[american century logo]
American
Century(sm)
Prospectus and
Proxy Statement
JUNE 2, 1997
Important Voting Information Inside!
[front cover]
TABLE OF CONTENTS
LETTER FROM THE PRESIDENT....................................................1
IMPORTANT INFORMATION YOU SHOULD CONSIDER....................................3
Notice of Special Meeting of Shareholders....................................7
COMBINED PROSPECTUS/PROXY STATEMENT..........................................9
COMPARISON OF CERTAIN INFORMATION REGARDING THE FUNDS.......................11
Comparison of Fund Service Providers...................................14
Risk Factors...........................................................14
TRANSACTION AND OPERATING EXPENSE INFORMATION...............................15
ADDITIONAL INFORMATION ABOUT THE PROPOSED TRANSACTION.......................18
Summary of Plan of Reorganization......................................18
Description of the Acquiring Funds Securities..........................20
Reasons Supporting the Reorganization..................................21
Federal Income Tax Consequences........................................21
Capitalization.........................................................21
Information About the Funds.................................................23
Acquiring Funds........................................................23
Liquidating Funds......................................................25
Fundamental Investment Restrictions....................................26
INFORMATION RELATING TO VOTING MATTERS......................................27
General Information....................................................27
Voting and Revocation of Proxies.......................................28
Record Date............................................................28
Quorum.................................................................28
Shareholder Vote Required..............................................28
Cost of Proxy Solicitation.............................................29
Certain Shareholders...................................................29
Appraisal Rights.......................................................30
Annual Meetings........................................................31
ADDITIONAL INFORMATION......................................................31
Litigation.............................................................32
Financial Statements...................................................32
Other Business.........................................................32
Shareholder Inquiries..................................................33
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.................................33
APPENDIX I: STANDARDIZED FUNDAMENTAL INVESTMENT RESTRICTIONS................39
APPENDIX II: CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS....................40
Table of Contents American Century Investments
American Century Investments
4500 Main Street
Kansas City, Missouri 64111
June 2, 1997
Dear American Century Shareholder:
I am writing to ask for your support of an important proposal affecting
your fund. The proposal will be voted on at an upcoming Special Meeting of
Shareholders to be held on Wednesday, July 30, 1997. Please take a few minutes
to read the enclosed materials, complete and sign the proxy voting card and mail
it back to us.
As a shareholder of one of the American Century mutual funds listed below,
you are being asked to approve the combination of your fund(s) with a similar
fund that has the same or substantially the same investment objectives and
policies.
Short-Term Government Fund
Intermediate-Term Government Fund
Limited-Term Tax-Exempt Fund
Intermediate-Term Tax-Exempt Fund
Long-Term Tax-Exempt Fund
The reason for each combination is that the funds to be combined are very
similar, as you will see by reading the enclosed materials. Please note that if
the fund combinations are approved, the dollar value of your account(s) will not
change.
After reviewing many factors, your Board of Directors believes the
combination is in your fund's and your best interests for the following reasons:
o lower total fees to shareholders;
o management and operational efficiencies may be achieved by combining
two funds into one;
o customer confusion regarding which fund to choose will be eliminated;
and
o there will be no dilution of the interests of existing shareholders.
Proxy Statement 1
We encourage you to vote "FOR" the reorganization. The enclosed materials
give more detailed information about the proposed reorganization and the reasons
why we recommend you vote for it.
If you lead a busy life, as I do, you're probably tempted to put these
materials aside, having the best intentions to return to them at another time.
PLEASE DON'T DO THAT. If shareholders don't return their proxies, additional
expenses must be incurred to pay for follow-up mailings and telephone calls.
PLEASE TAKE A FEW MINUTES TO REVIEW THE ENCLOSED MATERIALS AND SIGN AND RETURN
YOUR PROXY CARD TODAY.
To more efficiently handle this proxy solicitation, we have hired D.F. King
& Co., Inc. to act as our proxy solicitor. If you have any questions or need any
help in voting your shares, please call them at 1-800-755-3107. Any question
they cannot respond to will be forwarded to us immediately.
I appreciate you taking the time to consider this important proposal. We
believe the reorganization will enable us to better serve your needs. Thank you
for investing with American Century and for your continued support.
Sincerely,
/s/James E. Stowers III
James E. Stowers III
President and Chief Executive Officer
2 American Century Investments
IMPORTANT INFORMATION
YOU SHOULD CONSIDER
The following Q&A is a brief summary of some of the issues that may be
important to you. More detailed information is available, as described elsewhere
in this document. Please read all the enclosed proxy materials before voting.
PLEASE REMEMBER TO VOTE YOUR SHARES AS SOON AS POSSIBLE. If enough shareholders
return their proxy cards soon, additional costs for follow-up mailings and phone
calls may be avoided.
If you own other American Century Funds and/or accounts, you may receive
additional proxy statements and proxy voting cards in a separate mailing. It is
important that you vote ALL proxy cards that you receive.
WHAT IS THE PURPOSE OF THE UPCOMING MEETING?
The Board of Directors has recommended reorganizing the funds as follows:
Short-Term Gov't Fund into Adjustable Rate Gov't Securities Fund
Intermediate-Term Gov't Fund into Intermediate-Term Treasury Fund
Limited-Term Tax-Exempt Fund into Limited-Term Tax-Free Fund
Intermediate-Term Tax-Exempt Fund into Intermediate-Term Tax-Free Fund
Long-Term Tax-Exempt Fund into Long-Term Tax-Free Fund
These combinations require shareholder approval. The meeting will be held
on Wednesday, July 30, 1997, at 10 a.m. Central time at the companies' offices
at 4500 Main Street,Kansas City, Missouri. Shareholders of record as of the
close of business on May 16, 1997, are eligible to vote.
WHY IS THE REORGANIZATION BEING PROPOSED?
The reorganization seeks to achieve operational and investment management
efficiencies by combining funds with similar investment objectives, investment
policies and approaches, procedures and portfolio securities. Combining these
similar funds also will help eliminate confusion regarding which fund to choose
and result in lower management fees.
HOW WILL THE REORGANIZATION BE ACCOMPLISHED?
Shareholders of the Liquidating Funds are being asked to approve the
combination of their fund with the corresponding Acquiring Fund. The
reorganization will take the form of a sale of assets by your fund in exchange
for shares of the Acquiring Funds. Your fund will then distribute the shares it
receives to its shareholders.
WHAT WILL I GET IF THE REORGANIZATION IS APPROVED?
As a result of the liquidating distribution, you will receive shares of the
corresponding Acquiring Fund in an amount equal to the dollar value of your
shares on the date the combination takes place (probably August 30th). Because
the net asset value (price per share) of your fund may be different
Proxy Statement Important Information You Should Consider 3
than the net asset value of the corresponding fund with which your fund will be
combined, you may receive a different number of shares than you have, but the
TOTAL DOLLAR VALUE of your account after the reorganization WILL BE THE SAME as
before the reorganization.
WHY DID THE BOARD OF DIRECTORS APPROVE THE REORGANIZATION?
AFTER REVIEWING MANY FACTORS, YOUR BOARD OF DIRECTORS UNANIMOUSLY
DETERMINED THAT THE REORGANIZATION WAS IN THE BEST INTERESTS OF EACH OF THE
LIQUIDATING FUNDS AND ITS SHAREHOLDERS. Some of the factors considered include:
o THE TOTAL EXPENSE RATIO OF EACH OF THE ACQUIRING FUNDS IS, IN ALL CASES,
LOWER THAN THE TOTAL EXPENSE RATIO OF THE CORRESPONDING LIQUIDATING FUND;
o the similarity of the corresponding two funds' investment objectives and
policies;
o the possibility of achieving management and operational efficiencies;
o the fact that each fund's investment advisor is a wholly owned subsidiary
of American Century Companies, Inc. and that the parent company is taking
steps to consolidate all investment advisory activities into a single
investment advisor; and
o that there will be no dilution of the interests of existing shareholders.
WILL THE REORGANIZATION AFFECT THE MANAGEMENT TEAM OF YOUR FUND?
No. The portfolio managers of your fund also serve as portfolio managers
for the fund with which your fund will be combined.
WILL THE EXCHANGE FOR SHARES OF THE ACQUIRING FUNDS CAUSE ME TO REALIZE
INCOME OR CAPITAL GAINS FOR TAX PURPOSES?
No. The exchange of shares in the reorganization will be tax-free. Your
tax basis and holding period for your shares will be unchanged.
HOW DO THE FEE STRUCTURE AND TOTAL EXPENSE RATIO OF MY FUND COMPARE TO THAT
OF THE ACQUIRING FUND'S?
Each Acquiring Fund's Board of Trustees has approved, and has recommended
that shareholders also approve, a management fee that is in many ways similar to
the expense structure of your fund. Under this "all-inclusive" management fee
structure, the Acquiring Funds will pay a single management fee. In exchange for
this fee, the manager is responsible for paying all of the costs associated with
providing or procuring all services for the fund except taxes, interest,
brokerage commissions, the fees and expenses of outside directors, and
extraordinary items. The following table sets forth the total operating expenses
for your fund and the expected total operating expenses for each of the
Acquiring Funds after the reorganization (assuming the fee structure approved by
the Acquiring Funds' Boards of Trustees is also approved by shareholders):
4 Important Information You Should Consider American Century Investments
<TABLE>
Liquidating Funds Acquiring Funds
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Gov't Fund 0.70% Adjustable Rate Gov't Securities Fund 0.60%
Intermediate-Term Gov't Fund 0.75% Intermediate-Term Treasury Fund 0.52%
Limited-Term Tax-Exempt Fund 0.60% Limited-Term Tax-Free Fund 0.52%
Intermediate-Term Tax-Exempt Fund 0.60% Intermediate-Term Tax-Free Fund 0.52%
Long-Term Tax-Exempt Fund 0.60% Long-Term Tax-Free Fund 0.52%
</TABLE>
ARE ANY OF THE ACQUIRING FUNDS RISKIER THAN MY FUND?
Relative risk is difficult to assess with corresponding funds that are as
similar as these, and not all experts agree on the definition of risk. But if
you interpret "risk" to mean short-term price volatility, then we would probably
expect the corresponding funds' risks to be fairly similar. The funds invest in
similar investment portfolios and utilize similar investment techniques. The
corresponding funds also have similar weighted average maturities. Although the
Short-Term Government Fund and Adjustable Rate Government Securities Fund
currently do have different risk profiles, it is a condition of the
reorganization that the Adjustable Rate Government Securities Fund adopt the
investment objective and policies of the Short-Term Government Fund prior to the
reorganization.
HOW DO I VOTE MY SHARES?
We've made it easy for you. You can vote by mail, phone, fax or in person
at the Special Meeting. To vote by mail, sign and send us the enclosed proxy
voting card in the envelope provided. You can fax your vote by signing the proxy
voting card and faxing both sides of the card to 1-888-PROXY-FAX
(1-888-776-9932). D.F. King & Co., Inc., our proxy solicitor, can accept your
vote over the phone -- simply call 1-800-755-3107. Or, you can vote in person at
the Special Meeting set for July 30, 1997.
If you have any questions regarding the proxy statement or need assistance
in voting your shares, please call D.F. King & Co., Inc. at 1-800-755-3107.
IF I SEND MY PROXY IN NOW AS REQUESTED, CAN I CHANGE MY VOTE LATER?
Yes. A proxy can be revoked at any time by writing to us, by sending us
another proxy, or by attending the meeting and voting in person. Even if you
plan to attend the meeting to vote in person, we ask that you return the
enclosed proxy. Doing so will help us achieve a quorum for the meeting.
WHEN AND HOW WILL THE COMBINATION TAKE PLACE?
Subject to receiving shareholder approval, the reorganization is scheduled
to take place on August 30, 1997. After the funds have calculated their net
asset value on August 29, each of the Liquidating Funds will transfer all of its
assets and liabilities to the Acquiring Funds in exchange for the appropriate
number of Acquiring Fund shares. Each Liquidating Fund will then make a
liquidating distribution of those shares pro rata to its shareholders
Proxy Statement Important Information You Should Consider 5
according to the value of their accounts immediately prior to the transfer of
assets. THE VALUE OF YOUR ACCOUNT WILL NOT CHANGE AS A RESULT OF THIS
REORGANIZATION.
HOW WILL THE DISTRIBUTION, PURCHASE, REDEMPTION AND EXCHANGE POLICIES AND
PROCEDURES CHANGE AS A RESULT OF THE REORGANIZATION?
They won't. The Acquiring Funds have the same distribution, purchase,
redemption and exchange policies and procedures as the Liquidating Funds.
WHERE CAN I GET MORE INFORMATION ABOUT THE FUNDS?
Each fund is registered with the Securities and Exchange Commission. As a
result, each has on file with the Commission a Prospectus and Statement of
Additional Information with even more detailed information than is contained in
this document. A copy of each applicable Acquiring Fund's Prospectus accompanies
this Proxy Statement. If you are a shareholder of the Short-Term Government
Fund, you should refer to your copy of that fund's prospectus for a description
of what the ARM Fund's investment objective and policies will be following the
combination. In addition, the funds issue semiannual and annual reports to their
shareholders that contain financial and operating information regarding the
funds. For shareholders of the Intermediate-Term Government Fund, the manager's
discussion and analysis of fund performance portion of the Intermediate-Term
Treasury Fund's most recent Annual Report to Shareholders is included in this
document on page 33. If you are a shareholder of the Short-Term Government fund
or one of the tax-exempt funds, the performance history of your fund will
survive the reorganization. As a result, for information regarding the manager's
discussion and analysis of your fund's recent performance, you should refer to
your fund's Annual Report, dated October 31, 1996, which you have previously
received. If you would like a copy of the any of the funds' Prospectuses,
Statements of Additional Information, or most recent Annual or Semiannual
Report, please call our proxy solicitor at 1-800-755-3107.
6 Important Information You Should Consider American Century Investments
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Investments
4500 Main Street
P. O. Box 419200
Kansas City, Missouri 64141-6200
(800) 345-2021
TO BE HELD ON JULY 30, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of the
American Century-Benham Short-Term Government Fund, American Century-Benham
Intermediate-Term Government Fund, American Century-Benham Limited-Term
Tax-Exempt Fund, American Century-Benham Intermediate-Term Tax-Exempt Fund and
American Century-Benham Long-Term Tax-Exempt Fund, each a portfolio of American
Century Mutual Funds, Inc. (the "Liquidating Funds") will be held at the
companies' offices at 4500 Main Street, Kansas City, Missouri on Wednesday, July
30, 1997, at 10:00 a.m. (Central time) for the following purposes:
1. To consider and act upon a proposal to approve an Agreement and Plan of
Reorganization and the transactions contemplated thereby, including:
(a) the transfer of substantially all of the assets and liabilities of
the Liquidating Funds to certain investment portfolios of American
Century Government Income Trust and American Century Municipal Trust as
described in the attached proxy statement (the "Acquiring Funds") in
exchange for shares in the Acquiring Funds; and
(b) the distribution of the Acquiring Funds' shares to the shareholders
of the Liquidating Funds according to their respective interests; and
2. To transact such other business as may properly come before the Special
Meeting or any adjournment(s) thereof.
The proposed reorganization and related matters are described in the
attached Combined Prospectus/Proxy Statement.
Shareholders of record as of the close of business on May 16, 1997, are
entitled to notice of, and to vote at, the Special Meeting or any adjournment(s)
thereof.
Proxy Statement Notice of Special Meeting of Shareholders 7
WE URGE YOU TO MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE
POSTAGE-PAID ENVELOPE PROVIDED SO YOU WILL BE REPRESENTED AT THE MEETING.
The Boards of Directors recommend that you cast your vote FOR the
reorganization.
BY ORDER OF THE BOARDS OF DIRECTORS
William M. Lyons
Executive Vice President
June 2, 1997
8 Notice of Special Meeting of Shareholders American Century Investments
COMBINED PROSPECTUS/
PROXY STATEMENT
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY MUTUAL FUNDS, INC.
June 2, 1997
This Combined Prospectus/Proxy Statement is furnished in connection with
the solicitation of votes by the Board of Directors of American Century Mutual
Funds, Inc. on behalf of its Short-Term Government Fund, Intermediate-Term
Government Fund, Limited-Term Tax-Exempt Fund, Intermediate-Term Tax-Exempt Fund
and Long-Term Tax-Exempt Fund in connection with a Special Meeting of
Shareholders to be held on Wednesday, July 30, 1997, at 10 a.m. Central time at
the companies' offices at 4500 Main Street, Kansas City, Missouri.
At the Special Meeting, shareholders of the funds identified below are
being asked to approve the combination of their fund into the Acquiring Fund
indicated below opposite its name.
<TABLE>
Liquidating Funds Acquiring Funds
- ------------------------------------------------------------------------------------------------
AMERICAN CENTURY MUTUAL FUNDS, INC. AMERICAN CENTURY GOVERNMENT INCOME TRUST
- ------------------------------------------------------------------------------------------------
<S> <C>
Short-Term Government Fund* Adjustable Rate Government Securities Fund
Intermediate-Term Government Fund Intermediate-Term Treasury Fund*
AMERICAN CENTURY MUNICIPAL TRUST
------------------------------------------
Limited-Term Tax-Exempt Fund* Limited-Term Tax-Free Fund
Intermediate-Term Tax-Exempt Fund* Intermediate-Term Tax-Free Fund
Long-Term Tax-Exempt Fund* Long-Term Tax-Free Fund
- ---------------------
</TABLE>
* Denotes the surviving fund for the purposes of maintaining the financial
statements and performance history in the post-reorganization fund.
