taxes," page 30.)

Each Fund may quote tax-equivalent yields, which show the taxable yields
an investor would have to earn before taxes to equal the Fund's tax-free
yields. As a prospective investor in the Funds, you should determine whether
your tax-equivalent yield is likely to be higher with a taxable or with a
tax-exempt Fund. To determine this, you may use the formulas depicted below.

For the Florida Funds, the tax-equivalent yield is based on each Fund's
current tax-free yield, your federal income tax bracket , and the Florida
intangibles tax applicable to a taxable investment. The formula is:

Fund's Tax-Free Yield Florida Your Tax-
------------------------ + Intangibles Tax = Eqivalent
100% - Your Federal Tax Rate Yield
Rate

For the Arizona Fund, the tax-equivalent yield is based on the current
double tax-exempt yield and your combined federal and state marginal tax
rate. Assuming that all of the Arizona Fund's dividends are tax-exempt in
Arizona (which may not always be the case) and that your Arizona taxes are
fully deductible for federal income tax purposes, you can calculate your
tax-equivalent yield for the Arizona Fund using the following equation:

Fund's Double Tax-Free Yield Your Tax-
---------------------------------------- = Equivalent
(100% - Federal Tax Rate)(100% - Arizona Yield
Tax Rate)

You can calculate your tax-equivalent yield for a National Tax-Free Fund
(taking into account only federal income taxes and not any applicable state
taxes) using the following equation:

Fund's Tax-Free Yield Your Tax-
------------------------ = Equivalent
100% - FEDERAL TAX RATE Yield

OTHER INVESTMENT PRACTICES,
THEIR CHARACTERISTICS AND RISKS

For additional information regarding the investment practices of any of
the Funds, see the Statement of Additional Information.

PORTFOLIO TURNOVER

The portfolio turnover rates of the Variable Price Funds are shown in
the Financial Highlights tables on pages 5, 6, 7, 8, 9 and 10 of this
Prospectus.

Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the particular Fund's
objectives. The rate of portfolio turnover is irrelevant when management
believes a change is in order to achieve those objectives and, accordingly,
the annual portfolio turnover rate cannot be accurately anticipated.

The portfolio turnover of each Fund may be higher than other mutual
funds with similar investment objectives. A high turnover rate involves
correspondingly higher transaction costs that are borne directly by a Fund.
It may also affect the character of capital gains, if any, realized and
distributed by a Fund since short-term capital gains are taxable as ordinary
income.

WHEN-ISSUED AND FORWARD COMMITMENT AGREEMENTS

Each of the Funds may purchase new issues of securities on a when-issued
or forward commitment basis when, in the opinion of the Manager, such
purchases will further the investment objectives of the Fund. The price of
when-issued securities is established at the time commitment to purchase is
made. Delivery of and payment for these securities typically occurs 15 to 45
days after the commitment to purchase. Market rates of interest on debt
securities at the time of delivery may be higher or lower than those
contracted for on the security. Accordingly, the value of each security may
decline prior to delivery, which could result in a loss to the Fund.

INTEREST RATE FUTURES CONTRACTS AND OPTIONS THEREON

The Variable Price Funds may buy and sell interest rate futures
contracts relating to debt securities ("debt futures," i.e., futures relating
to debt securities, and "bond index futures," i.e., futures relating to
indexes on types or groups of bonds) and write and buy put and call options
relating to interest rate futures contracts.

For options sold, a Fund will segregate cash or high-quality debt
securities equal to the value of securities underlying the option unless the
option is otherwise covered.

A Fund will deposit in a segregated account with its custodian bank
high-quality debt obligations maturing in one year or less, or cash, in an
amount equal to the fluctuating market value of long futures contracts it has
purchased, less any margin deposited on its long position. It may hold cash
or acquire such debt obligations for the purpose of making these deposits.

The Variable Price Funds may use futures and options transactions to
maintain cash reserves while remaining fully invested, to facilitate trading,
to reduce transaction costs, or to pursue higher investment returns when a
futures contract is priced more attractively than its underlying security or
index.

Since futures contracts and options thereon can replicate movements in
the cash markets for the securities in which a Fund invests without the large
cash investments required for dealing in such markets, they may subject a
Fund to greater and more volatile risks than might otherwise be the case. The
principal risks related to the use of such instruments are (1) the offsetting
correlation between movements in the market price of the portfolio
investments (held or intended) being hedged and in the price of the futures
contract or option may be imperfect; (2) possible lack of a liquid secondary
market for closing out futures or option positions; (3) the need of
additional portfolio management skills and techniques; and (4) losses due to
unanticipated market price movements. For a hedge to be completely effective,
the price change of the hedging instrument should equal the price change of
the securities being hedged. Such equal price changes are not always possible
because the investment underlying the hedging instrument may not be the same
investment that is being hedged.

Management will attempt to create a closely correlated hedge but hedging
activities may not be completely successful in eliminating market value
fluctuation. The ordinary spreads between prices in the cash and futures
markets, due to the differences in the natures of those markets, are subject
to distortion. Due to the possibility of distortion, a correct forecast of
general interest rate trends by management may still not result in a
successful transaction. Management may be incorrect in its expectations as to
the extent of various interest rate movements or the time span within which
the movements take place.

See the Statement of Additional Information for further information
about these instruments and their risks.

RESTRICTED AND ILLIQUID
SECURITIES

The Funds may, from time to time, purchase Rule 144A securities when
they present attractive investment opportunities that otherwise meet the
Funds' criteria for selection. Rule 144A securities are securities that are
privately placed with and traded among qualified institutional buyers rather
than the general public. Although Rule 144A securities are considered
"restricted securities," they are not necessarily illiquid.

With respect to securities eligible for resale under Rule 144A, the
staff of the SEC has taken the position that the liquidity of such securities
in the portfolio of a fund offering redeemable securities is a question of
fact for the board of trustees to determine, such determination to be based
upon a consideration of the readily available trading markets and the review
of any contractual restrictions. Accordingly, the board of trustees is
responsible for developing and establishing the guidelines and procedures for
determining the liquidity of Rule 144A securities. As allowed by Rule 144A,
the board of trustees of the Funds has delegated the day-to-day function of
determining the liquidity of Rule 144A securities to the Manager. The board
retains the responsibility to monitor the implementation of the guidelines
and procedures it has adopted.

Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and a fund may, from time to time, hold a Rule 144A
security that is illiquid. In such an event, the Manager will consider
appropriate remedies to minimize the effect on such Fund's liquidity. No Fund
may invest more than 10% of its total assets (15% of total assets, with
regard to the Arizona and Florida Intermediate-Term Funds) in illiquid
securities (securities that may not be sold within seven days at
approximately the price used in determining the net asset value of Fund
shares).

CASH MANAGEMENT

For cash management purposes, each of the Variable Price Funds may
invest up to 5% of its total assets in a money market fund advised by the
Manager, provided that the investment is consistent with the Fund's
investment policies and restrictions.

OTHER TECHNIQUES

The Manager may buy other types of securities or employ other portfolio
management techniques on behalf of the Funds. When SEC guidelines require it
to do so, a Fund will set aside cash or appropriate liquid assets in a
segregated account to cover its obligations. See the Funds' respective
Statements of Additional Information for a more detailed discussion of these
investments and some of the risks associated with them.

PERFORMANCE ADVERTISING

From time to time, the Funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return, yield,
effective yield and tax-equivalent yield (for tax-exempt funds).

CUMULATIVE TOTAL RETURN data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. AVERAGE ANNUAL TOTAL RETURN is determined by
computing the annual compound return over a stated period of time that would
have produced a fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.

A quotation of YIELD reflects a fund's income over a stated period
expressed as a percentage of the fund's share price. In the case of the Money
Market Funds, yield is calculated by measuring

the income generated by an investment in the Fund over a seven-day period
(net of expenses). This income is then annualized, that is, the amount of
income generated by the investment over the seven day period is assumed to be
generated over each similar period each week throughout a full year and is
shown as a percentage of the investment. The EFFECTIVE YIELD is calculated in
a similar manner but, when annualized, the income earned by the investment is
assumed to be reinvested. The effective yield will be slightly higher than
the yield because of the compounding effect on the assumed reinvestment.

With respect to the Variable Price Funds, yield is calculated by adding
over a 30-day (or one-month) period all interest and dividend income (net of
fund expenses) calculated on each day's market values, dividing this sum by
the average number of Fund shares outstanding during the period, and
expressing the result as a percentage of the Fund's share price on the last
day of the 30-day (or one month) period. The percentage is then annualized.
Capital gains and losses are not included in the calculation.

Yields are calculated according to accounting methods that are
standardized in accordance with SEC rules. The SEC yield should be regarded
as an estimate of the Funds' 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 Funds' financial
statements.

A TAX-EQUIVALENT YIELD demonstrates the taxable yield necessary to
produce after-tax yield equivalent to that of a mutual fund which invests in
exempt obligations. (See "Tax-Exempt Securities," page 18, for a description
of the formulas used in comparing yields to tax-equivalent yields.)

The Funds may also include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such
as Lipper Analytical Services or Donoghue's Money Fund Report) and
publications that monitor the performance of mutual funds. Performance
information may be quoted numerically or may be presented in a table, graph
or other illustration. In addition, fund performance may be compared to
well-known indices of market performance. A fund's performance may also be
compared, on a relative basis, to the other funds in our fund family. This
relative comparison, which may be based upon historical or expected fund
performance, volatility or other fund characteristics, may be presented
numerically, graphically or in text. The performance of a fund may also be
combined or blended with other funds in our fund family, and that combined or
blended performance may be compared to the same indices to which individual
funds may be compared.

All performance information advertised by the Funds is historical in
nature and is not intended to represent or guarantee future results. The
value of Fund shares when redeemed may be more or less than their original
cost.

HOW TO INVEST WITH TWENTIETH CENTURY AND THE BENHAM GROUP
- --------------------------------------------------------------------------------

The following section explains how to invest with Twentieth Century and
The Benham Group, including purchases, redemptions, exchanges and special
services. You will find more detail about doing business with us by referring
to the Investor Services Guide that you will receive when you open an
account.

If you own or are considering purchasing Fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 28.

HOW TO OPEN AN ACCOUNT

To open an account, you must complete and sign an application,
furnishing your taxpayer identification number. (You must also certify
whether you are subject to withholding for failing to report income to the
IRS.) Investments received without a certified taxpayer identification number
will be returned.

The minimum investment is $2,500 for the Money Market Funds and $5,000
for the Variable Price Funds.

The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on out retirement plans, which are available for individual
investors or for those investing through their employers.

Please note: If you register your account as belonging to multiple
owners (e.g., as joint tenants), you must provide us with specific
authorization on your application in order for us to accept written or
telephone instructions from a single owner. Otherwise, all owners will have
to agree to any transactions that involve the account (whether the
transaction request is in writing or over the telephone).

You may invest in the following ways:

BY MAIL

Send a completed application and check or money order payable in U.S.
dollars to Twentieth Century.

BY WIRE

You may make your initial investment by wiring funds. To do so, call us
or mail a completed application and provide your bank with the following
information:

RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)

BENEFICIARY (BNF):
Twentieth Century Services, Inc.
4500 Main St., Kansas City, MO 64111

BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918

REFERENCE FOR BENEFICIARY (RFB):
Twentieth Century account number into which you are investing. If more
than one, leave blank and see Bank to Bank Information below.

ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.

BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
o Taxpayer identification or social security number
o If more than one account, account numbers and amount to be invested in
each account.
o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA or SARSEP-IRA.

BY EXCHANGE

Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get
information on opening an account by exchanging from another Twentieth
Century or Benham account. See page 23 for more information on exchanges.

IN PERSON

If you prefer to work with a representative in person, please visit one
of our Investors Centers, located at:

4500 Main Street
Kansas City, MO 64111

1665 Charleston Road
Mountain View, CA 94043

2000 S. Colorado Blvd.
Denver, CO 80222.

SUBSEQUENT INVESTMENTS

Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see"Automatic Investment Plan," this page) or by
any of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the remittance portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.

BY MAIL

When making subsequent investments, enclose your check with the
remittance portion of the confirmation of a previous investment. If the
remittance slip is not available, indicate your name, address and account
number on your check or a separate piece of paper. (Please be aware that the
investment minimum for subsequent investments is higher without a remittance
slip.)

BY TELEPHONE

Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw
on your bank account. You may call an Investor Services Representative or use
our Automated Information Line.

BY WIRE

You may make subsequent investments by wire. Follow the wire transfer
instructions on page 22 and indicate your account number.

IN PERSON

You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on this
page.

AUTOMATIC INVESTMENT PLAN

You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must
be at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application
to receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.

HOW TO EXCHANGE FROM ONE
ACCOUNT TO ANOTHER

As long as you meet any minimum initial investment requirements, you may
exchange your Fund shares to our other funds up to six times per year per
account. For any single exchange, the shares of each fund being acquired must
have a value of at least $100. However, we will allow investors to set up an
Automatic Exchange Plan between any two funds in the amount of at least $50
per month. See our Investor Services Guide for further information about
exchanges.

BY MAIL

You may direct us in writing to exchange your shares from one Twentieth
Century or Benham account to another. For additional information, please see
our Investor Services Guide.

BY TELEPHONE

You can make exchanges over the phone (either with an Investor Services
Representative or using our Automated Information Line-see page 25) if you
have authorized us to accept telephone instructions. You can authorize this
by selecting "Full Services" on your application or by calling us at
1-800-345-2021 to receive the appropriate form.

HOW TO REDEEM SHARES

We will redeem or "buy back" your shares at any time. Redemptions will
be made at the next net asset value determined after a complete redemption
request is received.

Please note that a request to redeem shares in an IRA or 403(b) plan
must be accompanied by an executed IRS Form W4-P and a reason for withdrawal
as specified by the IRS.

BY MAIL

Your written instructions to redeem shares may be made either by a
redemption form, which we will send to you upon request, or by a letter to
us. Certain redemptions may require a signature guarantee. Please see
"Signature Guarantee," page 25.

BY TELEPHONE

If you have authorized us to accept telephone instructions, you may
redeem your shares by calling an Investor Services Representative.

BY CHECK-A-MONTH

If you have at least a $10,000 balance in your account, you may redeem
shares by Check-A-Month. A Check-A-Month plan automatically redeems enough
shares each month to provide you with redemption proceeds in an amount you
choose (minimum $50). To set up a Check-A-Month plan, please call to request
our Check-A-Month brochure.

OTHER AUTOMATIC REDEMPTIONS

You may elect to make redemptions automatically by authorizing us to
send funds directly to your account at a bank or other financial institution.
To set up automatic redemptions, call one of our Investor Services
Representatives.

REDEMPTION PROCEEDS

Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up
to 15 days or longer to send redemption proceeds (to allow your purchase
funds to clear). No interest is paid on the redemption proceeds after the
redemption is processed but before your redemption proceeds are sent.

Redemption proceeds may be sent to you in one of the following ways:

BY CHECK

Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For
more information, please refer to our Investor Services Guide.

BY WIRE AND ACH

You may authorize us to transmit redemption proceeds by wire or ACH.
These services will be effective 15 days after we receive the authorization.

Your bank will usually receive wired funds within 48 hours of
transmission. Funds transferred by ACH may be received up to seven days after
transmission. Wired funds are subject to a $10 fee to cover bank wire
charges, which is deducted from redemption proceeds. Once the funds are
transmitted, the time or receipt and the funds' availability are not under
our control.

REDEMPTION OF SHARES
IN LOW-BALANCE ACCOUNTS

Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity to
bring the value of the shares held in the account up to the minimum. If
action is not taken within 90 days of the letter's date, the shares held in
the account will be redeemed and proceeds from the redemption will be sent by
check to your address of record. We reserve the right to increase the
investment minimums.

SIGNATURE GUARANTEE

To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee
will depend on which service options you elect when you open your account.
For example, if you choose "In Writing Only," a signature guarantee will be
required when:

o Redeeming more than $25,000
o Establishing or increasing a Check-A-Month or automatic transfer on an
existing account.

You may obtain a signature guarantee from a bank or trust company,
credit union, broker- dealer, securities exchange or association, clearing
agency or savings association, as defined by federal law.

For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.

We reserve the right to require a signature guarantee on any
transaction, or to change this policy at any time.

SPECIAL INVESTOR SERVICES

We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these
options and elect the ones that are appropriate for you. Be aware that the
"Full Services" option offers you the most flexibility. You will find more
information about each of these service options in our Investor Services
Guide.

Our special investor services include:

AUTOMATED INFORMATION LINE

We offer an Automated Information Line, 24 hours a day, seven days a
week, at 1-800-345-8765. By calling the Automated Information Line, you may
listen to fund prices, yields and total return figures. You may also use the
Automated Information Line to make investments into your accounts (if we have
your bank information on file) and obtain your share balance, value and most
recent transactions. If you have authorized us to accept telephone
instructions, you also may exchange shares from one fund to another via the
Automated Information Line. Redemption instructions cannot be given via the
Automated Information Line.

CHECKWRITING

We offer CheckWriting as a service option for your account in either of
the Money Market Funds. CheckWriting allows you to redeem shares in your
account by writing a draft ("check") against your account balance. (Shares

held in certificate form may not be redeemed by check.) There is no limit on
the number of checks you can write, but each one must be for at least $100.

When you write a check, you will continue to receive dividends on all
shares until your check is presented for payment to our clearing bank. If you
redeem all shares in your account by check, any accrued distributions on the
redeemed shares will be paid to you in cash on the next monthly distribution
date.

If you want to add CheckWriting to an existing account that offers
CheckWriting, contact us by phone or mail for an appropriate form. For a new
account, you may elect CheckWriting on your purchase application by choosing
the "Full Services" option. CheckWriting is not available for any account
held in an IRA or 403(b) plan.

CheckWriting redemptions may only be made on checks provided by us.
Currently, there is no charge for checks or for the CheckWriting service.

We will return checks drawn on insufficient funds or on funds from
investments made by means other than by wire within the previous 15 days.
Neither the company nor our clearing bank will be liable for any loss or
expenses associated with returned checks. Your account may be assessed a $15
service charge for checks drawn on insufficient funds.

A stop payment may be ordered on a check written against your account.
We will use reasonable efforts to stop a payment, but we cannot guarantee
that we will be able to do so. If we are successful in fulfilling a
stop-payment order, your account may be assessed a $15 fee.

OPEN ORDER SERVICE

Through our open order service, you may designate a price at which to
buy shares of a variable-priced fund by exchange from one of our money market
funds, or a price at which to sell shares of a variable-priced fund by
exchange to one of our money market funds. The designated purchase price must
be equal to or lower, or the designated sale price equal to or higher, than
the variable-priced fund's net asset value at the time the order is placed,
If the designated price is met within 90 calendar days, we will execute your
exchange order automatically at that price (or better). Open orders not
executed within 90 days will be canceled.

If the fund you have selected deducts a distribution from its share
price, your order price will be adjusted accordingly so the distribution does
not inadvertently trigger an open order transaction on your behalf. If you
close or re-register the account from which the shares are to be redeemed,
your open order will be canceled.

Because of their time-sensitive nature, open order transactions are
accepted only by telephone or in person. These transactions are subject to
exchange limitations described in each fund's prospectus, except that orders
and cancellations received before 2 p.m. Central time are effective the same
day, and orders or cancellations received after 2 p.m. Central time are
effective the next business day.

TAX-QUALIFIED RETIREMENT PLANS

Each fund is available for your tax-deferred retirement plan. Call or
write us and request the appropriate forms for:

o Individual Retirement Accounts ("IRAs")
o 403(b) plans for employees of public school systems and non-profit
organizations
o Profit sharing plans and pension plans for corporations and other
employers.

If your IRA and 403(b) accounts do not total $10,000, each account is
subject to an annual $10 fee, up to a total of $30 per year.

You can also transfer your tax-deferred plan to us from another company
or custodian. Call or write us for a "Request to Transfer" form.

IMPORTANT POLICIES REGARDING
YOUR INVESTMENTS

Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we
offer.

(1) We reserve the right for any reason to suspend the offering of shares
for a period of time, or to reject any specific purchase order
(including purchases by exchange). Additionally, purchases may be
refused if, in the opinion of the manager, they are of a size that
would disrupt the management of the Fund.

(2) We reserve the right to make changes to any stated investment
requirements, including those that relate to purchases, transfers and
redemptions. In addition, we may also alter, add to or terminate any
investor services and privileges. Any changes may affect all
shareholders or only certain series or classes of shareholders.

(3) Shares being acquired must be qualified for sale in your state of
residence.

(4) Transactions requesting a specific price and date, other than open
orders, will be refused.

(5) If a transaction request is made by a corporation, partnership,
trust, fiduciary, agent or unincorporated association, we will
require evidence satisfactory to us of the authority of the
individual making the request.

(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include
requesting personal identification from callers, recording telephone
calls, and providing written confirmations of telephone transactions.
These procedures are designed to protect shareholders from
unauthorized or fraudulent instructions. If we do not employ
reasonable procedures to confirm the genuineness of instructions,
then we may be liable for losses due to unauthorized or fraudulent
instructions. The company, its transfer agent and investment adviser
will not be responsible for any loss due to instructions they
reasonably believe are genuine.

(7) All signatures should be exactly as the name appears in the
registration. If the owner's name appears in the registration as Mary
Elizabeth Jones, she should sign that way and not as Mary E. Jones.

(8) Unusual stock market conditions have in the past resulted in an
increase in the number of shareholder telephone calls. If you
experience difficulty in reaching us during such periods, you may
send your transaction instructions by mail, express mail or courier
service, or you may visit one of our Investors Centers. You may also
use our Automated Information Line if you have requested and received
an access code and are not attempting to redeem shares.

(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50
to cover the penalty the IRS will impose on us for failure to report
your correct taxpayer identification number on information reports.

(10) We will perform special inquiries on shareholder accounts. A research
fee of $15 may be applied.

REPORTS TO SHAREHOLDERS

At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your Twentieth Century and Benham holdings,
as well as an individual statement for each fund you own that reflects all
year-to-date activity in your account. You may request a statement of your
account activity at any time.

With the exception of most automatic transactions and transactions by
CheckWriting, each time you invest, redeem, transfer or exchange shares, we
will send you a confirmation of the transactions. Transactions initiated by
CheckWriting will be confirmed on a monthly basis. See the Investor Services
Guide for more detail.

Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If
you fail to provide notification of an error with reasonable promptness,
i.e., within 30 days of non-automatic transactions or within 30 days of the
date of your consolidated quarterly statement, in the case of automatic
transactions, we will deem you to have ratified the transaction.

No later than January 31st of each year, we will send you reports that
you may use in completing your U.S. income tax return. See the Investor
Services Guide for more information.

Each year, we will send you an annual and a semiannual report relating
to your fund, each of which is incorporated herein by reference. The annual
report includes audited financial statements and a list of portfolio
securities as of the fiscal year end. The semiannual report includes
unaudited financial statements for the first six months of the fiscal year,
as well as a list of portfolio securities at the end of the period. You also
will receive an updated prospectus at least once each year. Please read these
materials carefully as they will help you understand your fund.

EMPLOYER-SPONSORED
RETIREMENT PLANS AND
INSTITUTIONAL ACCOUNTS

Information contained in our Investor Services Guide and in the "How to
Invest" sections beginning on page 22 pertain to shareholders who invest
directly with Twentieth Century rather than through an employer-sponsored
retirement plan or through a financial intermediary. If you own or are
considering purchasing fund shares through an employer-sponsored retirement
plan, your ability to purchase shares of the funds, exchange them for shares
of other Twentieth Century or Benham funds, and redeem them will depend on
the terms of your plan. If you own or are considering purchasing Fund shares
through a bank, broker-dealer, insurance company or other financial
intermediary, your ability to purchase, exchange and redeem shares will
depend on your agreement with, and the policies of, such financial
intermediary.

You may reach one of our Institutional Investor Service Representatives
by calling 1-800-345-3533 to request information about our funds, to obtain a
current prospectus or to get answers to any questions about our funds and
services that you are unable to obtain through your plan administrator or
financial intermediary.

ADDITIONAL INFORMATION YOU SHOULD KNOW
- --------------------------------------------------------------------------------

SHARE PRICE

WHEN SHARE PRICE IS DETERMINED

The price of your shares is also referred to as their net asset value.
Net asset value is determined by calculating the total value of a Fund's
assets, deducting total liabilities and dividing the result by the number of
shares outstanding. Net asset value is determined at the close of regular
trading on each day that the New York Stock Exchange (the "Exchange") is
open.

Investments and requests to redeem or exchange shares will receive the
share price next determined after receipt by us of the investment, redemption
or exchange request. For example, investments and requests to redeem or
exchange shares received by us or our authorized agents before the close of
business on the Exchange, usually 3 p.m. Central time, are effective on, and
will receive the price determined, that day as of the close of the Exchange.
Investment, redemption and exchange requests received thereafter are
effective on, and receive the price determined as of, the close of the
Exchange on the next day the Exchange is open.

Investments are considered received only when your check or wired funds
are received by us. Wired funds are considered received on the day they are
deposited in our bank account if your telephone call is received before the
close of business on the Exchange, usually 3 p.m. Central time and the money
is deposited that day.

Investments by telephone pursuant to your prior authorization to us to
draw on your bank account are considered received at the time of your
telephone call.

Investment and transaction instructions received by us on any business
day by mail prior to the close of business on the Exchange will receive that
day's price. Investments and instructions received after that time will
receive the price determined on the next business day.

If you invest in Fund shares through an employer-sponsored retirement
plan or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange
and redemption requests to the Funds' transfer agent prior to the applicable
cut-off time for receiving orders and to make payment for any purchase
transactions in accordance with the Funds' procedures or any contractual
arrangement with the Funds or the Funds' distributor in order for you to
receive that day's price.

HOW SHARE PRICE IS DETERMINED

The valuation of assets for determining net asset value may be
summarized as follows:

Portfolio securities of each Fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or
if local convention or regulation so provides, the mean of the latest bid and
asked prices is used. Depending on local convention or regulation, securities
traded over-the-counter are priced at the mean of the latest bid and asked
prices, or at the last sale price. When market quotations are not readily
available, securities and other assets are valued at fair value as determined
in accordance with procedures adopted by the board of trustees.

Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the board of trustees.

Pursuant to a determination by the Money Market Funds' board of trustees
and Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"),
portfolio securities of the Funds are valued at amortized cost. When a
security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by assuming a constant amortization to maturity of
any discount

or premium, regardless of the impact of fluctuating interest rates on the
market value of the instrument.

WHERE TO FIND INFORMATION ABOUT SHARE PRICE

The net asset values of the Funds are published in leading newspapers
daily. The yields of the Money Market Funds are published weekly in leading
financial publications and daily in many local newspapers. The net asset
values, as well as yield information on all of the Funds and other funds in
the Twentieth Century family of funds, may be obtained by calling us.

DISTRIBUTIONS

At the close of each day including Saturdays, Sundays and holidays, net
income of the Variable Price Funds is determined and declared as a
distribution. The distribution will be paid monthly.

You will begin to participate in the distributions the day AFTER your
purchase is effective. See "When Share Price is Determined," page 29. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed (other than by CheckWriting), the
distribution on the redeemed shares will be included with your redemption
proceeds.

Distributions from net realized capital gains, if any, generally are
declared and paid once a year, but the Funds may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code and its Regulations, in all events in a manner consistent with
the provisions of the 1940 Act.

Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders investing through taxable
accounts, distributions will be reinvested unless you elect to receive them
in cash. Distributions of less than $10 generally will be reinvested.
Distributions made shortly after a purchase by check or ACH may be held up to
15 days. You may elect to have distributions on shares held in Individual
Retirement Accounts and 403(b) plans paid in cash only if you are 591/2 years
old or permanently and totally disabled. Distribution checks normally are
mailed within seven days after the record date. Please consult our Investor
Services Guide for further information regarding your distribution options.

The board of trustees may elect not to distribute capital gains in whole
or in part to take advantage of loss carryovers.

TAXES

Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code, which means that to the
extent its income is distributed to shareholders, it pays no income taxes.

TAX-DEFERRED ACCOUNTS

If the Funds' shares are purchased through tax-deferred accounts, such
as a qualified employer-sponsored retirement or savings plan, income and
capital gains distributions paid by the Funds will generally not be subject
to current taxation, but will accumulate in your account under the plan on a
tax-deferred basis.

Employer-sponsored retirement and savings plans are governed by complex
tax rules. If you elect to participate in your employer's plan, consult your
plan administrator, your plan's summary plan description, or a professional
tax advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.

TAXABLE ACCOUNTS

If Fund shares are purchased through taxable accounts, distributions of
net investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income

of the Variable Price Funds do not qualify for the 70% dividends-received
deduction for corporations since they are derived from interest income.
Dividends representing income derived from tax-exempt bonds generally retain
the bonds' tax-exempt character in a shareholder's hands. Distributions from
net long-term capital gains are taxable as long-term capital gains regardless
of the length of time you have held the shares on which such distributions
are paid. However, you should note that any loss realized upon the sale or
redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to such shares.

Distributions of capital gains are taxable to you regardless of whether
they are taken in cash or reinvested, even if the value of your shares is
below your cost. If you purchase shares shortly before a capital gain
distribution, you must pay income taxes on the distribution, even though the
value of your investment (plus cash received, if any) will not have
increased. In addition, the share price at the time you purchase shares may
include unrealized gains in the securities held in the investment portfolio
of the Fund. If these portfolio securities are subsequently sold and the
gains are realized, they will, to the extent not offset by capital losses, be
paid to you as a distribution of capital gains and will be taxable to you as
short-term or long-term capital gains.

In January of the year following the distribution, we or your financial
intermediary will send you a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes. The Funds anticipate that
substantially all of the dividends to be paid by the Funds will be exempt
from federal income taxes to an individual unless, due to that person's own
tax situation, he or she is subject to the AMT. In that case, it is likely
that a portion of the dividends will be taxable to that shareholder while
remaining tax-exempt in the hands of most other shareholders. The Funds will
advise shareholders of the percentage, if any, of the dividends not exempt
from federal income tax, and the percentage, if any, subject to the
individual AMT should a shareholder be subject to it.

Distributions may also be subject to state and local taxes, even if all
or a substantial part of such distribution are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax
exemption to pass through to Fund shareholders when a Fund pays distributions
to its shareholders. You should consult your tax adviser about the tax status
of such distributions in your own state.

If you have not complied with certain provisions of the Internal Revenue
Code and its Regulations, we are required by federal law to withhold and
remit to the IRS 31% of reportable payments (which may include dividends,
capital gains distributions and redemptions). Those regulations require you
to certify that the social security number or tax identification number you
provide is correct and that you are not subject to 31% withholding for
previous under-reporting to the IRS. You will be asked to make the
appropriate certification on your application. PAYMENTS REPORTED BY US THAT
OMIT YOUR SOCIAL SECURITY NUMBER OR TAX IDENTIFICATION NUMBER WILL SUBJECT US
TO A PENALTY OF $50, WHICH WILL BE CHARGED AGAINST YOUR ACCOUNT IF YOU FAIL
TO PROVIDE THE CERTIFICATION BY THE TIME THE REPORT IS FILED, AND IS NOT
REFUNDABLE.

Redemption of shares of a Fund (including redemptions made in an
exchange transaction) will be a taxable transaction for federal income tax
purposes and shareholders will generally recognize a gain or loss in an
amount equal to the difference between the basis of the shares and the amount
received. Assuming that shareholders hold such shares as a capital asset, the
gain or loss will be a capital gain or loss and will generally be long term
if shareholders have held such shares for a period of more than one year. If
a loss is realized on the redemption of Fund shares, the reinvestment in
additional Fund

shares within 30 days before or after the redemption may be subject to the
"wash sale" rules of the Internal Revenue Code, resulting in a postponement
of the recognition of such loss for federal income tax purposes.

SPECIAL TAX INFORMATION

Each Fund intends to invest a sufficient portion of its assets in state
and municipal obligations so that it will qualify to pay "exempt-interest
dividends" to shareholders. Such exempt-interest dividends are generally
excludable from a shareholder's gross income for federal tax purposes. If a
Fund earned federally taxable income from any of its investments, the income
would be distributed to shareholders as a taxable dividend as described
above.

MUNICIPAL SECURITIES

Opinions relating to the validity of municipal securities and the
exemptions of interest thereon from federal income tax are rendered by bond
counsel to the issuers. The Funds and the Manager rely on the opinion of bond
counsel and do not undertake any independent investigation of proceedings
relating to the issuance of state or municipal securities. The Funds may
invest in various instruments that are not traditional state and local
obligations and that are believed to generate interest excludable from
taxable income under Code Section 103, including, but not limited to,
municipal lease obligations and inverse floaters. Although the Funds may
invest in these instruments, they cannot guarantee the tax-exempt status of
the income earned thereon from any other investment.

AMT LIABILITY

To the extent that the Funds invest in municipal obligations (private
activity bonds) whose interest is treated as a tax preference item in
calculating AMT liability, shareholders who calculate AMT liability will be
required to include a portion of the Fund's dividends as a tax preference
item in making this calculation. In addition, corporate shareholders may be
required to include all dividends and distributions by the Fund in an
adjustment of alternative minimum taxable income for purposes of the AMT and
the environmental tax imposed under Internal Revenue Code Sections 55 and
59A, respectively.

ARIZONA FUND

Under a ruling by the Arizona Department of Revenue, shareholders who
are otherwise subject to Arizona income tax will not be subject to such tax
on Fund dividends to the extent that such dividends are attributable to
either (1) obligations of the state of Arizona or its political subdivisions
or (2) obligations issued by the governments of Guam, Puerto Rico, or the
Virgin Islands.

In addition, Arizona Fund dividends that are attributable to interest
payments on direct obligations of the U.S. government will not be subject to
Arizona income tax if, as intended, the Arizona Fund qualifies as a regulated
investment company under Subchapter M of the Code. Other distributions from
the Fund, however, such as distributions of short-term or long-term capital
gains or income earned on obligations of other states, will generally be
subject to income, personal property, intangibles or similar taxes in their
respective states and localities.

FLORIDA FUNDS

Florida currently does not have a personal income tax, so dividends from
the Florida Funds and distributions earned by Florida residents will not be
subject to such a tax. However, if you are domiciled outside of Florida,
dividends and distributions from the Florida Funds may be subject to your
state's taxes. Dividends and distributions earned by corporate shareholders
that are subject to the Florida corporate income tax may be taxable by
Florida; these shareholders should consult their tax advisors regarding the
application of the Florida corporate income tax to dividends and
distributions from the Florida Funds.

The Florida Funds may apply for rulings from the Florida Department of
Revenue to the effect that shares of a Florida Fund be exempt from the
Florida intangibles tax each year if the Florida Fund's portfolio of
investments on January 1 of that year consists of qualifying investments.

Investments exempt from the Florida intangibles tax include but are not
limited to (1) notes, bonds and other obligations issued by Florida or its
municipalities, counties and other taxing districts and (2) notes, bonds, and
other obligations issued by the U.S. government and its agencies. Obligations
issued by the governments of Puerto Rico, Guam and the Virgin Islands are
also exempt if permitted by ruling.

If a Florida Fund's portfolio of investments on January 1 of each year
includes investments that are not exempt from the Florida intangibles tax,
the Florida Fund's shares could be subject to the Florida intangibles tax.
The Florida Funds intend that on January 1 of each year, each Florida Fund's
portfolio of investments will consist solely of investments exempt from the
Florida intangibles tax. Shareholders who are domiciled outside of Florida
may be subject to income, personal property, intangibles or similar taxes in
their respective states.

MANAGEMENT

INVESTMENT MANAGEMENT

The Funds are series of the Benham Municipal Trust (the "Trust"). Under
the laws of the Commonwealth of Massachusetts, the board of trustees is
responsible for managing the business and affairs of the Trust. Acting
pursuant to an investment management agreement entered into with the Trust,
Benham Management Corporation (the "Manager") serves as the investment
manager of the Funds. Its principal place of business is 1665 Charleston
Road, Mountain View, California 94043. The Manager has been providing
investment advisory services to investment companies and other clients since
1971.

The Manager supervises and manages the investment portfolio of each of
the Funds and directs the purchase and sale of their investment securities.
The Manager utilizes a team of portfolio managers, assistant portfolio
managers and analysts acting together to manage the assets of the Funds. The
team meets regularly to review portfolio holdings and to discuss purchase and
sale activity. The team adjusts holdings in the Funds' portfolios and the
Funds' asset mix as it deems appropriate in pursuit of the Funds' investment
objectives. Individual portfolio manager members of the team may also adjust
portfolio holdings of the Funds or of sectors of the Funds as necessary
between team meetings.

In June 1995, Twentieth Century Companies, Inc. ("TCC") acquired Benham
Management International, Inc., the then-parent company of the Manager. TCC
is the parent company of Investors Research Corporation ("IRC"), which
provides investment management services to the Twentieth Century family of
funds. In the acquisition, the Manager became a wholly owned subsidiary of
TCC. Certain employees of the Manager provide investment management services
to the Twentieth Century family of funds, while certain Twentieth Century
employees provide investment management services to Benham funds.

The portfolio manager members of the teams managing the funds described
in this Prospectus and their work experience for the last five years are
listed as follows:

G. DAVID MACEWEN, Vice President, the Manager, is the manager of the
portfolio management team which manages the Funds in the Benham Municipal
Trust and has been primarily responsible for the day-to-day operations of the
Funds since May, 1991. Mr. MacEwen joined Benham in 1991 as a Senior
Municipal Portfolio Manager, and currently maintains principal management
responsibility for the Benham California Tax-Free Short-Term, Benham
California Tax-

Free Intermediate-Term, Benham California Tax-Free Long-Term and Benham
California Tax-Free Insured Funds. Mr. MacEwen is also a member of the team
that manages the Twentieth Century Investors Tax-Exempt Long-Term Fund.

The activities of the Manager are subject only to directions of the
Trust's board of trustees. For the services provided to the Funds, the
Manager receives an annual fee which cannot exceed .50% of average daily net
assets. The Manager's fee drops to a marginal rate of .19% of average daily
net assets as the Trust's assets increase.

CODE OF ETHICS

The Trust and the Manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the Manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with
access to information about the purchase or sale of securities in the Funds'
portfolios obtain preclearance before executing personal trades. With respect
to portfolio managers and other investment personnel, the Code of Ethics
prohibits acquisition of securities in an initial public offering, as well as
profits derived from the purchase and sale of the same security within 60
calendar days. These provisions are designed to ensure that the interests of
the Fund shareholders come before the interests of the people who manage
those Funds.

TRANSFER AND ADMINISTRATIVE SERVICES

Twentieth Century Services, Inc., 4500 Main Street, Kansas City,
Missouri, 64141, ("TCS") acts as transfer, administrative services and
dividend paying agent for the funds. It provides facilities, equipment and
personnel to the Funds and is paid for such services by the Funds. For
administrative services, each Fund pays TCS a monthly fee equal to its pro
rata share of the dollar amount derived from applying the average daily net
assets of all of the Funds managed by the Manager. The administrative fee
rate ranges from .11% to .08% of average daily net assets, dropping as assets
managed by the Manager increase. For transfer agent services, each Fund pays
TCS a monthly fee for each shareholder account maintained and for each
shareholder transaction executed during that month.

The Funds charge no sales commissions, or "loads," of any kind. However,
investors who do not choose to purchase or sell Fund shares directly from TCS
may purchase or sell Fund shares through registered broker-dealers and other
qualified service providers, who may charge investors fees for their
services. These broker-dealers and service providers generally provide
shareholder, administrative and/or accounting services which would otherwise
be provided by TCS as the Funds' transfer agent. To accommodate these
investors, the Manager and its affiliates have entered into agreements with
some broker-dealers and service providers to provide these services. Fees for
such services are borne normally by the Funds at the rates normally paid to
TCS, which would otherwise provide the services. Any distribution expenses
associated with these arrangements are borne by the Manager.

From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation
of shareholder transactions, newsletters and a team of personal
representatives. Any expenses associated with these special services will be
paid by the Manager or its affiliates.

The Manager and TCS are both wholly owned by Twentieth Century
Companies, Inc. James E. Stowers Jr., Chairman of the board of directors of
TCC, controls TCC by virtue of his ownership of a majority of its common
stock.

DISTRIBUTION OF FUND SHARES

The Funds' shares are distributed by Twentieth Century Securities, Inc.
(the "Distributor"), a registered broker-dealer and an affiliate of the
Manager. The Manager pays all expenses for promoting sales of, and
distributing the Fund shares offered by this Prospectus. The Funds do not pay
any commissions or other fees to the Distributor or to any other
broker-dealers or financial intermediaries in connection with the
distribution of Fund shares.

EXPENSES

Each Fund pays certain operating expenses directly, including, but not
limited to: custodian, audit, and legal fees; fees of the independent
directors or trustees; costs of printing and mailing prospectuses, statements
of additional information, proxy statements, notices, and reports to
shareholders; insurance expenses; and costs of registering the Fund's shares
for sale under federal and state securities laws. See the Statements of
Additional Information for a more detailed discussion of independent trustee
compensation.

FURTHER INFORMATION ABOUT
THE FUNDS

Benham Municipal Trust was organized as a Massachusetts business trust
on May 1, 1984. The Trust is a diversified, open-end management investment
company. Its business and affairs are managed by its officers under the
direction of its board of trustees.

The principal office of the Trust is Twentieth Century Tower, 4500 Main
Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may
be made by mail to that address, or by phone to 1-800-345-2021. (For
international callers: 816-531-5575.)

The Funds are individual series of the Trust which issues shares with no
par value. The assets belonging to each series of shares are held separately
by the custodian and in effect each series is a separate fund.

Each share, irrespective of series, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except
those matters which must be voted on separately by the series of shares
affected. Matters affecting only one Fund are voted upon only by that Fund.

Shares have non-cumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of trustees can elect
all of the trustees if they choose to do so, and in such event the holders of
the remaining less-than 50% of the shares will not be able to elect any
person or persons to the board of trustees.

Unless required by the 1940 Act, it will not be necessary for the Trust
to hold annual meetings of shareholders. As a result, shareholders may not
vote each year on the election of trustees or the appointment of auditors.
However, pursuant to the Trust's by-laws, the holders of shares representing
at least 10% of the votes entitled to be cast may request that the Trust hold
a special meeting of shareholders. We will assist in the communication with
other shareholders.

WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF
ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE
INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.

THIS PROSPECTUS CONSTITUTES AN OFFER TO SELL SECURITIES OF A FUND ONLY
IN THOSE STATES WHERE THE FUND'S SHARES HAVE BEEN REGISTERED OR OTHERWISE
QUALIFIED FOR SALE. A FUND WILL NOT ACCEPT APPLICATIONS FROM PERSONS RESIDING
IN STATES WHERE THE FUND'S SHARES ARE NOT REGISTERED.

BENHAM
Municipal Funds

Prospectus
September 3, 1996

TWENTIETH CENTURY MUTUAL FUNDS
and THE BENHAM GROUP
- --------------------------------------------

P.O. Box 419200
Kansas City, Missouri
64141-6200
- --------------------------------------------
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
- --------------------------------------------

Automated Information Line:
1-800-345-8765
- --------------------------------------------
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
- --------------------------------------------
Fax: 816-340-7962
- --------------------------------------------
Internet: http://www.twentieth-century.com
- --------------------------------------------
BENHAM
MUNICIPAL TRUST
- --------------------------------------------------------------------------------

BN-BKT-5486 [recycled logo]
9608 Recycled

<PAGE>
BENHAM ARIZONA MUNICIPAL INTERMEDIATE-TERM FUND

A SERIES OF BENHAM MUNICIPAL TRUST

4500 Main Street
Kansas City, MO 64111

Person-to-Person Assistance: 1-800-345-2021 or 816-531-5575
Automated: 1-800-345-8765

STATEMENT OF ADDITIONAL INFORMATION

September 3, 1996

This Statement is not a prospectus but should be read in conjunction with the
Fund's current Prospectus dated September 3, 1996. The Fund's Annual Report for
the fiscal year ended May 31, 1996 is incorporated herein by reference. To
obtain a copy of the Prospectus or Annual Report, call or write Twentieth
Century Mutual Funds.

TABLE OF CONTENTS

Page

Investment Policies and Techniques 2
Special Considerations Regarding Arizona Municipal Securities 9
Investment Restrictions 10
Portfolio Transactions 12
Valuation of Portfolio Securities 12
Performance 13
Taxes 15
About the Trust 18
Trustees and Officers 19
Investment Advisory Services 21
Transfer and Administrative Services 22
Direct Fund Expenses 23
Expense Limitation Agreement 23
Additional Purchase and Redemption Information 23
Other Information 24

INVESTMENT POLICIES AND TECHNIQUES

The following pages provide a more detailed description of the securities and
investment practices identified in the Prospectus. Unless otherwise noted, the
policies described in this Statement of Additional Information are not
fundamental and may be changed by the board of trustees.

MUNICIPAL NOTES

Municipal notes are issued by state and local governments or government entities
to provide short-term capital or to meet cash flow needs.

TAX ANTICIPATION NOTES (TANS) are issued in anticipation of seasonal tax
revenues, such as ad valorem property, income, sales, use, and business taxes,
and are payable from these future taxes. Tax anticipation notes usually are
general obligations of the issuer. General obligations are secured by the
issuer's pledge of its full faith and credit (i.e., taxing power) for the
payment of principal and interest.

REVENUE ANTICIPATION NOTES (RANS) are issued with the expectation that receipt
of future revenues, such as federal revenue sharing or state aid payments, will
be used to repay the notes. Typically, these notes also constitute general
obligations of the issuer.

BOND ANTICIPATION NOTES (BANS) are issued to provide interim financing until
long-term financing can be arranged. In most cases, the long-term bonds provide
the money for repayment of the notes.

TAX-EXEMPT COMMERCIAL PAPER is an obligation with a stated maturity of 365 days
or less issued to finance seasonal cash flow needs or to provide short-term
financing in anticipation of longer-term financing.

MUNICIPAL BONDS

Municipal bonds, which generally have maturities of more than one year when
issued, are designed to meet longer-term capital needs. These securities have
two principal classifications: general obligation bonds and revenue bonds.

GENERAL OBLIGATION (GO) BONDS are issued by states, counties, cities, towns, and
regional districts to fund a variety of public projects, including construction
of and improvements to schools, highways, and water and sewer systems. General
obligation bonds are backed by the issuer's full faith and credit based on its
ability to levy taxes for the timely payment of interest and repayment of
principal, although such levies may be constitutionally or statutorily limited
as to rate or amount.

REVENUE BONDS are not backed by an issuer's taxing authority; rather, interest
and principal are secured by the net revenues from a project or facility.
Revenue bonds are issued to finance a variety of capital projects, including
construction or refurbishment of utility and waste disposal systems, highways,
bridges, tunnels, air and sea port facilities, schools, and hospitals. Many
revenue bond issuers provide additional security in the form of a debt service
reserve fund that may be used to make payments of interest and repayments of
principal on the issuer's obligations. Some revenue bond financings are further
protected by a state's assurance (without obligation) that it will make up
deficiencies in the debt service reserve fund.

INDUSTRIAL DEVELOPMENT BONDS (IDBs), a type of revenue bond, are issued by or on
behalf of public authorities to finance privately operated facilities. These
bonds are used to finance business,

manufacturing, housing, athletic, and pollution control projects as well as
public facilities, such as mass transit systems, air and sea port facilities,
and parking garages. Payment of interest and repayment of principal on an IDB
depends solely on the ability of the facility's user to meet its financial
obligations and on the pledge, if any, of the real or personal property
financed. The interest earned on IDBs may be subject to the federal alternative
minimum tax.

VARIABLE- AND FLOATING-RATE DEMAND OBLIGATIONS

The Fund may buy variable- and floating-rate demand obligations (VRDOs and
FRDOs). These obligations carry rights that permit holders to demand payment of
the unpaid principal, plus accrued interest, from the issuers or from financial
intermediaries. Floating-rate securities have interest rates that change
whenever there is a change in a designated base rate; variable-rate instruments
provide for a specified, periodic adjustment in the interest rate, which
typically is based on an index. These rate formulas are designed to result in a
market value for the VRDO or FRDO that approximates par value.

OBLIGATIONS WITH TERM PUTS ATTACHED

The Fund may invest in fixed-rate bonds subject to third party puts and in
participation interests in such bonds held by a bank in trust or otherwise.
These bonds and participation interests have tender options or demand features
that permit the Fund to tender (or put) their bonds to an institution at
periodic intervals and to receive the principal amount thereof.

Benham Management Corporation (BMC), the Fund's investment advisor, expects that
the Fund will pay more for securities with puts attached than for securities
without these liquidity features. BMC may buy securities with puts attached to
keep the Fund fully invested in municipal securities while maintaining
sufficient portfolio liquidity to meet redemption requests or to facilitate
management of the Fund's investments. To ensure that the interest on municipal
securities subject to puts is tax-exempt to the Fund, BMC limits the Fund's use
of puts in accordance with applicable interpretations and rulings of the
Internal Revenue Service.

Because it is difficult to evaluate the likelihood of exercise or the potential
benefit of a put, puts normally will be determined to have a value of zero,
regardless of whether any direct or indirect consideration is paid. Accordingly,
puts as separate securities are not expected to affect the Fund's weighted
average maturities. When the Fund has paid for a put, the cost will be reflected
as unrealized depreciation on the underlying security for the period the put is
held. Any gain on the sale of the underlying security will be reduced by the
cost of the put.

There is a risk that the seller of a put will not be able to repurchase the
underlying obligation when (or if) the Fund attempts to exercise the put. To
minimize such risks, the Fund will purchase obligations with puts attached only
from sellers deemed creditworthy by BMC.

TENDER OPTION BONDS

Tender option bonds (TOBs) were created to increase the supply of high-quality,
short-term tax-exempt obligations. TOBs are created by municipal bond dealers
who purchase long-term tax-exempt bonds in the secondary market, place the
certificates in trusts, and sell interests in the trusts with puts or other
liquidity guarantees attached. The credit quality of the resulting synthetic
short-term instrument is based on the guarantor's short-term rating and the
underlying bond's long-term rating.

There is some risk that a remarketing agent will renege on a tender option
agreement if the underlying bond is downgraded or defaults. Because of this, BMC
monitors the credit quality of bonds underlying the Fund's TOB holdings and
intends to sell or put back any TOB if the rating on its underlying bond falls
below the second-highest rating category designated by a rating agency.

BMC also takes steps to minimize the risk that the Fund may realize taxable
income as a result of holding TOBs. These steps may include consideration of (a)
legal opinions relating to the tax-exempt status of the underlying municipal
bonds, (b) legal opinions relating to the tax ownership of the underlying bonds,
and (c) other elements of the structure that could result in taxable income or
other adverse tax consequences.

After purchase, BMC monitors factors related to the tax-exempt status of the
Fund's TOB holdings in order to minimize the risk of generating taxable income.

WHEN-ISSUED AND FORWARD COMMITMENT AGREEMENTS

The Fund may engage in municipal securities transactions on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date (typically 15 to 45 days later).

When purchasing securities on a when-issued or forward commitment basis, each
Fund assumes the rights and risks of ownership, including the risk of price and
yield fluctuations. While a Fund will make commitments to purchase or sell
securities with the intention of actually receiving or delivering them, it may
nevertheless sell the securities before the settlement date if deemed advisable
as a matter of investment strategy.

In purchasing securities on a when-issued or forward commitment basis, a Fund
will establish and maintain until the settlement date a segregated account
consisting of cash, U.S. government securities, or other high-quality liquid
debt securities in an amount sufficient to meet the purchase price. When the
time comes to pay for when-issued securities, the Fund will meet its obligations
with available cash, through the sale of securities, or, although it would not
normally expect to do so, through sales of when-issued securities themselves
(which may have a market value greater or less than the Fund's payment
obligation). Selling securities to meet when-issued or forward commitment
obligations may generate taxable capital gains or losses.

The Funds may sell a security and at the same time make a commitment to purchase
the same security at a future date and specified price. Conversely, the Funds
may purchase a security and at the same time make a commitment to sell the same
security at a future date and specified price. These types of transactions are
executed simultaneously in what are known as "dollar-roll" or "cash-and-carry"
transactions. For example, a broker-dealer may seek to purchase a particular
security that the Funds own. The Funds will sell that security to the
broker-dealer and simultaneously enter into a forward commitment agreement to
buy it back at a future date. This type of transaction generates income for the
Funds if the dealer is willing to execute the transaction at a favorable price
in order to acquire a specific security.

As an operating policy, the Fund will not commit greater than 50% of its total
assets to when-issued or forward commitment agreements. If fluctuations in the
value of securities held cause more than 50% of the Fund's total assets to be
committed under when-issued or forward commitment agreements, BMC need not sell
such agreements, but it will be restricted from entering into further

agreements on behalf of the Fund until the percentage of assets committed to
such agreements is below 50% of total assets.

MUNICIPAL LEASE OBLIGATIONS

The Fund may invest in municipal lease obligations. These obligations, which may
take the form of a lease, an installment purchase, or a conditional sale
contract, are issued by state and local governments and authorities to acquire
land and a wide variety of equipment and facilities. Generally, the Fund will
not hold such obligations directly as a lessor of the property but will purchase
a participation interest in a municipal lease obligation from a bank or other
third party.

Municipal leases frequently carry risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set forth
requirements that states and municipalities must meet to incur debt. These may
include voter referenda, interest rate limits, or public sale requirements.
Leases, installment purchases, and conditional sale contracts (which normally
provide for title to the leased asset to pass to the government issuer) have
evolved as a way for government issuers to acquire property and equipment
without meeting constitutional and statutory requirements for the issuance of
debt.

Many leases and contracts include nonappropriation clauses providing that the
governmental issuer has no obligation to make future payments under the lease or
contract unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Municipal lease
obligations also may be subject to abatement risk. For example, construction
delays or destruction of a facility as a result of an uninsurable disaster that
prevents occupancy could result in all or a portion of a lease payment not being
made.

INVERSE FLOATERS

The Fund may buy or sell inverse floaters. An inverse floater is a type of
derivative that bears an interest rate that moves inversely to market interest
rates. As market interest rates rise, the interest rate on inverse floaters goes
down, and vice versa. Generally, this is accomplished by expressing the interest
rate on the inverse floater as an above-market fixed rate of interest, reduced
by an amount determined by reference to a market-based or bond-specific floating
interest rate (as well as by any fees associated with administering the inverse
floater program).

Inverse floaters may be issued in conjunction with an equal amount of Dutch
Auction floating-rate bonds (floaters), or a market-based index may be used to
set the interest rate on these securities. Floaters and inverse floaters may be
brought to market by a broker-dealer who purchases fixed-rate bonds and places
them in a trust or by an issuer seeking to reduce interest expenses by using a
floater/inverse floater structure in lieu of fixed-rate bonds.

In the case of a broker-dealer structured offering (where underlying fixed-rate
bonds have been placed in a trust), distributions from the underlying bonds are
allocated to floater and inverse floater holders in the following manner:

(i) Floater holders receive interest based on rates set at a Dutch Auction,
which is typically held every 28 to 35 days. Current and prospective
floater holders bid the minimum interest rate that they are willing to
accept on the floaters, and the interest rate is set just high enough to
ensure that all of the floaters are sold.

(ii) Inverse floater holders receive all of the interest that remains on the
underlying bonds after floater interest and auction fees are paid.

Procedures for determining the interest payment on floaters and inverse floaters
brought to market directly by the issuer are comparable, although the interest
paid on the inverse floaters is based on a presumed coupon rate that would have
been required to bring fixed-rate bonds to market at the time the floaters and
inverse floaters were issued.

Where inverse floaters are issued in conjunction with floaters, inverse floater
holders may be given the right to acquire the underlying security (or to create
a fixed-rate bond) by calling an equal amount of corresponding floaters. The
underlying security may then be held or sold. However, typically, there are time
constraints and other limitations associated with any right to combine interests
and claim the underlying security.

Floater holders subject to a Dutch Auction procedure generally do not have the
right to "put back" their interests to the issuer or to a third party. If a
Dutch Auction fails, the floater holder may be required to hold its position
until the underlying bond matures, during which time interest on the floater is
capped at a predetermined rate.