Each fund reorganization involves funds that are similarly managed
diversified, open-end mutual funds that invest in a similar mix of fixed income
securities. The purpose of the reorganization is to achieve management and
operational efficiencies by combining these similar funds. Each fund has shares
registered with the Securities and Exchange Commission.
This Combined Prospectus/Proxy Statement constitutes the Proxy Statement of
your fund for the Special Meeting of Shareholders and a prospectus for the
Acquiring Funds' shares that are to be issued in connection with the
reorganization. It is intended to give you the information you need to consider
and vote on the proposed reorganization. You should retain this document for
future reference.
Proxy Statement Combined Prospectus/Proxy Statement 9
A Statement of Additional Information, dated June 2, 1997, about your fund
and the Acquiring Funds has been filed with the Commission and is incorporated
into this document by reference. A copy of the Statement of Additional
Information may be obtained without charge upon request by calling or writing to
us at the address or telephone number set forth below.
The principal executive offices of your fund and the Acquiring Funds are
located at American Century Investments, 4500 Main Street, P. O. Box 419200,
Kansas City, Missouri 64141-6200. The funds' telephone number is 1-800-345-2021.
Copies of the Acquiring Funds' prospectuses accompany this document and are
incorporated into it by reference. If you are a shareholder of the Short-Term
Government Fund, you should be aware that as a condition to your fund's
consolidation with the Adjustable Rate Government Securities (the "ARM Fund"),
the shareholders of the ARM Fund must adopt an investment objective and
strategies that are substantially the same as those of your fund. As a result,
you may want to review your own copy of the Short-Term Government Fund
prospectus for information about the fund's operations following the
consolidation.
The information contained in this Combined Prospectus/Proxy Statement is
required by rules of the Securities and Exchange Commission; some of it is
highly technical. If you have any questions about these materials or how to vote
your shares, please call our proxy solicitor, D.F. King & Co., Inc., at
1-800-755-3107.
LIKE ALL MUTUAL FUND SHARES, THE SECURITIES OF THE ACQUIRING FUNDS 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 ON THE ADEQUACY OR ACCURACY OF THIS
COMBINED PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representations other than those contained in this Combined Prospectus/ Proxy
Statement and in the materials expressly incorporated herein by reference. If
given or made, such other information or representations must not be relied upon
as having been authorized by your fund, the Acquiring Funds or anyone affiliated
with American Century Investments.
PLEASE NOTE THAT THE SPECIAL MEETING OF SHAREHOLDERS WILL BE A BUSINESS
MEETING ONLY. IT IS NOT A SHAREHOLDER SEMINAR.
10 Combined Prospectus/Proxy Statement American Century Investments
COMPARISON OF CERTAIN INFORMATION
REGARDING THE FUNDS
The following charts are provided to show a comparison of certain key
attributes of your fund with its Acquiring Fund. No comparison is provided for
the Short-Term Government Fund and Adjustable Rate Government Securities Fund
since the ARM fund will, as a condition to the reorganization, adopt an
investment objective and strategies that are substantially similar to the
Short-Term Government Fund prior to the reorganization.(1) The Total Expenses
Ratios for the Liquidating Funds are stated as of their most recent fiscal year
ended October 31, 1996, while the Total Expense Ratio shown for the
corresponding Acquiring Fund is the fee expected to be in place at the time of
the reorganization. Actual total expense ratios for the Acquiring Funds for
their most recent fiscal year ended are included in the Fee Table under the
heading "Transaction and Operating Expense Information" starting at page 4 in
each prospectus. For additional information about the funds, see the section
titled "Information About the Funds" starting at page 23.
<TABLE>
INTERMEDIATE-TERM INTERMEDIATE-TERM
GOVERNMENT FUND TREASURY FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Type of Fund Taxable Bond Fund Taxable Bond Fund
Investment Objective Seeks a competitive Seeks to earn and distribute the
level of income highest level of current income
consistent with the conservation
of assets and the safety provided
by U.S. Treasury bills, notes
and bonds
Investment Policies Pursues its objective by investing Pursues its objective by investing
in securities of the U.S. government primarily in U.S. Treasury notes,
and its agencies which carry the direct full faith
and credit pledge of the U.S.
Government
Weighted Average 3 to 10 years 13 months to 10 years
Portfolio Maturity
Credit Quality Highest Quality Securities Only Highest Quality Securities Only
Total Expense Ratio 0.75% 0.52%
Distribution Policy Same as Intermediate-Term Dividends:
Treasury Fund declared daily, paid monthly
Capital Gains:
declared and paid annually
Proxy Statement Comparison of Certain Information Regarding the Funds 11
INTERMEDIATE-TERM INTERMEDIATE-TERM
GOVERNMENT FUND TREASURY FUND
- ------------------------------------------------------------------------------------------------------------
Purchases and Same as Intermediate-Term See pages 20-22 of accompanying
Exchanges Treasury Fund Prospectus
Redemption Policies Same as Intermediate-Term See pages 22-23 of accompanying
Treasury Fund Prospectus
- -------------------------
(1) The only difference between the Short-Term Government Fund and the
post-reorganization fund is that the post-reorganization fund will
maintain a duration of 3 years or less, as compared to the Short-Term
Government Fund which maintains a weighted average portfolio maturity of 3
years or less.
LIMITED-TERM TAX-EXEMPT FUND LIMITED-TERM TAX-FREE FUND
- ------------------------------------------------------------------------------------------------------------
Type of Fund Tax-Exempt Bond Fund Tax-Exempt Bond Fund
Investment Objective Seeks to provide investors with Seeks to provide investors with
income generally exempt from income generally exempt from
federal income taxes federal income taxes
Investment Policies Pursues its objective by investing Pursues its objective by investing
in a portfolio of tax-exempt in a portfolio of tax-exempt
securities securities
Weighted Average 5 years or less 5 years or less
Portfolio Maturity
Credit Quality Investment Grade (Baa or BBB) Investment Grade (Baa or BBB)
or if unrated, determined by the or if unrated, determined by the
manager to be of comparable manager to be of comparable
quality to those so rated quality to those so rated
Total Expense Ratio 0.60% 0.52%
Distribution Policy Same as Limited-Term Dividends:
Tax-Free Fund declared daily, paid monthly
Capital Gains:
declared and paid annually
Purchases and Same as Limited-Term See pages 12-14 of accompanying
Exchanges Tax-Free Fund Prospectus
Redemption Policies Same as Limited-Term See pages 14-15 of accompanying
Tax-Free Fund Prospectus
12 Comparison of Certain Information Regarding the Funds American Century Investments
INTERMEDIATE-TERM INTERMEDIATE-TERM
- ------------------------------------------------------------------------------------------------------------
Type of Fund Tax-Exempt Bond Fund Tax-Exempt Bond Fund
Investment Objective Seeks a competitive level of Seeks as high a level of interest
income generally exempt from income exempt from regular
federal income taxes federal income taxes as is
consistent with prudent
investment management,
while seeking to conserve
shareholders' capital
Investment Policies Pursues its objective by investing Pursues its objective by investing
in a portfolio of tax-exempt in a portfolio of tax-exempt
securities securities
Weighted Average 3 to 10 years 5 to 10 years
Portfolio Maturity
Credit Quality Investment Grade (Baa or BBB) or Investment Grade (Baa or BBB) or
if unrated, determined by the if unrated, determined by the
manager to be of comparable manager to be of comparable
quality to those so rated quality to those so rated
Total Expense Ratio 0.60% 0.52%
Distribution Policy Same as Intermediate-Term Dividends:
Tax-Free Fund declared daily, paid monthly
Capital Gains:
declared and paid annually
Purchases and Same as Intermediate-Term See pages 20-22 of accompanying
Exchanges Tax-Free Fund Prospectus
Redemption Policies Same as Intermediate-Term See pages 22-23 of accompanying
Tax-Free Fund Prospectus
LONG-TERM TAX-EXEMPT FUND LONG-TERM TAX-FREE FUND
- ------------------------------------------------------------------------------------------------------------
Type of Fund Tax-Exempt Bond Fund Tax-Exempt Bond Fund
Investment Objective Seeks to provide investors with Seeks as high a level of interest
income generally exempt from income exempt from regular
federal income taxes federal income taxes as is
consistent with prudent
investment management, while
seeking to conserve shareholders'
capital
Investment Policies Pursues its objective by investing Pursues its objective by investing
in a portfolio of tax-exempt in a portfolio of tax-exempt
securities securities
Weighted Average 10 years or more 10 years or more
Portfolio Maturity
Proxy Statement Comparison of Certain Information Regarding the Funds 13
LONG-TERM TAX-EXEMPT FUND LONG-TERM TAX-FREE FUND
- ------------------------------------------------------------------------------------------------------------
Credit Quality Investment Grade (Baa or BBB) or Investment Grade (Baa or BBB) or
if unrated, determined by the if unrated, determined by the
manager to be of comparable manager to be of comparable
quality to those so rated quality to those so rated
Total Expense Ratio 0.60% 0.52%
Distribution Policy Same as Long-Term Tax-Free Fund Dividends:
declared daily, paid monthly
Capital Gains:
declared and paid annually
Purchases and Same as Long-Term Tax-Free Fund See pages 20-22 of accompanying
Exchanges Prospectus
Redemption Policies Same as Long-Term Tax-Free Fund See pages 22-23 of accompanying
Prospectus
COMPARISON OF FUND SERVICE PROVIDERS
POST-REORGANIZATION
LIQUIDATING FUNDS ACQUIRING FUNDS FUNDS
- ------------------------------------------------------------------------------------------------------------
Investment American Century Benham Management ACIM
Advisor Investment Corporation(1) ("BMC")
Management, Inc.(1)
("ACIM")
Transfer Agent American Century American Century American Century
Services Corporation Services Corporation Services Corporation
Distributor American Century American Century American Century
Investment Investment Investment
Services, Inc. Services, Inc. Services, Inc.
Custodians Chase Manhattan Bank Chase Manhattan Bank Chase Manhattan Bank
Independent Baird, Kurtz & Dobson KPMG Peat Coopers & Lybrand
Auditors Marwick LLP
- --------------------
(1) BMC and ACIM are both wholly owned subsidiaries of American Century
Companies, Inc. Through this and many other proposals being submitted to
shareholders, American Century is seeking to consolidate all of its
investment advisory activities in ACIM.
</TABLE>
RISK FACTORS
Because each of the funds has similar investment objectives and shares
substantially similar investment policies, approaches and procedures with the
fund with which it is being merged, your Board of Directors does not believe
that the reorganization exposes shareholders of the Liquidating Funds to any new
or different risks than they are exposed to as shareholders of their funds. For
a discussion of the various investment policies, approaches and procedures of
the Acquiring Funds and the risks associated there-
14 Comparison of Certain Information Regarding the Funds
American Century Investments
with, please see the accompanying Prospectuses beginning at page 13 for the
Adjustable Rate Government Securities Fund and Intermediate-Term Treasury Fund,
page 6 for the Limited-Term Tax-Free Fund and page 11 for the Intermediate-Term
Tax-Free Fund and Long-Term Tax-Free Fund.
TRANSACTION AND
OPERATING EXPENSE INFORMATION
The tables below compare various shareholder transaction and annual fund
operating expenses of the Liquidating Funds as of their most recent fiscal year
end (October 31, 1996) and the Acquiring Funds as of their most recent fiscal
year end (March 31, 1996, with respect to the Adjustable Rate Government
Securities Fund and Intermediate-Term Treasury Fund and May 31, 1996, with
respect to the Intermediate-Term Tax-Free Fund and Long-Term Tax-Free Fund) and
show these expense levels after the reorganization. The first table compares
shareholder transaction expenses among all of the Liquidating Funds and
Acquiring Funds as a group. The next five tables compare, on a fund-by-fund
basis, various annual fund operating expenses, including pro forma annual fund
operating expenses of the post-reorganization funds.
<TABLE>
<CAPTION>
Pro Forma:
Liquidating Acquiring Acquiring
Funds Funds Funds(1)
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C> <C>
Maximum Sales Load Imposed
on Purchases none none none
Maximum Sales Load Imposed
on Reinvested Dividends none none none
Deferred Sales Load none none none
Redemption Fee(2) none none none
Exchange Fee none none none
Adjustable Rate Pro-Forma
Short-Term Government Short-Term
Government Fund Securities Fund Government Fund
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees 0.70% 0.29% 0.60%
12b-1 Fees none none none
Other Expenses 0.00%(3) 0.31% 0.00%(3)
Total Fund Operating Expenses 0.70% 0.60%(4) 0.60%
</TABLE>
Proxy Statement Transaction and Operating Expense Information 15
<TABLE>
Adjustable Rate Pro-Forma
Short-Term Government Short-Term
Government Fund Securities Fund Government Fund
EXAMPLE:
<S> <C> <C> <C> <C>
You would pay the following 1 year $ 7 $ 6 $ 6
expenses on a $1,000 3 years 22 19 19
investment, assuming a 5 years 39 33 33
5% annual return and 10 years 87 75 75
redemption at the end
of each time period.
Pro-Forma
Intermediate-Term Intermediate-Term Intermediate-Term
Government Fund Treasury Fund Treasury Fund
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees 0.75% 0.28% 0.52%
12b-1 Fees none none none
Other Expenses 0.00%(3) 0.25% 0.00%(3)
Total Fund Operating Expenses 0.75% 0.53%(4) 0.52%
EXAMPLE:
You would pay the following 1 year $ 8 $ 5 $ 5
expenses on a $1,000 3 years 24 17 17
investment, assuming a 5 years 42 30 29
5% annual return and 10 years 93 66 65
redemption at the end
of each time period.
Pro-Forma
Limited-Term Limited-Term Limited-Term
Tax-Exempt Fund Tax-Free Fund Tax-Free Fund
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees 0.60% ----(5) 0.52%
12b-1 Fees none ---- none
Other Expenses 0.00%(3) ---- 0.00%(3)
Total Fund Operating Expenses 0.60% ---- 0.52%
EXAMPLE:
You would pay the following 1 year $ 6 ---- $ 5
expenses on a $1,000 3 years 19 ---- 17
investment, assuming a 5 years 33 ---- 29
5% annual return and 10 years 75 ---- 65
redemption at the end
of each time period.
</TABLE>
16 Transaction and Operating Expense Information American Century Investments
<TABLE>
Pro-Forma
Intermediate-Term Intermediate-Term Intermediate-Term
Tax-Exempt Fund Tax-Free Fund Tax-Free Fund
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees (after fee waivers
<S> <C> <C> <C>
and reimbursements) 0.60% 0.38% 0.52%
12b-1 Fees none none none
Other Expenses 0.00%(3) 0.29% 0.00%(3)
Total Fund Operating Expenses
(after fee waivers and
reimbursements) 0.60% 0.67%(4) 0.52%
EXAMPLE:
You would pay the following 1 year $ 6 $ 7 $ 5
expenses on a $1,000 3 years 19 21 17
investment, assuming a 5 years 33 37 29
5% annual return and 10 years 75 83 65
redemption at the end of
each time period.
Pro-Forma
Long-Term Long-Term Long-Term
Tax-Exempt Fund Tax-Free Fund Tax-Free Fund
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees (after fee waivers
and reimbursements) 0.60% 0.35% 0.52%
12b-1 Fees none none none
Other Expenses 0.00%(3) 0.32% 0.00%(3)
Total Fund Operating Expenses
(after fee waivers and
reimbursements) 0.60% 0.67%(4) 0.52%
EXAMPLE:
You would pay the following 1 year $ 6 $ 7 $ 5
expenses on a $1,000 3 years 19 21 17
investment, assuming a 5 years 33 37 29
5% annual return and 10 years 75 83 65
redemption at the end
of each time period.
</TABLE>
Proxy Statement Transaction and Operating Expense Information 17
(1) The Management Fee information assumes approval of the proposed Management
Agreement for the "all inclusive" fee submitted by the Board of Trustees to
shareholders for approval.
(2) Redemption proceeds sent by wire are subject to a $10 processing fee.
(3) Other Expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were less than 0.01 of 1% of average
net assets for the fund's most recent fiscal year. The manager expects
Other Expenses to be less than 0.005 of 1% of average net assets for the
combined funds' next fiscal year end.
(4) The fund's investment advisor has agreed to limit the fund's total
operating expenses to specified percentages of the fund's average daily net
assets. The agreement provides that the advisor 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
Adjustable Rate Government Securities Fund and Intermediate-Term Treasury
Fund is 0.60%. The current expense limit for the Intermediate-Term Tax-Free
Fund and Long-Term Tax-Free Fund is 0.67%. These expense limits are subject
to annual renewal in June. Amounts which are paid by unaffiliated third
parties do not apply to these limitations. If the expense limitations were
not in effect, the Intermediate-Term Tax-Free Fund's Management Fees, Other
Expenses and Total Operating Expenses would have been 0.44%, 0.29% and
0.73%, respectively, and the Long-Term Tax-Free Fund's Management Fees,
Other Expenses and Total Operating Expenses would have been 0.44%, 0.32%
and 0.76%, respectively.
(5) The Limited-Term Tax Free Fund will commence operations as a new investment
portfolio of American Century Municipal Trust to acquire the assets of the
Limited-Term Tax-Exempt Fund in connection with the reorganization.