The secondary market for floaters and inverse floaters may be limited. Changes
in the market value of inverse floaters tend to be significantly greater than
those of fixed-rate bonds because of the way interest payments are determined.
The interest rates on inverse floaters may be significantly reduced, even to
zero, if interest rates rise.

SHORT-TERM SECURITIES

Under certain circumstances, the Fund may invest in short-term municipal or U.S.
government securities, including money market instruments (short-term
securities). Except as otherwise required for temporary defensive purposes, BMC
does not expect the Fund's investments in short-term securities to exceed 35% of
total assets. If the Fund invests in U.S. government securities, a portion of
dividends paid to shareholders will be taxable at the federal level, and may be
taxable at the state level, as ordinary income. BMC intends to minimize such
investments, however, and may allow the Fund to hold cash to avoid generating
taxable dividends when suitable short-term municipal securities are unavailable.

Pursuant to an exemptive order that BMC received from the Securities and
Exchange Commission, for liquidity purposes, the Fund may invest up to 5% of its
assets in shares of a money market fund advised by BMC provided that the
investment is consistent with the Fund's investment policies and restrictions.

CONCENTRATION OF ASSETS IN OBLIGATIONS ISSUED TO FINANCE SIMILAR PROJECTS
OR FACILITIES

From time to time, a significant portion of the Fund's assets may be invested in
municipal obligations related to the extent that economic, business, or
political developments affecting one of these obligations could affect the other
obligations in a similar manner. For example, if the Fund invested a significant
portion of its assets in utility bonds and a state or federal government agency
or legislative body promulgated or enacted new environmental protection
requirements for utility providers, projects financed by utility bonds could
suffer as a class. Additional financing might be required to comply with the new
environmental requirements, and outstanding debt might be downgraded in

the interim. Among other factors that could negatively affect bonds issued to
finance similar types of projects are state and federal legislation regarding
financing for municipal projects, pending court decisions relating to the
validity or means of financing municipal projects, material or manpower
shortages, and declining demand for the projects or facilities financed by the
municipal bonds.

FUTURES AND OPTIONS

The Fund may enter into futures contracts, options, or options on futures
contracts. Some futures and options strategies, such as selling futures, buying
puts, and writing calls, hedge the Fund's investments against price
fluctuations. Other strategies, such as buying futures, writing puts, and buying
calls, tend to increase market exposure. The Fund does not use futures and
options transactions for speculative purposes.

Although other techniques may be used to control the Fund's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While the Fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than the
transaction costs incurred in the purchase and sale of the underlying
securities.

FUTURES CONTRACTS provide for the sale by one party and purchase by another
party of a specific security at a specified future time and price. Futures
contracts are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission (CFTC), a U.S. government agency. The Fund may engage in
futures and options transactions based on securities indexes, such as the Bond
Buyer Index of Municipal Bonds, that are consistent with the Fund's investment
objectives. The Fund may also engage in futures and options transactions based
on specific securities, such as U.S. Treasury bonds or notes.

Bond Buyer Municipal Bond Index futures contracts differ from traditional
futures contracts in that when delivery takes place, no bonds change hands.
Instead, these contracts settle in cash at the spot market value of the
Municipal Bond Index. Although other types of futures contracts, by their terms,
call for actual delivery or acceptance of the underlying securities, in most
cases the contracts are closed out before the settlement date. A futures
position may be closed by taking an opposite position in an identical contract
(i.e., buying a contract that has previously been sold or selling a contract
that has previously been bought).

To initiate and maintain open positions in a futures contract, the Fund would be
required to make a good faith margin deposit in cash or government securities
with a futures broker or custodian. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimum initial
margin requirements are established by the futures exchanges and may be revised.
In addition, brokers may establish deposit requirements that are higher than the
exchange minimums.

Once a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, the contract holder is
required to pay additional "variation" margin. Conversely, changes in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to or
from the futures broker for as long as the contract remains open and do not
constitute margin transactions for purposes of the Fund's investment
restrictions.

The Fund could suffer losses if it were unable to close out its position because
of an illiquid secondary market. Futures contracts may be closed out only on an
exchange that provides a secondary market for these contracts, and there is no
assurance that a liquid secondary market will exist for any particular futures
contract at any particular time. Consequently, it may not be possible to close a
futures position when BMC considers it appropriate or desirable to do so. In the
event of adverse price movements, the Fund would be required to continue making
daily cash payments to maintain its required margin. If the Fund had
insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when BMC would not otherwise elect to do so. In
addition, the Fund may be required to deliver or take delivery of instruments
underlying futures contracts it holds. BMC will seek to minimize these risks by
limiting the contracts it enters into on behalf of the Fund to those traded on
national futures exchanges and for which there appears to be a liquid secondary
market.

The Fund could suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments or if securities underlying
futures contracts purchased by the Fund had different maturities than those of
the portfolio securities being hedged. Such imperfect correlation might give
rise to circumstances in which the Fund lost money on a futures contract at the
same time that it experienced a decline in the value of its hedged portfolio
securities. The Fund could also lose margin payments it had deposited with a
margin broker if, for example, the broker became bankrupt.

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of the trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond the limit. However, the daily limit
governs only price movement during a particular trading day and, therefore, does
not limit potential losses. In addition, the daily limit may prevent liquidation
of unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.

OPTIONS ON FUTURES. By purchasing an option on a futures contract, the Fund
obtains the right, but not the obligation, to sell the futures contract (a put
option) or to buy the contract (a call option) at a fixed strike price. The Fund
can terminate its position in a put option by allowing it to expire or by
exercising the option. If the option is exercised, the Fund completes the sale
of the underlying security at the strike price. Purchasing an option on a
futures contract does not require the Fund to make margin payments unless the
option is exercised. Although it does not currently intend to do so, the Fund
may write (or sell) call options that obligate it to sell (or deliver) the
option's underlying instrument upon exercise of the option. While the receipt of
option premiums would mitigate the effects of price declines, the Fund would
give up some ability to participate in a price increase on the underlying
security. If the Fund were to engage in options transactions, it would own the
futures contract at the time a call were written and would keep the contract
open until the obligation to deliver it pursuant to the call expired.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS. The Fund may enter
into futures contracts, options, or options on futures contracts, provided that
such obligations represent no more

than 20% of the Fund's net assets. Under the Commodity Exchange Act, the Fund
may enter into futures and options transactions (a) for hedging purposes without
regard to the percentage of assets committed to initial margin and option
premiums or (b) for other than hedging purposes, provided that assets committed
to initial margin and option premiums do not exceed 5% of the Fund's net assets.
To the extent required by law, the Fund will set aside cash and appropriate
liquid assets in a segregated account to cover its obligations related to
futures contracts and options.

The Fund intends to comply with tax rules applicable to regulated investment
companies, including a requirement that gains from the sale of securities and
certain other instruments held less than three months constitute less than 30%
of the Fund's gross income for each fiscal year. Gains on some futures contracts
and options are included in this 30% calculation, which may limit the Fund's
investments in such instruments.

SPECIAL CONSIDERATIONS REGARDING ARIZONA MUNICIPAL SECURITIES

As briefly discussed in the Prospectus, the Fund is susceptible to political,
economic, and regulatory events that affect issuers of Arizona municipal
obligations. The following information about risk factors is provided in view of
the Fund's policy of concentrating its assets in Arizona municipal securities.
This information is based on certain official statements of the state of Arizona
published in connection with the issuance of specific Arizona municipal
securities as well as from other publicly available sources. It does not
constitute a complete description of the risk associated with investing in
securities of these issuers. While BMC has not independently verified the
information contained in the official statements, it has no reason to believe
the information is inaccurate.

Located in the country's sunbelt, Arizona has been, and is projected to continue
to be, one of the faster growing areas in the United States. Over the last
several decades, the state has outpaced most other regions of the country in
population and personal income growth, gross state product, and job creation.

Geographically, Arizona is the nation's sixth largest state in terms of area. It
is divided into three distinct topographic regions: the northern third which is
high plateau country traversed by deep canyons, such as Grand Canyon National
Park; central Arizona which is rugged, mountainous, and heavily forested; and
the southern third which encompasses desert areas and flat, fertile agricultural
lands in valleys between mountains rich in mineral deposits. These topographic
areas all have different climates, which have distinctively influenced
development in each region. Land ownership is vested largely in the federal and
state governments: 32% is owned by the federal government, 28% is held as
Federal Trust Land (Indian), 17% is in private ownership, and 13% is held by the
state, leaving approximately 10% held in other categories.

Over the last twenty-five years, the state's emphasis on the mining and
agricultural employment sectors has diminished, and significant job growth has
occurred in the areas of aerospace and high technology, construction, finance,
insurance, and real estate. Arizona's economy has continued to grow in recent
years, although at a slower rate of growth than was experienced in earlier
periods.

Under its constitution, the state of Arizona is not permitted to issue general
obligation bonds secured by the full faith and credit of the state. However,
certain agencies and instrumentalities of the state are authorized to issue
bonds secured by revenues from specific projects and activities, and the state
and local governmental units may enter into lease transactions. The particular
source of payments and security for an Arizona municipal obligation is detailed
in the instruments themselves and in related offering materials.

The state and local governmental units are subject to limitations imposed by
Arizona law with respect to ad valorem taxation, bonded indebtedness, the amount
of annual increases in taxes, and other matters. These limitations may affect
the ability of the issuers to generate revenues to satisfy their debt
obligations. There are periodic attempts in the form of voter initiatives and
legislative proposals to further limit the amount of annual increases in taxes
that may be levied without voter approval. If such a proposal were enacted,
there might be an adverse impact on state or local government financing.

Arizona is required by law to maintain a balanced budget. In the past, the state
has used a combination of spending reductions and tax increases to avoid
potential budgetary shortfalls and may be required to do so again in the future.

INVESTMENT RESTRICTIONS

The Fund's investment restrictions set forth below are fundamental and may not
be changed without approval of "a majority of the outstanding voting securities"
of the Fund, as defined in the Investment Company Act of 1940.

THE FUND MAY NOT:

(1) Borrow money, except from a bank as a temporary measure to satisfy
redemption requests or for extraordinary or emergency purposes and provided
that the Fund maintains asset coverage of at least 300% for all such
borrowings. The Fund may borrow money for temporary or emergency purposes
from other funds or portfolios for which BMC is the investment advisor or
from a joint account of such funds or portfolios as permitted by federal
regulatory agencies. Before such borrowing from another fund would be
permissible, the Fund would need to obtain exemptive relief from the staff
of the SEC. The Fund has no current intention to obtain such relief.

(2) Act as an underwriter of securities issued by others, except to the extent
that the Fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities, and
except to the extent that the purchase of municipal securities or other
permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Fund's investment policies and techniques may be deemed
to be an underwriting.

(3) Purchase or sell real estate, unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate or
securities of issuers engaged in the real estate business); physical
commodities or contracts relating to physical commodities; or interests in
oil, gas and/or mineral exploration or development programs or leases. This
restriction shall not be deemed to prohibit the Fund from purchasing or
selling currencies; entering into futures contracts on securities,
currencies, or on indexes of such securities or currencies, or any other
financial instruments; and purchasing and selling options on such futures
contracts.

(4) Make loans to others, except in accordance with the Fund's investment
objective and policies.

(5) Issue senior securities, except as permitted under the Investment Company
Act of 1940.

The Fund is also subject to the following restrictions, which are not
fundamental and may therefore be changed by the board of trustees without
shareholder approval.

THE FUND MAY NOT:

(a) Purchase equity securities in any company, including warrants, or bonds
with warrants attached, or any preferred stocks, convertible bonds, or
convertible debentures.

(b) Sell securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in options and futures contracts are not deemed to
constitute short sales of securities.

(c) Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions, and
provided that margin payments in connection with futures contracts and
options on futures contracts shall not constitute the purchase of
securities on margin.

(d) Invest in securities that are not readily marketable or the disposition of
which is restricted under federal securities laws (collectively, illiquid
securities) if, as a result, more than 10% of the Fund's net assets would
be invested in illiquid securities. The Fund may not invest more than 10%
of its net assets in repurchase agreements providing for settlement in more
than seven days, or options that are traded in the over-the-counter market
and investments hedged by such options.

(e) Acquire or retain the securities of any other investment company if, as a
result, more than 3% of such investment company's outstanding shares would
be held by the Fund, more than 5% of the value of the Fund's assets would
be invested in shares of such investment company, or more than 10% of the
value of the Fund's assets would be invested in shares of investment
companies in the aggregate, or except in connection with a merger,
consolidation, acquisition, or reorganization.

(f) Invest in securities of an issuer that, together with any predecessor or
unconditional guarantor, has been in operation for less than three years
if, as a result, more than 5% of the total assets of the Fund would then be
invested in such securities, except obligations issued or guaranteed by the
U.S. government or its agencies and municipal securities.

(g) Purchase any security if, as a result, 25% or more of the value of the
Fund's total assets would be invested in the securities of issuers having
their principal business activities in the same industry. However, this
limitation does not apply to securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities or to municipal
securities of any type.

Unless otherwise indicated, with the exception of the percentage limitations on
borrowing, the restrictions apply at the time transactions are entered into.
Accordingly, any later increase or decrease beyond the specified limitation
resulting from a change in the Fund's net assets will not be considered in
determining whether it has complied with its investment restrictions.

For purposes of the Fund's investment restrictions, the party identified as the
"issuer" of a municipal security depends on the form and conditions of the
security. When the assets and revenues of a political subdivision are separate
from those of the government that created the subdivision and the security is
backed only by the assets and revenues of the subdivision, the subdivision is
deemed the sole issuer. Similarly, in the case of an IDB, if the bond is backed
only by the assets and revenues of a nongovernmental user, the nongovernmental
user is deemed the sole issuer. If, in either case, the creating government or
some other entity were to guarantee the security, the guarantee would be
considered a separate security and would be treated as an issue of the
guaranteeing entity.

PORTFOLIO TRANSACTIONS

The Fund's assets are invested by BMC in a manner consistent with the Fund's
investment objectives, policies, and restrictions, and with any instructions the
board of trustees may issue from time to time. Within this framework, BMC is
responsible for making all determinations as to the purchase and sale of
portfolio securities and for taking all steps necessary to implement securities
transactions on behalf of the Fund.

In placing orders for the purchase and sale of portfolio securities, BMC will
use its best possible price and execution and will otherwise place orders with
broker-dealers subject to and in accordance with any instructions the board of
trustees may issue from time to time. BMC will select broker-dealers to execute
portfolio transactions on behalf of the Fund solely on the basis of best price
and execution.

Under normal conditions, the Fund's annual portfolio turnover rate is not
expected to exceed 100%. Because a higher turnover rate increases transaction
costs and may increase taxable capital gains, BMC carefully weighs the potential
benefits of short-term investing against these considerations.

The Fund's portfolio turnover rate for the years ended May 31, 1995 and May 31,
1996 were 33.22% and 35.78% respectively.

Investment decisions are made for the Fund independently from those made for
other funds advised by BMC. From time to time, however, two or more funds
advised by BMC may hold the same security. When two or more funds are
simultaneously engaged in purchasing or selling a security, the prices and
amounts are allocated in a manner believed by BMC to be equitable to each of the
funds involved. In some instances, simultaneous transactions could have a
detrimental effect on the price or value of a security as far as the
participating funds are concerned. In other instances, however, the ability to
participate in volume transactions will produce better prices and executions for
the funds.

VALUATION OF PORTFOLIO SECURITIES

The Fund's net asset value per share ("NAV") is calculated by Twentieth Century
Services, Inc. (TCS), as of the close of business of the New York Stock Exchange
(the "Exchange") each day the Exchange is open for business, usually at 3:00
p.m. Central Time. The Exchange has designated the following holiday closings
for 1996: New Year's Day (observed), Presidents` Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day (observed).
Although TCS expects the same holiday schedule to be observed in the future, the
Exchange may modify its holiday schedule at any time.

The Fund's share price is calculated by adding the value of all portfolio
securities and other assets, deducting liabilities, and dividing the result by
the number of shares outstanding. Expenses and interest earned on portfolio
securities are accrued daily.

Securities held by the Fund are normally priced by an independent pricing
service, provided that such prices are believed by BMC to reflect the fair
market value of portfolio securities.

Because the majority of outstanding municipal issues do not trade daily, the
prices provided by pricing services are generally determined without regard to
bid or last sale prices. In valuing securities, the pricing services generally
take into account institutional trading activity, trading in similar groups of
securities, and any developments related to specific securities. The methods
used

by the pricing service and the valuations so established are reviewed by BMC
under the general supervision of the board of trustees. There are a number of
pricing services available, and BMC, on the basis of ongoing evaluation of these
services, may use other pricing services or discontinue the use of any pricing
service in whole or in part.

Securities not priced by a pricing service are valued at the mean between the
most recently quoted bid and ask prices provided by broker-dealers. The
municipal bond market is typically a "dealer market"; that is, dealers buy and
sell bonds for their own accounts rather than for customers. As a result, the
spread, or difference between bid and asked prices, for certain municipal bonds
may differ substantially among dealers.

Securities maturing within 60 days of the valuation date may be valued at cost,
plus or minus any amortized discount or premium, unless the trustees determine
that this would not result in fair valuation of a given security. Other assets
and securities for which quotations are not readily available are valued in good
faith at their fair value using methods approved by the board of trustees. The
amortized cost method involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium paid at
the time of purchase. While this method provides certainty in valuation, it
generally disregards the effect of fluctuating interest rates on an instrument's
market value. Consequently, the instrument's amortized cost value may be higher
or lower than its market value, and this discrepancy may be reflected in the
Fund's yield. During periods of declining interest rates, for example, the daily
yield on Fund shares computed as described above may be higher than that of a
fund with identical investments priced at market value. The converse would apply
in a period of rising interest rates.

PERFORMANCE

The Fund's yields and total returns may be quoted in advertising and sales
literature. Yields and total return will vary, and past performance should not
be considered an indication of future results.

Yield quotations for the Fund are based on the investment income per share
earned during a particular 30-day period, less expenses accrued during the
period (net investment income), and are computed by dividing the Fund's net
investment income by its share price on the last day of the period according to
the following formula:
6
YIELD = 2 [(a - b + 1) - 1]
-----
cd

where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends, and d =
the maximum offering price per share on the last day of the period.

For the 30-day period ended May 31, 1996, the Fund's yield was 4.42%.

Total returns quoted in advertising and sales literature reflect all aspects of
the Fund's return, including the effect of reinvesting dividends and capital
gain distributions and any change in the Fund's NAV during the period.

Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in the Fund over a stated
period and then calculating the annually

compounded percentage rate that would have produced the same result if the rate
of growth or decline in value had been constant throughout the period. For
example, a cumulative return of 100% over ten years would produce an average
annual return of 7.18%, which is the steady annual rate that would equal 100%
growth on a compounded basis in ten years. While average annual total returns
are a convenient means of comparing investment alternatives, investors should
realize that the Fund's performance is not constant over time but changes from
year to year and that average annual total returns represent averaged figures as
opposed to actual year-to-year performance.

Performance for the fiscal year ended May 31, 1996 is listed in the chart below:

INTERMEDIATE-TERM FUND

One Year 4.65%
Since Inception 6.65

In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as percentages or as a dollar amount and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Performance information may be quoted numerically or in a table, graph,
or similar illustration.

The Fund's performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indexes of market
performance. This may include comparisons with funds that, unlike Benham funds,
are sold with a sales charge or deferred sales charge. Sources of economic data
that may be used for making such comparisons may include, but are not limited
to, U.S. Treasury bill, note, and bond yields, money market fund yields, U.S.
government debt and percentage held by foreigners, the U.S. money supply, net
free reserves, and yields on current-coupon GNMAs (source: Board of Governors of
the Federal Reserve System); the federal funds and discount rates (source:
Federal Reserve Bank of New York); yield curves for U.S. Treasury securities and
AA/AAA-rated corporate securities (source: Bloomberg Financial Markets); yield
curves for AAA-rated tax-free municipal securities (source: Telerate); yield
curves for foreign government securities (sources: Bloomberg Financial Markets
and Data Resources, Inc.); total returns on foreign bonds (source: J.P. Morgan
Securities Inc.); various U.S. and foreign government reports; the junk bond
market (source: Data Resources, Inc.); the CRB Futures Index (source: Commodity
Index Report); the price of gold (sources: London a.m./p.m. fixing and New York
Comex Spot Price); rankings of any mutual fund or mutual fund category tracked
by Lipper Analytical Services, Inc. or Morningstar, Inc.; mutual fund rankings
published in major nationally distributed periodicals; data provided by the
Investment Company Institute; Ibbotson Associates, Stocks, Bonds, Bills, and
Inflation; major indexes of stock market performance; and indexes and historical
data supplied by major securities brokerage or investment advisory firms. The
Fund may also utilize reprints from newspapers and magazines furnished by third
parties to illustrate historical performance.

The Fund's shares are sold without a sales charge (load). No-load funds offer an
advantage to investors when compared to load funds with comparable investment
objectives and strategies. If an investor pays $10,000 to buy shares of a load
fund with an 8.5% sales charge, $850 of that $10,000 is paid as a commission to
a salesperson, leaving only $9,150 to put to work for the investor. Over time,
the difference between paying a sales load and not paying one can have a
significant effect on an investor's total return. The Mutual Fund Education
Alliance provides a comparison of $10,000 invested in each of two mutual funds,
one with an 8.5% sales load and one without a sales load. Assuming a compounded
annual growth rate of 10% for both investments, the no-load fund investment is
worth $25,937 after ten years, and the load fund investment is worth only
$23,732.

TAXES

FEDERAL INCOME TAX

The Fund intends to qualify annually as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986 (the Code), as amended. By so
qualifying, each Fund will not incur federal and Arizona income taxes on its net
investment income and on net realized capital gains to the extent distributed to
shareholders.

It is intended that the Fund's assets will be sufficiently invested in municipal
securities to qualify to pay "exempt-interest dividends" (as defined in the
Code) to shareholders. The Fund's dividends payable from net tax-exempt interest
earned from municipal securities will qualify as exempt-interest dividends if,
at the close of each quarter of its taxable year, at least 50% of the value of
its total assets consists of municipal securities. Exempt-interest dividends
distributed to shareholders are not included in shareholders' gross income for
purposes of the regular federal income tax. The percentage of income that is
tax-exempt is applied uniformly to all distributions made during each calendar
year. This percentage may differ from the actual percentage of tax-exempt income
received during any particular month.

The Fund will determine periodically which distributions will be designated as
exempt-interest dividends. If the Fund earns income that is not eligible to be
designated as exempt-interest dividends, the Fund, nonetheless, intends to
distribute such income. Such distributions will be subject to federal, state,
and local taxes, as applicable, in the hands of shareholders.

Distributions of net investment income received by the Fund from investments in
debt securities other than municipal securities, of ordinary income realized
upon the disposition of market discount bonds (including tax-exempt market
discount bonds), and of any net realized short-term capital gains will be
taxable to shareholders as ordinary income. Because the Fund's investment income
is derived from interest rather than dividends, no portion of such distributions
is eligible for the dividends-received deduction available to corporations.

The timing of your investment could have undesirable tax consequences. If you
open an account or buy shares for your account before the day a dividend or
distribution is declared, you may receive a portion of your investment back as
taxable income if that dividend or distribution is not an exempt-interest
dividend.

Under the Code, any distribution from the Fund's net realized long-term capital
gains is taxable to shareholders as long-term capital gains, regardless of the
length of time shares have been held.

The Fund intends to comply with tax rules applicable to regulated investment
companies, including a requirement that capital gains from the sale of
securities held less than three months constitute less than 30% of the Fund's
gross income for each fiscal year. Gains on some futures contracts and options
are included in this 30% calculation, which may limit the investments in such
instruments.

Upon the sale or exchange of shares, a shareholder generally will realize a
taxable gain or loss depending upon his/her basis in the shares. Such gain or
loss will be treated as a capital gain or loss if the shares are capital assets
in the shareholder's hands and will be long-term if the shareholder's holding
period for the shares is more than one year and, generally, will otherwise be
short-term. However, any loss realized upon a sale or redemption of shares
within six months of their purchase

will be treated as long-term capital loss to the extent of capital gain
dividends received on such shares.

Any loss realized from a disposition of Fund shares held for six months or less
will be disallowed to the extent that dividends received from the Fund have been
designated as exempt-interest dividends. Any loss realized on a sale or exchange
of Fund shares also will be disallowed to the extent that the shares disposed of
are replaced (including replacement through reinvesting of dividends and capital
gain distributions in the Fund) within a period of 61 days beginning 30 days
before and ending 30 days after the disposition of the shares. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.

Interest on certain types of industrial development bonds is not exempt from
federal income tax when received by "substantial users" or persons related to
substantial users as defined in the Code. The term "substantial user" includes
any "nonexempt person" who regularly uses in trade or business part of a
facility financed from the proceeds of industrial development bonds. The Fund
may invest periodically in industrial development bonds and, therefore, may not
be an appropriate investment for entities that are substantial users of
facilities financed by industrial development bonds or "related persons" of
substantial users. Generally, an individual will not be a related person of a
substantial user under the Code unless he or his immediate family (spouse,
brothers, sisters, and lineal descendants) owns directly or indirectly in
aggregate more than 50% of the equity value of the substantial user.

Certain options, futures contracts, and forward contracts in which the Fund may
invest are "section 1256 contracts." Gains or losses on section 1256 contracts
generally are considered 60% long-term and 40% short-term capital gains or
losses (60-40). Also, section 1256 contracts held by the Fund at the end of each
taxable year (and, in some cases, for purposes of the 4% excise tax, on October
31 of each year) are marked to market with the result that unrealized gains or
losses are treated as though they were realized.

The hedging transactions undertaken by the Fund may result in straddles for
federal income tax purposes. The straddle rules may affect the character of
gains (or losses) realized by the Fund. In addition, losses realized by the Fund
on positions that are part of a straddle may be deferred under the straddle
rules, rather than being taken into account in calculating the taxable income
for the taxable year in which such losses are realized. Because only a few
regulations implementing the straddle rules have been promulgated, the tax
consequences to the Fund of hedging transactions are not entirely clear. The
hedging transactions may increase the amount of short-term capital gains
realized by the Fund, which are taxed as ordinary income when distributed to
shareholders.

The Fund may make one or more of the elections available under the Code that are
applicable to straddles. If the Fund makes any of the elections, the amount,
character, and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
elections made. The rules applicable under certain of the elections may operate
to accelerate the recognition of gains or losses from the affected straddle
positions.

Because application of the straddle rules may affect the character of gains or
losses, defer losses, and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount that must be distributed to
shareholders and that will be taxed to shareholders as ordinary income or a
long-term capital gain may be substantially more or less than for a fund that
did not engage in such hedging transactions.

Opinions relating to the tax status of interest derived from individual
municipal securities are rendered by bond counsel to the issuer. The Funds, the
investment manager, and the Fund's counsel do not review the proceedings
relating to the issuance of state or municipal securities on the basis of bond
counsel opinions..

From time to time, proposals have been introduced in Congress for the purpose of
restricting or eliminating the federal income tax exemption for interest on
municipal securities, and similar proposals may be introduced in the future. If
such a proposal were enacted, the availability of municipal securities for
investment by the Fund and the Fund's NAV would be adversely affected. Under
these circumstances, the trustees would reevaluate the Fund's investment
objectives and policies and would consider either changes in the structure of
the Trust or its dissolution.

ALTERNATIVE MINIMUM TAX

While the interest on bonds issued to finance essential state and local
government operations is generally tax-exempt, interest on certain nonessential
or private activity securities issued after August 7, 1986, while tax-exempt for
regular federal income tax purposes, constitutes a tax-preference item for
taxpayers in determining alternative minimum tax liability under the Code and
income tax provisions of several states. The interest on private activity
securities could subject a shareholder to, or increase liability under, the
federal alternative minimum tax, depending on the shareholder's tax situation.

All distributions derived from interest exempt from regular federal income tax
may subject corporate shareholders to, or increase their liability under, the
alternative minimum tax because these distributions are included in the
corporation's adjusted current earnings.

The Trust will inform shareholders annually as to the dollar amount of
distributions derived from interest payments on private activity securities.

STATE AND LOCAL TAXES

Under a ruling by the Arizona Department of Revenue, shareholders who are
otherwise subject to Arizona income tax will not be subject to such tax on
dividends paid by the Fund to the extent that such dividends are attributable to
either (a) obligations of the State of Arizona or its political subdivisions
thereof or (b) obligations issued by the governments of Guam, Puerto Rico, or
the Virgin Islands. In addition, dividends paid by the Fund that are
attributable to interest payments on direct obligations of the United States
government will not be subject to Arizona income tax so long as the Fund
qualifies as a regulated investment company under Subchapter M of the Code.
Other distributions from the Fund, however, such as distributions of short-term
or long-term capital gains, will generally not be exempt from Arizona income
tax.

The Fund's dividends may not qualify for exemption under income or other tax
laws of state or local taxing authorities outside of Arizona. Shareholders
should consult their tax advisors or state or local tax authorities about the
status of distributions from the Fund in this regard.

The information above is only a summary of some of the tax considerations
affecting the Fund and its shareholders. No attempt has been made to discuss
individual tax consequences. To determine whether the Fund is a suitable
investment based on his or her tax situation, a prospective shareholder may wish
to consult a tax advisor.

ABOUT THE TRUST

The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest without par value, which may
be issued in series (funds). Shares issued are fully paid and nonassessable and
have no preemptive, conversion, or similar rights.

The series votes separately on matters affecting that series exclusively. Voting
rights are not cumulative; investors holding more than 50% of the Trust's (i.e.,
all series') outstanding shares may elect a board of trustees. The Trust has
instituted dollar-based voting, meaning that the number of votes you are
entitled to is based upon the dollar value of your investment. The election of
trustees is determined by the votes received from all Trust shareholders without
regard to whether a majority of shareholders of any one series voted in favor of
a particular nominee or all nominees as a group. The shareholder has rights to
dividends and distributions declared by the Fund and in the net assets of such
Fund upon its liquidation or dissolution proportionate to his or her share
ownership interest in the Fund.

The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust. The Declaration of Trust also provides for
indemnification and reimbursement of expenses of any shareholder held personally
liable for obligations of the Trust. The Declaration of Trust provides that the
Trust will, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. The Declaration of Trust further provides that the Trust may maintain
appropriate insurance (for example, fidelity, bonding, and errors and omissions
insurance) for the protection of the Trust, its shareholders, trustees,
officers, employees, and agents to cover possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance exists and the Trust itself is unable to meet its obligations.

CUSTODIAN BANK: State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02101, is custodian of the Trust's assets. Services
provided by the custodian bank include (a) settling portfolio purchases and
sales, (b) reporting failed trades, (c) identifying and collecting portfolio
income, and (d) providing safekeeping of securities. The custodian takes no part
in determining the Fund's investment policies or in determining which securities
are sold or purchased by the Fund. Effective October 7, 1996, Chase Manhattan
Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245 will provide the custodian
services for the Fund.

INDEPENDENT AUDITORS: KPMG Peat Marwick LLP, 1000 Walnut, Suite 1600, Kansas
City, Missouri 64106, serves as the Trust's independent auditors. KPMG audits
the annual report and provides tax and other services.

TRUSTEES AND OFFICERS

The Trust's activities are overseen by a board of trustees, including seven
independent trustees. The individuals listed below whose names are marked by an
asterisk (*) are "interested persons" of the Trust (as defined in the Investment
Company Act of 1940) by virtue of, among other considerations, their affiliation
with either the Trust; the Trust's investment advisor, Benham Management
Corporation (BMC); the Trust's agent for transfer and administrative services,
Twentieth Century Services, Inc. (TCS); the Trust's distribution agent,
Twentieth Century Securities, Inc.; the parent corporation, Twentieth Century
Companies, Inc. (TCC) or TCC's subsidiaries; or other funds advised by BMC. The
trustees listed below serve as trustees or directors of other funds managed by
BMC. Unless otherwise noted, a date in parentheses indicates the date the
trustee or officer began his or her service in a particular capacity. The
trustees' and officers' address with the exception of Mr. Stowers III and Ms.
Roepke is 1665 Charleston Road, Mountain View, California 94043. The address of
Mr. Stowers III and Ms. Roepke is 4500 Main Street, Kansas City, Missouri 64111.

TRUSTEES

*JAMES M. BENHAM, chairman of the board of trustees (1985), president and chief
executive officer (1996). Mr. Benham is also chairman of the boards of Benham
Financial Services, Inc. (BFS) (1985), BMC (1971), and Benham Distributors, Inc.
(BDI) (1988); president of BMC (1971), and BDI (1988); and a member of the board
of governors of the Investment Company Institute (1988). Mr. Benham has been in
the securities business since 1963, and he frequently comments through the media
on economic conditions, investment strategies, and the securities markets.

ALBERT A. EISENSTAT, independent trustee (1995). Mr. Eisenstat is an independent
director of each of Commercial Metals Co. (1982), Sungard Data Systems (1991)
and Business Objects S/A (1994). Previously, he served as vice president of
corporate development and corporate secretary of Apple Computer and served on
its Board of Directors (1985 to 1993).

RONALD J. GILSON, independent trustee (1995); Charles J. Meyers Professor of Law
and Business at Stanford Law School (1979) and the Mark and Eva Stern Professor
of Law and Business at Columbia University School of Law (1992); counsel to
Marron, Reid & Sheehy (a San Francisco law firm, 1984).

MYRON S. SCHOLES, independent trustee (1985). Mr. Scholes is a principal of
Long-Term Capital Management (1993). He is also Frank E. Buck Professor of
Finance at the Stanford Graduate School of Business (1983) and a director of
Dimensional Fund Advisors (1982) and the Smith Breeden Family of Funds (1992).
From August 1991 to June 1993, Mr. Scholes was a managing director of Salomon
Brothers Inc. (securities brokerage).

KENNETH E. SCOTT, independent trustee (1985). Mr. Scott is Ralph M. Parsons
Professor of Law and Business at Stanford Law School (1972) and a director of
RCM Capital Funds, Inc. (June 1994).

EZRA SOLOMON, independent trustee (1985). Mr. Solomon is Dean Witter Professor
of Finance Emeritus at the Stanford Graduate School of Business, where he served
as Dean Witter Professor of Finance from 1965 to 1990, and a director of
Encyclopedia Britannica.

ISAAC STEIN, independent trustee (1992). Mr. Stein is former chairman of the
board (1990 to 1992) and chief executive officer (1991 to 1992) of Esprit de
Corp. (clothing manufacturer). He is a member of the board of Raychem
Corporation (electrical equipment, 1993), president of Waverley Associates, Inc.
(private investment firm, 1983), and a director of ALZA Corporation
(pharmaceuticals, 1987). He is also a trustee of Stanford University (1994) and
chairman of Stanford Health Services (hospital, 1994).

*JAMES E. STOWERS III, trustee (1995). Mr. Stowers III is president and director
of Twentieth Century Investors, Inc.; president and director, TCI Portfolios,
Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium
Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century
Companies, Inc., Investors Research Corporation and Twentieth Century Services,
Inc.

JEANNE D. WOHLERS, independent trustee (1985). Ms. Wohlers is a private investor
and an independent director and partner of Windy Hill Productions, LP.
Previously, she served as vice president and chief financial officer of Sybase,
Inc. (software company, 1988 to 1992).

OFFICERS

*JAMES M. BENHAM, president and chief executive officer (1996).

*DOUGLAS A. PAUL, secretary (1988), vice president (1990), and general counsel
(1990); secretary, vice president and general counsel of BMC, BFS, BDI and all
of the funds in the Benham Group.

*ANN N. McCOID, CPA, controller (1987); controller of BFS and all of the funds
in the Benham Group.

*MARYANNE ROEPKE, CPA, chief financial officer and treasurer (1995); vice
president, treasurer and principal accounting officer, Twentieth Century
Strategic Asset Allocations; vice president and treasurer, Twentieth Century
Investors, Inc., Twentieth Century World Investors, Inc., Twentieth Century
Capital Portfolios, Inc., Twentieth Century Premium Reserves, Inc. and TCI
Portfolios, Inc.; vice president, Twentieth Century Services, Inc.

The table on the following page summarizes the compensation that the trustees
received from the Fund for the Fund's fiscal year ended May 31, 1996, as well as
the compensation received for serving as a director or trustee of all other
funds managed by BMC.

TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED
MAY 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------
NAME OF AGGREGATE PENSION OR ESTIMATED TOTAL
TRUSTEE COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS COMPENSATION
FROM ACCRUED AS PART OF UPON RETIREMENT FROM FUND AND
THE FUND FUND EXPENSES FUND COMPLEX**
PAID TO TRUSTEES
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert A. Eisenstat $ 22 Not Applicable Not Applicable $47,750
- ---------------------------------------------------------------------------------------------------------------------------
Ronald J. Gilson $369 Not Applicable Not Applicable $97,333
- ---------------------------------------------------------------------------------------------------------------------------
Myron S. Scholes $369 Not Applicable Not Applicable $69,750
- ---------------------------------------------------------------------------------------------------------------------------
Kenneth E. Scott $386 Not Applicable Not Applicable $78,273
- ---------------------------------------------------------------------------------------------------------------------------
Ezra Solomon $291 Not Applicable Not Applicable $68,499
- ---------------------------------------------------------------------------------------------------------------------------
Isaac Stein $372 Not Applicable Not Applicable $71,500
- ---------------------------------------------------------------------------------------------------------------------------
Jeanne D. Wohlers $376 Not Applicable Not Applicable $73,750
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Interested directors receive no compensation for their services as such.

** Twentieth Century family of funds includes 66 no-load mutual funds.

As of July 31, 1996, the Trust's officers and trustees, as a group, owned less
than 1% of the Fund's outstanding shares.

INVESTMENT ADVISORY SERVICES

The Fund has an investment advisory agreement with Benham Management Corporation
(BMC) dated June 1, 1995, that was approved by shareholders on May 31, 1995.

BMC is a California corporation and a wholly owned subsidiary of Twentieth
Century Companies (TCC), a Delaware corporation. BMC, as well as BFS and BDI,
became wholly owned subsidiaries of TCC on June 1, 1995, upon the merger of
Benham Management International (BMI), the former parent of BFS and BDI, into
TCC. BMC has served as investment advisor to the Fund since the Fund's
inception. TCC is a holding company that owns all of the stock of the operating
companies that provide the investment management, transfer agency, shareholder
service, and other services for the Twentieth Century funds. James E. Stowers,
Jr., controls TCC by virtue of his ownership of a majority of its common stock.
BMC has been a registered investment advisor since 1971 and is investment
advisor to the rest of Twentieth Century's Benham brand of mutual funds.

The Fund's agreement with BMC continues for an initial period of two years and
thereafter from year to year provided that, after the initial two-year period,
it is approved at least annually by vote of a majority of the Fund's outstanding
shares or by vote of a majority of the Fund's directors, including a majority of
those directors who are neither parties to the agreement nor interested persons
of any such party, cast in person at a meeting called for the purpose of voting
on such approval.

The agreement is terminable on sixty days' written notice, either by the Fund or
by BMC, to the other party, and terminates automatically in the event of its
assignment.

Pursuant to the investment advisory agreement, BMC provides the Fund with
investment advice and portfolio management services in accordance with the
Fund's investment objectives, policies, and restrictions. BMC determines what
securities will be purchased and sold by the Fund and assists the Fund's
officers in carrying out decisions made by the board of directors.

For these services, the Fund pays BMC a monthly investment advisory fee based on
its pro rata share of the dollar amount derived from applying the Fund's average
daily net assets to the following investment advisory fee rate 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; and
.19% of net assets over $6.5 billion;

Investment advisory fees paid by the Fund to BMC for the fiscal period ended May
31, 1995, is indicated in the following table. Fee amounts are net of expense
limitations/recoupments as described below.

FISCAL PERIOD INVESTMENT ADVISORY FEES

Year ended 5/31/96 $0
Year ended 5/31/95 0
April 11, 1994-May 31, 1995 0

TRANSFER AND ADMINISTRATIVE SERVICES

Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri,
64111, (TCS) acts as transfer, administrative services and dividend paying agent
for the Fund. TCS provides facilities, equipment and personnel to the Fund and
is paid for such services by the Fund. For administrative services, each Fund
pays TCS a monthly fee equal to its pro rata share of the dollar amount derived
from applying the average daily net assets of all of the Fund managed by the
Manager to the following administrative fee rate schedule:

GROUP ASSETS ADMINISTRATIVE FEE RATE

up to $4.5 billion .11%
up to $6.0 billion .10
up to $9.0 billion .09
over $9.0 billion .08

For transfer agent services, the Fund pays TCS monthly fees of $1.3958 for each
shareholder account maintained and $1.35 for each shareholder transaction
executed during that month.

Due to reimbursements, the Fund paid no administrative services or transfer
agent fees to during the fiscal period from April 11, 1994 (commencement of
operations), through May 31, 1994, and for the years ended May 31, 1995 and
1996.

DIRECT FUND EXPENSES

The Fund pays certain operating expenses that are not assumed by BMC or TCS.
These include fees and expenses of the independent trustees; custodian, audit,
and pricing fees; fees of outside counsel and counsel employed directly by the
Trust; costs of printing and mailing prospectuses, statements of additional
information, proxy statements, notices, confirmations, and reports to
shareholders; fees for registering the Fund's shares under federal and state
securities laws; brokerage fees and commissions; trade association dues; costs
of fidelity and liability insurance policies covering the Fund; costs for
incoming WATS lines maintained to receive and handle shareholder inquiries; and
organizational costs.

EXPENSE LIMITATION AGREEMENT

Under an Expense Limitation Agreement between the Fund and BMC, BMC is obligated
to limit the Fund's expenses to .67% of average daily net assets through May 31,
1997.

The expense limit is subject to annual renewal. The expense limits for the years
ended May 31, 1995 and May 31, 1996 were .66% and .69%, respectively, of average
daily net assets.

Net reimbursements paid by BMC for the fiscal year ended May 31, 1995 and May
31, 1996 were $139,257 and $157,428.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Fund's shares are available only to residents of Arizona, California,
Colorado, Nevada, Oregon, Washington, and Texas. The Fund's shares are
continuously offered at net asset value. Share certificates are issued (without
charge) only when requested in writing. Certificates are not issued for
fractional shares. Dividend and voting rights are not affected by the issuance
of certificates.

Twentieth Century may reject or limit the amount of an investment to prevent any
one shareholder or affiliated group from controlling the Trust or one of its
series; to avoid jeopardizing a series' tax status; or whenever, in management's
opinion, such rejection is in the Trust's or a series' best interest. The matrix
below shows the names, addresses, and holdings of all shareholders of record who
owned more than 5% of a Fund's outstanding shares.

- --------------------------------------------------------------------------------
FUND SHAREHOLDER # OF SHARES HELD % OF TOTAL
NAME AND ADDRESS SHARES OUTSTANDING

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

Arizona Municipal Charles Schwab & Co. 405,547.960 16.3%
Intermediate-Term 101 Montgomery Street
Fund San Francisco, CA 94104

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

As of July 31, 1996, to the knowledge of the Trust, no other shareholder was the
beneficial shareholder or record shareholder of 5% or more of the Fund's total
shares outstanding.

TCS charges neither fees nor commissions on the purchase and sale of fund
shares. However, TCS may charge fees for special services requested by a
shareholder or necessitated by acts or omissions of a shareholder. For example,
TCS may charge a fee for processing dishonored investment checks or stop-payment
requests. See the Investor Services Guide for more information.

OTHER INFORMATION

The Fund's investment advisor, Benham Management Corporation (BMC), has been
continuously registered with the Securities and Exchange Commission under the
Investment Advisers Act of 1940 since December 14, 1971. The Trust has filed a
registration statement under the Securities Act of 1933 and the Investment
Company Act of 1940 with respect to the shares offered. Such registrations do
not imply approval or supervision of the Trust or the advisor by the Securities
and Exchange Commission.

For further information, refer to the registration statement and exhibits on
file with the Securities and Exchange Commission in Washington, D.C. These
documents are available upon payment of a reproduction fee. Statements in the
Prospectus and in this Statement of Additional Information concerning the
contents of contracts or other documents, copies of which are filed as exhibits
to the registration statement, are qualified by reference to such contracts or
documents.

MUNICIPAL SECURITIES RATINGS

Securities rating descriptions provided under this heading are excerpted from
publications of Moody's Investors Service, Inc. and Standard & Poor's
Corporation.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:

Aaa: Bonds that are rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds that are rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group, they constitute what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make long-term risks appear somewhat larger than in Aaa securities.

A: Bonds that are rated "A" possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.

Baa: Bonds that are rated "Baa" are considered medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.

Ba: Bonds that are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds that are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be limited.

Caa: Bonds that are rated "Caa" are of poor standing. Such issues may be in
default, or there may be elements of danger present with respect to principal or
interest.

Ca: Bonds that are rated "Ca" represent obligations that are speculative to a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds that are rated "C" are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

NOTE: Moody's may apply the numerical modifier "1" for municipally backed bonds
and modifiers "1," "2," and "3" for corporate-backed municipal bonds. The
modifier "1" indicates that the security ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking, and the
modifier "3" indicates that the issue ranks in the lower end of its generic
rating category.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF NOTES AND
VARIABLE-RATE DEMAND OBLIGATIONS:

Moody's ratings for state and municipal short-term obligations are designated
Moody's Investment Grade or MIG. Such ratings recognize the differences between
short-term credit and long-term risk. Short-term ratings on issues with demand
features (variable-rate demand obligations) are differentiated by the use of the
VMIG symbol to reflect such characteristics as payment upon periodic demand
rather than on fixed maturity dates and payments relying on external liquidity.

MIG 1/VMIG 1: This designation denotes best quality. There is strong protection
present through established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.

MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample,
although not as large as in the preceding group.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S TAX-EXEMPT COMMERCIAL PAPER
RATINGS:

Moody's commercial paper ratings are opinions of the ability of issuers to
punctually repay those promissory obligations that have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment ability of rated issuers of
securities in which the Funds may invest.

PRIME 1: Issuers rated "Prime 1" (or supporting institutions) have a superior
ability for repayment of senior short-term promissory obligations.

PRIME 2: Issuers rated "Prime 2" (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR MUNICIPAL BONDS:

INVESTMENT GRADE

AAA: Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in a small degree.

A: Debt rated "A" has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

SPECULATIVE

BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.

BB: Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions that could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

B: Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also

used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.

CCC: Debt rated "CCC" has a currently identifiable vulnerability to default and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

CC: The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" debt rating.

C: The "C" rating is typically applied to debt subordinated to senior debt that
is assigned an actual or implied "CCC-" debt rating. The "C" rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

CI: The "CI" rating is reserved for income bonds on which no interest is being
paid.

D: Debt rated "D" is in default, and payment of interest and/or repayment
of principal is in arrears.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR INVESTMENT GRADE
MUNICIPAL NOTES AND SHORT-TERM DEMAND OBLIGATIONS:

SP-1: Issues carrying this designation have a very strong or strong capacity to
pay principal and interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+) designation.

SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR DEMAND OBLIGATIONS
AND TAX-EXEMPT COMMERCIAL PAPER:

A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The two rating categories for securities in which the Funds may invest
are as follows:

A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) designation.

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."

27
<PAGE>
BENHAM FLORIDA MUNICIPAL MONEY MARKET FUND
BENHAM FLORIDA MUNICIPAL INTERMEDIATE-TERM FUND

SERIES OF BENHAM MUNICIPAL TRUST

4500 Main Street
Kansas City, MO 64111

Person-to-Person Assistance: 1-800-345-2021 or 816-531-5575
Automated: 1-800-345-8765

STATEMENT OF ADDITIONAL INFORMATION

September 3, 1996

This Statement is not a prospectus but should be read in conjunction with the
Funds' current Prospectus dated September 3, 1996. The Funds' Annual Report for
the fiscal year ended May 31, 1996 is incorporated herein by reference. To
obtain a copy of the Prospectus or Annual Report, call or write Twentieth
Century Mutual Funds.

TABLE OF CONTENTS
Page

Investment Policies and Techniques 2
Special Considerations Regarding Florida Municipal Securities 9
Investment Restrictions 10
Portfolio Transactions 12
Valuation of Portfolio Securities 13
Performance 15
Taxes 17
About the Trust 20
Trustees and Officers 21
Investment Advisory Services 23
Transfer and Administrative Services 24
Direct Fund Expenses 25
Expense Limitation Agreements 25
Additional Purchase and Redemption Information 25
Other Information 26

NOTE: Throughout this Statement of Additional Information, Benham Florida
Municipal Money Market Fund will be referred to as the Money Market Fund, and
Benham Florida Municipal Intermediate-Term Fund will be referred to as the
Intermediate-Term Fund.

INVESTMENT POLICIES AND TECHNIQUES

MUNICIPAL NOTES

Municipal notes are issued by state and local governments or government entities
to provide short-term capital or to meet cash flow needs.

BOND ANTICIPATION NOTES (BANS) are issued to provide interim financing until
long-term financing can be arranged. In most cases, the long-term bonds provide
the money for repayment of the notes.

MUNICIPAL BONDS

INDUSTRIAL DEVELOPMENT BONDS (IDBs), a type of revenue bond, are issued by or on
behalf of public authorities to finance privately operated facilities. These
bonds are used to finance business,

VARIABLE- AND FLOATING-RATE DEMAND OBLIGATIONS

The Funds may buy variable- and floating-rate demand obligations (VRDOs and
FRDOs). These obligations carry rights that permit holders to demand payment of
the unpaid principal, plus accrued interest, from the issuers or from financial
intermediaries. Floating-rate securities have interest rates that change
whenever there is a change in a designated base rate; variable-rate instruments
provide for a specified, periodic adjustment in the interest rate, which
typically is based on an index. These rate formulas are designed to result in a
market value for the VRDO or FRDO that approximates par value.

OBLIGATIONS WITH TERM PUTS ATTACHED

Each Fund may invest in fixed-rate bonds subject to third party puts and in
participation interests in such bonds held by a bank in trust or otherwise.
These bonds and participation interests have tender options or demand features
that permit the Funds to tender (or put) their bonds to an institution at
periodic intervals and to receive the principal amount thereof.

Benham Management Corporation (BMC), the Funds' investment advisor, expects that
the Funds will pay more for securities with puts attached than for securities
without these liquidity features. BMC may buy securities with puts attached to
keep a Fund fully invested in municipal securities while maintaining sufficient
portfolio liquidity to meet redemption requests or to facilitate management of
the Funds' investments. To ensure that the interest on municipal securities
subject to puts is tax-exempt to the Funds, BMC limits the Funds' use of puts in
accordance with applicable interpretations and rulings of the Internal Revenue
Service (IRS).

Because it is difficult to evaluate the likelihood of exercise or the potential
benefit of a put, puts normally will be determined to have a value of zero,
regardless of whether any direct or indirect consideration is paid. Accordingly,
puts as separate securities are not expected to affect the Funds' weighted
average maturities. Where a Fund has paid for a put, the cost will be reflected
as unrealized depreciation on the underlying security for the period the put is
held. Any gain on the sale of the underlying security will be reduced by the
cost of the put.

There is a risk that the seller of a put will not be able to repurchase the
underlying obligation when, or if, a Fund attempts to exercise the put. To
minimize such risks, the Funds will purchase obligations with puts attached only
from sellers deemed creditworthy by BMC under the direction of the board of
trustees.

TENDER OPTION BONDS

Tender option bonds (TOBs) were created to increase the supply of high-quality,
short-term tax-exempt obligations, and thus they are of particular interest to
the Money Market Fund. However, either Fund may purchase these instruments.

TOBs are created by municipal bond dealers who purchase long-term tax-exempt
bonds in the secondary market, place the certificates in trusts, and sell
interests in the trusts with puts or other liquidity guarantees attached. The
credit quality of the resulting synthetic short-term instrument is based on the
guarantor's short-term rating and the underlying bond's long-term rating.

There is some risk that a remarketing agent will renege on a tender option
agreement if the underlying bond is downgraded or defaults. Because of this, BMC
monitors the credit quality of bonds underlying the Funds' TOB holdings and
intends to sell or put back any TOB if the rating on its underlying bond falls
below the second highest rating category designated by a nationally recognized
statistical rating agency (a "rating agency").

After purchase, BMC monitors factors related to the tax-exempt status of the
Fund's TOB holdings in order to minimize the risk of generating taxable income.

WHEN-ISSUED AND FORWARD COMMITMENTS

The Funds may engage in securities transactions on a when-issued or forward
commitment basis in which the transaction price and yield are each fixed at the
time the commitment is made, but payment and delivery occur at a future date
(typically 15 to 45 days later).

When purchasing securities on a when-issued or forward commitment basis, each
Fund assumes the rights and risks of ownership, including the risk of price and
yield fluctuations. While the Funds will make commitments to purchase or sell
securities with the intention of actually receiving or delivering them, it may
nevertheless sell the securities before the settlement date if deemed advisable
as a matter of investment strategy.

In purchasing securities on a when-issued or forward commitment basis, each Fund
will establish and maintain until the settlement date a segregated account
consisting of cash, U.S. government securities, or other high-quality liquid
debt securities in an amount sufficient to meet the purchase price. When the
time comes to pay for when-issued securities, the Fund will meet its obligations
with available cash, through the sale of securities, or, although it would not
normally expect to do so, through sales of when-issued securities themselves
(which may have a market value greater or less than the Fund's payment
obligation). Selling securities to meet when-issued or forward commitment
obligations may generate taxable capital gains or losses.

As an operating policy, each Fund will not commit greater than 50% of its total
assets to when-issued or forward commitment agreements. If fluctuations in the
value of securities held cause more than 50% of a Fund's total assets to be
committed under when-issued or forward commitment agreements, BMC need not sell
such agreements, but it will be restricted from entering into further agreements
on behalf of the Fund until the percentage of assets committed to such
agreements is below 50% of total assets.

MUNICIPAL LEASE OBLIGATIONS

Each Fund may invest in municipal lease obligations. These obligations, which
may take the form of a lease, an installment purchase, or a conditional sale
contract, are issued by state and local governments and authorities to acquire
land and a wide variety of equipment and facilities. Generally, the Funds will
not hold such obligations directly as a lessor of the property but will purchase
a participation interest in a municipal lease obligation from a bank or other
third party.

Municipal leases frequently carry risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set forth
requirements that states and municipalities must meet to incur debt. These may
include voter referenda, interest rate limits, or public sale requirements.
Leases, installment purchases, and conditional sale contracts (which normally
provide for the title to the leased asset to pass to the government issuer) have
evolved as a way for government issuers to acquire property and equipment
without meeting their constitutional and statutory requirements for the issuance
of debt.

INVERSE FLOATERS (INTERMEDIATE-TERM FUND)

The Intermediate-Term Fund may buy or sell inverse floaters. An inverse floater
is a type of derivative that bears an interest rate that moves inversely to
market interest rates. As market interest rates rise, the interest rate on
inverse floaters goes down, and vice versa. Generally, this is accomplished by
expressing the interest rate on the inverse floater as an above-market fixed
rate of interest, reduced by an amount determined by reference to a market-based
or bond-specific floating interest rate (as well as by any fees associated with
administering the inverse floater program).

(a) Floater holders receive interest based on rates set at a Dutch Auction,
which is typically held every 28 to 35 days. Current and prospective
floater holders bid the minimum interest rate that they are willing to
accept on the floaters, and the interest rate is set just high enough to
ensure that all of the floaters are sold.

(b) Inverse floater holders receive all of the interest that remains on the
underlying bonds after floater interest and auction fees are paid.

The secondary market for floaters and inverse floaters may be limited. The
market value of inverse floaters tends to be significantly more volatile than
fixed-rate bonds. The interest rates on inverse floaters may be significantly
reduced, even to zero, if interest rates rise.

SHORT-TERM SECURITIES (INTERMEDIATE-TERM FUND)

Under certain circumstances, the Intermediate-Term Fund may invest in short-term
municipal or U.S. government securities, including money market instruments
(short-term securities). Except as otherwise required for temporary defensive
purposes, BMC does not expect the Funds' investments in short-term securities to
exceed 35% of total assets. If the Fund invests in U.S. government securities, a
portion of dividends paid to shareholders will be taxable at the federal level
and may be taxable at the state level, as ordinary income. BMC intends to
minimize such investments, however, and may allow the Fund to hold cash to avoid
generating taxable dividends when suitable short-term municipal securities are
unavailable.