The purpose of the above tables is to help you compare the various costs
and expenses that shareholders bear, directly or indirectly, as a result of
owning 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 Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN SHOULD BE CONSIDERED
INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
ADDITIONAL INFORMATION
ABOUT THE PROPOSED TRANSACTION
SUMMARY OF PLAN OF REORGANIZATION
Subject to receipt of shareholder approval, the reorganization will be
carried out pursuant to the terms of the Agreement and Plan of Reorganization, a
copy of which is included in the Statement of Additional Information. The
18 Additional Information About the Proposed Transaction
American Century Investments
following is a brief summary of some of the important terms of that Agreement.
EFFECTIVE TIME OF THE REORGANIZATION. The Agreement requires that the
exchange of assets for stock take place after the close of business on one
business day but before (or as of) the opening of business on the next business
day (the "Effective Time"). It is currently anticipated that the reorganization
will take place after the close of business on August 29, 1997, but before (or
as of) the opening of business on September 2, 1997. However, the Agreement
gives the officers of the funds the flexibility to choose another date.
EXCHANGE OF ASSETS. After the close of business on August 29th (or such
other business day as selected by the manager), the funds will determine the
value of their assets and liabilities in the same manner as described in the
enclosed corresponding Acquiring Fund Prospectus. The assets and liabilities of
the Liquidating Funds will then be transferred to the Acquiring Funds in
exchange for that number of full and fractional shares (rounded to the third
decimal place) that have the same aggregate net asset value as the value of the
net assets received in the exchange. The Liquidating Funds will retain enough
cash to pay any unpaid dividends and distributions payable by the funds.
LIQUIDATING DISTRIBUTIONS AND TERMINATION OF THE LIQUIDATING FUNDS.
Immediately after the exchange of its assets for the Acquiring Funds shares,
each Liquidating Fund will distribute pro rata all of the shares received in the
exchange to its shareholders of record at the Effective Time. All of the
outstanding shares of the Liquidating Funds will be redeemed and canceled and
their stock books closed. As a result, Liquidating Fund shareholders will become
shareholders of the corresponding Acquiring Fund.
SHAREHOLDER APPROVAL. Consummation of each reorganization requires approval
of the appropriate Liquidating Fund's shareholders.
REPRESENTATIONS AND WARRANTIES. The Agreement and Plan of Reorganization
contains representations and warranties made by each fund to the other fund with
which it will be merged concerning the fund's formation and existence under
applicable state law, its power to consummate the reorganization, its
qualification as a "regulated investment company" under applicable tax law, the
registration of its shares under federal law and other matters that are
customary in a reorganization of this type. The representations and warranties
terminate at the Effective Time.
CONDITIONS TO CLOSING. The Agreement contains conditions to closing the
proposed reorganizations for the benefit of each fund. The conditions to closing
each of the reorganizations require approval by Liquidating Fund shareholders,
that all representations of the funds be true in all material respects, receipt
of the legal opinion described on page 21 under the caption "Federal Income Tax
Consequences," and other matters that are customary in a reorganization of this
type.
Proxy Statement Additional Information About the Proposed Transaction 19
TERMINATION OF AGREEMENT. The Agreement and Plan of Reorganization may be
terminated by a fund as a result of a failure by the other fund with which it is
to be merged to meet one of its conditions to closing, or by mutual consent.
GOVERNING LAW. The Agreement states that it is to be interpreted under
Massachusetts law, the state of organization of the Acquiring Funds.
DESCRIPTION OF THE ACQUIRING FUNDS SECURITIES
The Adjustable Rate Government Securities Fund and Intermediate-Term
Treasury Fund are each a series of shares offered by American Century Government
Income Trust. The Limited-Term Tax-Free Fund, Intermediate-Term Tax-Free Fund
and Long-Term Tax-Free Fund are each a series of shares offered by American
Century Municipal Trust. Each series is commonly referred to as a mutual fund.
The assets belonging to each series of shares are held separately by the
custodian.
The fund with which your fund is to be combined is a Massachusetts business
trust, which means its activities are overseen by a Board of Trustees rather
than a Board of Directors. The function of the Board of Trustees is the same as
the function of the Board of Directors of your fund.
Each of the Acquiring Funds currently offers only one class of shares,
although each may offer additional classes of shares in the future. The
Acquiring Funds' shares have no up-front charges, commissions or 12b-1 fees.
Your Board of Directors believes there are no material differences between
the rights of a Liquidating Fund shareholder and the rights of a shareholder of
the corresponding Acquiring Fund with which it will be combined. 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 for those matters that
must be voted on separately by the series affected. Matters affecting only one
series are voted upon only by that series.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of trustees can elect all of the
trustees if they choose to do so, and in such event the holders of the remaining
votes will not be able to elect any person or persons to the Board of Trustees.
Unless required by the Investment Company Act of 1940, it is not necessary
for the Acquiring Funds 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 each fund's bylaws, the holders of
at least 10% of the votes entitled to be cast may request the fund to hold a
special meeting of shareholders.
20 Additional Information About the Proposed Transaction
American Century Investments
REASONS SUPPORTING THE REORGANIZATION
The reasons supporting the combination of these funds are described fully
in the second question of the Q&A at the front of this document. The Liquidating
Funds were started by its investment manager before the combination of the
Benham family of mutual funds and the Twentieth Century family of mutual funds.
After a year of operating funds that have similar investment objectives,
investment strategies, approaches, procedures and portfolio securities, American
Century believes that combining the Liquidating Funds with the corresponding
Acquiring Funds will create operational and management efficiencies. In
addition, the combination will help eliminate customer confusion regarding which
fund to choose.
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the reorganization is subject to the condition that we
receive a legal opinion from Dechert Price & Rhoads to the effect that for
federal income tax purposes (i) no gain or loss will be recognized by you or any
fund, (ii) your basis in the Acquiring Fund shares that you receive will be the
same as your basis in the Liquidating Fund shares held by you immediately prior
to the reorganization, and (iii) your holding period for the Acquiring Fund
shares will include your holding period for your fund shares.
We have not sought a tax ruling from the Internal Revenue Service, but are
relying upon the opinion of counsel referred to above. That opinion is not
binding on the IRS and does not preclude them from taking a contrary position.
The opinion of Dechert Price & Rhoads does not cover state or local taxes and
you should consult your own advisors concerning the potential tax consequences.
The Agreement and Plan of Reorganization provides that the Liquidating
Funds will declare dividends prior to the reorganization which, together with
all previous dividends, will have the effect of distributing to the Liquidating
Fund shareholders all undistributed ordinary income earned and net capital gains
realized up to and including the Effective Time of the reorganization. The
distribution is necessary to ensure that the reorganization will not create tax
consequences to the Liquidating Funds. The distributions to shareholders
generally will be taxable to the extent ordinary distributions are taxable to
such shareholders; provided, that distributions to shareholders of
Intermediate-Term Tax-Free and Long-Term Tax-Free will be taxable to the extent
they are not designated as "Exempt Interest Dividends."
CAPITALIZATION
The following sets forth as of October 31, 1996, (i) the capitalization of
the Liquidating Funds and Acquiring Funds and (ii) the pro forma capitalization
of the Acquiring Funds as adjusted to give effect to the reorganization. If
consummated, the capitalization of each Acquiring Fund will be different at
Proxy Statement Additional Information About the Proposed Transaction 21
the Effective Time of the reorganization as a result of market fluctuations and
daily share purchase and redemption activity in the funds.
Pro Forma:
Short-Term Adjustable Rate Short-Term
Government Government Securities Government
Fund Fund Fund
---------- --------------------- ----------
$ 367,317 $ 327,056 $ 694,388
---------- --------------------- ----------
Pro Forma:
Intermediate-Term Intermediate-Term Intermediate-Term
Government Treasury Treasury
Fund Fund Fund
----------------- ----------------- -----------------
$ 24,250,631 $ 310,275,306 $ 334,525,937
----------------- ----------------- -----------------
Pro Forma:
Limited-Term Limited-Term Limited-Term
Tax-Exempt Tax-Free Tax-Free
Fund Fund Fund
------------ ------------ ------------
$ 49,455,996 N/A $ 49,455,996
------------ ------------ ------------
Pro Forma:
Intermediate-Term Intermediate-Term Intermediate-Term
Tax-Exempt Tax-Free Tax-Free
Fund Fund
----------------- ----------------- -----------------
$ 78,401 $ 61,143 $ 139,554
----------------- ----------------- -----------------
Pro Forma:
Long-Term Long-Term Long-Term
Tax-Exempt Tax-Free Tax-Free
Fund Fund Fund
---------- ---------- ----------
$ 57,802 $ 51,687 $ 109,497
---------- ---------- ----------
22 Additional Information About the Proposed Transaction
American Century Investments
INFORMATION ABOUT THE FUNDS
ACQUIRING FUNDS
Complete information about the Acquiring Funds is contained in their
Prospectuses included with this Combined Prospectus/Proxy Statement. The content
of these Prospectuses is incorporated into this document by reference. Below is
a list of types of information about the Acquiring Funds and the pages in those
Prospectuses where the information can be found.
<TABLE>
<CAPTION>
INFORMATION ABOUT THE CAN BE FOUND IN THE
FOLLOWING ITEMS FOLLOWING PLACES
- ---------------------------------------------------------------------------------------------------------
IN THE ADJUSTABLE RATE IN THE
GOVERNMENT SECURITIES INTERMEDIATE-TERM IN THE
FUND(1) AND TAX-FREE FUND AND LIMITED-TERM
INTERMEDIATE-TERM LONG-TERM TAX-FREE TAX-FREE FUND
TREASURY FUND PROSPECTUS FUND PROSPECTUS PROSPECTUS
- ---------------------------------------------------------------------------------------------------------
Condensed financial information about the funds.
<S> <C> <C> <C>
See Financial Highlights pages 9, 11 pages 9-10 page 5
Organization and proposed operation of the funds, including a description of the
investment objectives and policies, and how the funds seek to achieve such
objectives.
See Further Information
About American Century page 31 page 32 pages 22-23
See Investment Policies
of the Funds pages 13-18 pages 11-17 pages 6-8
See Other Investment
Practices, Their
Characteristics and Risks page 18 pages 17-19 pages 8-10
A description of the individuals who will be managing the funds, the services
the investment manager will provide, and its fees.
See Management -
Investment Management pages 28-30 page 31 pages 21-22
The funds' policies with respect to dividends and distributions and tax
consequences of investments in the funds.
See Distributions page 27 page 28 pages 18-19
See Taxes pages 27-28 pages 28-30 pages 19-21
An explanation of "net asset value" of your shares.
See When Share Price
is Determined page 26 page 27 page 18
See How Share Price
is Determined pages 26-27 page 27 page 18
Proxy Statement Information About the Funds 23
INFORMATION ABOUT THE CAN BE FOUND IN THE
FOLLOWING ITEMS FOLLOWING PLACES
- ---------------------------------------------------------------------------------------------------------
IN THE ADJUSTABLE RATE IN THE
GOVERNMENT SECURITIES INTERMEDIATE-TERM IN THE
FUND(1) AND TAX-FREE FUND AND LIMITED-TERM
INTERMEDIATE-TERM LONG-TERM TAX-FREE TAX-FREE FUND
TREASURY FUND PROSPECTUS FUND PROSPECTUS PROSPECTUS
- ---------------------------------------------------------------------------------------------------------
Information about the transaction and operating expenses of the funds.
See Transaction and
Operating Expense Table page 4 page 4 page 4
Information about distribution of the funds' shares, such as the name of the
funds' transfer agent and dividend-paying agent, distributor of fund shares, and
charges that may be imposed by broker-dealers.
See Distribution
of Fund Shares page 30 page 32 page 22
See Transfer and
Administrative Services page 30 page 32 page 22
The funds' minimum initial and subsequent investments.
See How to Open
An Account pages 20-21 pages 20-21 pages 12-13
Discussion regarding each fund's voting rights and restrictions of shareholders.
See Further Information
About American Century page 31 pages 32-33 pages 22-23
Procedures for redeeming shares, refusals to honor redemption requests and
involuntary redemption of shares.
See How to Redeem Shares page 22 pages 22-23 page 14
See Redemption of Shares
in Low-Balance Accounts. page 22 page 23 pages 14-15
- -----------------------
(1) Shareholders of the Adjustable Rate Government Securities Fund must vote to
change that fund's investment objective and policies to be substantially
the same as the investment objective and policies of the Short-Term
Government Fund. As a result, Short-Term Government Fund shareholders may
want to refer to the information contained in the Short-Term Government
Fund Prospectus.
</TABLE>
For shareholders of the Intermediate-Term Government Fund, the manager's
discussion and analysis of fund performance for Intermediate-Term Treasury Fund
for the fiscal year ended March 31, 1997, is included in this Proxy Statement on
page 33. If you are a shareholder of the Short-Term Government Fund or one of
the tax-exempt funds, the performance history of your fund will survive the
reorganization. As a result, you should refer to the Annual Report of your Fund,
dated October 31, 1996, which you have previously received, for the Manager's
Discussion and Analysis of Fund Performance.
24 Information About the Funds American Century Investments
LIQUIDATING FUNDS
Complete information about the Liquidating Funds is contained in their
prospectuses, which are available to you by calling us at 1-800-345-2021. The
content of these prospectuses is incorporated into this document by reference.
Below is a list of types of information about the Liquidating Funds and the
pages in those prospectuses where the information can be found.
<TABLE>
INFORMATION ABOUT THE CAN BE FOUND IN THE
FOLLOWING ITEMS FOLLOWING PLACES
- -------------------------------------------------------------------------------------------------------
IN THE SHORT-TERM IN THE LIMITED-TERM
GOVERNMENT FUND AND TAX-EXEMPT FUND,
INTERMEDIATE-TERM INTERMEDIATE-TERM TAX-EXEMPT
GOVERNMENT FUND FUND AND LONG-TERM TAX-EXEMPT
PROSPECTUS FUND PROSPECTUS
- -------------------------------------------------------------------------------------------------------
Condensed financial information about the funds.
<S> <C> <C>
See Financial Highlights pages 5-6 pages 5-7
Organization and proposed operation of the funds, including a description of the
investment objectives and policies, and how the funds seek to achieve such
objectives.
See Further Information
About American Century pages 21-22 pages 24-25
See Investment Policies
of the Funds pages 7-9 pages 8-10
See Other Investment
Practices, Their
Characteristics and Risks pages 9-11 pages 10-13
A description of the individuals who will be managing the funds, the services
the investment manager will provide, and its fees.
See Management -
Investment Management pages 20-21 pages 23
The funds' policies with respect to dividends and distributions and tax
consequences of investmentsin the funds.
See Distributions pages 18-19 pages 21-22
See Taxes pages 19-20 pages 22-23
An explanation of "net asset value" of your shares.
See When Share Price
is Determined page 18 page 21
Information about the transaction and operating expenses of the funds.
See Transaction and
Operating Expense Table page 4 page 4
Proxy Statement Information About the Funds 25
INFORMATION ABOUT THE CAN BE FOUND IN THE
FOLLOWING ITEMS FOLLOWING PLACES
- -------------------------------------------------------------------------------------------------------
IN THE SHORT-TERM IN THE LIMITED-TERM
GOVERNMENT FUND AND TAX-EXEMPT FUND,
INTERMEDIATE-TERM INTERMEDIATE-TERM TAX-EXEMPT
GOVERNMENT FUND FUND AND LONG-TERM TAX-EXEMPT
PROSPECTUS FUND PROSPECTUS
- -------------------------------------------------------------------------------------------------------
Information about distribution of the funds' shares, such as the name of the
funds' transfer agent and dividend-paying agent, distributor of fund shares, and
charges that may be imposed by broker-dealers.
See Distribution
of Fund Shares page 21 page 24
See Transfer and
Administrative Services page 21 page 24
The funds' minimum initial and subsequent investments.
See How to Open
An Account. page2 12-13 pages 15-16
Discussion regarding each fund's voting rights and restrictions of shareholders.
See Further Information
About American Century pages 21-22 pages 24-25
Procedures for redeeming shares, refusals to honor redemption requests and
involuntary redemption of shares.
See How to
Redeem Shares page 14 page 17
See Redemption of Shares
in Low-Balance Accounts pages 14-15 pages 17-18
</TABLE>
FUNDAMENTAL INVESTMENT RESTRICTIONS
Neither the Liquidating Funds nor the Acquiring Funds may change their
investment objectives or any of their investment policies designated as
"fundamental" in their Prospectuses or Statements of Additional Information
without shareholder approval. As stated above, each fund that is proposed to be
combined with another (other than the Short-Term Government Fund) has a similar,
but not identical, investment objective and similar investment strategies with
the fund into which it is to be combined. As a condition to closing, the
shareholders of the Adjustable Rate Government Securities Fund must approve the
modification of its investment objective and strategies to be substantially
similar to those of the Short-Term Government Fund.
Each Acquiring Fund's shareholders (other then the Limited-Term Tax-Free
Fund) are currently considering proposals to modify certain of its investment
restrictions in order to make them consistent with the other funds within the
American Century family of funds. If you would like to
26 Information About the Funds American Century Investments
review those policies as proposed, they are set forth in Appendix I. There is no
assurance that a fund's shareholders will approve these proposals and their
approval is not a condition to closing the proposed reorganization. If an
Acquiring Fund's shareholders do not approve the proposed revisions, then the
existing limitations, which are similar but not identical to those proposed,
will remain in effect. If you would like to review the Acquiring Funds' current
investment limitations, they are set forth in Appendix II.
If any of the reorganizations proposed by this proxy are not approved, it
is anticipated that the manager will propose that the Board of Directors approve
the submission to a vote of shareholders of substantially similar policies as
those set forth in Appendix I in order to make its investment restrictions
consistent with the other funds within the American Century family of funds.