Pursuant to an exemptive order that BMC received from the Securities and
Exchange Commission (SEC), for liquidity purposes, the Intermediate-Term Fund
may invest up to 5% of its total assets in shares of a money market fund advised
by BMC, provided that the investment is consistent with the Fund's investment
policies and restrictions.

CONCENTRATION OF ASSETS IN OBLIGATIONS ISSUED TO FINANCE SIMILAR PROJECTS OR
FACILITIES

significant portion of its assets in utility bonds and a state or federal
government agency or legislative body promulgated or enacted new environmental
protection requirements for utility providers, projects financed by utility
bonds that the Fund holds could suffer as a class. Additional financing might be
required to comply with the new environmental requirements, and outstanding debt
might be downgraded in the interim. Among other factors that could negatively
affect bonds issued to finance similar types of projects are state and federal
legislation regarding financing for municipal projects, pending court decisions
relating to the validity or means of financing municipal projects, material or
manpower shortages, and declining demand for the projects or facilities financed
by the municipal bonds.

FUTURES AND OPTIONS (INTERMEDIATE-TERM FUND)

The Intermediate-Term Fund may enter into futures contracts, options, or options
on futures contracts. Some futures and options strategies, such as selling
futures, buying puts, and writing calls, hedge the Fund's investments against
price fluctuations. Other strategies, such as buying futures, writing puts, and
buying calls, tend to increase market exposure.
The Fund does not use futures and options transactions for speculative purposes.

Although other techniques may be used to control the Fund's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While a Fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than the
transaction costs incurred in the purchase and sale of the underlying
securities.

Although futures contracts, by their terms, call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date. A futures position may be closed out by taking
an opposite position in an identical contract (i.e., buying a contract that has
previously been sold, or selling a contract that has previously been bought).

To initiate and maintain open positions in a futures contract, a Fund would be
required to make a good faith margin deposit in cash or government securities
with a broker or custodian. A margin deposit is intended to assure completion of
the contract (delivery or acceptance of the underlying security) if it is not
terminated prior to the specified delivery date. Minimum initial margin
requirements are established by the futures exchanges and may be revised. In
addition, brokers may establish margin deposit requirements that are higher than
the exchange minimums.

RISKS RELATED TO FUTURES AND OPTIONS TRANSACTIONS. Futures and options prices
can be volatile, and trading in these markets involves certain risks. If BMC
applies a hedge at an inappropriate time or judges interest rate trends
incorrectly, futures and options strategies may lower a Fund's return. A Fund
could suffer losses if it were unable to close out its position because of an
illiquid secondary market.

Futures contracts may be closed out only on an exchange that provides a
secondary market for these contracts, and there is no assurance that a liquid
secondary market will exist for any particular futures contract at any
particular time. Consequently, it may not be possible to close a futures
position when BMC considers it appropriate or desirable to do so. In the event
of adverse price movements, the Fund would be required to continue making daily
cash payments to maintain its required margin. If the Fund had insufficient
cash, it might have to sell portfolio securities to meet daily margin
requirements at a time when BMC would not otherwise elect to do so. In addition,
the Fund may be required to deliver or take delivery of instruments underlying
futures contracts it holds. BMC will seek to minimize these risks by limiting
the contracts it enters into on behalf of the Fund to those traded on national
futures exchanges and for which there appears to be a liquid secondary market.

The Fund could suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments or if securities underlying
futures contracts purchased by the Fund had different maturities than those of
the portfolio securities being hedged. Such imperfect correlation may give rise
to circumstances in which the Fund loses money on a futures contract at the same
time that it experiences a decline in the value of its hedged portfolio
securities. The Fund could also lose margin payments it has deposited with a
margin broker if, for example, the broker becomes bankrupt.

thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.

Although it does not currently intend to do so, the Fund may write (or sell)
call options that obligate them to sell (or deliver) the option's underlying
instrument upon exercise of the option. While the receipt of option premiums
would mitigate the effects of price declines, the Fund would give up some
ability to participate in a price increase on the underlying security. If the
Fund were to engage in options transactions, it would own the futures contract
at the time a call was written and would keep the contract open until the
obligation to deliver it pursuant to the call expired.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS. The Intermediate-Term
Fund may enter into futures contracts, options, or options on futures contracts,
provided that such obligations represent no more than 20% of the Fund's net
assets. Under the Commodity Exchange Act, a fund may enter into futures and
options transactions (a) for hedging purposes without regard to the percentage
of assets committed to initial margin and option premiums or (b) for other than
hedging purposes, provided that assets committed to initial margin and option
premiums do not exceed 5% of the fund's net assets. To the extent required by
law, the Fund will set aside cash and appropriate liquid assets in a segregated
account to cover its obligations related to futures contracts and options.

The Fund intends to comply with tax rules applicable to regulated investment
companies, including a requirement that capital gains from the sales of
securities held less than three months constitute less than 30% of a Fund's
gross income for each fiscal year. Gains on some futures contracts and options
are included in this 30% calculation, which may limit the Fund's investments in
such instruments.

SPECIAL CONSIDERATIONS REGARDING FLORIDA MUNICIPAL SECURITIES

As briefly discussed in the Prospectus, the Funds are susceptible to political,
economic, and regulatory events that affect issuers of Florida municipal
obligations. The following information about risk factors is provided in view of
the Funds' policies of concentrating their assets in Florida municipal
securities. This information is based on independent municipal credit reports
relating to securities offerings of Florida issuers and other publicly available
sources. It does not constitute a complete description of the risk associated
with investing in securities of these issuers. While BMC has not independently
verified this information, it has no reason to believe the information is
inaccurate.

Because the Funds invest primarily in Florida municipal securities, the Funds
will be affected by political and economic conditions and developments within
the state of Florida. In general, the credit quality and credit risk of any
issuer's debt depend on the state and local economy, the health of the issuer's
finances, the amount of the issuer's debt, the quality of management, and the
strength of legal provisions in debt documents that protect debt holders. Credit
risk is usually lower whenever the economy is strong, growing and diversified,
financial operations are sound, and the debt burden is reasonable.

The state of Florida's economy is characterized by a large service sector, a
dependence on the tourism and construction industries, and a large retirement
population. The management of rapid growth has been the major challenge facing
state and local governments. Florida's population has grown rapidly and is now
the fourth largest state; this growth is expected to continue, but at reduced
rates. The retiree component is expected to continue to be a major factor. As
this growth continues, particularly within the retirement population, the demand
for both public and private services will increase, which may strain the service
sector's capacity and impede the state's budget balancing efforts.

In recent years, the Florida economy has been transforming from a narrow base of
agriculture and seasonal tourism into a service and trade economy, with
substantial insurance, banking, and export participation as well as greater
year-round attraction. The outlook for the Florida economy is continued
expansion fueled by population growth but at a slower rate than that of the
1980s.

Debt levels in the state of Florida are moderate to high, reflecting the
tremendous capital demands associated with rapid population growth. Florida is
unusual among states in that all general obligation full faith and credit debt
issues of municipalities must be approved by public referendum and are,
therefore, relatively rare. Most debt instruments issued by local municipalities
and authorities have a narrower pledge of security, such as a sales tax stream,
special assessment revenue, user fees, utility taxes, or fuel taxes. Credit
quality of such debt instruments tends to be somewhat lower than that of general
obligation debt. The state of Florida issues general obligation debt for a
variety of purposes; however, the state constitution requires a specific revenue
stream to be pledged to state general obligation bonds as well.

The state of Florida is heavily dependent upon sales tax, which makes the
state's general fund vulnerable to recession and presents difficulties in
expanding the tax base in an economy increasingly geared to services. This
dependence upon sales tax, combined with economic recession, has resulted in
budgetary shortfalls in the past; Florida has reacted to preserve an adequate
financial position primarily through expenditure reductions. State officials,
however, still face tremendous capital and operating pressures due to the growth
that will continue to strain the state's narrow revenue base. Future budgets may
require a wider revenue base to meet such demands; the most likely candidate for
such revenue enhancement is a tax on consumer services. The creation of a
Florida personal income tax is a remote possibility because it would require an
amendment to the state's constitution. However, there can be no assurance that a
personal income tax will not be implemented in the future if such a tax were to
be imposed, there is no assurance that interest earned on Florida municipal
obligations would be exempt from this tax.

INVESTMENT RESTRICTIONS

Each of the Fund's investment restrictions are set forth below. Except for those
designated as operating policies, these restrictions are fundamental and may not
be changed without approval of "a majority of the outstanding voting securities"
of the Fund as defined in the Investment Company Act of 1940.

A FUND MAY NOT:

purposes from other funds or portfolios for which BMC is the investment
advisor or from a joint account of such funds or portfolios as permitted by
federal regulatory agencies. Before such borrowing from another fund would
be permissible, the Fund would need to obtain exemptive relief from the
staff of the SEC. The Fund has no current intent of obtaining such relief.

(3) Purchase or sell real estate, unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent a Fund from
investing in securities or other instruments backed by real estate or
securities of issuers engaged in the real estate business); physical
commodities or contracts relating to physical commodities; or interests in
oil, gas and/or mineral exploration or development programs or leases. This
restriction shall not be deemed to prohibit a Fund from purchasing or
selling currencies; entering into futures contracts on securities,
currencies, or on indexes of such securities or currencies, or any other
financial instruments; and purchasing and selling options on such futures
contracts.

(4) Make loans to others, except in accordance with the Fund's investment
objective and policies.

(5) Issue senior securities, except as permitted under the Investment Company
Act of 1940.

The Funds are also subject to the following restrictions, which are not
fundamental and may therefore be changed by the board of trustees without
shareholder approval.

A FUND MAY NOT:

(a) Purchase equity securities in any companies, including warrants or bonds
with warrants attached, or any preferred stocks, convertible bonds, or
convertible debentures.

(d) Invest in securities that are not readily marketable or the disposition of
which is restricted under federal securities laws (collectively, illiquid
securities) if, as a result, more than 10% of the Florida Municipal Money
Market Fund's net assets or more than 15% of the Intermediate-Term Fund's
net assets would be invested in illiquid securities.

For purposes of the Funds' investment restrictions, the party identified as the
"issuer" of a municipal security depends on the form and conditions of the
security. When the assets and revenues of a political subdivision are separate
from those of the government that created the subdivision, and the security is
backed only by the assets and revenues of the subdivision, the subdivision is
deemed the sole issuer. Similarly, in the case of an IDB, if the bond is backed
only by the assets and revenues of a nongovernmental user, the nongovernmental
user would be deemed the sole issuer. If, in either case, the creating
government or some other entity were to guarantee the security, the guarantee
would be considered a separate security and would be treated as an issue of the
guaranteeing entity.

PORTFOLIO TRANSACTIONS

Each Fund's assets are invested by BMC in a manner consistent with the Fund's
investment objectives, policies, and restrictions, and with any instructions the
board of trustees may issue from time to time. Within this framework, BMC is
responsible for making all determinations as to the purchase and sale of
portfolio securities and for taking all steps necessary to implement securities
transactions on behalf of the Funds. In placing orders for the purchase and sale
of portfolio securities, BMC will use its best possible price and execution and
will otherwise place orders with broker-dealers subject to and in accordance
with any instructions the board of trustees may issue from time to time. BMC
will select broker-dealers to execute portfolio transactions on behalf of the
Funds solely on the basis of best price and execution.

Under normal conditions, the Intermediate-Term Fund's annual portfolio turnover
rate is not expected to exceed 100%. Because a higher turnover rate increases
transaction costs and may increase taxable capital gains, BMC carefully weighs
the potential benefits of short-term investing against these considerations.

The Intermediate-Term Fund's portfolio turnover rates for the fiscal years ended
May 31, 1996 and 1995 were 66.39% and 36.63%, respectively.

Investment decisions are made for each Fund independently from those made for
other funds advised by BMC. From time to time, however, two or more funds
advised by BMC may hold the same security. When two or more funds are
simultaneously engaged in purchasing or selling a security, the prices and
amounts are allocated in a manner believed by BMC to be equitable to each of the
funds involved. In some instances, simultaneous transactions could have a
detrimental effect on the price or value of a security as far as the
participating funds are concerned. In other instances, however, the ability to
participate in volume transactions will produce better prices and executions for
the funds.

VALUATION OF PORTFOLIO SECURITIES

Each Fund's net asset value per share ("NAV") is calculated by Twentieth Century
Services, Inc. (TCS), as of the close of business of the New York Stock Exchange
(the "Exchange") each day the Exchange is open for business, usually at 3:00
p.m. Central Time. The Exchange has designated the following holiday closings
for 1996: New Year's Day (observed), Presidents` Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day (observed).
Although TCS expects the same holiday schedule to be observed in the future, the
Exchange may modify its holiday schedule at any time.

BMC typically completes its trading on behalf of each Fund in various markets
before the Exchange closes for the day. Each Fund's share price is calculated by
adding the value of all portfolio securities and other assets, deducting
liabilities, and dividing the result by the number of shares outstanding.
Expenses and interest on portfolio securities are accrued daily.

MONEY MARKET FUND. Securities held by the Money Market Fund are valued at
amortized cost. This method involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium paid at the time of purchase. While this method provides certainty in
valuation, it generally disregards the effect of fluctuating interest rates on
an instrument's market value. Consequently, the instrument's amortized cost
value may be higher or lower than its market value, and this discrepancy may be
reflected in the Fund's yield. During periods of declining interest rates, for
example, the daily yield on Fund shares computed as described above may be
higher than that of a fund with identical investments priced at market value.
The converse would apply in a period of rising interest rates.

The amortized cost method of valuation is permitted in accordance with Rule 2a-7
under the Investment Company Act of 1940. Under the Rule, a fund holding itself
out as a money market fund must adhere to certain quality and maturity criteria.
In particular, such a fund must limit its investments to U.S. dollar-denominated
instruments determined by its directors or trustees to present minimal credit
risks and that are (a) high-grade obligations rated in accordance with
applicable rules in one of the two highest rating categories for short-term
obligations by at least two rating agencies (or by one if only one has rated the
obligation) or (b) unrated obligations judged by the advisor, under the
direction of the fund's directors or trustees, to be of comparable quality.
Further, pursuant to Rule 2a-7, a money market fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less and purchase
instruments with remaining maturities of 397 days or less.

The trustees have established procedures designed to stabilize, to the extent
reasonably possible, the Florida Municipal Money Market Fund's NAV at $1.00 per
share. These procedures require the Trust's chief financial officer to notify
the trustees immediately if, at any time, a Fund's weighted average maturity
exceeds 90 days or its NAV, as determined by using available market quotations,
deviates from its amortized cost per share by .25% or more. If such deviation
exceeds .40%, a meeting of the board of trustees' audit committee will be called
to consider what actions, if any, should be taken. If such deviation exceeds
.50%, the Trust's chief financial officer is instructed to adjust daily dividend
distributions immediately to the extent necessary to reduce the deviation to
.50% or lower and to call a meeting of the board of trustees to consider further
action.

The board of trustees monitors the levels of illiquid securities, however if the
levels are exceeded, they will take action to rectify these levels.

Actions the board may consider under these circumstances include: (a) selling
portfolio securities prior to maturity, (b) withholding dividends or
distributions from capital, (c) authorizing a one-time dividend adjustment, (d)
discounting share purchases and initiating redemptions in kind, or (e) valuing
portfolio securities at market for purposes of calculating NAV.

INTERMEDIATE-TERM FUND. Securities held by the Intermediate-Term Fund are
normally priced by an independent pricing service, provided that such prices are
believed by BMC to reflect the fair market value of portfolio securities.

Because there are hundreds of thousands of municipal issues outstanding, and the
majority of them do not trade daily, the prices provided by pricing services are
generally determined without regard to bid or last sale prices. In valuing
securities, the pricing services generally take into account institutional
trading activity, trading in similar groups of securities, and any developments
related to specific securities. The methods used by the pricing service and the
valuations so established are reviewed by BMC under the general supervision of
the board of trustees. There are a number of pricing services available, and
BMC, on the basis of ongoing evaluation of these services, may use other pricing
services or discontinue the use of any pricing service in whole or in part.

PERFORMANCE

The Funds may quote performance in various ways. Historical performance
information will be used in advertising and sales literature and is not
indicative of future results. The Funds share price, yield, and return will vary
with changing market conditions.

For the MONEY MARKET FUND, yield quotations are based on the change in the value
of a hypothetical investment (excluding realized gains and losses from the sale
of securities and unrealized appreciation and depreciation of securities) over a
seven-day period (base period) and stated as a percentage of the investment at
the start of the base period (base-period return). The base-period return is
then annualized by multiplying by 365/7 with the resulting yield figure carried
to at least the nearest hundredth of one percent.

Calculations of effective yield begin with the same base-period return used to
calculate yield, but the return is then annualized to reflect weekly compounding
according to the following formula:

365/7
Effective Yield = [(Base-Period Return + 1) - 1

For the seven-day period ended May 31, 1996, the Money Market Fund's yield was
3.80%, and its effective yield was 3.86%.

For the INTERMEDIATE-TERM FUND, yield quotations are based on the investment
income per share earned during a particular 30-day period, less expenses accrued
during the period (net investment income), and are computed by dividing the
Fund's net investment income by its share price on the last day of the period
according to the following formula:
6
YIELD = 2 [(a - b + 1) - 1]
-----
cd

For the 30-day period ended May 31, 1996, the Intermediate-Term Fund's yield was
4.50%.

Total returns quoted in advertising and sales literature reflect all aspects of
a Fund's return, including the effect of reinvesting dividends and capital gain
distributions and any change in the Fund's NAV during the period.

Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in a fund over a stated period,
and then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over ten years would produce an average annual total return of 7.18%, which is
the steady annual rate that would equal 100% growth on a compounded basis in ten
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the Funds' performance is
not constant over time but changes from year to year and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.

Performance for the fiscal year ended May 31, 1996 is listed in the chart below:

MONEY MARKET FUND INTERMEDIATE-TERM FUND

One Year 3.86% 4.34%
Since Inception* 3.73 6.30

*The inception date for the Funds is April 11, 1994.

In addition to average annual total returns, each Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as percentages or as a dollar amount and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Performance information may be quoted numerically or in a table, graph,
or similar illustration.

The Funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indexes of market
performance. This may include comparisons with funds that, unlike Benham funds,
are sold with a sales charge or deferred sales charge. Sources of economic data
that may be used for making such comparisons may include, but are not limited
to, U.S. Treasury bill, note, and bond yields, money market fund yields, U.S.
government debt and percentage held by foreigners, the U.S. money supply, net
free reserves, and yields on current-coupon GNMAs (source: Board of Governors of
the Federal Reserve System); the federal funds and discount rates (source:
Federal Reserve Bank of New York); yield curves for U.S. Treasury securities and
AA/AAA-rated corporate securities (source: Bloomberg Financial Markets); yield
curves for AAA-rated tax-free municipal securities (source: Telerate); yield
curves for foreign government securities (sources: Bloomberg Financial Markets
and Data Resources, Inc.); total returns on foreign bonds (source: J.P. Morgan
Securities Inc.); various U.S. and foreign government reports; the junk bond
market (source: Data Resources, Inc.); the CRB Futures Index (source: Commodity
Index Report); the price of gold (sources: London a.m./p.m. fixing and New York
Comex Spot Price); rankings of any mutual fund or mutual fund category tracked
by Lipper Analytical Services, Inc. or Morningstar, Inc.; mutual fund rankings
published in major nationally distributed periodicals; data provided by the
Investment Company Institute; Ibbotson Associates, Stocks, Bonds, Bills, and
Inflation; major indexes of stock market performance; and indexes and historical
data supplied by major securities brokerage or investment advisory firms. The
Fund may also utilize reprints from newspapers and magazines furnished by third
parties to illustrate historical performance.

The Funds' shares are sold without a sales charge (or "load"). No-load funds
offer an advantage to investors when compared to load funds with comparable
investment objectives and strategies. For example, if you invest $10,000 in a
no-load fund, 100% of your investment is used to buy shares. If you invest
$10,000 in a fund with a 5.5% load, only $9,450 ($10,000 minus $550) is used to
buy shares. Over time, this difference can have a significant effect on total
return. Assuming a compounded annual growth rate of 10% for both investments,
the no-load fund investment would be worth $25,937 after 10 years, whereas the
load fund investment would be worth only $24,511.

BMC may obtain fund ratings on the safety of Fund shares from one or more
nationally recognized statistical rating organizations (rating agencies) and may
publish these ratings in advertisements and sales literature.

TAXES

FEDERAL INCOME TAX

Each Fund intends to qualify annually as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying, each Fund will not incur federal income and state taxes on its
net investment income and on net realized capital gains to the extent
distributed to shareholders.

It is intended that each Fund's assets will be sufficiently invested in
municipal securities to qualify to pay "exempt-interest dividends" (as defined
in the Code) to shareholders. Each Fund's dividends payable from net tax-exempt
interest earned from municipal securities will qualify as exempt-interest
dividends if, at the close of each quarter of its taxable year, at least 50% of
the value of its total assets consists of municipal securities. Exempt-interest
dividends distributed to shareholders are not included in shareholders' gross
income for purposes of the regular federal income tax. The percentage of income
that is tax-exempt is applied uniformly to all distributions made during each
calendar year. This percentage may differ from the actual percentage of
tax-exempt income received during any particular month.

Each Fund will determine periodically which distributions will be designated as
exempt-interest dividends. If a Fund earns income that is not eligible to be so
designated, the Fund, nonetheless, intends to distribute such income. Such
distributions will be subject to federal, state, and local taxes, as applicable,
in the hands of shareholders.

Distributions of net investment income received by each Fund from investment in
debt securities other than municipal securities, of ordinary income realized
upon the disposition of market discount bonds (including tax-exempt market
discount bonds), and of any net realized short-term capital gains will be
taxable to shareholders as ordinary income. Because the Funds' investment income
is derived from interest rather than dividends, no portion of such distributions
is eligible for the dividends-received deduction available to corporations.

The timing of an investment could have undesirable tax consequences. If a
shareholder opens an account or buys shares for an account before the day a
dividend or distribution is declared, the shareholder may receive a portion of
the investment back as taxable income if that dividend or distribution is not an
exempt-interest dividend.

Under the Code, any distribution designated as being made from a fund's net
realized long-term capital gains is taxable to shareholders as long-term capital
gains, regardless of the length of time shares have been held.

The Funds intend to comply with tax rules applicable to regulated investment
companies, including a requirement that capital gains from the sale of
securities held less than three months constitute less than 30% of a Fund's
gross income for each fiscal year. Gains on some futures contracts and options
are included in this 30% calculation, which may limit the Fund's investments in
such instruments.

Upon the sale or exchange of shares, a shareholder generally will realize a
taxable gain or loss depending upon his or her basis in the shares. Such gain or
loss will be treated as a capital gain or loss if the shares are capital assets
in the shareholder's hands and will be long term if the shareholder's holding
period for the shares is more than one year and, generally, will otherwise be

short term. However, any loss realized upon a sale or redemption of shares
within six months of their purchase will be treated as long-term capital loss to
the extent of capital gain dividends received on such gains.

Any loss realized from a disposition of a Fund's shares held for six months or
less will be disallowed to the extent that dividends received from the Fund have
been designated as exempt-interest dividends. Any loss realized on a sale or
exchange of the Fund's shares also will be disallowed to the extent that the
shares disposed of are replaced (including replacement through reinvesting of
dividends and capital gain distributions in the Fund) within a period of 61
days, beginning 30 days before and ending 30 days after the disposition of the
shares. In such a case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss.

Interest on certain types of industrial development bonds is not exempt from
federal income tax when received by "substantial users" or persons related to
substantial users as defined in the Code. The term "substantial user" includes
any "nonexempt person" who regularly uses in trade or business part of a
facility financed from the proceeds of industrial development bonds. The Funds
may invest periodically in industrial development bonds and, therefore, may not
be appropriate investments for entities that are substantial users of facilities
financed by industrial development bonds or "related persons" of substantial
users. Generally, an individual will not be a related person of a substantial
user under the Code unless he/she or his/her immediate family (spouse, brothers,
sisters, and lineal descendants) owns directly or indirectly in aggregate more
than 50% in the equity value of the substantial user.

Certain options, futures contracts, and forward contracts in which the Funds may
invest are "section 1256 contracts." Gains or losses on section 1256 contracts
generally are considered 60% long-term and 40% short-term capital gains or
losses (60-40). Also, section 1256 contracts held by a Fund at the end of each
taxable year (and, in some cases, for purposes of the 4% excise tax, on October
31st of each year) are marked to market with the result that unrealized gains or
losses are treated as though they were realized.

The hedging transactions undertaken by the Funds may result in straddles for
federal income tax purposes. The straddle rules may affect the character of
gains (or losses) realized by a fund. In addition, losses realized by a fund on
positions that are part of a straddle may be deferred under the straddle rules,
rather than being taken into account in calculating the taxable income for the
taxable year in which such losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated, the tax consequences to
the Funds of hedging transactions are not entirely clear. The hedging
transactions may increase the amount of short-term capital gains realized by the
Funds, which are taxed as ordinary income when distributed to shareholders.

Each Fund may make one or more of the elections available under the Code that
are applicable to straddles. If the Fund makes any of the elections, the amount,
character, and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
elections made. The rules applicable under certain of the elections may operate
to accelerate the recognition of gains or losses from the affected straddle
positions.

Because application of the straddle rules may affect the character of gains or
losses, defer losses, and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount that must be distributed to
shareholders and that will be taxed to shareholders as ordinary income or as a
long-term capital gain may be increased or decreased substantially as compared
to a fund that did not engage in such hedging transactions.

From time to time, proposals have been introduced in Congress for the purpose of
restricting or eliminating the federal income tax exemption for interest on
municipal securities, and similar proposals may be introduced in the future. If
such a proposal were enacted, the availability of municipal securities for
investment by the Funds, and the Funds' NAVs would be adversely affected. Under
these circumstances, the trustees would reevaluate the Funds' investment
objectives and policies and would consider either changes in the structure of
the Trust or its dissolution.

ALTERNATIVE MINIMUM TAX

The Trust will inform shareholders annually as to the dollar amount of
distributions derived from interest payments on private activity securities.

STATE AND LOCAL TAXES

Dividends and distributions paid by the Funds to individuals who are Florida
residents will not be subject to personal income taxation by Florida because
Florida does not have a personal income tax. Corporate shareholders that are
subject to the Florida corporate income tax should consult with their tax
advisor regarding the application of the Florida corporate income tax to
dividends and distributions paid by the Funds.

The Funds may apply for rulings from the Florida Department of Revenue (FDR) to
the effect that shares of a Fund will be exempt from the Florida intangibles tax
each year if the Fund's portfolio of investments on January 1 of that year
consists of investments exempt from the Florida intangibles tax. Investments
exempt from the Florida intangibles tax include, but are not limited to, (a)
notes, bonds and other obligations issued by the state of Florida or its
municipalities, counties, and other taxing districts and (b) notes, bonds, and
other obligations issued by the U.S. government and its agencies. Obligations
issued by the government of Puerto Rico are also exempt if permitted by ruling.
If a Fund's portfolio of investments on January 1 of each year includes
investments that are not exempt from the Florida intangibles tax, the Fund's
shares could be wholly or partially subject to the Florida intangibles tax. The
Funds intend that on January 1 of each year, each Fund's portfolio of
investments will consist solely of investments exempt from the Florida
intangibles tax.

The Funds' dividends may not qualify for exemption under income or other tax
laws of state or local taxing authorities outside of Florida. Shareholders
should consult their tax advisors or state or local tax authorities about the
status of distributions from the Funds in this regard.

The information above is only a summary of some of the tax considerations
affecting the Funds and their shareholders. No attempt has been made to discuss
individual tax consequences. To determine whether the Funds are a suitable
investment based on his or her tax situation, a prospective investor may wish to
consult a tax advisor.

ABOUT THE TRUST

The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest without par value, which may
be issued in series (Funds). Shares issued are fully paid and nonassessable and
have no preemptive, conversion, or similar rights.

Each series votes separately on matters affecting that series exclusively.
Voting rights are not cumulative, so that investors holding more than 50% of the
Trust's (i.e., all series') outstanding shares may elect a board of trustees.
The Trust has instituted dollar-based voting, meaning that the number of votes
you are entitled to is based upon the dollar value of your investment. The
election of trustees is determined by the votes received from all Trust
shareholders, without regard to whether a majority of shareholders of any one
series voted in favor of a particular nominee or all nominees as a group.
Shareholders have equal rights as to dividends and distributions declared by
their series and in the net assets of such series upon its liquidation or
dissolution. Shares of each series have equal voting rights, although each
series votes separately on matters affecting that series exclusively.

Shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust. The Declaration of Trust also provides for
indemnification and reimbursement of expenses of any shareholder held personally
liable for obligations of the Trust. The Declaration of Trust provides that the
Trust will, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. The Declaration of Trust further provides that the Trust may maintain
appropriate insurance (for example, fidelity, bonding, and errors and omissions
insurance) for the protection of the Trust, its shareholders, trustees,
officers, employees, and agents to cover possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance exists and the Trust itself is unable to meet its obligations.

Fund's investment policies or in determining which securities are sold or
purchased by the Fund. Effective October 7, 1996, Chase Manhattan Bank, 4 Chase
Metrotech Center, Brooklyn, NY 11245 will provide the custodian services for the
Fund.

TRUSTEES AND OFFICERS

TRUSTEES

ALBERT A. EISENSTAT, independent director (1995). Mr. Eisenstat is an
independent director of each of Commercial Metals Co. (1982), Sungard Data
Systems (1991) and Business Objects S/A (1994). Previously, he served as vice
president of corporate development and corporate secretary of Apple Computer and
served on its Board of Directors (1985 to 1993).

KENNETH E. SCOTT, independent trustee (1985). Mr. Scott is Ralph M. Parsons
Professor of Law and Business at Stanford Law School (1972) and a director of
RCM Capital Funds, Inc. (June 1994).

*JAMES E. STOWERS III, trustee (1995). Mr Stowers III is president and director
of Twentieth Century Investors, Inc.; president and director, TCI Portfolios,
Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium
Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century
Companies, Inc., Investors Research Corporation and Twentieth Century Services,
Inc.

OFFICERS

*JAMES M. BENHAM, president and chief executive officer (1996).

*DOUGLAS A. PAUL, secretary (1988), vice president (1990), and general counsel
(1990); secretary, vice president and general counsel of BMC, BFS, BDI and all
of the funds in the Benham Group.

*ANN N. McCOID, CPA, controller (1987); controller of BFS and all of the funds
in the Benham Group.

The table on the next page summarizes the compensation that the trustees
received from the Funds for the Funds' fiscal year ended May 31, 1996, as well
as the compensation received for serving as a director or trustee of all other
funds managed by BMC.

TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED
MAY 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------
NAME OF AGGREGATE PENSION OR ESTIMATED TOTAL
TRUSTEE* COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS COMPENSATION
FROM ACCRUED AS PART OF UPON RETIREMENT FROM FUND AND
THE FUND FUND EXPENSES FUND COMPLEX**
PAID TO TRUSTEES
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert Eisenstat $ 83 (Money Market) Not Applicable Not Applicable $47,750
10 (Intermediate-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Ronald J. Gilson $453 (Money Market) Not Applicable Not Applicable $97,333
327 (Intermediate-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Myron S. Scholes $455 (Money Market) Not Applicable Not Applicable $69,750
327 (Intermediate-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Kenneth E. Scott $524 (Money Market) Not Applicable Not Applicable $78,273
336 (Intermediate-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Ezra Solomon $563 (Money Market) Not Applicable Not Applicable $68,499
218 (Intermediate-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Isaac Stein $467 (Money Market) Not Applicable Not Applicable $71,500
329 (Intermediate-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Jeanne D. Wohlers $484 (Money Market) Not Applicable Not Applicable $73,750
331 (Intermediate-Term)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Interested trustees receive no compensation for their services as such.

** Twentieth Century family of funds includes 66 no-load mutual funds.

As of July 31, 1996, the Trust's officers and trustees, as a group, owned less
than 1% of the each Fund's outstanding shares.

INVESTMENT ADVISORY SERVICES

Each Fund has an investment advisory agreement with Benham Management
Corporation (BMC) dated June 1, 1995, that was approved by shareholders on May
31, 1995.

Each Fund's agreement with BMC continues for an initial period of two years and
thereafter from year to year provided that, after the initial two-year period,
it is approved at least annually by vote of a majority of the Fund's outstanding
shares or by vote of a majority of the Fund's directors, including

a majority of those directors who are neither parties to the agreement nor
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.

Each Fund's agreement is terminable on sixty days' written notice, either by the
Fund or by BMC, to the other party, and terminates automatically in the event of
its assignment.

For these services, each Fund pays BMC a monthly investment advisory fee based
on its pro rata share of the dollar amount derived from applying the Fund's
average daily net assets to the following investment advisory fee rate 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 net assets over $6.5 billion

Due to reimbursements, the Funds paid no investment advisory fees to BMC during
the fiscal period from April 11, 1994 (commencement of operations), through May
31, 1994 or for the fiscal years ended May 31, 1995 and May 31, 1996.

TRANSFER AND ADMINISTRATIVE SERVICES

Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri,
64111, (TCS) acts as transfer, administrative services and dividend paying agent
for the Funds. TCS provides facilities, equipment and personnel to the Funds and
is paid for such services by the Fund. For administrative services, each Fund
pays TCS a monthly fee equal to its pro rata share of the dollar amount derived
from applying the average daily net assets of all of the Fund managed by the
Manager to the following administrative fee rate schedule:

GROUP ASSETS ADMINISTRATIVE FEE RATE
up to $4.5 billion .11%
up to $6 billion .10
up to $9 billion .09
over $9 billion .08

For transfer agent services, each Fund pays TCS monthly fees of $1.3958 for each
shareholder account maintained and $1.35 for each shareholder transaction
executed during the month.

Due to reimbursements, the Funds paid no administrative services or transfer
agent fees during the fiscal period from April 11, 1994 (commencement of
operations), through May 31, 1994, and for the years ended May 31, 1995 and May
31, 1996.

DIRECT FUND EXPENSES

Each Fund pays certain operating expenses that are not assumed by BMC or TCS.
These include fees and expenses of the independent trustees; custodian, audit,
and pricing fees; fees of outside counsel and counsel employed directly by the
Trust; costs of printing and mailing prospectuses, statements of additional
information, proxy statements, notices, confirmations, and reports to
shareholders; fees for registering the Fund's shares under federal and state
securities laws; brokerage fees and commissions; trade association dues; costs
of fidelity and liability insurance policies covering the Fund; costs for
incoming WATS lines maintained to receive and handle shareholder inquiries; and
organizational costs.

EXPENSE LIMITATION AGREEMENT

BMC may recover amounts absorbed on behalf of the Fund during the preceding 11
months if, and to the extent that, for any given month, the Fund's expenses were
less than the expense limit in effect at that time. BMC has agreed to limit each
Fund's expenses to a specified percentage of average daily net assets until May
31, 1997 as listed below:

FUND EXPENSE LIMIT

Money Market Fund .61%
Intermediate-Term Fund .67%

The expense limit is subject to annual renewal. The expense limit for each Fund
for the year ended May 31, 1995 was .66% of average daily net assets. The
expense limits for the Money Market Fund and the Intermediate-Term Fund for the
year ended May 31, 1996 were .65% and .69%, respectively, of average daily net
assets.

Net reimbursements paid by BMC for the year ended May 31, 1995, were $201,445
and $70,638 for the Money Market Fund and Intermediate-Term Fund, respectively.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Funds' shares are available only to residents of California, Florida,
Georgia, Illinois, Michigan, New Jersey, and Pennsylvania. The Funds' shares are
continuously offered at net asset value. Certificates are issued (without
charge) only when requested in writing. Certificates are not issued for
fractional shares. Dividend and voting rights are not affected by the issuance
of certificates.

As of July 31, 1996, to the knowledge of the Trust, the shareholders listed in
the chart on the following page were the only holders of 5% or more of
outstanding shares of the individual Funds.

- --------------------------------------------------------------------------------
FUND SHAREHOLDER # OF SHARES HELD % OF TOTAL
NAME AND ADDRESS SHARES OUTSTANDING

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

Money Market Fund G. Teichner 6,326,324.770 5.5%
P.O. Box 369
Ft. Lauderdale, FL 33302

- --------------------------------------------------------------------------------
Intermediate-Term Charles Schwab & Co. 128,975.425 12.9%
Fund 101 Montgomery Street
San Francisco, CA 94104

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

Share purchases and redemptions are governed by California law.

OTHER INFORMATION

The Funds' investment advisor, Benham Management Corporation (BMC), has been
continuously registered with the Securities and Exchange Commission (SEC) under
the Investment Advisers Act of 1940 since December 14, 1971. The Trust has filed
a registration statement under the Securities Act of 1933 and the Investment
Company Act of 1940 with respect to the shares offered. Such registrations do
not imply approval or supervision of the Trust or the advisor by the Securities
and Exchange Commission.

For further information, refer to the registration statement and exhibits on
file with the SEC in Washington, D.C. These documents are available upon payment
of a reproduction fee. Statements in the Prospectus and in this Statement of
Additional Information concerning the contents of contracts or other documents,
copies of which are filed as exhibits to the registration statement, are
qualified by reference to such contracts or documents.

MUNICIPAL SECURITIES RATINGS

Securities rating descriptions provided under this heading are excerpted from
publications of Moody's Investors Service, Inc. and Standard & Poor's
Corporation.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:

Aaa: Bonds that are rated "Aaa" are judged to be of the highest quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds that are rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation

of protective elements may be of greater amplitude, or there may be other
elements present that make long-term risks appear somewhat larger than in Aaa
securities.

A: Bonds that are rated "A" possess many favorable investment attributes and are
considered to be upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.

Caa: Bonds that are rated "Caa" are of poor standing. Such issues may be in
default, or there may be elements of danger present with respect to principal or
interest.

Ca: Bonds that are rated "Ca" represent obligations that are speculative to a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds that are rated "C" are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

NOTE: Moody's may apply the numerical modifier "1" for municipally backed bonds
and modifiers "1," "2," and "3" for corporate-backed municipal bonds. The
modifier "1" indicates that the security ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking; and the
modifier "3" indicates that the issue ranks in the lower end of its generic
rating category.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF NOTES AND
VARIABLE-RATE DEMAND OBLIGATIONS:

MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample,
although not as large as in the preceding group.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S TAX-EXEMPT COMMERCIAL PAPER
RATINGS:

PRIME - 1: Issuers rated "Prime - 1" (or supporting institutions) have a
superior ability for repayment of senior short-term promissory obligations.

PRIME - 2: Issuers rated "Prime - 2" (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR MUNICIPAL BONDS:

INVESTMENT GRADE

AAA: Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in a small degree.

SPECULATIVE

CCC: Debt rated "CCC" has a currently identifiable vulnerability to default and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

CC: The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" debt rating.

CI: The "CI" rating is reserved for income bonds on which no interest is being
paid.

D: Debt rated "D" is in default, and payment of interest and/or repayment of
principal is in arrears.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR INVESTMENT GRADE
MUNICIPAL NOTES AND SHORT-TERM DEMAND OBLIGATIONS:

SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR DEMAND OBLIGATIONS
AND TAX-EXEMPT COMMERCIAL PAPER:

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."

<PAGE>

BENHAM NATIONAL TAX-FREE MONEY MARKET FUND
BENHAM NATIONAL TAX-FREE INTERMEDIATE-TERM FUND
BENHAM NATIONAL TAX-FREE LONG-TERM FUND

Series of Benham Municipal Trust

4500 Main Street
Kansas City, MO 64111

Person-to-Person Assistance: 1-800-345-2021 or 816-531-5575
Automated: 1-800-345-8765

STATEMENT OF ADDITIONAL INFORMATION

September 3, 1996

TABLE OF CONTENTS

Page

Investment Policies and Techniques 2
Investment Restrictions 10
Portfolio Transactions 13
Valuation of Portfolio Securities 13
Performance 15
Taxes 17
About the Trust 19
Trustees and Officers 20
Investment Advisory Services 23
Transfer and Administrative Services 24
Direct Fund Expenses 25
Expense Limitation Agreements 25
Additional Purchase and Redemption Information 25
Other Information 26

NOTE: Throughout this Statement of Additional Information, Benham National
Tax-Free Money Market Fund will be referred to as the Money Market Fund. Benham
National Tax-Free Intermediate-Term Fund (Intermediate-Term Fund) and Benham
National Tax-Free Long-Term Fund (Long-Term Fund) are referred to collectively
as the Variable-Price Funds.

INVESTMENT POLICIES AND TECHNIQUES

The following pages provide a more detailed description of securities and
investment practices identified in the Prospectus. Unless otherwise noted, the
policies described in this Statement of Additional Information are not
fundamental and may be changed by the board of trustees.

MUNICIPAL NOTES

Municipal notes are issued by state and local governments or government entities
to provide short-term capital or to meet cash flow needs.

TAX ANTICIPATION NOTES (TANs) are issued in anticipation of seasonal tax
revenues, such as ad valorem property, income, sales, use, and business taxes,
and are payable from these future taxes. Tax anticipation notes usually are
general obligations of the issuer. General obligations are secured by the
issuer's pledge of its full faith and credit (i.e., taxing power) for the
payment of principal and interest.

REVENUE ANTICIPATION NOTES (RANs) are issued with the expectation that receipt
of future revenues, such as federal revenue sharing or state aid payments, will
be used to repay the notes. Typically, these notes also constitute general
obligations of the issuer.

BOND ANTICIPATION NOTES (BANs) are issued to provide interim financing until
long-term financing can be arranged. In most cases, the long-term bonds provide
the money for repayment of the notes.

MUNICIPAL BONDS

INDUSTRIAL DEVELOPMENT BONDS (IDBs), types of revenue bonds, are issued by or on
behalf of public authorities to finance privately operated facilities. These
bonds are used to finance business, manufacturing, housing, athletic, and
pollution control projects as well as public facilities, such as mass transit
systems, air and sea port facilities, and parking garages. Payment of interest
and repayment of principal on IDBs depend solely on the ability of the
facility's user to meet its financial obligations and on the pledge, if any, of
the real or personal property financed. The interest earned on IDBs may be
subject to the federal alternative minimum tax. Currently the Funds do not buy
obligations whose interests are subject to the alternative minimum tax.

VARIABLE- AND FLOATING-RATE DEMAND OBLIGATIONS

The Funds may buy variable- and floating-rate demand obligations (VRDOs and
FRDOs). These obligations carry rights that permit holders to demand payment of
the unpaid principal, plus accrued interest, from the issuers or financial
intermediaries. Floating-rate instruments have interest rates that change
whenever there is a change in a designated base rate; variable-rate instruments
provide for a specified, periodic adjustment in the interest rate, which is
typically based on an index. These formulas are designed to result in a market
value for the VRDO or FRDO that approximates its par value.

The board of trustees has approved investments in VRDOs and FRDOs on the
following conditions:

(1) The Fund must have an unconditional right to demand a return of principal
plus accrued interest from the issuer on thirty days' notice or less;

(2) Under the direction of the board of trustees, Benham Management Corporation
(BMC) must determine that the issuer will be able to make payment upon such
demand, either from its own resources or through an unqualified commitment
(such as a letter of credit) from a third party; and

(3) The rate of interest payable on the VRDO or FRDO must be calculated to
ensure that its market value will approximate par value on interest rate
adjustment dates.

OBLIGATIONS WITH TERM PUTS ATTACHED

BMC expects that the Funds will pay more for securities with puts attached than
for securities without these liquidity features. BMC may buy securities with
puts attached to keep a Fund fully invested in municipal securities while
maintaining sufficient liquidity to meet redemption requests or to facilitate
management of the Funds' investments. To ensure that the interest on municipal
securities subject to puts is tax-exempt to the Funds, BMC limits the Funds' use
of puts in accordance with applicable interpretations and rulings of the
Internal Revenue Service.

Because it is difficult to evaluate the likelihood of exercise or the potential
benefit of a put, it is expected that puts will be determined to have a value of
zero, regardless of whether any direct or indirect consideration was paid.
Accordingly, puts as separate securities are not expected to affect

the Funds' weighted average maturities. Where a Fund has paid for a put, the
cost will be reflected as unrealized depreciation on the underlying security for
the period the put is held. Any gain on the sale of the underlying security will
be reduced by the cost of the put.

There is a risk that the seller of a put will not be able to repurchase the
underlying obligation when (or if) a Fund attempts to exercise the put. To
minimize such risks, the Funds will purchase obligations with puts attached only
from sellers deemed creditworthy by BMC under the direction of the board of
trustees.

TENDER OPTION BONDS

Tender option bonds (TOBs) are created by municipal bond dealers who purchase
long-term tax-exempt bonds in the secondary market, place the certificates in
trusts, and sell interests in the trusts with puts or other liquidity guarantees
attached. The credit quality of the resulting synthetic short-term instrument is
based on the guarantor's short-term rating and the underlying bond's long-term
rating.

There is some risk that a remarketing agent will renege on a tender option
agreement if the underlying bond is downgraded or defaults. Because of this, BMC
monitors the credit quality of bonds underlying the Funds' TOB holdings and
intends to sell or put back any TOB if the rating on its underlying bond falls
below the second highest rating category designated by a nationally recognized
statistical rating agency (a "rating agency").

After purchase, BMC monitors factors related to the tax-exempt status of the
Fund's TOB holdings in order to minimize the risk of generating taxable income.

TOBs were created to increase the supply of high-quality, short-term tax-exempt
obligations, and, thus, they are of particular interest to the Money Market
Fund. However, any of the Funds may purchase these instruments.

WHEN-ISSUED AND FORWARD COMMITMENT AGREEMENTS

When purchasing securities on a when-issued or forward commitment basis, each
Fund assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. While a Fund will make commitments to purchase or sell
securities with the intention of actually receiving or delivering them, it may
nevertheless sell the securities before the settlement date if deemed advisable
as a matter of investment strategy.

In purchasing securities on a when-issued or forward commitment basis, a Fund
will establish and maintain until the settlement date a segregated account
consisting of cash, U.S. government securities, or other high-quality liquid
debt securities in an amount sufficient to meet the purchase price. When the
time comes to pay for when-issued securities, the Fund will meet its obligations
with available cash, through sales of securities, or, although it would not
normally expect to do so, through sales of the when-issued securities themselves
(which may have a market value greater or less than the Fund's payment
obligation). Selling securities to meet when-issued or forward commitment
obligations may generate taxable capital gains or losses.

As an operating policy, each Fund will not commit greater than 50% of its assets
to when-issued or forward commitment agreements. If fluctuations in the value of
securities held cause more than 50% of a Fund's total assets to be committed
under when-issued or forward commitment agreements, BMC need not sell such
agreements, but it will be restricted from entering into further agreements on
behalf of the Fund until the percentage of assets committed to such agreements
is reduced to 50% of total assets. In addition, as an operating policy, each
Fund will not enter into when-issued or forward commitment transactions that
settle in more than 120 days.

MUNICIPAL LEASE OBLIGATIONS

Each Fund may invest a portion of its assets in municipal lease obligations.
These obligations, which may take the form of a lease, an installment purchase,
or a conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, the Funds will not hold such obligations directly as a lessor of the
property but will purchase a participation interest in a municipal lease
obligation from a bank or other third party.

Municipal leases frequently carry risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set forth
requirements that states and municipalities must meet to incur debt. These may
include voter referenda, interest rate limits, or public sale requirements.
Leases, installment purchases, or conditional sale contracts (which normally
provide for title to the leased asset to pass to the government issuer) have
evolved as a way for government issuers to acquire property and equipment
without meeting constitutional and statutory requirements for the issuance of
debt.

Many leases and contracts include nonappropriation clauses, which provide that
the government issuer has no obligation to make future payments under the lease
or contract unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Municipal lease
obligations also may be subject to abatement risk. For example, construction
delays or destruction of a facility as a result of an uninsurable disaster that
prevents occupancy could result in all or a portion of a lease payment not being
made.

INVERSE FLOATERS (VARIABLE-PRICE FUNDS)

An inverse floater is a type of derivative that bears an interest rate that
moves inversely to market interest rates. As market interest rates rise, the
interest rate on an inverse floater goes down, and vice versa. Generally this is
accomplished by expressing the interest rate on the inverse floater as an
above-market fixed rate of interest, reduced by an amount determined by
reference to a market-based or bond-specific floating interest rate (as well as
by any fees associated with administering the inverse floater program).

(b) Inverse floater holders receive all of the interest that remains on the
underlying bonds after floater interest and auction fees are paid.

Procedures for determining the interest payment on floaters and inverse floaters
brought to market directly by the issuer are comparable, although the interest
paid on such inverse floaters is based on a presumed coupon rate that would have
been required to bring fixed-rate bonds to market at the time the floaters and
inverse floaters were issued.

Where inverse floaters are issued in conjunction with floaters, inverse floater
holders may be given the right to acquire the underlying security (or to create
a fixed-rate bond) by calling an equal amount of corresponding floaters. The
underlying security may then be held or sold. However, typically there are time
constraints and other limitations associated with any right to combine interests
and claim the underlying security.

Floater holders subject to a Dutch Auction procedure generally do not have the
right to "put back" their interests to the issuer or to a third party. If a
Dutch Auction fails, the floater holder may be required to hold its position
until the underlying bond matures; during this time, interest on the floater is
capped at a predetermined rate.

RESTRICTED SECURITIES

The Funds may buy securities that are subject to restrictions on resale. These
securities will be deemed illiquid unless (a) the board of trustees establishes
guidelines for determining the liquidity of restricted securities and (b) the
securities (on a case by case basis) are determined to be liquid in accordance
with board-approved guidelines.

SHORT-TERM INVESTMENTS (VARIABLE-PRICE FUNDS)

Under certain circumstances, the Variable-Price Funds may invest in short-term
municipal or U.S. government securities, including money market instruments
(short-term securities). Except as otherwise required for temporary defensive
purposes, BMC does not expect these Funds' investments in short-term securities
to exceed 35% of total assets. If a Fund invests in U.S. government securities,
a portion of dividends paid to shareholders will be taxable at the federal
level, and may be taxable at the state level, as ordinary income. BMC intends to
minimize such investments, however, and may allow the Funds to hold cash to
avoid generating taxable dividends when suitable short-term municipal securities
are unavailable.

Pursuant to an exemptive order that BMC received from the Securities and
Exchange Commission (SEC), for liquidity purposes each Variable-Price Fund may
invest up to 5% of its total assets in shares of a money market fund advised by
BMC, provided that the investment is consistent with the Fund's investment
policies and restrictions.

CONCENTRATION OF ASSETS IN OBLIGATIONS ISSUED TO FINANCE SIMILAR PROJECTS
OR FACILITIES

From time to time, a significant portion of a Fund's assets may be invested in
municipal obligations related to the extent that economic, business, or
political developments affecting one of these obligations could affect the other
obligations in a similar manner. For example, if a Fund invested a significant
portion of its assets in utility bonds and a state or federal government agency
or legislative body promulgated or enacted new environmental protection
requirements for utility providers, projects financed by utility bonds that the
Fund holds could suffer as a class. Additional financing might be required to
comply with the new environmental requirements, and outstanding debt might be
downgraded in the interim. Among other factors that could negatively affect
bonds issued to finance similar types of projects are state and federal
legislation regarding financing for municipal projects, pending court decisions
relating to the validity of or the means of financing municipal projects,
material or manpower shortages, and declining demand for the project or facility
financed by the municipal bonds.

FUTURES AND OPTIONS (VARIABLE-PRICE FUNDS)

Each Variable-Price Fund may enter into futures contracts, options, or options
on futures contracts. Some futures and options strategies, such as selling
futures, buying puts, and writing calls, hedge a Fund's investments against
price fluctuations. Other strategies, such as buying futures, writing puts, and
buying calls, tend to increase market exposure. The Funds do not use futures
and options transactions for speculative purposes.

Although other techniques may be used to control a Fund's exposure to market
fluctuations, the use of futures contracts can be a more effective means of
hedging this exposure. While a Fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of the underlying
securities.

FUTURES CONTRACTS provide for the sale by one party and purchase by another
party of a specific security at a specified future time and price. Futures
contracts are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission (CFTC), a U.S. government agency. The Funds may engage in
futures and options transactions based on securities indexes, such as the Bond
Buyer Index of Municipal Bonds, that are consistent with the Funds' investment
objectives. The Funds may also engage in futures and options transactions based
on specific securities, such as U.S. Treasury bonds or notes.

To initiate and maintain an open position in a futures contract, a Fund would be
required to make a good-faith margin deposit in cash or government securities
with a broker or custodian. A margin deposit is intended to assure completion of
the contract (delivery or acceptance of the underlying security) if it is not
terminated prior to the specified delivery date. Minimum initial margin
requirements are established by the futures exchanges and may be revised. In
addition, brokers may establish margin deposit requirements that are higher than
the exchange minimums.

RISKS RELATED TO FUTURES AND OPTIONS TRANSACTIONS. Futures and options prices
can be volatile, and trading in these markets involves certain risks. If BMC
applies a hedge at an inappropriate time or judges interest rate trends
incorrectly, futures and options strategies may lower a Fund's return. A Fund
could also suffer losses if the prices of its futures and options positions were
poorly correlated with its other investments, or if it were unable to close out
its position because of an illiquid secondary market.

movements, a Fund would be required to continue making daily cash payments to
maintain its required margin. If the Fund had insufficient cash, it might have
to sell portfolio securities to meet daily margin requirements at a time when
BMC would not otherwise elect to do so. In addition, a Fund may be required to
deliver or take delivery of instruments underlying the futures contracts it
holds. BMC will seek to minimize these risks by limiting the contracts it enters
into on behalf of the Funds to those traded on national futures exchanges and
for which there appears to be a liquid secondary market.

The Fund could suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments or if securities underlying
futures contracts purchased by the Fund had different maturities than those of
the portfolio securities being hedged. Such imperfect correlation may give rise
to circumstances in which the Fund loses money on a futures contract at the same
time that it experiences a decline in the value of its hedged portfolio
securities. The Fund could also lose margin payments it has deposited with a
margin broker if, for example, the broker becomes bankrupt.

Securities underlying futures contracts purchased by the Funds may have
different maturities from those of the portfolio securities being hedged. Such
imperfect correlation may give rise to circumstances in which a Fund loses money
on a futures contract at the same time that it experiences a decline in the
value of its "hedged" portfolio securities. The Fund may also lose margin
payments it has deposited with a margin broker if, for example, the broker
becomes bankrupt.

OPTIONS ON FUTURES. By purchasing an option on a futures contract, a Fund
obtains the right, but not the obligation, to sell the futures contract (a put
option) or to buy the contract (a call option) at a fixed "strike" price. A Fund
can terminate its position in a put option by allowing it to expire or by
exercising the option. If the option is exercised, the Fund completes the sale
of the underlying security at the strike price. Purchasing an option on a
futures contract does not require a Fund to make margin payments unless the
option is exercised.

Although they do not currently intend to do so, the Funds may write (or sell)
call options that obligate them to sell (or deliver) the option's underlying
instrument upon exercise of the option. While the receipt of option premiums
would mitigate the effects of price declines, the Funds would give up some
ability to participate in a price increase on the underlying security. If a Fund
were to engage in options transactions, it would own the futures contract at the
time a call was written and would keep the contract open until the obligation to
deliver it pursuant to the call expired.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS. Each Variable-Price
Fund may enter into futures contracts, options, or options on futures contracts,
provided that such obligations represent no more than 20% of the Fund's net
assets. Under the Commodity Exchange Act, a fund may enter into futures and
options transaction (a) for hedging purposes without regard to the percentage of
assets committed to initial margin and option premiums or (b) for other than
hedging purposes, provided that assets committed to initial margin and option
premiums do not exceed 5% of the fund's net assets. To the extent required by
law, each Fund will set aside cash and appropriate liquid assets in a segregated
account to cover its obligations related to futures contracts and options.