As a new series of shares of American Century Municipal Trust, the
Limited-Term Tax-Free Fund was established with investment restrictions that are
the same as those set forth in Appendix II. No shareholder vote is needed to
approve those policies and restrictions.
INFORMATION RELATING
TO VOTING MATTERS
GENERAL INFORMATION
This Combined Prospectus/Proxy Statement is being furnished in connection
with the solicitation of proxies by the Board of Directors of the Liquidating
Funds. To more efficiently handle the proxy solicitation, American Century
Investment Management, Inc. has hired D.F. King & Co., Inc. to act as proxy
solicitor. Proxies may also be solicited by officers and employees of the
investment advisors of the funds, their affiliates and employees. It is
anticipated that the solicitation of proxies will be primarily by mail,
telephone, facsimile or personal interview. Authorizations to execute proxies
may be obtained by telephonic or electronically transmitted instructions in
accordance with procedures designed to authenticate the shareholder's identity
and to confirm that the shareholder has received the Combined Prospectus/Proxy
Statement and proxy voting card. If you have any questions regarding voting your
shares or the proxy, you should call D.F. King & Co., Inc. at 1-800-755-3107.
Proxy Statement Information Relating to Voting Matters 27
VOTING AND REVOCATION OF PROXIES
The fastest and most convenient way to vote your shares is to complete,
sign and mail the enclosed proxy voting card to us in the enclosed envelope.
This will help us obtain a quorum for the meeting and avoid the cost of
additional proxy solicitation efforts.
You may also fax your vote by signing the proxy voting card and faxing both
sides of the card to 1-888-PROXY-FAX (1-888-776-9932). D.F. King & Co., Inc. can
also accept your vote over the phone by simply calling 1-800-755-3107. If you
return your proxy to us, we will vote it exactly as you tell us. If you simply
sign the card and return it, we will follow the recommendation of the Board of
Directors and vote "FOR" the reorganization.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by submitting a written notice of revocation, or a subsequently
executed proxy, or by attending the meeting and voting in person.
RECORD DATE
Only shareholders of record at the close of business on May 16, 1997, will
be entitled to vote at the meeting.
QUORUM
A quorum is the number of shareholders legally required to be at a meeting
in order to conduct business. The quorum for the Special Meeting of Shareholders
is 331/3% of the outstanding shares of the fund entitled to vote at the meeting.
Shares may be represented in person or by proxy. Proxies properly executed and
marked with a negative vote or an abstention will be considered to be present at
the meeting for the purposes of determining the existence of a quorum for the
transaction of business. If a quorum is not present at the meeting, or if a
quorum is present at the meeting but sufficient votes are not received to
approve the Agreement and Plan of Reorganization, the persons named as proxies
may propose one or more adjournments of the meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares affected by the adjournment that are represented
at the meeting in person or by proxy. If a quorum is not present, the persons
named as proxies will vote those proxies for which they are required to vote FOR
the Agreement and Plan of Reorganization in favor of such adjournments, and will
vote those proxies for which they are required to vote AGAINST such proposals
against any such adjournments.
SHAREHOLDER VOTE REQUIRED
The Agreement and Plan of Reorganization must be approved by the holders of
a majority of the outstanding shares of the Liquidating Funds in accordance with
the provisions of their Articles of Incorporation and the
28 Information Relating to Voting Matters American Century Investments
requirements of the Investment Company Act. The term "majority of the
outstanding shares" means more than 50% of its outstanding shares.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a proposal
because instructions have not been received from the beneficial owners) will be
counted for purposes of determining whether or not a quorum is present for
purposes of convening the meeting. Abstentions and broker non-votes will,
however, be considered to be a vote against the Agreement and Plan of
Reorganization.
The approval of the reorganization by the shareholders of the Acquiring
Funds is not being solicited because their approval or consent is not legally
required.
COST OF PROXY SOLICITATION
The cost of the proxy solicitation and shareholder meeting will be borne by
American Century Investment Management, Inc. and not by the shareholders of the
funds.
CERTAIN SHAREHOLDERS
The following table lists, as of May 5, 1997, the names, addresses and
percentage of ownership of each person who owned of record or is known by either
fund to own beneficially 5% or more of a Liquidating Fund, or 5% or more of the
an Acquiring Fund. The percentage of shares to be owned after consummation of
the reorganization is based upon their holdings and the outstanding shares of
both funds on May 5, 1997.
<TABLE>
PERCENT
SHAREHOLDER NAME NUMBER OF PERCENT OF OWNED AFTER
AND ADDRESS SHARES OWNED OWNERSHIP REORGANIZATION
- -----------------------------------------------------------------------------------------------
Short-Term Government Fund
<S> <C> <C> <C>
Nationwide Life 3,611,496 10.4% 6.1%
Insurance Company
Columbus, OH
- -----------------------------------------------------------------------------------------------
Adjustable Rate Government Securities Fund
Charles Schwab & Co., Inc. 1,313,719 5.5% 2.3%
San Francisco, CA
- -----------------------------------------------------------------------------------------------
Intermediate-Term Government Fund
The Chase Manhattan Bank 346,692 13.3% 0.9%
Trustee for Robert Bosch
Corp. Star Plan and Trust
New York, NY
American Century 331,489 12.8% 0.9%
Investment Management, Inc.
Kansas City, MO
Charles Schwab & Co., Inc. 143,593 5.5% 9.4%
San Francisco, CA
- -----------------------------------------------------------------------------------------------
Proxy Statement Information Relating to Voting Matters 29
PERCENT
SHAREHOLDER NAME NUMBER OF PERCENT OF OWNED AFTER
AND ADDRESS SHARES OWNED OWNERSHIP REORGANIZATION
- -----------------------------------------------------------------------------------------------
Intermediate-Term Treasury Fund
Lorillard, Inc. 3,223,556 10.1% 9.4%
New York, NY
Charles Schwab & Co., Inc. 3,096,868 9.7% 9.4%
San Francisco, CA
- -----------------------------------------------------------------------------------------------
Limited-Term Tax-Exempt Fund
American Century 713,388 15.8% 15.8%
Investment Management, Inc.
Kansas City, MO
- -----------------------------------------------------------------------------------------------
Limited-Term Tax-Free Fund
None -- -- --
- -----------------------------------------------------------------------------------------------
Intermediate-Term Tax-Exempt Fund
None -- -- --
- -----------------------------------------------------------------------------------------------
Intermediate-Term Tax-Free Fund
Charles Schwab & Co., Inc. 712,459 12.5% 5.7%
San Francisco, CA
- -----------------------------------------------------------------------------------------------
Long-Term Tax-Exempt Fund
American Century 379,909 7.1% 3.7%
Investment Management, Inc.
Kansas City, MO
- -----------------------------------------------------------------------------------------------
Long-Term Tax-Free Fund
Charles Schwab & Co., Inc. 590,571 12.9% 6.3%
San Francisco, CA
- -----------------------------------------------------------------------------------------------
</TABLE>
At May 5, 1997, the directors and officers of the issuer of the Liquidating
Funds, as a group, owned less than 1% of the outstanding shares of each
Liquidating Fund. At May 5, 1997, the trustees and officers of the issuer of the
Acquiring Funds, as a group, owned less than 1% of the outstanding shares of
each Acquiring Fund.
APPRAISAL RIGHTS
Shareholders of the Liquidating Funds are not entitled to any rights of
share appraisal under their Articles of Incorporation, or under the laws of the
State of Maryland.
Shareholders have, however, the right to redeem their fund shares until the
reorganization, and thereafter, shareholders may redeem from American Century
Government Income Trust and American Century Municipal Trust the Acquiring Fund
shares received in the reorganization. Any such redemption will be made at the
fund's net asset value as determined in accordance with the fund's then-current
prospectus.
30 Information Relating to Voting Matters American Century Investments
ANNUAL MEETINGS
American Century Government Income Trust and American Century Municipal
Trust, the issuers of the Acquiring Funds, intend to hold an annual meeting of
shareholders for the election of trustees, the ratification of the appointment
of auditors, the modification of certain fundamental policies (as described in
the section titled "Fundamental Investment Restrictions," page 26), and such
other business as may properly come before the meeting. That meeting is also
scheduled to be held on Wednesday, July 30, 1997. Unless you are also a
shareholder of the Acquiring Funds on the record date for that meeting (May 16,
1997), you will not be entitled to vote at this meeting.
Thereafter, the Acquiring Funds do not intend to hold annual meetings of
shareholders. Shareholders of the Acquiring Funds have the right to call a
special meeting of shareholders and such meeting will be called when requested
in writing by the holders of record of 10% or more of the fund's votes. To the
extent required by law, American Century Government Income Trust and American
Century Municipal Trust will assist in shareholder communications on such
matters.
The Liquidating Funds do not intend to hold an annual meeting of
shareholders this year for the election of directors or the ratification of the
appointment of auditors.
ADDITIONAL INFORMATION
Information about the Liquidating Funds is incorporated into this document
by reference from its Prospectuses and Statements of Additional Information,
each dated March 1, 1997, and information about the Acquiring Funds is
incorporated herein by reference from their Prospectuses and Statements of
Additional Information, each dated September 3, 1996, revised January 1, 1997.
Copies of any of those documents may be obtained without charge by writing or
calling D.F. King & Co., Inc. at 1-800-755-3107.
Reports and other information filed by the Liquidating Funds and Acquiring
Funds may be inspected and copied at the Public Reference Facilities maintained
by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such
materials may be obtained from the Public Reference Branch, Office of Consumer
Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549, at prescribed rates or by accessing the Web site
maintained by the SEC (www.sec.gov).
Proxy Statement Additional Information 31
LITIGATION
None of the Liquidating Funds or the Acquiring Funds are involved in any
litigation or proceeding.
FINANCIAL STATEMENTS
The financial highlights and financial statements for the Liquidating Funds
for the fiscal year ended October 31, 1996, are contained in their Annual Report
to Shareholders and in the Prospectuses and Statement of Additional Information
dated March 1, 1997, each of which is incorporated by reference into this
Combined Prospectus/Proxy Statement. The financial highlights and the financial
statements for the Adjustable Rate Government Securities Fund and
Intermediate-Term Treasury Fund for the fiscal year ended March 31, 1996, and
six-month period ended September 30, 1996, and the financial highlights and the
financial statements for the Intermediate-Term Tax-Free Fund and Long-Term
Tax-Free Fund for the fiscal year ended May 31, 1996, and six-month period ended
November 30, 1996, are contained in their Annual Reports and Semiannual Reports
to Shareholders and in the Prospectuses and Statements of Additional Information
dated September 3, 1996, revised January 1, 1997, which are incorporated by
reference in this Combined Prospectus/Proxy Statement.
The audited financial statements of the Liquidating Funds for the fiscal
year ended October 31, 1996, contained in its Annual Report and incorporated by
reference in this Combined Prospectus/Proxy Statement, have been audited by of
Baird, Kurtz & Dobson, independent certified public accountants, as indicated in
their reports with respect thereto and are incorporated herein in reliance on
their report given upon the authority of such firm as experts in accounting and
auditing.
The audited financial statements of the American Century Government Income
Trust for the fiscal year ended March 31, 1996, and the audited financial
statements for American Century Municipal Trust for the fiscal year ended May
31, 1996, contained in their respective Annual Reports and incorporated by
reference in this Combined Prospectus/Proxy Statement, have been audited by KPMG
Peat Marwick LLP, independent public accountants, as indicated in their reports
with respect thereto and are incorporated herein in reliance on their reports
given the authority of said firm as experts in accounting and auditing.
OTHER BUSINESS
The Board of Directors is not aware of any other business to be brought
before the meeting. However, if any other matters come before the meeting, it is
the intention that proxies that do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
32 Additional Information American Century Investments
SHAREHOLDER INQUIRIES
Shareholder inquiries may be directed to D.F. King & Co., Inc. at
1-800-755-3107 or addressed to us at the address or telephone number set forth
on the cover page of this Combined Prospectus/Proxy Statement.
SHAREHOLDERS ARE REQUESTED TO DATE AND SIGN EACH ENCLOSED PROXY VOTING CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE. PLEASE RETURN YOUR PROXY VOTING CARD
EVEN IF YOU ARE PLANNING TO ATTEND THE MEETING. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
MANAGEMENT'S DISCUSSION
OF FUND PERFORMANCE
The following are excerpts of management's discussion of fund performance
from the Annual Report dated March 31, 1997, of the Intermediate-Term Treasury
Fund. For a complete copy of the report, please call D.F. King & Co., Inc. at
1-800-755-3107.
PERIOD OVERVIEW
o The U.S. economy grew by 4.1% during the year ended March 31, 1997, while
inflation rose by just 2.8%.
o To head off potential inflation and slow the rapid pace of economic growth,
the Federal Reserve raised short-term interest rates in March.
o U.S. Treasury bond prices fell during the year ended March 31, but the
interest income enabled Treasurys to produce modestly positive returns.
o U.S. government agency securities outperformed Treasury securities during
the period.
INTERMEDIATE-TERM TREASURY
o The fund was the top performer out of 12 intermediate Treasury funds during
the fiscal year ended March 31, 1997.
o The fund's conservative positioning early in the fiscal year contributed to
the fund's favorable performance.
o The fund invested in the Treasury's new inflation-indexed bonds for a brief
period in early 1997.
o Intermediate-term Treasury securities are now yielding 7%, while inflation
remains below 3%. We are extending the fund's average maturity to capture
these high real yields.
Proxy Statement Management's Discussion 33
TOTAL RETURNS: as of 3/31/97
6 Months 1.60%*
1 Year 4.05%
NET ASSETS: $328.8 million (as of 3/31/97)
Inception Date: 5/16/80
TICKER SYMBOL: CPTNX
- ------------------
*Not annualized
<TABLE>
AVERAGE ANNUAL RETURNS
- -------------------------------------------------------------------------------------------------------
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------------
TOTAL RETURNS
AS OF MARCH 31, 1997
<S> <C> <C> <C> <C> <C>
INTERMEDIATE-TERM TREASURY 1.60% 4.05% 5.31% 5.97% 6.60%
Merrill Lynch 1- to 10-Year
Treasury Index 2.29% 4.65% 6.02% 6.46% 7.56%
Average Intermediate
U.S. Treasury Fund(1) 1.40% 3.38% 5.39% 6.29% 7.03%
Fund's Ranking
Among Intermediate
U.S. Treasury Funds(1) -- 1 out of 12 4 out of 9 4 out of 6 2 out of 2
- --------------------------------------------
(1) According to Lipper Analytical Services.
</TABLE>
[mountain graph - data below]
GROWTH OF $10,000 OVER TEN YEARS
Value on 3/31/97
Merrill Lynch
1-10 Year Intermediate-Term
Treasury Index Treasury
$10,000 $10,000
$9,836 $9,649
$9,938 $9,677
$9,957 $9,624
$9,928 $9,525
$9,798 $9,302
$10,106 $9,694
$10,162 $9,711
$10,257 $9,837
$10,516 $10,196
$10,626 $10,320
$10,580 $10,161
$10,566 $10,098
$10,507 $10,021
$10,678 $10,215
$10,652 $10,152
$10,660 $10,149
$10,845 $10,337
$10,993 $10,486
$10,897 $10,362
$10,907 $10,354
$11,015 $10,457
$10,969 $10,393
$11,023 $10,443
$11,226 $10,617
$11,463 $10,849
$11,755 $11,140
$11,995 $11,379
$11,828 $11,183
$11,888 $11,229
$12,132 $11,461
$12,250 $11,554
$12,281 $11,589
$12,211 $11,518
$12,242 $11,550
$12,266 $11,552
$12,223 $11,498
$12,481 $11,750
$12,644 $11,905
$12,825 $12,078
$12,770 $12,022
$12,886 $12,139
$13,066 $12,306
$13,261 $12,491
$13,448 $12,656
$13,585 $12,771
$13,656 $12,828
$13,730 $12,891
$13,872 $13,024
$13,951 $13,093
$13,966 $13,089
$14,116 $13,225
$14,380 $13,494
$14,624 $13,714
$14,790 $13,881
$14,963 $14,043
$15,329 $14,395
$15,174 $14,230
$15,232 $14,256
$15,170 $14,170
$15,308 $14,320
$15,526 $14,536
$15,751 $14,746
$16,044 $15,033
$16,229 $15,195
$16,454 $15,425
$16,251 $15,223
$16,179 $15,134
$16,392 $15,340
$16,699 $15,635
$16,949 $15,855
$17,012 $15,922
$17,147 $16,041
$17,096 $15,979
$17,346 $16,226
$17,381 $16,241
$17,647 $16,487
$17,723 $16,546
$17,754 $16,573
$17,669 $16,483
$17,914 $16,725
$17,660 $16,465
$17,412 $16,216
$17,294 $16,088
$17,312 $16,094
$17,325 $16,095
$17,539 $16,289
$17,594 $16,348
$17,453 $16,222
$17,457 $16,215
$17,370 $16,124
$17,436 $16,165
$17,725 $16,412
$18,064 $16,705
$18,163 $16,789
$18,372 $16,968
$18,897 $17,415
$19,020 $17,530
$19,033 $17,529
$19,189 $17,683
$19,318 $17,783
$19,535 $17,992
$19,779 $18,196
$19,980 $18,381
$20,151 $18,522
$19,926 $18,318
$19,830 $18,203
$19,768 $18,147
$19,757 $18,125
$19,950 $18,328
$20,011 $18,388
$20,033 $18,330
$20,288 $18,640
$20,618 $19,043
$20,871 $19,334
$20,758 $19,133
$20,836 $19,152
$20,859 $19,181
$20,752 $18,941
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost. The line representing the fund's total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total return line of the index does not.
34 Management's Discussion American Century Investments
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
3/31/97 3/31/96
Number of Securities 13 10
Weighted Average Maturity 5.8 years 3.8 years
Average Duration 4.4 years 3.1 years
Expense Ratio 0.51% 0.53%
YIELD AS OF MARCH 31, 1997
- --------------------------------------------------------------------------------
30-Day SEC Yield
Intermediate-Term Treasury 6.27%
INTERMEDIATE-TERM TREASURY MANAGEMENT Q & A
An interview with Dave Schroeder, Vice President and a senior portfolio
manager on the Benham Treasury funds management team.
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?
The fund was the top-performing intermediate Treasury fund. For the fiscal
year ended March 31, 1997, the fund had a total return of 4.05%, compared with
the 3.38% average return of the 12 "Intermediate U.S. Treasury Funds" tracked by
Lipper Analytical Services. (See the Total Returns table on the previous page
for other fund performance comparisons.)
[bar chart - data below]
INTERMEDIATE-TERM TREASURY FISCAL YEAR RETURNS (Periods ended March 31)
Intermediate-Term Merrill Lynch 1- to 10-Year
Treasury Treasury Index
1988 1.60% 5.80%
1989 2.78% 4.19%
1990 10.65% 11/27%
1991 11/59% 11.94%
1992 9.92% 10.49%
1993 12.36% 12.15%
1994 1.85% 2.33%
1995 3.54% 4.31%
1996 8.42% 9.18%
1997 4.05% 4.65%
This chart illustrates the historical year-by-year volatility of the fund's
returns over the past 10 years and compares them with the index's returns. The
fund's total returns include operating expenses, while the index's do not. See
page 32 of the Annual Report for a definition of the index.
WHAT FACTORS LED TO THE FUND'S STRONG PERFORMANCE RELATIVE TO ITS LIPPER
CATEGORY?
The main reason was the fund's more conservative positioning during the
first half of the fiscal year. Historically, the fund's average maturity and
Proxy Statement Management's Discussion 35
duration have been shorter than those of its peers, and this positioning helped
limit the fund's price depreciation as interest rates rose in mid-1996.
But as we mentioned in our last report, we changed the fund's benchmark
index toward the end of last summer. As a result, the fund's average maturity
and duration are now more in line with those of other intermediate Treasury
funds. The fund's performance over the last six months of the fiscal year
reflected this change; its 1.60% return was closer to the 1.40% average return
of its peers.
DID THE FUND'S AVERAGE MATURITY AND DURATION CHANGE MUCH OVER THE PAST SIX
MONTHS?
Not really, although we made some small adjustments to the fund's
positioning in response to changing market conditions. For example, in
mid-February we held the interest payments on several of the fund's securities
in cash rather than reinvesting them in the Treasury market. This move
effectively shortened the fund's average maturity and duration, which proved to
be timely--bond prices plunged and yields rose during the latter half of
February. The fund's larger cash position helped reduce the negative effects of
rising interest rates.
After the market turbulence eased a little in March, we invested the cash
in longer-term, high-yielding Treasury securities. This transaction extended the
fund's average maturity and duration while adding some extra yield.
THE FUND HELD SOME INFLATION-INDEXED TREASURY BONDS DURING THE PERIOD. WHY?
It was part of the same mid-February adjustment to position the fund more
conservatively. The Treasury had recently introduced its first-ever
inflation-indexed bonds with maturities of 10 years, and our analysis indicated
that these securities were less volatile than five-year Treasury notes. So, we
sold some of the fund's five-year Treasury notes and purchased some
inflation-indexed Treasury securities.
The inflation-indexed securities performed as expected--they suffered less
price depreciation during the bond price decline in late February. But the fund
only held the inflation-indexed bonds for about two weeks; we sold them at the
end of February. By that time, five-year Treasury notes were more attractively
valued, so we rotated back into those securities.
DO YOU PLAN TO ADD ANY INFLATION-INDEXED SECURITIES TO THE FUND'S PORTFOLIO
IN THE FUTURE?
Absolutely. An inflation-indexed bond tends to have about half the
interest-rate sensitivity of a normal bond with the same maturity. The only
inflation-indexed Treasury securities currently available have maturities of 10
years, which means their interest-rate sensitivity is similar to that of a
five-year Treasury note. That level of interest-rate sensitivity makes them
perfect candidates for the fund's portfolio.
36 Management's Discussion American Century Investments
Going forward, we will monitor the relative value between five-year
Treasury notes and 10-year inflation-indexed Treasury bonds. We'll invest in
whichever securities are most attractive based on our evaluations of their total
return potential.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
Treasury Notes 81%
Treasury Bonds 19%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/96)
Treasury Notes 97%
Treasury Bonds 3%
LOOKING AHEAD, WHAT IS YOUR OUTLOOK FOR THE TREASURY MARKET OVER THE NEXT
SIX MONTHS?
Bond yields rose dramatically in the first quarter of 1997, largely because
the U.S. economy has shown stronger-than-normal growth and wages have been
rising. These factors also led the Federal Reserve to raise short-term interest
rates in March. The Fed appears to be in a rate-raising mode; our only question
is how high they will go.
Historically, the average Fed "tightening cycle"--a series of consecutive
short-term interest rate increases designed to restrain economic growth and head
off inflation--consisted of four rate hikes totaling 200 basis points (2
percentage points). This magnitude of tightening seems unlikely this time
around, especially since rising wage pressures have not materialized in the
consumer inflation figures. Overall, we believe that this will be a mild Fed
tightening cycle.
The bond market has already priced in another Fed rate increase, even
though inflation trended lower in the first quarter of 1997. In addition, the
rise in bond yields over the past few months may already be enough to slow
economic activity and keep inflation at bay. As a result, we see a strong
possibility of lower intermediate-term Treasury yields over the next six months.
Proxy Statement Management's Discussion 37
WITH THIS OUTLOOK IN MIND, WHAT ARE YOUR PLANS FOR THE FUND OVER THE NEXT
SIX MONTHS?
Intermediate-term Treasury securities are currently yielding almost 7%, an
attractive yield considering that inflation was just 2.8% during the past fiscal
year. That's a real yield (the stated yield minus the inflation rate) of more
than 4%. So, we're lengthening the fund's average maturity and duration to
capture these high real yields. We've already extended the fund's duration from
4.4 years to 4.7 years since the end of the fiscal year.
We're also positioning the fund for a steeper yield curve. Recently, the
Treasury yield curve has been relatively flat between two and ten years--that
is, the gap between two-year Treasury yields and ten-year Treasury yields is
narrower than usual. Because we expect this situation to change, we're
concentrating the fund's portfolio in bonds with maturities at or near the
fund's average maturity of six years. This structure--known as a "bullet"--tends
to perform best when the yield curve moves from flat to steep.
We've sold some of the fund's longer-term bonds and replaced them with
six-year securities, including some zero-coupon Treasury bonds. The zero-coupon
bonds have longer durations than ordinary six-year Treasury securities, so they
help maintain the fund's duration while fitting into the "bullet" portfolio
structure.
[pie charts]
PORTFOLIO COMPOSITION BY MATURITY (as of 3/31/97)
0-3 Years 4%
3-5 Years 58%
5-7 Years 8%
7-10 Years 24%
10-20 Years 6%
PORTFOLIO COMPOSITION BY MATURITY (as of 9/30/96)
0-3 Years 2%
3-5 Years 65%
5-7 Years 17%
7-10 Years 13%
10-20 Years 3%
38 Management's Discussion American Century Investments
APPENDIX I
STANDARDIZED FUNDAMENTAL
INVESTMENT RESTRICTIONS
Each Acquiring Fund's shareholders (other than the Limited-Term Tax-Free
Fund) is currently considering a proposal to modify its fundamental investment
restrictions to those set forth in the following table in order to make them
consistent with the other funds within the American Century family of funds.
These fundamental investment restrictions cannot be changed without the approval
a fund's shareholders. The Limited-Term Tax-Free Fund was established with the
following fundamental investment restrictions already in place. Accordingly, no
shareholder vote is needed to amend that fund's fundamental investment
restrictions.
CATEGORY PROPOSED LIMITATION
- --------------------------------------------------------------------------------
SENIOR SECURITIES The funds shall not issue senior securities,
except as permitted under the Investment Company Act of
1940.
- --------------------------------------------------------------------------------
BORROWING The funds shall not borrow money, except that a fund
may borrow money for temporary or emergency purposes
(not for leveraging or investment) in an amount not
exceeding 331/3% of the fund's total assets
(including the amount borrowed) less liabilities
(other than borrowings).
- --------------------------------------------------------------------------------
LENDING The funds shall not lend any security or make any
other loan if, as a result, more than 331/3% of a
fund's total assets would be lent to other parties,
except, (i) through the purchase of debt securities
in accordance with its investment objective, policies
and limitations, or (ii) by engaging in repurchase
agreements with respect to portfolio securities.
- --------------------------------------------------------------------------------
REAL ESTATE The funds shall not purchase or sell real estate
unless acquired as a result of ownership of
securities or other instruments. This policy shall
not prevent a fund from investment in securities or
other instruments backed by real estate or securities
of companies that deal in real estate or are engaged
in the real estate business.
- --------------------------------------------------------------------------------
Proxy Statement Appendix I 39
CATEGORY PROPOSED LIMITATION
- --------------------------------------------------------------------------------
CONCENTRATION The funds shall not concentrate their investments in
securities of issuers in a particular industry (other
than securities issued or guaranteed by the U.S.
government or any of its agencies or
instrumentalities).
- --------------------------------------------------------------------------------
UNDERWRITING The funds shall not act as an underwriter of securities
issued by others, except to the extent that a fund may
be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted
securities.
- --------------------------------------------------------------------------------
COMMODITIES The funds shall not purchase or sell physical
commodities unless acquired as a result of ownership
of securities or other instruments; provided that
this limitation shall not prohibit a fund from
purchasing or selling options and futures contracts
or from investing in securities or other instruments
backed by physical commodities.
- --------------------------------------------------------------------------------
INVESTING The funds shall not invest for purposes of
FOR CONTROL exercising control over management.
- --------------------------------------------------------------------------------
APPENDIX II
CURRENT FUNDAMENTAL
INVESTMENT RESTRICTIONS
The existing fundamental investment restrictions for each of the Acquired
Funds (other than the Limited-Term Tax-Free Fund) is set forth in the table
below. In the event that the shareholders of an Acquiring Fund do not approve
the limitations set forth in Appendix I, the limitations set forth below will
remain as fundamental investment restrictions for that fund.
CATEGORY CURRENT LIMITATIONS
- --------------------------------------------------------------------------------
Senior Securities ARM FUND: 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.
INTERMEDIATE-TERM TREASURY FUND: Issue or sell any
class of senior security, except to the extent that
notes evidencing temporary borrowing might be deemed
such.
40 Appendix II American Century Investments
CATEGORY CURRENT LIMITATIONS
- --------------------------------------------------------------------------------
SENIOR SECURITIES INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM TAX-
(CONT.) FREE FUND: 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.
- --------------------------------------------------------------------------------
BORROWING ARM FUND: 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 or 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 pledge or hypothecate
not 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.
INTERMEDIATE-TERM TREASURY FUND: Borrow money except
from a bank as a temporary measure to satisfy
redemption requests, or for extraordinary or emergency
purposes and then only in an amount not exceeding
331/3% of the market value of the fund's total assets,
so 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 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.
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM TAX-FREE
FUND: 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.
- --------------------------------------------------------------------------------
LENDING ARM FUND: Make loans to others, except for the lending
of portfolio securities pursuant to guidelines
established by the Board of Trustees or for the
purchase of debt securities in accordance with the
fund's investment objective and policies.
INTERMEDIATE-TERM TREASURY FUND: Lend money other than
through the purchase of debt securities in accordance
with its investment policy (this restriction does not
apply to repurchase agreements).
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM
TAX-FREE FUND: The funds shall not lend any security
or make any other loan if, as a result, more than
331/3% of a fund's total assets would be lent to other
parties, except, (i) through the purchase of debt
securities in accordance with its investment
objective, policies and limitations, or (ii) by
engaging in repurchase agreements with respect to
portfolio securities.
- --------------------------------------------------------------------------------
Proxy Statement Appendix II 41
CATEGORY CURRENT LIMITATIONS
- --------------------------------------------------------------------------------
UNDERWRITING ARM FUND: Act as an underwriter of securities issued
by others.
INTERMEDIATE-TERM TREASURY FUND: N/A
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM TAX-FREE
FUND: The funds shall not act as an underwriter of
securities issued by others, except to the extent that
a fund may be considered an underwriter within the
meaning of the Securities Act of 1933 in the
disposition of restricted securities.
- --------------------------------------------------------------------------------
REAL ESTATE AND ARM FUND: Purchase, sell, or invest in real
COMMODITIES estate, commodities, commodity contracts, foreign
exchange, or interest in oil, gas, or other mineral
exploration or development programs, provided that this
limitation shall not prohibit the purchase of U.S.
government securities and other debt securities secured
by real estate or interests therein.
INTERMEDIATE-TERM TREASURY FUND: Purchase or sell
real estate, commodities, or commodity contracts, or
buy and sell foreign exchange.
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM
TAX-FREE FUND: 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 no 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.
- --------------------------------------------------------------------------------
SHORT-SALES ARM FUND: Engage in any short-selling operations
INTERMEDIATE-TERM TREASURY FUND: Engage in any
short-selling operations.
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM
TAX-FREE FUND: 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.
- --------------------------------------------------------------------------------
EQUITY SECURITIES ARM FUND: Purchase any equity securities in any
companies, including warrants or bonds with warrants
attached, or any preferred stocks, convertible bonds,
or convertible debentures.
INTERMEDIATE-TERM TREASURY FUND: N/A
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM
TAX-FREE FUND: N/A
- --------------------------------------------------------------------------------
42 Appendix II American Century Investments
CATEGORY CURRENT LIMITATIONS
- --------------------------------------------------------------------------------
U.S. TREASURY ARM FUND: N/A
SECURITIES
INTERMEDIATE-TERM TREASURY FUND: Purchase the
securities of any issuer other than the U.S. Treasury.
This restriction shall not apply to repurchase
agreements consisting of U.S. government securities or
to purchases by the fund of shares of other investment
companies, provided that not more than 3% of such
investment company's outstanding shares would be held
by the fund, not more that 5% of the value of the
fund's assets would be invested in shares of such
company, and not more than 10% of the value of the
fund's assets would be invested in shares of investment
companies in the aggregate.
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM
TAX-FREE FUND: N/A
- --------------------------------------------------------------------------------
OTHER INVESTMENT ARM FUND: Acquire or retain the securities of any
COMPANIES 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 that 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.
INTERMEDIATE-TERM TREASURY FUND: See Limitation on
"U.S. Treasury Securities."
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM
TAX-FREE FUND: Acquire or retain the securities of
any other investment company, except that the fund
may, for temporary purposes, purchase shares of the
American Century 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.
- --------------------------------------------------------------------------------
MARGIN TRANSACTIONS ARM FUND: Engage in margin transactions or in
transactions involving puts, calls, straddles, or
spreads.
INTERMEDIATE-TERM TREASURY FUND: Engage in margin
transactions or in transactions involving puts,
calls, straddles, or spreads.
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM TAX-FREE
FUND: 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
investments techniques.
- --------------------------------------------------------------------------------
Proxy Statement Appendix II 43
CATEGORY CURRENT LIMITATIONS
- --------------------------------------------------------------------------------
RESTRICTED ARM FUND: Invest in securities that are not
SECURITIES 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.
INTERMEDIATE-TERM TREASURY FUND: Invest in portfolio
securities that the fund may not be free to sell to the
public without registration under the Securities Act of
1933 or the taking of similar actions under other
securities laws relating to the sale of securities.
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM
TAX-FREE FUND: N/A
- --------------------------------------------------------------------------------
FURTHER LIABILITY ARM FUND: N/A
INTERMEDIATE-TERM TREASURY FUND: Purchase securities
for which the fund might be liable for further
payment or liability.
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM
TAX-FREE FUND: N/A
- --------------------------------------------------------------------------------
INVESTING ARM FUND: Purchase or retain securities of any issuer
FOR CONTROL if, to the knowledge of the Trust'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.
INTERMEDIATE-TERM TREASURY FUND: N/A
INTERMEDIATE-TERM TAX-FREE FUND AND LONG-TERM
TAX-FREE FUND: N/A
- --------------------------------------------------------------------------------
44 Appendix II American Century Investments
NOTES
Notes 45
[american century logo]
American
Century(sm)
9705 [recycled logo]
SH-BKT-8602-C Recycled
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[american century logo]
American
Century(sm)
June 2, 1997
[front cover]
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Investments
4500 Main Street
P.O. Box 419200
Kansas City, Missouri 64141-6200
1-800-345-2021
Statement of Additional Information
1997 Special Meeting of Shareholders of American Century Mutual Funds, Inc.
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement/Prospectus dated June
2, 1997 for the Special Meeting of Shareholders to be held on July 30, 1997.
Copies of the Combined Proxy Statement/Prospectus may be obtained at no charge
by calling D. F. King & Co., the proxy solicitor for the funds, at
1-800-755-3107, or American Century Mutual Funds, Inc. at 1-800-345-2021.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement/Prospectus.