INVESTMENT RESTRICTIONS

The Funds' investment restrictions set forth below are fundamental and may not
be changed without approval of a majority of the votes of shareholders of each
Fund, as determined in accordance with the Investment Company Act of 1940.

NONE OF THE FUNDS MAY:

(1) With respect to 75% of its total assets, purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S. government
or any of its agencies or instrumentalities) if, as a result, (a) more than
5% of the Fund's total assets would be invested in the securities of that
issuer, or (b) the Fund would own more than 10% of the outstanding voting
securities of that issuer.

(2) Act as an underwriter of securities issued by others, except to the extent
that the purchase of municipal securities, or other permitted investments,
directly from the issuer thereof or from an underwriter for an issuer and
the later disposition of such securities in accordance with the Fund's
investment policies and techniques may be deemed to be an underwriting.

(3) Make loans to others, except in accordance with the Fund's investment
objective and policies.

(4) Purchase any equity securities in any companies, including warrants, or
bonds with warrants attached, or any preferred stocks, convertible bonds,
or convertible debentures.

(5) Invest in securities that are not readily marketable or the disposition of
which is restricted under federal securities laws (collectively, illiquid
securities) if, as a result, more than 10% of the Fund's net assets would
be invested in illiquid securities.

(6) Purchase or retain securities of any issuer if, to the knowledge of the
Fund's management, those officers and trustees of the Trust and of its
investment advisor, who each own beneficially more than 0.5% of the
outstanding securities of such issuer, together own beneficially more than
5% of such securities. However, such restrictions shall not apply to
holdings of the issuers of industrial development bonds.

(7) Acquire securities for the purpose of exercising control over management
of the issuer.

(8) Purchase any security if, as a result, 25% or more of the value of the
Fund's total assets would be invested in the securities of issuers having
their principal business activity in the same industry. However, this
limitation does not apply to securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities, or to municipal
securities of any type.

THE MONEY MARKET FUND MAY NOT:

(1) Borrow money in excess of 331/3% of the market value of its total assets,
and then only from a bank and as a temporary measure to satisfy redemption
requests for extraordinary or emergency purposes, and provided that
immediately after any such borrowing there is an asset coverage of at least
300 per centum for all such borrowings. To secure any such borrowing, the
Fund may not mortgage, pledge, or hypothecate in excess of 331/3% of the
value of its total assets. The Fund will not purchase any security while
borrowings representing more than 5% of its total assets are outstanding.

(3) Engage in any short-selling operations.

(4) Engage in margin transactions or in transactions involving puts, calls,
straddles, or spreads, except that it may purchase and hold securities with
rights to put securities to the seller or "standby commitments" in
accordance with its investment techniques.

(5) Issue or sell any class of senior security as defined in the Investment
Company Act of 1940 except to the extent that notes evidencing temporary
borrowings or the purchase of securities on a when-issued or
delayed-delivery basis might be deemed such.

(6) Acquire or retain the securities of any other investment company, except in
connection with a merger, consolidation, acquisition, or reorganization.

THE INTERMEDIATE-TERM FUND AND THE LONG-TERM FUND EACH MAY NOT:

(2) Purchase, sell, or invest in real estate, commodities, commodity contracts,
foreign exchange, or interests in oil, gas, or other mineral exploration or
development programs, provided that this limitation shall not prohibit the
purchase of municipal securities and other debt securities secured by real
estate or interests therein, and shall not prohibit the Fund from
purchasing, selling, or entering into options on securities or indexes of
securities, futures contracts, options on futures contracts, or any other
interest rate hedging instrument, subject to the Fund's compliance with
applicable provisions of the federal securities or commodities laws.

(3) Engage in any short-selling operations, except that the Fund may purchase,
sell, or enter into short positions in options on securities or indexes of
securities, futures contracts, options on futures contracts, and any other
interest rate hedging instrument as may be permitted under the federal
securities or commodities laws.

(4) Engage in margin transactions, except that it may purchase, sell, or enter
into positions in options on securities or indexes of securities, futures
contracts, options on futures contracts, and other interest rate hedging
instruments, and may make margin deposits in connection therewith, and may
purchase and hold securities with rights to put securities to the seller
(standby commitments) in accordance with its investment techniques.

(5) Issue or sell any class of senior security as defined in the Investment
Company Act of 1940 except to the extent that transactions in options,
futures, options on futures, other interest rate hedging instruments, notes
evidencing temporary borrowings, or the purchase of securities on a
when-issued or delayed-delivery basis might be deemed such.

(6) Acquire or retain the securities of any other investment company, except
that the Fund may, for temporary purposes, purchase shares of the Money
Market Fund, subject to such restrictions as may be imposed by (i) the
Investment Company Act of 1940 and rules thereunder or (ii) any state in
which shares of the Fund are registered, and may acquire shares of any
investment company in connection with a merger, consolidation, acquisition,
or reorganization.

The Funds are also subject to the following restriction that is not fundamental
and may therefore be changed by the board of trustees without shareholder
approval.

NONE OF THE FUNDS MAY:

(a) Purchase any security if, as a result, more than 5% of the value of the
Fund's total assets would be invested in the securities of issuers that at
the time of purchase had been in operation for less than three years,
except obligations issued or guaranteed by the U.S. government or its
agencies, and municipal securities (for this purpose, the period of
operation of any issuer shall include the period of operation of any
predecessor or unconditional guarantor of such issuer); provided, however,
that for the purpose of this limitation, industrial development bonds
issued by nongovernmental users shall not be deemed municipal securities.

Unless otherwise indicated, with the exception of the percentage limitation on
borrowing, percentage limitations included in the restrictions apply at the time
transactions are entered into. Accordingly, any later increase or decrease
beyond the specified limitation resulting from a change in the Fund's net assets
will not be considered in determining whether it has complied with its
investment restrictions.

For purposes of the Funds' investment restrictions, the party identified as the
"issuer" of a municipal security depends on the form and conditions of the
security. When the assets and revenues of a political subdivision are separate
from those of the government that created the subdivision and the security is
backed only by the assets and revenues of the subdivision, the subdivision is
deemed the sole issuer. Similarly, in the case of an IDB, if the bond is backed
only by the assets and revenues of a nongovernmental user, the nongovernmental
user would be deemed the sole issuer. If the creating government or some other
entity guarantees the security, the guarantee would be considered a separate
security and would be treated as an issue of the guaranteeing entity.

PORTFOLIO TRANSACTIONS

Each Fund's assets are invested by BMC in a manner consistent with the Fund's
investment objectives, policies, and restrictions, and with any instructions the
board of trustees may issue from time to time. Within this framework, BMC is
responsible for making all determinations as to the purchase and sale of
portfolio securities and for taking all steps necessary to implement securities
transactions on behalf of the Funds. In placing orders for the purchase and sale
of portfolio securities, BMC will use its best possible price and execution and
will otherwise place orders with broker-dealers subject to and in accordance
with any instructions from the board of trustees that may be issued from time to
time. BMC will select broker-dealers to execute portfolio transactions on behalf
of the Funds solely on the basis of best price and execution.

Under normal conditions, the Intermediate-Term Fund's annual portfolio turnover
rate is not expected to exceed 100%, and the Long-Term Fund's annual portfolio
turnover rate is not expected to exceed 200%. Because a higher turnover rate
increases transaction costs and may increase taxable capital gains, BMC
carefully weighs the potential benefits of short-term investing against these
considerations.

The Variable-Price Funds' portfolio turnover rates for the fiscal years ended
May 31, 1996 and 1995, are indicated in the following table.

PORTFOLIO TURNOVER RATES
Fiscal Fiscal
Fund 1996 1995

Intermediate-Term Fund 45.98% 47.48%
Long-Term Fund 49.17 34.09

VALUATION OF PORTFOLIO SECURITIES

BMC typically completes trading on behalf of each Fund in various markets before
the Exchange closes for the day. Each Fund's share price is calculated by adding
the value of all portfolio securities and other assets, deducting liabilities,
and dividing the result by the number of shares outstanding. Expenses and
interest earned on portfolio securities are accrued daily.

The amortized cost valuation method is permitted in accordance with Rule 2a-7
under the Investment Company Act of 1940. Under the Rule, a fund holding itself
out as a money market fund must adhere to certain quality and maturity criteria.
In particular, such a fund must limit its investments to U.S. dollar-denominated
instruments that are determined by its directors or trustees to present minimal
credit risks and that are (a) high-grade obligations rated in accordance with
applicable rules in one of the two highest rating categories for short-term
obligations by at least two rating agencies (or by one if only one has rated an
obligation) or (b) unrated obligations judged by the advisor, under the
direction of the fund's directors or trustees, to be of comparable quality.
Further, pursuant to Rule 2a-7, a money market fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less and purchase
instruments with remaining maturities of 397 days or less. As an operating
policy, the Money Market Fund maintains a dollar-weighted average maturity of 60
days or less.

The trustees have established procedures designed to stabilize, to the extent
reasonably possible, the Money Market Fund's NAV at $1.00 per share. These
procedures require the Trust's chief financial officer to notify the trustees
immediately if, at any time, the Fund's weighted average maturity exceeds 60
days, or its NAV, as determined by using available market quotations, deviates
from its amortized cost per share by .25% or more. If such deviation exceeds
.40%, a meeting of the board of trustees' audit committee will be called to
consider what actions, if any, should be taken. If such deviation exceeds .50%,
the Trust's chief financial officer is instructed to adjust daily dividend
distributions immediately to the extent necessary to reduce the deviation to
.50% or lower and to call a meeting of the board of trustees to consider what
further action to take.

The board of trustees monitors the levels of illiquid securities, however if the
levels are exceeded, they will take action to rectify these levels.

VARIABLE-PRICE FUNDS. Securities held by the Variable-Price Funds normally are
priced by an independent pricing service, provided that such prices are believed
by BMC to reflect the fair market value of portfolio securities. Because there
are hundreds of thousands of municipal issues

outstanding, and the majority of them do not trade daily, the prices provided by
pricing services are generally determined without regard to bid or last sale
prices. In valuing securities, the pricing services take into account
institutional trading activity, trading in similar groups of securities, and any
developments related to specific securities. The methods used by the pricing
service and the valuations so established are reviewed by BMC under the general
supervision of the board of trustees. There are a number of pricing services
available, and BMC, on the basis of ongoing evaluation of these services, may
use other pricing services or discontinue the use of any pricing service in
whole or in part.

Securities not priced by a pricing service are valued at the mean between the
most recently quoted bid and asked prices provided by broker-dealers. The
municipal bond market is typically a "dealer market"; that is, dealers buy and
sell bonds for their own accounts rather than for customers. As a result, the
spread, or difference between bid and asked prices, for certain municipal bonds
may differ substantially among broker-dealers.

PERFORMANCE

For the MONEY MARKET FUND, yield quotations are based on the change in the value
of a hypothetical investment (excluding realized gains and losses from the sale
of securities and unrealized appreciation and depreciation of securities) over a
seven-day period (base period) and stated as a percentage of the investment at
the start of the base period (base-period return). The base-period return is
then annualized by multiplying it by 365/7, with the resulting yield figure
carried to at least the nearest hundredth of one percent.

Calculations of effective yield begin with the same base-period return used to
calculate yield, but the return is then annualized to reflect weekly compounding
according to the following formula:

365/7
Effective Yield = [(Base-Period Return + 1) ] - 1

For the seven-day period ended May 31, 1996, the Money Market Fund's yield was
3.17%, and its effective yield was 3.22%.

For the Variable-Price Funds, yield quotations are based on the investment
income per share earned during a given 30-day period, less expenses accrued
during the period (net investment income), and are computed by dividing the
Fund's net investment income by its share price on the last day of the period,
according to the following formula:
6
YIELD = 2 [(a - b + 1) - 1]
-----
cd

For the 30-day period ended May 31, 1996, the Intermediate-Term Fund's yield was
4.33%, and the Long-Term Fund's yield was 4.92%.

Total returns quoted in advertising reflect all aspects of a Fund's return,
including the effect of reinvesting dividends and capital gain distributions and
any change in the Fund's NAV during the period.

Average annual returns are calculated by determining the growth or decline in
value of a hypothetical historical investment in a Fund over a stated period and
then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative return of 100% over
ten years would produce an average annual total return of 7.18%, which is the
steady annual rate that would equal 100% growth on a compounded basis in ten
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the Funds' performance is
not constant over time but changes from year to year and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance. The Funds' average annual total returns for the one-year,
five-year, and life-of-fund periods ended May 31, 1996, are indicated in the
following table.

Fund One Year Five Year Ten Year

Money Market Fund 3.19% 2.73% 3.88%
Intermediate-Term Fund 4.38 6.42 6.87
Long-Term Fund 3.75 7.62 7.23

In addition to average annual total returns, each Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return.

returns on foreign bonds (source: J.P. Morgan Securities Inc.); various U.S. and
foreign government reports; the junk bond market (source: Data Resources, Inc.);
the CRB Futures Index (source: Commodity Index Report); the price of gold
(sources: London a.m./p.m. fixing and New York Comex Spot Price); rankings of
any mutual fund or mutual fund category tracked by Lipper Analytical Services,
Inc. or Morningstar, Inc.; mutual fund rankings published in major nationally
distributed periodicals; data provided by the Investment Company Institute;
Ibbotson Associates, Stocks, Bonds, Bills, and Inflation; major indexes of stock
market performance; and indexes and historical data supplied by major securities
brokerage or investment advisory firms. The Fund may also utilize reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance.

TAXES

FEDERAL INCOME TAX

The Fund intends to qualify annually as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying, the Fund will not incur federal income taxes on its net
investment income and on net realized capital gains to the extent distributed to
shareholders.

It is intended that each Fund's assets will be sufficiently invested in
municipal securities to pay "exempt-interest dividends" (as defined in the Code)
to shareholders. A Fund's dividends payable from net tax-exempt interest earned
from municipal securities will qualify as exempt-interest dividends if, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of municipal securities. Exempt-interest dividends
distributed to shareholders are not included in shareholders' gross income for
purposes of the regular federal income tax. The percentage of income that is
tax-exempt is applied uniformly to all distributions made during each calendar
year. This percentage may differ from the actual percentage of tax-exempt income
received during any particular month.

Each Fund will determine periodically which distributions will be designated as
exempt-interest dividends. If a Fund earns income which is not eligible to be
designated as exempt-interest dividends, the Fund, nonetheless, intends to
distribute such income. Such distributions will be subject to federal, state,
and local taxes, as applicable, in the hands of shareholders.

Distributions of net investment income received by a Fund from investment in
debt securities other than municipal securities and any net realized short-term
capital gains distributed by the Fund will be taxable to shareholders as
ordinary income. Because the Funds' investment income is derived from interest
rather than dividends, no portion of such distributions is eligible for the
dividends-received deduction available to corporations.

Under the Code, any distribution from a Fund's net realized long-term capital
gains is taxable to shareholders as a long-term capital gain, regardless of the
length of time shares have been held.

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.

Upon the sale or exchange of a Fund's shares, a shareholder generally will
realize a taxable gain or loss depending upon his/her basis in the shares. Such
gain or loss will be treated as a capital gain or loss if the shares are capital
assets in the shareholder's hands and will be long-term if the shareholder's
holding period for the shares is more than one year and, generally, will
otherwise be short-term.

Any loss realized from a disposition of Fund shares held for six months or less
will be disallowed to the extent that dividends from the Fund have been
designated as exempt-interest dividends. Any loss realized on a sale or exchange
of Fund shares also will be disallowed to the extent that the shares disposed of
are replaced (including replacement through reinvesting of dividends and capital
gain distributions in the Fund) within a period of 61 days beginning 30 days
before and ending 30 days after the disposition of the shares. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.

Interest on certain types of industrial development bonds is subject to federal
income tax when received by "substantial users" or persons related to
substantial users as defined in the Code. The term "substantial user" includes
any "nonexempt person" who regularly uses in trade or business part of a
facility financed from the proceeds of industrial development bonds. The Funds
may invest periodically in industrial development bonds and, therefore, may not
be appropriate investments for entities that are substantial users of facilities
financed by industrial development bonds or "related persons" of substantial
users. Generally, an individual will not be a related person of a substantial
user under the Code unless he/she or his/her immediate family (spouse, brothers,
sisters, and lineal descendants) owns directly or indirectly in aggregate more
than 50% of the equity value of the substantial user.

Opinions relating to the tax status of interest derived from individual
municipal securities are rendered by bond counsel to the issuer. The Funds, the
investment manager, and the Funds' counsel do not review the proceedings
relating to the issuance of state or municipal securities on the basis of bond
counsel opinions.

From time to time, proposals have been introduced in Congress for the purpose of
restricting or eliminating the federal income tax exemption for interest on
municipal securities, and similar proposals may be introduced in the future. If
such a proposal were enacted, the availability of municipal securities for
investment by the Funds and the Funds' NAVs would be adversely affected. Under
these circumstances, the trustees would re-evaluate the Funds' investment
objectives and policies and would consider either changes in the structure of
the Trust or its dissolution.

The information above is only a summary of some of the tax considerations
affecting the Fund and its shareholders. No attempt has been made to discuss
individual tax consequences. To determine whether the Fund is a suitable
investment based on his or her situation, a prospective investor may wish to
consult a tax advisor.

ALTERNATIVE MINIMUM TAX

The Trust will inform shareholders annually as to the dollar amount of
distributions derived from interest payments on private activity securities.

ABOUT THE TRUST

Benham Municipal Trust is a registered open-end management investment company
that was organized as a Massachusetts business trust on May 1, 1984 (the Trust
was formerly known as "Benham National Tax-Free Trust"). Three of the Trust's
eight series are described in this Statement of Additional Information. The
board of trustees may create additional series from time to time. The
Declaration of Trust permits the trustees to issue an unlimited number of full
and fractional shares of beneficial interest without par value, which may be
issued in series (funds). Shares issued are fully paid and nonassessable and
have no preemptive, conversion, or similar rights.

Shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust. The Declaration of Trust also provides for
indemnification and reimbursement of expenses of any shareholder held personally
liable for obligations of the Trust. The Declaration of Trust provides that the
Trust will, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. The Declaration of Trust further provides that the Trust may maintain
appropriate insurance (for example, fidelity, bonding, and errors and omissions
insurance) for the protection of the Trust, its shareholders, trustees,
officers, employees, and agents to cover possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss as a result of
shareholder liability is limited to circumstances in which both inadequate
insurance exists and the Trust itself is unable to meet its obligations.

CUSTODIAN BANK: State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02101, is custodian of the Trust's assets. Services
provided by the custodian include (a) settling portfolio purchases and sales,
(b) reporting failed trades, (c) identifying and collecting portfolio income,
and (d) providing safekeeping of securities. The custodian takes no part in
determining the Fund's investment policies or in determining which securities
are sold or purchased by the Fund. Effective October 7, 1996, Chase Manhattan
Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245 will provide the custodian
services for the Fund.

INDEPENDENT AUDITORS: KPMG Peat Marwick LLP, 1000 Walnut, Suite 1600, Kansas
City, Missouri 64106, serve as the Trust's independent auditors. KPMG audits the
annual report and provides tax and other services.

TRUSTEES AND OFFICERS

The Trust's activities are overseen by a board of trustees, including seven
independent trustees. The individuals listed below whose names are marked by an
asterisk (*) are "interested persons" of the Trust (as defined in the Investment
Company Act of 1940) by virtue of, among other considerations, their affiliation
with either the Trust; the Trust's investment advisor, Benham Management
Corporation (BMC); the Trust's agent for transfer and administrative services,
Twentieth Century Services, Inc. (TCS); the Trust's distribution agent,
Twentieth Century Securities, Inc.; the parent corporation, Twentieth Century
Companies, Inc. (TCC) or TCC's subsidiaries; or other funds advised by BMC. The
trustees listed below serve as trustees or directors of other funds managed by
BMC. Unless otherwise noted, a date in parentheses indicates the date the
trustee or officer began his or her service in a particular capacity. The
trustees' and officers' address, with the exception of Mr. Stowers III and Ms.
Roepke, is 1665 Charleston Road, Mountain View, California 94043. The address of
Mr. Stowers III and Ms. Ropeke is 4500 Main Street, Kansas City, Missouri 64111.

TRUSTEES

*JAMES M. BENHAM, chairman of the board of trustees (1985), president and chief
executive officer (1996). Mr. Benham is also chairman of the boards of Benham
Financial Services, Inc., (BFS) (1985), BMC (1971), and Benham Distributors,
Inc. (BDI) (1988); president of BMC (1971), and BDI (1988); and a member of the
board of governors of the Investment Company Institute (1988). Mr. Benham has
been in the securities business since 1963, and he frequently comments through
the media on economic conditions, investment strategies, and the securities
markets.

KENNETH E. SCOTT, independent trustee (1985). Mr. Scott is Ralph M. Parsons
Professor of Law and Business at Stanford Law School (1972) and a director of
RCM Capital Funds, Inc. (June 1994).

OFFICERS

*JAMES M. BENHAM, president and chief executive officer (1996).

*DOUGLAS A. PAUL, secretary (1988), vice president (1990), and general counsel
(1990); secretary, vice president and general counsel of BMC, BFS, BDI and all
of the funds in the Benham Group.

*ANN N. McCOID, CPA, controller (1987); controller of BFS and all of the funds
in the Benham Group.

The table below summarizes the compensation that the trustees of the Funds
received for the Fund's fiscal year ended May 31, 1996, as well as the
compensation received for serving as a director or trustee of all other funds
managed by BMC.

<TABLE>
<CAPTION>
TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED
May 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------
Name of Aggregate Pension or Estimated Total
Trustee Compensation Retirement Benefits Annual Benefits Compensation
From Accrued As Part of Upon Retirement From Fund and
The Fund Fund Expenses Fund Complex*
Paid to Trustees
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert Eisenstat $ 78 (Money Market) Not Applicable Not Applicable $47,750
56 (Intermediate-Term)
47 (Long-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Ronald J. Gilson $473 (Money Market) Not Applicable Not Applicable $97,333
432 (Intermediate-Term)
412 (Long-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Myron S. Scholes $479 (Money Market) Not Applicable Not Applicable $69,750
435 (Intermediate-Term)
414 (Long-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Kenneth E. Scott $543 (Money Market) Not Applicable Not Applicable $78,273
480 (Intermediate-Term)
452 (Long-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Ezra Solomon $575 (Money Market) Not Applicable Not Applicable $68,499
458 (Intermediate-Term)
414 (Long-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Isaac Stein $486 (Money Market) Not Applicable Not Applicable $71,500
441 (Intermediate-Term)
420 (Long-Term)
- ---------------------------------------------------------------------------------------------------------------------------
Jeanne D. Wohlers $504 (Money Market) Not Applicable Not Applicable $73,750
453 (Intermediate-Term)
429 (Long-Term)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Interested trustees receive no compensation for their services as such.

** Twentieth Century family of funds includes 66 no-load mutual funds.

As of July 31, 1996, the Trust's officers and trustees, as a group, owned less
than 1% of each Fund's total shares outstanding.

INVESTMENT ADVISORY SERVICES

Each Fund has an investment advisory agreement with Benham Management
Corporation (BMC) dated June 1, 1995, that was approved by shareholders on May
31, 1995.

BMC is a California corporation and a wholly owned subsidiary of Twentieth
Century Companies (TCC), a Delaware corporation. BMC, as well as BFS and BDI,
became wholly owned subsidiaries of TCC on June 1, 1995, upon the merger of
Benham Management International (BMI), the former parent of BMC, BFS and BDI,
into TCC. BMC has served as investment advisor to the Fund since the Fund's
inception. TCC is a holding company that owns all of the stock of the operating
companies that provide the investment management, transfer agency, shareholder
service, and other services for the Twentieth Century funds. James E. Stowers,
Jr., controls TCC by virtue of his ownership of a majority of its common stock.
BMC has been a registered investment advisor since 1971 and is investment
advisor to the rest of Twentieth Century's Benham brand of mutual funds.

Each Fund's agreement with BMC continues for an initial period of two years and
thereafter from year to year provided that, after the initial two year period,
it is approved at least annually by vote of a majority of the Fund's
shareholders or by vote of a majority of the Trust's trustees, including a
majority of those trustees who are neither parties to the agreement nor
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.

Each Fund's agreement is terminable on sixty days' written notice, either by the
Fund or by BMC, to the other party, and terminates automatically in the event of
its assignment.

Pursuant to the investment advisory agreement, BMC provides the Fund with
investment advice and portfolio management services in accordance with the
Fund's investment objectives, policies, and restrictions. BMC determines what
securities will be purchased and sold by the Fund and assist the Trust's
officers in carrying out decisions made by the board of trustees.

For these services, each Fund pays BMC a monthly investment advisory fee based
on a percentage of the Trust's average daily net assets to the following
investment advisory fee schedule:

Investment advisory fees paid by each Fund to BMC for the fiscal periods ended
May 31, 1996, 1995, and 1994, are indicated in the following table. Fee amounts
are net of reimbursements as described on the next page.

INVESTMENT ADVISORY FEES (NET OF REIMBURSEMENTS)

FISCAL FISCAL FISCAL
FUND 1996 1995 1994

Money Market Fund $331,599 $367,683 $397,311
Intermediate-Term Fund 262,048 234,926 275,656
Long-Term Fund 197,247 165,409 218,160

TRANSFER AND ADMINISTRATIVE SERVICES

Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri,
64111, (TCS) acts as transfer, administrative services and dividend paying agent
for the Funds. TCS provides facilities, equipment and personnel to the Funds and
is paid for such services by the Funds. For administrative services, each Fund
pays TCS a monthly fee equal to its pro rata share of the dollar amount derived
from applying the average daily net assets of all of the Funds managed by the
Manager to the following administrative fee rate schedule:

GROUP ASSETS ADMINISTRATIVE FEE RATE

up to $4.5 billion .11%
up to $6 billion .10
up to $9 billion .09
over $9 billion .08

For transfer agent services, each Fund pays TCS a monthly fee of $1.3958 for
each shareholder account maintained and $1.35 for each shareholder transaction
executed during the month.

Administrative service and transfer agent fees paid by each Fund for the fiscal
years ended May 31, 1996, 1995, and 1994, are indicated in the following tables.
Fee amounts are net of reimbursements as described below.

ADMINISTRATIVE FEES

FISCAL FISCAL FISCAL
FUND 1996 1995 1994

Money Market Fund $88,675 $103,791 $104,485
Intermediate-Term Fund 61,997 65,398 73,292
Long-Term Fund 49,774 49,352 59,711

TRANSFER AGENT FEES

FISCAL FISCAL FISCAL
FUND 1996 1995 1994

Money Market Fund $66,117 $65,409 $79,424
Intermediate-Term Fund 45,624 51,377 54,899
Long-Term Fund 41,782 43,687 46,314

DIRECT FUND EXPENSES

EXPENSE LIMITATION AGREEMENT

1997 1996 1995
FUND EXPENSE LIMIT EXPENSE LIMIT EXPENSE LIMIT

Money Market Fund .67% .64% .66%
Intermediate-Term Fund .67% .69% .66%
Long-Term Fund .67% .69% .66%

The Funds' contractual expense limit is subject to annual renewal. The expense
limit for each Fund for the year ended May 31, 1995 was .66% of average daily
net assets.

Net expense limitations/recoupments for the fiscal years ended May 31, 1995,
1994, and 1993, are indicated in the table below.

NET EXPENSE LIMITATIONS (RECOUPMENTS)

FISCAL FISCAL FISCAL FISCAL
FUND 1996 1995 1994 1993

Money Market Fund $76,481 $88,328 $93,387 $94,249
Intermediate-Term Fund 23,199 69,263 68,582 47,258
Long-Term Fund 31,698 64,101 62,290 38,268

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Funds' shares are continuously offered at net asset value. Share
certificates are issued (without charge) only when requested in writing.
Certificates are not issued for fractional shares. Dividend and voting rights
are not affected by the issuance of certificates.

As of July 31, 1996, to the knowledge of the Trust, the shareholders listed in
the chart below were record holders of 5% or more of the outstanding shares of
the individual Funds.