Further information about the Acquiring Funds is contained in and
incorporated by reference to their Statements of Additional Information dated
September 3, 1996, revised January 1, 1997, copies of which are incorporated
herein by reference. The audited financial statements and related independent
accountant's report for the Acquiring Funds contained in the Annual Reports
dated March 31, 1996 with respect to the Adjustable Rate Government Securities
Fund and Intermediate-Term Treasury Fund and May 31, 1996 with respect to the
Intermediate-Term Tax-Free Fund and Long-Term Tax-Free Fund are incorporated
herein by reference. The Acquired Funds' respective Semi-Annual Reports dated
September 30, 1996 and November 30, 1996 are also incorporated herein by
reference. No other parts of the Annual Report are incorporated by reference
herein.
Further information about the Liquidating Funds is contained in and
incorporated by reference to its Statements of Additional Information dated
March 1, 1997. The audited financial statements and related independent
accountant's report for the Liquidating Funds contained in their Annual Reports
dated October 31, 1996 are incorporated herein be reference. No other parts of
the Annual Report are incorporated by reference herein.
The date of this Statement of Additional Information is June 2, 1997.
TABLE OF CONTENTS
General Information...........................................................
Pro Forma Financial Statements................................................
Agreement and Plan of Reorganization..........................................
<PAGE>
GENERAL INFORMATION
The Shareholders of the Acquiring Funds are being asked to approve or
disapprove an Agreement and Plan of Reorganization (the "Reorganization
Agreement") between the American Century Government Income Trust, American
Century Municipal Trust, and American Century Mutual Funds, Inc. and the
transactions contemplated thereby. A copy of the proposed Reoganization
Agreement is contained in this Statement of Additional Information beginning at
page [2]. A summary of the material provisions of such Agreement is contained in
the Combined Proxy Statement/Prospectus. The Reorganization Agreement
contemplates the transfer of substantially all of the assets and liabilities of
the Acquired Company's Liquidating Funds to the Acquiring Funds in exchange for
full and fractional shares representing interests in such corresponding funds.
The shares issued by the Acquiring Funds will have an aggregate net asset value
equal to the aggregate net asset value of the shares of the Liquidating Funds
that are outstanding immediately before the effective time of the
Reorganization.
Following the exchange, the Liquidating Funds will make a liquidating
distribution of Acquiring Fund shares to shareholders. Each shareholder owning
shares of the Liquidating Funds at the effective time of the reorganization will
receive shares of the Acquiring Funds of equal value, plus the right to receive
any unpaid dividends and distributions that were declared before the effective
time of the reorganization on Liquidating Fund shares.
The Special Meeting of Shareholders to consider the Reorganization
Agreement and the related transactions will be held at 10:00 a.m. Central time
on July 30, 1997 at American Century Towers I, 4500 Main Street, Kansas City,
Missouri. For further information about the transaction, see the Combined Proxy
Statement/Prospectus.
PRO FORMA FINANCIAL STATEMENTS
In accordance with Item 14(a)(2) of Form N-14, pro forma financial statements
were not prepared for the proposed combination of the American Century - Benham
Intermediate-Term Government Fund and the American Century - Benham
Intermediate-Term Treasury Fund, since the net asset value of the American
Century - Benham Intermediate-Term Government Fund (non-surviving fund) did not
exceed ten percent of the net asset value of the American Century - Benham
Intermediate-Term Treasury Fund (surviving fund) on March 10, 1997.
<PAGE>
<TABLE>
<CAPTION>
BENHAM SHORT-TERM GOVERNMENT FUND
BENHAM ADJUSTABLE RATE GOVERNMENT SECURITIES FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
Benham
Adjustable
Benham Rate
October 31, 1996 (Unaudited) Short-Term Government Pro Forma
Government Securities Combined
Fund Fund Adjustments (Note 1)
---------------($ in Thousands, Except Per-Share Amounts)-------------------
ASSETS
<S> <C> <C> <C> <C>
Investment securities,
at value (identified
cost of $345,317 and
$255,853, respectively) $347,730 $256,362 $604,092
Cash - 542 $(410) (b) 132
Receivable for investments
sold - 11,834 11,834
Interest receivable 3,822 1,814 5,636
Prepaid expenses and other
assets - 4 (4) (c) -
----------------------------------------------------------------------------
351,552 270,556 (414) 621,694
----------------------------------------------------------------------------
LIABILITIES
Disbursements in excess
of demand deposit
cash 1,079 - (410) (b) 669
Payable for investments
purchased - 9,958 9,958
Payable for capital
shares redeemed 182 1,942 2,124
Dividend payable 311 240 551
Payable to affiliates - 115 (115) (c) -
Accrued management fee 208 - 103 (c) 311
Accrued expenses and
other liabilities - 7 (7) (c) -
-----------------------------------------------------------------------------
1,780 12,262 (429) 13,613
-----------------------------------------------------------------------------
Net Assets Applicable
to Outstanding Shares $349,772 $258,294 $15 $608,081
=============================================================================
CAPITAL SHARES (NOTE 3)
Outstanding 36,941 27,130 145 (a) 64,216
=============================================================================
Net Asset Value Per Share $9.47 $9.52 $9.47
=============================================================================
NET ASSETS CONSIST OF:
Capital paid in $367,317 $327,056 $15 (c) $694,388
Accumulated undistributed
net realized gain
(loss) from investment
transactions (19,958) (69,271) (89,229)
Net unrealized appreciation
(depreciation) on
investments 2,413 509 2,922
----------------------------------------------------------------------------
$349,772 $258,294 $15 $608,081
============================================================================
(a) Adjustment to reflect the issuance of Adjustable Rate Government Securities shares (at the Short-Term Government net asset value
per share since this fund is the accounting survivor) in connection with the proposed reorganization.
(b) Adjustment to net bank overdraft of the Short-Term Government Fund with cash of the Adjustable Rate Government Securities Fund.
(c) Adjustment restates the funds' accrued management fees to reflect the unitary fee structure at the proposed rate of the
reorganized entity.
See Notes to Pro Forma Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BENHAM SHORT-TERM GOVERNMENT FUND
BENHAM ADJUSTABLE RATE GOVERNMENT SECURITIES FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
Benham
Adjustable
Benham Rate
Year Ended October 31, 1996 Short-Term Government Pro Forma
(Unaudited) Government Securities Combined
Fund Fund Adjustments (Note 1)
---------------------------($ in Thousands)----------------------------------------
INVESTMENT INCOME
Income:
<S> <C> <C> <C>
Interest $22,514 $17,834 $40,348
-----------------------------------------------------------------------------------
Expenses:
Management fees 2,570 - 1,389 (a) 3,959
Investment advisory fees - 805 (805) (a) -
Administrative fees - 372 (372) (a) -
Transfer agency fees - 266 (266) (a) -
Custodian fees - 123 (123) (a) -
Printing and postage - 82 (82) (a) -
Registration and filing fees - 18 (18) (a) -
Directors' fees and expenses 4 10 (10) (a) 4
Auditing and legal fees - 24 (24) (a) -
Organizational expenses - 3 (3) (a) -
Other operating expenses - 57 (57) (a) -
----------------------------------------------------------------------------
Total expenses 2,574 1,760 (371) 3,963
Amount waived - (5) 5 (a) -
Custodian earnings credits - (78) 78 (a) -
----------------------------------------------------------------------------
Net expenses 2,574 1,677 (288) 3,963
----------------------------------------------------------------------------
Net investment income 19,940 16,157 288 36,385
----------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) (339) 363 24
Change in net unrealized
appreciation (depreciation) (1,269) 379 (890)
Net realized and unrealized gain
(loss) on investments (1,608) 742 (866)
----------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $18,332 $16,899 $288 $35,519
============================================================================
(a) Adjustment restates the funds' management fees to reflect the unitary fee structure at the proposed rate of the reorganized
entity and the expected savings when the two funds become one.
See Notes to Pro Forma Financial Statements
</TABLE>
Notes to Pro Forma Financial Statements (unaudited)
1. Basis of Combination-The unaudited Pro Forma Combining Schedules of
Investments, Pro Forma Combining Statements of Assets and Liabilities and
Pro Forma Combining Statements of Operations reflect the accounts of the
Benham Short-Term Government Fund and Benham Adjustable Rate Government
Securities Fund; Benham Intermediate-Term Tax-Exempt Fund and Benham
Intermediate-Term Tax-Free Fund and Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund, at and for the year ended October 31, 1996.
The pro forma statements give effect to the proposed transfer of the assets
and stated liabilities of the non-surviving fund, in exchange for shares of
the surviving entity as stated below:
Non-Surviving Fund: Surviving Fund:
Benham Adjustable Rate Government Benham Short-Term Government Fund
Securities Fund
Benham Intermediate-Term Benham Intermediate-Term
Tax-Free Fund Tax-Exempt Fund
Benham Long-Term Tax-Free Fund Benham Long-Term Tax-Exempt Fund
In accordance with generally accepted accounting principles, the historical
cost of investment securities will be carried forward to the surviving fund
and the results of operations for pre-combination periods for the surviving
fund will not be restated. The pro forma statements do not reflect the
expenses of either fund in carrying out its obligation under the Agreement
and Plan of Reorganization. Under the terms of the Plan of Reorganization,
the combination of the funds will be treated as a tax-free business
combination and accordingly will be accounted for by a method of accounting
for tax-free mergers of investment companies (sometimes referred to as the
pooling without restatement method).
The Pro Forma Combining Schedules of Investments, Statements of Assets and
Liabilities and Statements of Operations should be read in conjunction with
the historical financial statements of the funds which are incorporated by
reference in the Statement of Additional Information.
2. Portfolio Valuation-Securities are valued through valuations obtained from
a commercial pricing service or at the mean of the most recent bid and
asked prices. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by
the Board of Trustees.
3. Capital Shares-The pro forma net asset value per share assumes the
issuance of shares of the surviving fund which would have been issued at
October 31, 1996, in connection with the proposed reorganization. The
number of shares assumed to be issued is equal to the net asset value of
shares of the non-surviving fund, as of October 31, 1996, divided by the
net asset value per share of the shares of the surviving fund as of October
31, 1996. The pro forma total number of shares outstanding for each
combined fund consists of the following at October 31, 1996:
Additional Shares
Combined Total Outstanding Shares of Assumed Issued
Fund Shares Surviving Fund in Reorganization
Short-Term
Government Fund 64,215,708 36,940,713 27,274,995
Intermediate-Term
Tax-Exempt Fund 13,898,329 7,787,666 6,110,663
Long-Term
Tax-Exempt Fund 10,879,856 5,743,483 5,136,373
4. Investments-At October 31, 1996, the funds had the following net capital
loss carryforwards available to offset future capital gains. To the extent
that those carryforward losses are used to offset capital gains, it is
probable that any gains so offset will not be distributed.
Fund Net Capital Loss Carryforward
Adjustable Rate Government
Securities Fund $69,205,630
Short-Term Government Fund $19,957,873
Intermediate-Term Tax-Free Fund $420,126
Long-Term Tax-Free Fund $427,920
<TABLE>
<CAPTION>
Pro Forma Combining
Benham Short-Term Government Fund and
Benham Adjustable Rate Government Securities Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ in Thousands)
- --------------------------------------------------
Adjustable Pro Forma
Short-Term Rate Combined
Principal Principal Principal
Amount Amount Amount
U. S. TREASURY SECURITIES--27.3%
<S> <C> <C> <C>
$23,100 - $23,100 U.S. Treasury Notes, 5.75%, 9-30-97
23,100 - 23,100 U.S. Treasury Notes, 7.375%, 11-15-97
12,800 - 12,800 U.S. Treasury Notes, 5.375%, 11-30-97
11,070 - 11,070 U.S. Treasury Notes, 5.00%, 1-31-98
11,080 - 11,080 U.S. Treasury Notes, 7.25%, 2-15-98
11,000 - 11,000 U.S. Treasury Notes, 6.125%, 3-31-98
12,000 $8,000 20,000 U.S. Treasury Notes, 5.875%, 10-31-98
12,925 - 12,925 U.S. Treasury Notes, 5.00%, 1-31-99
18,600 - 18,600 U.S. Treasury Notes, 5.00%, 2-15-99
10,615 - 10,615 U.S. Treasury Notes, 6.75%, 5-31-99
4,670 - 4,670 U.S. Treasury Notes, 7.75%, 2-15-01
- 5,000 5,000 U.S. Treasury Notes, 7.00%, 7-15-06
U.S. GOVERNMENT AGENCY SECURITIES--15.0%
44,500 - 44,500 FHLB, 5.99%, 2-9-98
6,000 - 6,000 FHLB, 6.25%, 3-9-98
9,290 - 9,290 FHLMC, 5.19%, 1-20-99
25,000 - 25,000 FNMA, 6.01%, 10-9-98
6,000 - 6,000 FNMA, 5.20%, 2-18-99
ADJUSTABLE RATE MORTGAGE SECURITIES(1)
FHLMC--10.3%
- 3,857 3,857 FHLMC-ARM Pool #350053, 6.875%, due 5/1/17
- 247 247 FHLMC-ARM Pool #635104, 7.656%, due 8/1/18
- 683 683 FHLMC-ARM Pool #606095, 7.728%, due 11/1/18
- 1,720 1,720 FHLMC-ARM Pool #605775, 7.497%, due 4/1/19
- 2,072 2,072 FHLMC-ARM Pool #606116, 7.577%, due 9/1/19
- 3,316 3,316 FHLMC-ARM Pool #755188, 7.237%, due 9/1/20
- 480 480 FHLMC-ARM Pool #390263, 6.375%, due 1/1/21
- 55 55 FHLMC-ARM Pool #775473, 7.359%, due 6/1/21
- 1,067 1,067 FHLMC-ARM Pool #406645, 7.182%, due 5/1/22
- 2,208 2,208 FHLMC-ARM Pool #876559, 8.08%, due 3/1/24
- 5,478 5,478 FHLMC-ARM Pool #845986, 7.574%, due 3/1/24
- 2,892 2,892 FHLMC-ARM Pool #845898, 7.582%, due 6/1/24
- 13,271 13,271 FHLMC-ARM Pool #846018, 7.628%, due 6/1/24
- 5,783 5,783 FHLMC-ARM Pool #846061, 7.746%, due 7/1/24
- 9,046 9,046 FHLMC-ARM Pool #845995, 7.728%, due 9/1/24
- 7,612 7,612 FHLMC-ARM Pool #846197, 7.378%, due 10/1/25
continued
Pro Forma Combining
Benham Short-Term Government Fund and
Benham Adjustable Rate Government Securities Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
(CONTINUATION OF COLUMN FROM PRIOR PAGE)
($ in Thousands)
------------------------------------------------
Pro
Market Forma
Value Market Combined
Short- Value Market
Term Adjustable Value
U.S. Treasury Notes, 5.75%, 9-30-97 $23,160 - $23,160
U.S. Treasury Notes, 7.375%, 11-15-97 23,517 - 23,517
U.S. Treasury Notes, 5.375%, 11-30-97 12,777 - 12,777
U.S. Treasury Notes, 5.00%, 1-31-98 10,990 - 10,990
U.S. Treasury Notes, 7.25%, 2-15-98 11,297 - 11,297
U.S. Treasury Notes, 6.125%, 3-31-98 11,075 - 11,075
U.S. Treasury Notes, 5.875%, 10-31-98 12,028 $8,018 20,046
U.S. Treasury Notes, 5.00%, 1-31-99 12,711 - 12,711
U.S. Treasury Notes, 5.00%, 2-15-99 18,288 - 18,288
U.S. Treasury Notes, 6.75%, 5-31-99 10,840 - 10,840
U.S. Treasury Notes, 7.75%, 2-15-01 4,969 - 4,969
U.S. Treasury Notes, 7.00%, 7-15-06 - 5,225 5,225
------- ------ -------
151,652 13,243 164,895
------- ------ -------
FHLB, 5.99%, 2-9-98 44,657 - 44,657
FHLB, 6.25%, 3-9-98 6,041 - 6,041
FHLMC, 5.19%, 1-20-99 9,129 - 9,129
FNMA, 6.01%, 10-9-98 25,060 - 25,060
FNMA, 5.20%, 2-18-99 5,894 - 5,894
------- ------ -------
90,781 - 90,781
------- ------ -------
FHLMC-ARM Pool #350053, 6.875%, due 5/1/17 - 3,957 3,957
FHLMC-ARM Pool #635104, 7.656%, due 8/1/18 - 254 254
FHLMC-ARM Pool #606095, 7.728%, due 11/1/18 - 699 699
FHLMC-ARM Pool #605775, 7.497%, due 4/1/19 - 1,794 1,794
FHLMC-ARM Pool #606116, 7.577%, due 9/1/19 - 2,152 2,152
FHLMC-ARM Pool #755188, 7.237%, due 9/1/20 - 3,410 3,410
FHLMC-ARM Pool #390263, 6.375%, due 1/1/21 - 478 478
FHLMC-ARM Pool #775473, 7.359%, due 6/1/21 - 55 55
FHLMC-ARM Pool #406645, 7.182%, due 5/1/22 - 1,083 1,083
FHLMC-ARM Pool #876559, 8.08%, due 3/1/24 - 2,268 2,268
FHLMC-ARM Pool #845986, 7.574%, due 3/1/24 - 5,708 5,708
FHLMC-ARM Pool #845898, 7.582%, due 6/1/24 - 2,975 2,975
FHLMC-ARM Pool #846018, 7.628%, due 6/1/24 - 13,843 13,843
FHLMC-ARM Pool #846061, 7.746%, due 7/1/24 - 6,032 6,032
FHLMC-ARM Pool #845995, 7.728%, due 9/1/24 - 9,436 9,436
FHLMC-ARM Pool #846197, 7.378%, due 10/1/25 - 7,807 7,807
------- ------ -------
- 61,951 61,951
------- ------ -------
continued
Pro Forma Combining
Benham Short-Term Government Fund and
Benham Adjustable Rate Government Securities Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
Adjustable Pro Forma
Short-Term Rate Combined
Principal Principal Principal
Amount Amount Amount
FNMA--10.9%
- 217 217 FNMA-ARM Pool #066254, 6.059%, due 2/1/99
- 230 230 FNMA-ARM Pool #066376, 8.00%, due 2/1/01
- 358 358 FNMA-ARM Pool #066221, 7.50%, due 9/1/03
- 373 373 FNMA-ARM Pool #020155, 7.491%, due 8/1/14
- 63 63 FNMA-ARM Pool #009781, 7.067%. due 10/1/14
- 1,031 1,031 FNMA-ARM Pool #105320, 7.37%, due 7/1/15
- 129 129 FNMA-ARM Pool #020635, 7.18%, due 8/1/15
- 517 517 FNMA-ARM Pool #025432, 6.625%, due 4/1/16
- 103 103 FNMA-ARM Pool #009883, 7.375%, due 7/1/16
- 434 434 FNMA-ARM Pool #036922, 7.875% , due 8/1/16
- 612 612 FNMA-ARM Pool #105843, 7.902%, due 1/1/17
- 2,621 2,621 FNMA-ARM Pool #061401, 7.822%, due 5/1/17
- 1,624 1,624 FNMA-ARM Pool #066415, 7.197%, due 7/1/17
- 521 521 FNMA-ARM Pool #061392, 7.505%, due 7/1/17
- 406 406 FNMA-ARM Pool #070088, 7.383%, due 12/1/17
- 5,171 5,171 FNMA-ARM Pool #099782, 7.157%, due 1/1/18
- 491 491 FNMA-ARM Pool #064708, 7.875%, due 2/1/18
- 1,950 1,950 FNMA-ARM Pool #086885, 7.284%, due 3/1/18
- 527 527 FNMA-ARM Pool #070224, 7.625%, due 4/1/18
- 1,984 1,984 FNMA-ARM Pool #162880, 7.436%, due 5/1/18
- 450 450 FNMA-ARM Pool #070186, 7.142%, due 6/1/18
- 851 851 FNMA-ARM Pool #063167, #063623, #063658, 7.75%,
due 7/1/18
- 1,093 1,093 FNMA-ARM Pool #013786, 7.896%, due 8/1/18
- 1,376 1,376 FNMA-ARM Pool #099577, 7.44%, due 12/1/18
- 248 248 FNMA-ARM Pool #075462, 7.825%, due 5/1/19
- 686 686 FNMA-ARM Pool #244477, 7.203%, due 8/1/19
- 5,863 5,863 FNMA-ARM Pool #142402, 7.518%, due 9/1/19
- 1,903 1,903 FNMA-ARM Pool #070595, 6.98%, due 1/1/20
- 1,541 1,541 FNMA-ARM Pool #113709, 7.707%, due 4/1/20
- 1,087 1,087 FNMA-ARM Pool #070909, 7.43%, due 12/1/20
- 983 983 FNMA-ARM Pool #336479, 7.876%, due 3/1/21
- 361 361 FNMA-ARM Pool #129482, 6.525%. due 8/1/21
- 976 976 FNMA-ARM Pool #145556, 7.375%, due 1/1/22
- 1,577 1,577 FNMA-ARM Pool #163993, 7.262%, due 5/1/22
- 989 989 FNMA-ARM Pool #334441, 7.29%, due 5/1/22
- 959 959 FNMA-ARM Pool #169868, 7.31%, due 6/1/22
- 638 638 FNMA-ARM Pool #173165, 7.276%, due 7/1/22
- 684 684 FNMA-ARM Pool #178295, 7.405%, due 9/1/22
- 707 707 FNMA-ARM Pool #220498, 8.119%, due 6/1/23
- 518 518 FNMA-ARM Pool #222649, 8.125%, due 7/1/23
- 5,389 5,389 FNMA-ARM Pool #303336, 7.366%, due 8/1/23
- 1,348 1,348 FNMA-ARM Pool #190647, 7.689%, due 8/1/23
- 2,979 2,979 FNMA-ARM Pool #291248, 7.853%, due 8/1/24
- 1,032 1,032 FNMA-ARM Pool #318767, 7.708%, due 10/1/25
continued
Pro Forma Combining
Benham Short-Term Government Fund and
Benham Adjustable Rate Government Securities Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
(CONTINUATION OF COLUMN FROM PRIOR PAGE)
($ in Thousands)
Pro
Market Forma
Value Market Combined
Short- Value Market
Term Adjustable Value
FNMA-ARM Pool #066254, 6.059%, due 2/1/99 - 216 216
FNMA-ARM Pool #066376, 8.00%, due 2/1/01 - 228 228
FNMA-ARM Pool #066221, 7.50%, due 9/1/03 - 356 356
FNMA-ARM Pool #020155, 7.491%, due 8/1/14 - 375 375
FNMA-ARM Pool #009781, 7.067%. due 10/1/14 - 63 63
FNMA-ARM Pool #105320, 7.37%, due 7/1/15 - 1,060 1,060
FNMA-ARM Pool #020635, 7.18%, due 8/1/15 - 132 132
FNMA-ARM Pool #025432, 6.625%, due 4/1/16 - 526 526
FNMA-ARM Pool #009883, 7.375%, due 7/1/16 - 104 104
FNMA-ARM Pool #036922, 7.875% , due 8/1/16 - 446 446
FNMA-ARM Pool #105843, 7.902%, due 1/1/17 - 639 639
FNMA-ARM Pool #061401, 7.822%, due 5/1/17 - 2,752 2,752
FNMA-ARM Pool #066415, 7.197%, due 7/1/17 - 1,685 1,685
FNMA-ARM Pool #061392, 7.505%, due 7/1/17 - 544 544
FNMA-ARM Pool #070088, 7.383%, due 12/1/17 - 420 420
FNMA-ARM Pool #099782, 7.157%, due 1/1/18 - 5,314 5,314
FNMA-ARM Pool #064708, 7.875%, due 2/1/18 - 509 509
FNMA-ARM Pool #086885, 7.284%, due 3/1/18 - 2,010 2,010
FNMA-ARM Pool #070224, 7.625%, due 4/1/18 - 549 549
FNMA-ARM Pool #162880, 7.436%, due 5/1/18 - 2,051 2,051
FNMA-ARM Pool #070186, 7.142%, due 6/1/18 - 463 463
FNMA-ARM Pool #063167, #063623, #063658, 7.75%,
due 7/1/18 - 881 881
FNMA-ARM Pool #013786, 7.896%, due 8/1/18 - 1,103 1,103
FNMA-ARM Pool #099577, 7.44%, due 12/1/18 - 1,418 1,418
FNMA-ARM Pool #075462, 7.825%, due 5/1/19 - 257 257
FNMA-ARM Pool #244477, 7.203%, due 8/1/19 - 700 700
FNMA-ARM Pool #142402, 7.518%, due 9/1/19 - 6,100 6,100
FNMA-ARM Pool #070595, 6.98%, due 1/1/20 - 1,953 1,953
FNMA-ARM Pool #113709, 7.707%, due 4/1/20 - 1,607 1,607
FNMA-ARM Pool #070909, 7.43%, due 12/1/20 - 1,128 1,128
FNMA-ARM Pool #336479, 7.876%, due 3/1/21 - 1,025 1,025
FNMA-ARM Pool #129482, 6.525%. due 8/1/21 - 362 362
FNMA-ARM Pool #145556, 7.375%, due 1/1/22 - 996 996
FNMA-ARM Pool #163993, 7.262%, due 5/1/22 - 1,618 1,618
FNMA-ARM Pool #334441, 7.29%, due 5/1/22 - 1,012 1,012
FNMA-ARM Pool #169868, 7.31%, due 6/1/22 - 977 977
FNMA-ARM Pool #173165, 7.276%, due 7/1/22 - 647 647
FNMA-ARM Pool #178295, 7.405%, due 9/1/22 - 695 695
FNMA-ARM Pool #220498, 8.119%, due 6/1/23 - 736 736
FNMA-ARM Pool #222649, 8.125%, due 7/1/23 - 539 539
FNMA-ARM Pool #303336, 7.366%, due 8/1/23 - 5,537 5,537
FNMA-ARM Pool #190647, 7.689%, due 8/1/23 - 1,390 1,390
FNMA-ARM Pool #291248, 7.853%, due 8/1/24 - 3,072 3,072
FNMA-ARM Pool #318767, 7.708%, due 10/1/25 - 1,068 1,068
continued
Pro Forma Combining
Benham Short-Term Government Fund and
Benham Adjustable Rate Government Securities Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
Adjustable Pro Forma
Short-Term Rate Combined
Principal Principal Principal
Amount Amount Amount
- - 777 777 FNMA-ARM Pool #325305, 6.033% , due 11/1/25
- 148 148 FNMA-ARM Pool #062836, 6.658%, due 4/1/26
- 230 230 FNMA-ARM Pool #062835, 6.741%, due 1/1/27
- 284 284 FNMA-ARM Pool #070184, 7.40%, due 1/1/27
- 183 183 FNMA-ARM Pool #091688, 7.302%, due 2/1/27
- 3,663 3,663 FNMA-ARM Pool #062688, 6.059%, due 5/1/28
- 381 381 FNMA-ARM Pool #070716, 6.63%, due 1/1/29
- 298 298 FNMA-ARM Pool #091689, 7.289%, due 2/1/29
- 4,873 4,873 FNMA-ARM Pool #316518, 6.391%, due 10/1/30
GNMA--12.5%
- 379 379 GNMA-ARM Pool #008230, 7.125%, due 5/20/17
- 407 407 GNMA-ARM Pool #008763, 7.00%, due 2/20/21
- 633 633 GNMA-ARM Pool #008867, 7.00%, due 11/20/21
- 480 480 GNMA-ARM Pool #008872, 7.50%, due 11/20/21
- 13 13 GNMA-ARM Pool #008902, 6.50%, due 1/20/22
- 9,166 9,166 GNMA-ARM Pool #008038, 7.00%, due 8/20/22
- 1,981 1,981 GNMA-ARM Pool #008180, 7.125%, due 4/20/23
- 2,531 2,531 GNMA-ARM Pool #008484, 7.25%, due 8/20/24
- 12,828 12,828 GNMA-ARM Pool #008663, 7.00%, due 7/20/25
- 17,099 17,099 GNMA-ARM Pool #008684, 6.00%, due 8/20/25
- 3,524 3,524 GNMA-ARM Pool #008706, 7.50%, due 9/20/25
- 8,260 8,260 GNMA-ARM Pool #008744, 5.50%, due 11/20/25
- 6,783 6,783 GNMA-ARM Pool #008767, 6.00%, due 12/20/25
- 9,964 9,964 GNMA-ARM Pool #008989, 6.00%, due 12/20/26
Total Adjustable Rate Mortgage Securities--33.7%
continued
Pro Forma Combining
Benham Short-Term Government Fund and
Benham Adjustable Rate Government Securities Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ in Thousands)
Pro
Market Forma
Value Market Combined
Short- Value Market
Term Adjustable Value
FNMA-ARM Pool #325305, 6.033% , due 11/1/25 - 804 804
FNMA-ARM Pool #062836, 6.658%, due 4/1/26 - 146 146
FNMA-ARM Pool #062835, 6.741%, due 1/1/27 - 226 226
FNMA-ARM Pool #070184, 7.40%, due 1/1/27 - 295 295
FNMA-ARM Pool #091688, 7.302%, due 2/1/27 - 185 185
FNMA-ARM Pool #062688, 6.059%, due 5/1/28 - 3,648 3,648
FNMA-ARM Pool #070716, 6.63%, due 1/1/29 - 382 382
FNMA-ARM Pool #091689, 7.289%, due 2/1/29 - 301 301
FNMA-ARM Pool #316518, 6.391%, due 10/1/30 - 4,910 4,910
------- ------ -------
- 66,160 66,160
------- ------ -------
GNMA-ARM Pool #008230, 7.125%, due 5/20/17 - 383 383
GNMA-ARM Pool #008763, 7.00%, due 2/20/21 - 416 416
GNMA-ARM Pool #008867, 7.00%, due 11/20/21 - 645 645
GNMA-ARM Pool #008872, 7.50%, due 11/20/21 - 493 493
GNMA-ARM Pool #008902, 6.50%, due 1/20/22 - 14 14
GNMA-ARM Pool #008038, 7.00%, due 8/20/22 - 9,348 9,348
GNMA-ARM Pool #008180, 7.125%, due 4/20/23 - 2,021 2,021
GNMA-ARM Pool #008484, 7.25%, due 8/20/24 - 2,583 2,583
GNMA-ARM Pool #008663, 7.00%, due 7/20/25 - 13,094 13,094
GNMA-ARM Pool #008684, 6.00%, due 8/20/25 - 17,414 17,414
GNMA-ARM Pool #008706, 7.50%, due 9/20/25 - 3,597 3,597
GNMA-ARM Pool #008744, 5.50%, due 11/20/25 - 8,331 8,331
GNMA-ARM Pool #008767, 6.00%, due 12/20/25 - 6,902 6,902
GNMA-ARM Pool #008989, 6.00%, due 12/20/26 - 9,989 9,989
------- ------- -------
- 75,230 75,230
------- ------- -------
- 203,341 203,341
------- ------- -------
continued
Pro Forma Combining
Benham Short-Term Government Fund and
Benham Adjustable Rate Government Securities Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
Adjustable Pro Forma
Short-Term Rate Combined
Principal Principal Principal
Amount Amount Amount
FIXED RATE MORTGAGE SECURITIES(1)
FHLMC
- 4 4 FHLMC-FRM Pool #250918, 13.25%, due 9/1/13
GNMA--1.0%
- 13 13 GNMA-FRM Pool #059438, 11.50%, due 5/15/98
- 38 38 GNMA-FRM Pool #113802, 12.50%, due 6/15/99
- 13 13 GNMA-FRM Pool #127619, 12.50%, due 6/15/00
- 38 38 GNMA-FRM Pool #126325, 11.50%, due 8/15/00
- 244 244 GNMA-FRM Pool #001565, 5.50%, due 1/20/09
- 236 236 GNMA-FRM Pool #187019, 9.00%, due 11/20/16
- 278 278 GNMA-FRM Pool #179457, 9.00%, due 12/20/16
- 90 90 GNMA-FRM Pool #199973, 9.00%, due 12/20/16
- 530 530 GNMA-FRM Pool #220128, 9.00%, due 8/20/17
- 322 322 GNMA-FRM Pool #220134, 9.50%, due 8/20/17
- 418 418 GNMA-FRM Pool #234860, 9.50%, due 10/20/17
- 1,173 1,173 GNMA-FRM Pool #001291, 9.50%, due 11/20/19
- 2,306 2,306 GNMA-FRM Pool #001376, 8.00%, due 9/20/23
Total Fixed Rate Mortgage Securities--1.0%
COLLATERALIZED MORTGAGE OBLIGATIONS(1)
FHLMC(2)--4.8%
- 7,075 7,075 FHLMC 1581 F, 5.9375%, due 9/15/98
- 2,512 2,512 FHLMC 1234 G, 5.7375%, due 5/15/99
- 1,447 1,447 FHLMC 1110 F, 6.2375%, due 5/15/05
- 10,000 10,000 FHLMC 1580 FA, 5.9875%, due 9/15/08
- 8,000 8,000 FHLMC 1640 FC, 5.9375%, due 12/15/08
FNMA(2)--0.8%
- 4,445 4,445 FNMA 92-199 F, 5.90625%, due 11/25/99
Private Label (2)
- 182 182 Dean Witter CMO Trust I Floater DW I-A,
Underlying Collateral FHLMC, 6.125%, due
4/20/18
continued
Pro Forma Combining
Benham Short-Term Government Fund and
Benham Adjustable Rate Government Securities Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ in Thousands)
Pro
Market Forma
Value Market Combined
Short- Value Market
Term Adjustable Value
FHLMC-FRM Pool #250918, 13.25%, due 9/1/13 - 5 5
GNMA-FRM Pool #059438, 11.50%, due 5/15/98 - 14 14
GNMA-FRM Pool #113802, 12.50%, due 6/15/99 - 41 41
GNMA-FRM Pool #127619, 12.50%, due 6/15/00 - 15 15
GNMA-FRM Pool #126325, 11.50%, due 8/15/00 - 41 41
GNMA-FRM Pool #001565, 5.50%, due 1/20/09 - 229 229
GNMA-FRM Pool #187019, 9.00%, due 11/20/16 - 248 248
GNMA-FRM Pool #179457, 9.00%, due 12/20/16 - 292 292
GNMA-FRM Pool #199973, 9.00%, due 12/20/16 - 94 94
GNMA-FRM Pool #220128, 9.00%, due 8/20/17 - 556 556
GNMA-FRM Pool #220134, 9.50%, due 8/20/17 - 344 344
GNMA-FRM Pool #234860, 9.50%, due 10/20/17 - 447 447
GNMA-FRM Pool #001291, 9.50%, due 11/20/19 - 1,253 1,253
GNMA-FRM Pool #001376, 8.00%, due 9/20/23 - 2,344 2,344
----- ----- -----
- 5,918 5,918
----- ----- -----
- 5,923 5,923
----- ----- -----
FHLMC 1581 F, 5.9375%, due 9/15/98 - 7,085 7,085
FHLMC 1234 G, 5.7375%, due 5/15/99 - 2,524 2,524
FHLMC 1110 F, 6.2375%, due 5/15/05 - 1,452 1,452
FHLMC 1580 FA, 5.9875%, due 9/15/08 - 10,090 10,090
FHLMC 1640 FC, 5.9375%, due 12/15/08 - 8,045 8,045
----- ----- -----
- 29,196 29,196
----- ----- -----
FNMA 92-199 F, 5.90625%, due 11/25/99 - 4,477 4,477
----- ----- -----
Dean Witter CMO Trust I Floater DW I-A,
Underlying Collateral FHLMC, 6.125%,
due 4/20/18 - 182 182
----- ----- -----
continued
Pro Forma Combining
Benham Short-Term Government Fund and
Benham Adjustable Rate Government Securities Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
Adjustable Pro Forma
Short-Term Rate Combined
Principal Principal Principal
Amount Amount Amount
Remics--17.4%
15,177 - 15,177 FHLMC Series 1344 B TAC REMIC, 6.00%,10-15-05
6,500 - 6,500 FHLMC Series 1836 C PAC REMIC, 6.25%, 6-15-14
6,650 - 6,650 FHLMC Series 1822 B PAC REMIC, 6.50%, 2-15-16
14,404 - 14,404 FHLMC Series 1834 A PAC REMIC, 7.00%, 1-15-20
14,515 - 14,515 FHLMC Series 1861 E PAC REMIC, 6.50%, 8-15-20
9,988 - 9,988 FNMA 93 Series 93 C PAC REMIC, 5.50%, 2-25-06
4,372 - 4,372 FNMA 93 Series 185 PB PAC REMIC, 4.90%, 4-25-09
8,996 - 8,996 FNMA 96 Series 10 A PAC REMIC, 6.50%, 11-25-17
9,915 - 9,915 FNMA 96 Series 12 A PAC REMIC, 6.50%, 12-25-17
7,418 - 7,418 FNMA G93 Series 29 A PAC REMIC, 6.65%, 10-25-18
7,509 - 7,509 FNMA 96 Series 16 D PAC REMIC, 7.00%, 8-25-21
continued
Pro Forma Combining
Benham Short-Term Government Fund and
Benham Adjustable Rate Government Securities Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ in Thousands)
Pro
Market Forma
Value Market Combined
Short- Value Market
Term Adjustable Value
FHLMC Series 1344 B TAC REMIC, 6.00%,10-15-05 15,105 - 15,105
FHLMC Series 1836 C PAC REMIC, 6.25%, 6-15-14 6,493 - 6,493
FHLMC Series 1822 B PAC REMIC, 6.50%, 2-15-16 6,685 - 6,685
FHLMC Series 1834 A PAC REMIC, 7.00%, 1-15-20 14,490 - 14,490
FHLMC Series 1861 E PAC REMIC, 6.50%, 8-15-20 14,436 - 14,436
FNMA 93 Series 93 C PAC REMIC, 5.50%, 2-25-06 9,870 - 9,870
FNMA 93 Series 185 PB PAC REMIC, 4.90%, 4-25-09 4,346 - 4,346
FNMA 96 Series 10 A PAC REMIC, 6.50%, 11-25-17 8,999 - 8,999
FNMA 96 Series 12 A PAC REMIC, 6.50%, 12-25-17 9,923 - 9,923
FNMA G93 Series 29 A PAC REMIC, 6.65%, 10-25-18 7,415 - 7,415
FNMA 96 Series 16 D PAC REMIC, 7.00%, 8-25-21 7,535 - 7,535
----- ----- -----
105,297 - 105,297
----- ----- -----
Total Collaterlized Mortgage Obligations--23.0% 105,297 33,855 139,152
------- ------- -------
TOTAL INVESTMENT SECURITIES--100.0% $347,730 $256,362 $604,092
======= ======= =======
Notes to Schedule of Investments
FHLB - Federal Home Loan Banks
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
(1) Final maturity indicated. Expected remaining average life used for purposes
of calculating the weighted average portfolio maturity.