- --------------------------------------------------------------------------------
FUND SHAREHOLDER # OF SHARES HELD % OF TOTAL
NAME AND ADDRESS SHARES OUTSTANDING

- --------------------------------------------------------------------------------
Money Market Ellen Haebler Skove 4,727,046.750 5.0%
Fund 48 Card Sound Road
Key Largo, FL 33037

- --------------------------------------------------------------------------------
Intermediate-Term Charles Schwab & Co. 741,943.009 12.7%
Fund 101 Montgomery Street
San Francisco, CA 94104

- --------------------------------------------------------------------------------
Long-Term Fund Charles Schwab & Co. 671,485.453 14.8%
101 Montgomery Street
San Francisco, CA 94104
- --------------------------------------------------------------------------------

TCS charges neither fees nor commissions on the purchase and sale of Benham fund
shares. However, TCS may charge fees for special services requested by a
shareholder or necessitated by acts or omissions of a shareholder. For example,
TCS may charge a fee for processing dishonored investment checks or stop-payment
requests. See the Shareholder Services Guide for more information.

Pursuant to Rule 18f-1 under the Investment Company Act of 1940, the Trust has
elected to pay in cash all requests for redemption by any shareholder of record,
limited in amount with respect to each shareholder during any 90-day period to
the lesser of $250,000 or 1% of the net assets of the Fund in which shares are
held at the beginning of such period. This election is irrevocable without the
prior approval of the Securities and Exchange Commission. With respect to
redemption requests in excess of the above limit, it is the intention of the
Trust to make payments in cash, although the trustees reserve the right to make
payments in whole or in part in securities under emergency circumstances or when
payment in cash would impair the liquidity of a Fund to the detriment of
shareholders. In this event, the securities would be valued in the same manner
applied in valuing the Funds' assets for purposes of calculating NAV. An
investor may incur brokerage costs upon the sale of such securities.

Share purchases and redemptions are governed by California law.

OTHER INFORMATION

For further information, refer to registration statements and exhibits on file
with the SEC in Washington, D.C. These documents are available upon payment of a
reproduction fee. Statements in

the Prospectus and in this Statement of Additional Information concerning the
contents of contracts or other documents, copies of which are filed as exhibits
to the registration statement, are qualified by reference to such contracts or
documents.

MUNICIPAL SECURITIES RATINGS

Securities rating descriptions provided under this heading are excerpted from
publications of Moody's Investors Service, Inc. and Standard & Poor's
Corporation available as of July 31, 1993.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:

Aaa: Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make long-term risks appear somewhat larger than in Aaa securities.

A: Bonds that are rated A possess many favorable investment attributes and are
considered to be upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa: Bonds that are rated Baa are considered medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.

Ba: Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds that are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be limited.

Caa: Bonds that are rated Caa are of poor standing. Such issues may be in
default, or there may be elements of danger present with respect to principal or
interest.

Ca: Bonds that are rated Ca represent obligations that are speculative to a high
degree. Such issues are often in default or have other marked shortcomings.

C: Bonds that are rated C are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

NOTE: Moody's may apply the numerical modifier "1" for municipally backed bonds
and modifiers "1," "2," and "3" for corporate-backed municipal bonds. The
modifier "1" indicates that the security ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking; and the
modifier "3" indicates that the issue ranks in the lower end of its generic
rating category.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF NOTES AND
VARIABLE-RATE DEMAND OBLIGATIONS:

MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample,
although not as large as in the preceding group.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S TAX-EXEMPT COMMERCIAL PAPER
RATINGS:

PRIME - 1: Issuers rated Prime - 1 (or supporting institutions) have a superior
ability for repayment of senior short-term promissory obligations.

PRIME - 2: Issuers rated Prime - 2 (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR MUNICIPAL BONDS:

INVESTMENT GRADE

AAA: Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in a small degree.

SPECULATIVE

CI: The "CI" rating is reserved for income bonds on which no interest is being
paid.

D: Debt rated "D" is in default, and payment of interest and/or repayment of
principal is in arrears.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR INVESTMENT GRADE
MUNICIPAL NOTES AND SHORT-TERM DEMAND OBLIGATIONS:

SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR DEMAND OBLIGATIONS
AND TAX-EXEMPT COMMERCIAL PAPER:

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."

29
<PAGE>
BENHAM MUNICIPAL TRUST

1933 Act Post-Effective Amendment No. 18
1940 Act Amendment No. 19
- --------------------------------------------------------------------------------

PART C OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) FINANCIAL STATEMENTS.

Audited financial statements for each series of the Benham Municipal Trust for
the fiscal year ended May 31, 1996, are filed herein as included in the Trust's
Statement of Additional Information by reference to the Annual Report dated May
31, 1996, filed on July 25, 1996 (Accession # 0000746458-96-000011).

(b) EXHIBITS.

(1) Amended Declaration of Trust dated May 31, 1995, is incorporated
herein by reference to Exhibit 1(a) of Post-Effective Amendment No.
16 filed on July 28, 1995.

(2) Amended and Restated Bylaws dated May 17, 1995 are incorporated
herein by reference to Exhibit 2 of Post-Effective Amendment No. 17
filed on June 28, 1996 (Accession # 0000746458-96-000009).

(3) Not applicable.

(4) a) A specimen copy of each National Tax-Free Fund's share
certificate is incorporated herein by reference to Exhibit 4 to
Post-Effective Amendment No. 10.

b) Specimen copy of Benham Florida Municipal Money Market Fund's
share certificate is incorporated herein by reference to Exhibit
4(b) to Post-Effective Amendment No. 15.

c) Specimen copy of Benham Florida Municipal Intermediate-Term
Fund's share certificate is incorporated herein by reference to
Exhibit 4(c) to Post-Effective Amendment No. 15.

d) Specimen copy of Benham Florida Municipal Long-Term Fund's share
certificate is incorporated herein by reference to Exhibit 4(d) to
Post-Effective Amendment No. 15.

e) Specimen copy Benham Arizona Municipal Intermediate-Term Fund's
share certificate is incorporated herein by reference to Exhibit
4(e) to Post-Effective Amendment No. 15.

f) Specimen copy Benham Arizona Municipal Long-Term Fund's share
certificate is incorporated herein by reference to Exhibit 4(f) to
Post-Effective Amendment No. 15.

(5) Investment Advisory Agreement between Benham Municipal Trust on
behalf of all of its series and Benham Management Corporation dated
June 1, 1995, is incorporated herein by reference to Exhibit 5 of
Post-Effective Amendment No. 17 filed on June 28, 1996 (Accession #
0000746458-96-000009).

(6) Distribution Agreement between Benham Municipal Trust and Twentieth
Century Securities, Inc. dated as of September 3, 1996, is
incorporated herein by reference to Exhibit 6 of Post-Effective
Amendment No. 29 to the Registration Statement of the Benham
Government Income Trust filed on August 30, 1996 (Accession #
773674-96-000007).

(7) Not applicable.

(8) Custodian Agreement between Benham Municipal Trust and State Street
Bank & Trust Company dated August 10, 1993, Amendment No. 1 dated
December 1, 1994 to the Custodian Agreement and Amendment No. 2
dated March 4, 1996 to the Custodian Agreement are incorporated
herein as Exhibit 8 to Post Effective Amendment No. 7 of Benham
International Funds filed on April 22, 1996 (Accession #
880268-96-000010).

(9) Administrative Services and Transfer Agency Agreement between
Benham Municipal Trust and Twentieth Century Services, Inc. dated
as of September 3, 1996,. is incorporated herein by reference to
Exhibit 9 of Post-Effective Amendment No. 29 to the Registration
Statement of the Benham Government Income Trust filed on August 30,
1996 (Accession # 773674-96-000007).

(10)Opinion and consent of counsel as to the legality of the
securities being registered, dated May 16, 1996 is incorporated
herein by reference to Rule 24f-2 Notice filed on July 17, 1996
(Accession # 0000746458-96-000010).

(11)Consent of KPMG Peat Marwick, independent auditors, is included
herein.

(12)Not applicable.

(13)Not applicable.

(14)Not applicable.

(15)Not applicable.

(16)Schedule for computation of each performance quotation provided in
response to Item 22 is included herein.

(17)Power of Attorney dated March 4, 1996 is incorporated herein by
reference to Exhibit 17 of Post-Effective Amendment No. 17
filed on June 28, 1996 (Accession # 0000746458-96-000009).

Item 25. Persons Controlled by or Under Control with Registrant.

Not applicable.

Item 26. Number of Holders of Securities.

As of July 31, 1996, each operating series of the Registrant had the following
number of record shareholders:

Benham National Tax-Free Money Market Fund 2261
Benham National Tax-Free Intermediate-Term Fund 1786
Benham National Tax-Free Long-Term Fund 1532
Benham Florida Municipal Money Market Fund 1106
Benham Florida Municipal Intermediate-Term Fund 349
Benham Arizona Municipal Intermediate-Term Fund 728

Item 27. Indemnification.

As stated in Article VII, Section 3 of the Declaration of Trust, incorporated
herein by reference to Exhibit 1 to the Registration Statement, "The Trustees
shall be entitled and empowered to the fullest extent permitted by law to
purchase insurance for and to provide by resolution or in the Bylaws for
indemnification out of Trust assets for liability and for all expenses
reasonably incurred or paid or expected to be paid by a Trustee or officer in
connection with any claim, action, suit, or proceeding in which he or she
becomes involved by virtue of his or her capacity or former capacity with the
Trust. The provisions, including any exceptions and limitations concerning
indemnification, may be set forth in detail in the Bylaws or in a resolution
adopted by the Board of Trustees."

Registrant hereby incorporates by reference, as though set forth fully herein,
Article VI of the Registrant's Bylaws, amended on May 17, 1995, incorporated
herein by reference to Exhibit 2 of Post-Effective Amendment No. 17 filed on
June 28, 1996 (Accession # 0000746458-96-000009).

Item 28. Business and Other Connections of Investment Advisor.

The Registrant's investment advisor, Benham Management Corporation, provides
investment advisory services for various collective investment vehicles and
institutional clients and serves as investment advisor to a number of open-end
investment companies.

Item 29. Principal Underwriters.

The Registrant's distribution agent, Twentieth Century Securities, Inc., is
distribution agent to Capital Preservation Fund, Inc., Capital Preservation Fund
II, Inc., Benham California Tax-Free and Municipal Funds, Benham Government
Income Trust, Benham Municipal Trust, Benham Target Maturities Trust, Benham
Equity Funds, Benham International Funds, Benham Investment Trust, Benham
Manager Funds, TCI Portfolios, Inc., Twentieth Century Capital Portfolios, Inc.,
Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc.,
Twentieth Century Strategic Allocations, Inc. and Twentieth Century World
Investors, Inc. The information required with respect to each director, officer
or partner of Twentieth Century Securities is incorporated herein by reference
to Twentieth Century Securities' Form B-D filed on November 21, 1985 (SEC File
No. 8-35220; Firm CRD No. 17437).

Item 30. Location of Accounts and Records.

Benham Management Corporation, the Registrant's investment advisor, maintains
its principal office at 1665 Charleston Road, Mountain View, CA 94043. The
Registrant and its agent for transfer and administrative services, Twentieth
Century Services, maintain their principal office at 4500 Main St., Kansas City,
MO 64111. Twentieth Century Services maintains physical possession of each
account, book, or other document, and shareholder records as required by
ss.31(a) of the 1940 Act and rules thereunder. The computer and data base for
shareholder records are located at Central Computer Facility, 401 North Broad
Street, Sixth Floor, Philadelphia, PA 19108.

Item 31. Management Services.

Not applicable.

Item 32. Undertakings.

Registrant undertakes to furnish each person to whom a Prospectus is delivered
with a copy of the Registrant's latest report to shareholders, upon request and
without charge.

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 18/Amendment No. 19 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Mountain View, and State of
California, on the 30th day of August, 1996. I hereby certify that this
Amendment meets the requirements for immediate effectiveness pursuant to Rule
485(b).

BENHAM MUNICIPAL TRUST

By: /s/ Douglas A. Paul
Douglas A. Paul
Vice President, Secretary, and General Counsel

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 18/Amendment No. 19 has been signed below by the following persons
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Date
<S> <C> <C>
* Chairman of the Board of Trustees, August 30, 1996
- --------------------------------- President, and
James M. Benham Chief Executive Officer

* Trustee August 30, 1996
- ---------------------------------
Albert A. Eisenstat

* Trustee August 30, 1996
- ---------------------------------
Ronald J. Gilson

* Trustee August 30, 1996
- ---------------------------------
Myron S. Scholes

* Trustee August 30, 1996
- ---------------------------------
Kenneth E. Scott

* Trustee August 30, 1996
- ---------------------------------
Ezra Solomon

* Trustee August 30, 1996
- ---------------------------------
Isaac Stein

* Trustee August 30, 1996
- ---------------------------------
James E. Stowers III

* Trustee August 30, 1996
- ---------------------------------
Jeanne D. Wohlers

* Chief Financial Officer, Treasurer August 30, 1996
- ---------------------------------
Maryanne Roepke
</TABLE>

/s/ Douglas A. Paul
*by Douglas A. Paul, Attorney in Fact (pursuant to a Power of Attorney dated
March 4, 1996).

EXHIBIT DESCRIPTION

EX-99.B1 Amended Declaration of Trust dated May 31, 1995, is incorporated
herein by reference to Exhibit 1(a) of Post-Effective Amendment No.
16 filed on July 28, 1995.

EX-99.B2 Amended and Restated Bylaws dated May 17, 1995 are incorporated
herein by reference to Exhibit 2 of Post-Effective Amendment No. 17
filed on June 28, 1996 (Accession # 0000746458-96-000009).

EX-99.B4 a)A specimen copy of each National Tax-Free Fund's share certificate
is incorporated herein by reference to Exhibit 4 to Post-Effective
Amendment No. 10.

b)Specimen copy of Benham Florida Municipal Money Market Fund's
share certificate is incorporated herein by reference to Exhibit
4(b) to Post-Effective Amendment No. 15.

c)Specimen copy of Benham Florida Municipal Intermediate-Term Fund's
share certificate is incorporated herein by reference to Exhibit
4(c) to Post-Effective Amendment No. 15.

d)Specimen copy of Benham Florida Municipal Long-Term Fund's share
certificate is incorporated herein by reference to Exhibit 4(d) to
Post-Effective Amendment No. 15.

e)Specimen copy Benham Arizona Municipal Intermediate-Term Fund's
share certificate is incorporated herein by reference to Exhibit
4(e) to Post-Effective Amendment No. 15.

f)Specimen copy Benham Arizona Municipal Long-Term Fund's share
certificate is incorporated herein by reference to Exhibit 4(f) to
Post-Effective Amendment No. 15.

EX-99.B5 Investment Advisory Agreement between Benham Municipal Trust on
behalf of all of its series and Benham Management Corporation dated
June 1, 1995, is incorporated herein by reference to Exhibit 5 of
Post-Effective Amendment No. 17 filed on June 28, 1996 (Accession #
0000746458-96-000009).

EX-99.B6 Distribution Agreement between Benham Municipal Trust and Twentieth
Century Securities, Inc. dated as of September 3, 1996, is
incorporated herein by reference to Exhibit 6 of Post-Effective
Amendment No. 29 to the Registration Statement of the Benham
Government Income Trust filed on August 30, 1996 (Accession #
773674-96-000007).

EX-99.B8 Custodian Agreement between Benham Municipal Trust and State Street
Bank & Trust Company dated August 10, 1993, Amendment No. 1 dated
December 1, 1994 to the Custodian Agreement and Amendment No. 2
dated March 4, 1996 to the Custodian Agreement are incorporated
herein as Exhibit 8 to Post Effective Amendment No. 7 of Benham
International Funds filed on April 22, 1996 (Accession #
880268-96-000010).

EX-99.B9 Administrative Services and Transfer Agency Agreement between Benham
Municipal Trust and Twentieth Century Services, Inc. dated as of
September 3, 1996,. is incorporated herein by reference to Exhibit 9
of Post-Effective Amendment No. 29 to the Registration Statement of
the Benham Government Income Trust filed on August 30, 1996
(Accession # 773674-96-000007).

EX-99.B10 Opinion and consent of counsel as to the legality of the securities
being registered, dated May 16, 1996 is incorporated herein by
reference to Rule 24f-2 Notice filed on July 17, 1996 (Accession #
0000746458-96-000010).

EX-99.B11 Consent of KPMG Peat Marwick, independent auditors, is included
herein.

EX-99.B16 Schedule for computation of each performance quotation provided in
response to Item 22 is included herein.

EX-99.B17 Power of Attorney dated March 4, 1996 is incorporated herein by
reference to Exhibit 17 of Post-Effective Amendment No. 17 filed on
June 28, 1996 (Accession # 0000746458-96-000009).

EX-27.4.1 FDS - Benham National Tax-Free Money Market Fund.

EX-27.4.2 FDS - Benham Florida Municipal Money Market Fund.

EX-27.5.3 FDS - Benham National Tax-Free Intermediate-Term Fund.

EX-27.5.4 FDS - Benham Florida Municipal Intermediate-Term Fund.

EX-27.5.5 FDS - Benham Arizona Municipal Intermediate-Term Fund.

EX-27.5.6 FDS - Benham National Tax-Free Long-Term Fund.

Consent of Independent Auditors

The Board of Trustees and Shareholders
Benham Municipal Trust:

We consent to the inclusion in Benham Municipal Trust's Post-Effective Amendment
No. 18 to the Registration Statement No. 2-91229 on Form N-1A under the
Securities Act of 1933 and Amendment No. 19 to the Registration Statement No.
811-4025 filed on Form N-1A under the Investment Company Act of 1940 of our
reports dated July 8, 1996 on the financial statements and financial highlights
of the Benham Arizona Municipal Intermediate-Term Fund, Benham Florida Municipal
Money Market Fund, Benham Florida Municipal Intermediate-Term Fund, Benham
National Tax-Free Money Market Fund, Benham National Tax-Free Intermediate-Term
Fund and Benham National Tax-Free Long-Term Fund (the six funds comprising the
Benham Municipal Trust) for the periods indicated therein, which reports have
been incorporated by reference into the Statements of Additional Information of
Benham Municipal Trust. We also consent to the reference to our firm under the
heading "Financial Highlights" in the Prospectus and under the heading "About
the Trust" in the Statements of Additional Information which are incorporated by
reference in the Prospectus.

/s/KPMG Peat Marwick LLP

Kansas City, Missouri
August 30, 1996

BENHAM MUNICIPAL TRUST
BENHAM NATIONAL TAX-FREE MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURN
MAY 31, 1996

( ERV ) 1/N
Formula: T = (-----) - 1
( P )

P = A hypothetical initial payment of $1,000.

ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.

N = Number of years.

T = Average annual total return.

P ERV N T
Calculation: --------- --------- -------- -------

One Year $1,000.00 $1,031.90 1.000000 3.19%

Five Years $1,000.00 $1,144.16 5.000000 2.73%

Ten Years $1,000.00 $1,463.25 10.000000 3.88%

Date Of Inception* $1,000.00 $1,608.77 11.832900 4.10%

TR=Total return for period. TR=(ERV/P) - 1 60.88%

*Date Of Inception: July 31, 1984

<PAGE>

BENHAM MUNICIPAL TRUST
BENHAM NATIONAL TAX-FREE INTERMEDIATE-TERM FUND
AVERAGE ANNUAL TOTAL RETURN
MAY 31, 1996

( ERV ) 1/N
Formula: T = (-----) - 1
( P )

P = A hypothetical initial payment of $1,000.

ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.

N = Number of years.

T = Average annual total return.

P ERV N T
Calculation: --------- --------- -------- -------

One Year $1,000.00 $1,043.80 1.000000 4.38%

Five Years $1,000.00 $1,364.95 5.000000 6.42%

Ten Years $1,000.00 $1,943.38 10.000000 6.87%

Date Of Inception* $1,000.00 $2,214.59 11.832900 6.95%

TR=Total return for period. TR=(ERV/P) - 1 121.46%

*Date Of Inception: July 31, 1984

<PAGE>

BENHAM MUNICIPAL TRUST
BENHAM NATIONAL TAX-FREE LONG-TERM FUND
AVERAGE ANNUAL TOTAL RETURN
MAY 31, 1996

( ERV ) 1/N
Formula: T = (-----) - 1
( P )

P = A hypothetical initial payment of $1,000.

ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.

N = Number of years.

T = Average annual total return.

P ERV N T
Calculation: --------- --------- -------- -------

One Year $1,000.00 $1,037.50 1.000000 3.75%

Five Years $1,000.00 $1,443.66 5.000000 7.62%

Ten Years $1,000.00 $2,009.85 10.000000 7.23%

Date Of Inception* $1,000.00 $2,463.80 10.832900 8.68%

TR=Total return for period. TR=(ERV/P) - 1 146.38%

*Date Of Inception: July 31, 1984

<PAGE>

BENHAM MUNICIPAL TRUST
BENHAM FLORIDA MUNICIPAL MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURN
MAY 31, 1996

( ERV ) 1/N
Formula: T = (-----) - 1
( P )

P = A hypothetical initial payment of $1,000.

ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.

N = Number of years.

T = Average annual total return.

P ERV N T
Calculation: --------- --------- -------- -------

One Year $1,000.00 $1,038.60 1.000000 3.86%

Five Years

Ten Years

Date Of Inception* $1,000.00 $1,081.51 2.139726 3.73%

TR=Total return for period. TR=(ERV/P) - 1 8.15%

*Date Of Inception: April 11, 1994

<PAGE>

BENHAM MUNICIPAL TRUST
BENHAM FLORIDA MUNICIPAL INTERMEDIATE-TERM FUND
AVERAGE ANNUAL TOTAL RETURN
MAY 31, 1996

( ERV ) 1/N
Formula: T = (-----) - 1
( P )

P = A hypothetical initial payment of $1,000.

ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.

N = Number of years.

T = Average annual total return.

P ERV N T
Calculation: --------- --------- -------- -------

One Year $1,000.00 $1,043.40 1.000000 4.34%

Five Years

Ten Years

Date Of Inception* $1,000.00 $1,139.66 2.139726 6.30%

TR=Total return for period. TR=(ERV/P) - 1 13.97%

*Date Of Inception: April 11, 1994

<PAGE>

BENHAM MUNICIPAL TRUST
BENHAM ARIZONA MUNICIPAL INTERMEDIATE-TERM FUND
AVERAGE ANNUAL TOTAL RETURN
MAY 31, 1996

( ERV ) 1/N
Formula: T = (-----) - 1
( P )

P = A hypothetical initial payment of $1,000.

ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.

N = Number of years.

T = Average annual total return.

P ERV N T
Calculation: --------- --------- -------- -------

One Year $1,000.00 $1,046.50 1.000000 4.65%

Five Years

Ten Years

Date Of Inception* $1,000.00 $1,147.70 2.139726 6.65%

TR=Total return for period. TR=(ERV/P) - 1 14.77%

*Date Of Inception: April 11, 1994

<PAGE>
BENHAM MUNICIPAL TRUST
BENHAM NATIONAL TAX-FREE MONEY MARKET FUND
YIELD CALCULATION
MAY 31, 1996

365/7
Effective Yield: [ (Base Period Return) + 1) ] - 1

7 Day Yield = 3.17%

7 Day Effective Yield = 3.22%

<PAGE>

BENHAM MUNICIPAL TRUST
BENHAM NATIONAL TAX-FREE INTERMEDIATE-TERM FUND
YIELD CALCULATION
MAY 31, 1996

[ ( A-B ) 6 ]
Formula: Yield = 2[ (------- + 1) - 1 ]
[ ( C*D ) ]

A = Investment income earned during the period.

B = Expenses accrued for the period (net of reimbursements).

C = The average daily number of shares outstanding during the period that were
entitled to receive dividends.

D = The per share price on the last day of the period.

Calculation:

A = $260,750.75

B = $35,731.33

C = 5,907,116.636

D = $10.66

Yield = 4.33%

<PAGE>

BENHAM MUNICIPAL TRUST
BENHAM NATIONAL TAX-FREE LONG-TERM FUND
YIELD CALCULATION
MAY 31, 1996

[ ( A-B ) 6 ]
Formula: Yield = 2[ (------- + 1) - 1 ]
[ ( C*D ) ]

A = Investment income earned during the period.

B = Expenses accrued for the period (net of reimbursements).

C = The average daily number of shares outstanding during the period that were
entitled to receive dividends.

D = The per share price on the last day of the period.

Calculation:

A = $242,449.801

B = $29,570.83

C = 4,646,906.165

D = $11.29

Yield = 4.92%

<PAGE>

BENHAM MUNICIPAL TRUST
BENHAM FLORIDA MUNICIPAL MONEY MARKET FUND
YIELD CALCULATION
MAY 31, 1996

365/7
Effective Yield: [ (Base Period Return) + 1) ] - 1

7 Day Yield = 3.80%

7 Day Effective Yield = 3.86%

<PAGE>

BENHAM MUNICIPAL TRUST
BENHAM FLORIDA MUNICIPAL INTERMEDIATE-TERM FUND
YIELD CALCULATION
MAY 31, 1996

[ ( A-B ) 6 ]
Formula: Yield = 2[ (------- + 1) - 1 ]
[ ( C*D ) ]

A = Investment income earned during the period.

B = Expenses accrued for the period (net of reimbursements).

C = The average daily number of shares outstanding during the period that were
entitled to receive dividends.

D = The per share price on the last day of the period.

Calculation:

A = $42,381.79

B = $4,211.88

C = 1,008,795.327

D = $10.18

Yield = 4.50%

<PAGE>

BENHAM MUNICIPAL TRUST
BENHAM ARIZONA MUNICIPAL INTERMEDIATE-TERM FUND
YIELD CALCULATION
MAY 31, 1996

[ ( A-B ) 6 ]
Formula: Yield = 2[ (------- + 1) - 1 ]
[ ( C*D ) ]

A = Investment income earned during the period.

B = Expenses accrued for the period (net of reimbursements).

C = The average daily number of shares outstanding during the period that were
entitled to receive dividends.

D = The per share price on the last day of the period.

Calculation:

A = $104,075.96

B = $10,525.82

C = 2,485,768.608

D = $10.31

Yield = 4.42%

<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> NAT'L TAX-FREE MONEY MARKET

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 90155958
<INVESTMENTS-AT-VALUE> 90155958
<RECEIVABLES> 1157861
<ASSETS-OTHER> 513032
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 91826851
<PAYABLE-FOR-SECURITIES> 635148
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74071
<TOTAL-LIABILITIES> 709219
<SENIOR-EQUITY> 911176320
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 91117632
<SHARES-COMMON-PRIOR> 92034098
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 91117632
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3466489
<OTHER-INCOME> 0
<EXPENSES-NET> 588310
<NET-INVESTMENT-INCOME> 2878179
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2878179
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2878179
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 93328673
<NUMBER-OF-SHARES-REDEEMED> 96996191
<SHARES-REINVESTED> 2751052
<NET-CHANGE-IN-ASSETS> (916466)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 408080
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 675725
<AVERAGE-NET-ASSETS> 91764156
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.03
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> FLORIDA MUNICIPAL MONEY MARKET

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 98779263
<INVESTMENTS-AT-VALUE> 98779263
<RECEIVABLES> 845549
<ASSETS-OTHER> 395070
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100022913
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29849
<TOTAL-LIABILITIES> 29849
<SENIOR-EQUITY> 999930640
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 99993064
<SHARES-COMMON-PRIOR> 45146823
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 99993064
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2956034
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 2956034
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2956034
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2956034
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 196163359
<NUMBER-OF-SHARES-REDEEMED> 144204430
<SHARES-REINVESTED> 2887312
<NET-CHANGE-IN-ASSETS> 54846241
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 348352
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 555823
<AVERAGE-NET-ASSETS> 78668414
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.04
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> NAT'L TAX-FREE INTERMEDIATE-TERM

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</TABLE>

<ARTICLE> 6
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<NAME> FLORIDA MUNICIPAL INTERMEDIATE

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</TABLE>

<ARTICLE> 6
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<NAME> ARIZONA MUNICIPAL INTERMEDIATE

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<ARTICLE> 6
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<NAME> NAT'L TAX-FREE LONG-TERM FUND

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</TABLE>