(2) Interest rates shown are effective October 31, 1996. The coupons on these
securities reset frequently (monthly or quarterly) and are not restricted
by low periodic or lifetime caps, so their price volatility is similar to
Adjustable Rate Mortgage Securities.
</TABLE>
<TABLE>
<CAPTION>
BENHAM INTERMEDIATE-TERM TAX-EXEMPT FUND
BENHAM INTERMEDIATE-TERM TAX-FREE FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
Benham Benham Pro Forma
October 31, 1996 (Unaudited) Intermediate-Term Intermediate-Term Combined
Tax-Exempt Fund Tax-Free Fund Adjustments (Note 1)
------------($ in Thousands, Except Per-Share Amounts)--------------
--------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C>
Investment securities, at value (identified cost of
$77,976 and $59,846, respectively) $79,959 $62,240 $142,199
Cash - 262 (216) (b) 46
Interest receivable 1,333 1,046 2,379
--------------------------------------------------------------------
81,292 63,548 (216) 144,624
--------------------------------------------------------------------
LIABILITIES
Disbursements in excess of demand deposit cash 493 - (216) (b) 277
Payable for capital shares redeemed 128 216 344
Dividends payable 62 51 113
Payable to affiliates - 36 (36) (c) -
Accrued management fee 41 - 26 (c) 67
--------------------------------------------------------------------
724 303 (226) 801
--------------------------------------------------------------------
Net Assets Applicable to Outstanding Shares $80,568 $63,245 $10 $143,823
====================================================================
CAPITAL SHARES (NOTE 3)
Outstanding 7,788 5,857 253 (a) 13,898
====================================================================
Net Asset Value Per Share $10.35 $10.80 $10.35
================================== =============
NET ASSETS CONSIST OF:
Capital paid in $78,401 $61,143 $10 (c) $139,554
Accumulated undistributed net realized
gain (loss) from investment transactions 184 (292) (108)
Net unrealized appreciation (depreciation) on investments 1,983 2,394 4,377
--------------------------------------------------------------------
$80,568 $63,245 $10 $143,823
====================================================================
(a) Adjustment to reflect the issuance of Intermediate-Term Tax-Free shares (at
the Intermediate-Term Tax-Exempt net asset value per share since this fund
is the accounting survivor) in connection with the proposed organization.
(b) Adjustment to net bank overdraft of the Intermediate-Term Tax-Exempt Fund
with cash of the Intermediate-Term Tax-Free Fund.
(c) Adjustment restates the funds' accrued management fees to reflect the
unitary fee structure at the proposed rate of the reorganized entity.
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
<TABLE>
<CAPTION>
BENHAM INTERMEDIATE-TERM TAX-EXEMPT FUND
BENHAM INTERMEDIATE-TERM TAX-FREE FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
Year Ended October 31, 1996 (Unaudited) Benham Benham Pro Forma
Intermediate-Term Intermediate-Term Combined
Tax-Exempt Fund Tax-Free Fund Adjustments (Note 1)
--------------------------($ in Thousands)------------------------------
INVESTMENT INCOME
Income:
<S> <C> <C> <C> <C>
Interest $4,273 $3,507 $7,780
---------------------------------- -----------------
Expenses:
Management fees 485 - 314 (a) 799
Investment advisory fees - 278 (278) (a) -
Administrative fees - 61 (61) (a) -
Transfer agency fees - 45 (45) (a) -
Custodian fees - 12 (12) (a) -
Printing and postage - 19 (19) (a) -
Registration and filing fees - 17 (17) (a) -
Directors' fees and expenses 1 4 (4) (a) 1
Auditing and legal fees - 17 (17) (a) -
Other operating expenses - 17 (17) (a) -
--------------------------------------------------------------------
Total expenses 486 470 (156) 800
Amount waived - (33) 33 (a) -
Custodian earnings credits - (2) 2 (a) -
--------------------------------------------------------------------
Net expenses 486 435 (121) 800
--------------------------------------------------------------------
Net investment income 3,787 3,072 121 6,980
--------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) 185 94 279
Change in net unrealized appreciation (depreciation) (538) (391) (929)
---------------------------------- -----------------
Net realized and unrealized gain (loss) on investments (353) (297) (650)
---------------------------------- -----------------
Net Increase in Net Assets
Resulting from Operations $3,434 $2,775 $121 $6,330
====================================================================
(a) Adjustment restates the funds' management fees to reflect the unitary fee
structure at the proposed rate of the reorganized entity and the expected
savings when the two funds become one.
See Notes to Pro Forma Financial Statements
</TABLE>
Notes to Pro Forma Financial Statements (unaudited)
1. Basis of Combination-The unaudited Pro Forma Combining Schedules of
Investments, Pro Forma Combining Statements of Assets and Liabilities and
Pro Forma Combining Statements of Operations reflect the accounts of the
Benham Short-Term Government Fund and Benham Adjustable Rate Government
Securities Fund; Benham Intermediate-Term Tax-Exempt Fund and Benham
Intermediate-Term Tax-Free Fund and Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund, at and for the year ended October 31, 1996.
The pro forma statements give effect to the proposed transfer of the assets
and stated liabilities of the non-surviving fund, in exchange for shares of
the surviving entity as stated below:
Non-Surviving Fund: Surviving Fund:
Benham Adjustable Rate Government Benham Short-Term Government Fund
Securities Fund
Benham Intermediate-Term Benham Intermediate-Term
Tax-Free Fund Tax-Exempt Fund
Benham Long-Term Tax-Free Fund Benham Long-Term Tax-Exempt Fund
In accordance with generally accepted accounting principles, the historical
cost of investment securities will be carried forward to the surviving fund
and the results of operations for pre-combination periods for the surviving
fund will not be restated. The pro forma statements do not reflect the
expenses of either fund in carrying out its obligation under the Agreement
and Plan of Reorganization. Under the terms of the Plan of Reorganization,
the combination of the funds will be treated as a tax-free business
combination and accordingly will be accounted for by a method of accounting
for tax-free mergers of investment companies (sometimes referred to as the
pooling without restatement method).
The Pro Forma Combining Schedules of Investments, Statements of Assets and
Liabilities and Statements of Operations should be read in conjunction with
the historical financial statements of the funds which are incorporated by
reference in the Statement of Additional Information.
2. Portfolio Valuation-Securities are valued through valuations obtained from
a commercial pricing service or at the mean of the most recent bid and
asked prices. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by
the Board of Trustees.
3. Capital Shares-The pro forma net asset value per share assumes the
issuance of shares of the surviving fund which would have been issued at
October 31, 1996, in connection with the proposed reorganization. The
number of shares assumed to be issued is equal to the net asset value of
shares of the non-surviving fund, as of October 31, 1996, divided by the
net asset value per share of the shares of the surviving fund as of October
31, 1996. The pro forma total number of shares outstanding for each
combined fund consists of the following at October 31, 1996:
Additional Shares
Combined Total Outstanding Shares of Assumed Issued
Fund Shares Surviving Fund in Reorganization
Short-Term
Government Fund 64,215,708 36,940,713 27,274,995
Intermediate-Term
Tax-Exempt Fund 13,898,329 7,787,666 6,110,663
Long-Term
Tax-Exempt Fund 10,879,856 5,743,483 5,136,373
4. Investments-At October 31, 1996, the funds had the following net capital
loss carryforwards available to offset future capital gains. To the extent
that those carryforward losses are used to offset capital gains, it is
probable that any gains so offset will not be distributed.
Fund Net Capital Loss Carryforward
Adjustable Rate Government
Securities Fund $69,205,630
Short-Term Government Fund $19,957,873
Intermediate-Term Tax-Free Fund $420,126
Long-Term Tax-Free Fund $427,920
<TABLE>
<CAPTION>
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
MUNICIPAL SECURITIES
Alabama--0.7%
<S> <C> <C> <C>
- - $1,000 $1,000 Alabama Municipal Electric Power Auth. Rev.,
6.10%, 9-1-99 (MBIA)
Alaska--0.4%
- - 500 500 Anchorage Hospital Rev., Series 1991,
(Sisters of Providence), 6.50%, 10-1-99
Arizona--0.9%
$750 - 750 Maricopa County Certificates of
Participation, 5.625%, 6-1-00
- - 410 410 Pinal County Unified School District No. 43
Apache Junction GO, Series A,
6.80%, 7-1-08 (FGIC)
California--8.7%
- - 1,250 1,250 California Health Facility Auth. Rev.
Refunding, (Sisters of Providence),
6.20%, 10-1-03 (MBIA)
- - 2,170 2,170 California Housing Finance Agency Rev.,
5.60%,8-1-09 (MBIA)
- - 1,000 1,000 California Public Works Board Lease Rev.
6.00%, 1-1-05 (AMBAC)
- - 1,100 1,100 California Public Works Board Rev., (Various
Universities), 6.15%, 11-1-09
- - 1,060 1,060 Ontario Redevelopment Finance Auth. Special
Assessment, (Local Agency Series A),
5.90%, 9-2-07 (FSA)
- - 1,100 1,100 Sacramento Regional Transportation
Certificates of Participation,
Series A, 6.20%, 3-1-00
- - 1,000 1,000 Sacramento Schools Ins. Auth. Rev.,
Worker's Compensation Program,
Series C, 5.75%, 6-1-03
- - 1,000 1,000 San Bernardino County
Certificates of Participation,
5.75%, 8-1-06 (MBIA)
- - 1,000 1,000 State of California GO, 5.75%, 10-1-10
- - 1,080 1,080 Y/S School Facility Finance Auth. Rev.,
Series 1990, 5.65%, 9-1-06 (MBIA)
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
---------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Market
Market Market Value
Value Value (Note 1)
Alabama Municipal Electric Power Auth. Rev.,
6.10%, 9-1-99 (MBIA) - $1,050 $1,050
------ ------ ------
Anchorage Hospital Rev., Series 1991,
(Sisters of Providence), 6.50%, 10-1-99 - 528 528
------ ------ ------
Maricopa County Certificates of
Participation, 5.625%, 6-1-00 $767 - 767
Pinal County Unified School District No. 43
Apache Junction GO, Series A,
6.80%, 7-1-08 (FGIC) - 472 472
------ ------ ------
767 472 1,239
------ ------ ------
California Health Facility Auth. Rev.
Refunding, (Sisters of Providence),
6.20%, 10-1-03 (MBIA) - 1,358 1,358
California Housing Finance Agency Rev.,
5.60%,8-1-09 (MBIA) - 2,206 2,206
California Public Works Board Lease Rev.
6.00%, 1-1-05 (AMBAC) - 1,080 1,080
California Public Works Board Rev., (Various
Universities), 6.15%, 11-1-09 - 1,161 1,161
Ontario Redevelopment Finance Auth. Special
Assessment, (Local Agency Series A),
5.90%, 9-2-07 (FSA) - 1,123 1,123
Sacramento Regional Transportation
Certificates of Participation,
Series A, 6.20%, 3-1-00 - 1,156 1,156
Sacramento Schools Ins. Auth. Rev.,
Worker's Compensation Program,
Series C, 5.75%, 6-1-03 - 1,049 1,049
San Bernardino County
Certificates of Participation,
5.75%, 8-1-06 (MBIA) - 1,062 1,062
State of California GO, 5.75%, 10-1-10 - 1,047 1,047
Y/S School Facility Finance Auth. Rev.,
Series 1990, 5.65%, 9-1-06 (MBIA) - 1,117 1,117
------ ------ ------
- 12,359 12,359
------ ------ ------
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
Colorado--0.8%
1,000 - 1,000 Denver Sales Tax Rev., Series A,
(Major League Baseball Stadium District),
6.10%, 10-1-01 (FGIC)
District of Columbia--0.7%
1,000 - 1,000 District Columbia Hospital Rev., Series A,
(Medlantic Health Care Group),
5.25%, 8-15-02 (MBIA)
Florida--3.5%
- - 700 700 Broward Cnty School Dist GO, 6.75%, 2-15-00
1,250 - 1,250 Hillsborough County Aviation Auth. Rev.,
Series A, (Tampa Intl Airport),
6.60%, 10-1-03 (FGIC)
1,000 775 1,775 Lakeland Electric and Water Rev.,
Series B, 6.00%, 10-1-09 (FGIC)
1,000 - 1,000 Miami Beach Florida Water and Sewer
Rev., 5.10%, 9-1-05 (FSA)
Georgia--3.5%
1,000 - 1,000 Atlanta Airport Facilities Rev., 7.00%, 1-1-01
- - 2,000 2,000 Fulton County Water and Sewer
Rev. Refunding, 6.25%, 1-1-09
(FGIC)
500 - 500 Georgia State GO, Series B, 6.30%, 3-1-08
1,000 - 1,000 Metropolitan Atlanta Rapid Transit Auth.
Sales Tax Rev., Series M, 6.05%, 7-1-01
Hawaii--0.8%
- - 1,000 1,000 Hawaii GO, Series A,
7.00%, 6-1-00 (FGIC)(1)
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
---------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Market
Market Market Value
Value Value (Note 1)
Denver Sales Tax Rev., Series A,
(Major League Baseball Stadium District),
6.10%, 10-1-01 (FGIC) 1,072 - 1,072
------ ------ ------
District Columbia Hospital Rev., Series A,
(Medlantic Health Care Group),
5.25%, 8-15-02 (MBIA) 1,024 - 1,024
------ ------ ------
Broward Cnty School Dist GO, 6.75%, 2-15-00 - 747 747
Hillsborough County Aviation Auth. Rev.,
Series A, (Tampa Intl Airport),
6.60%, 10-1-03 (FGIC) 1,336 - 1,336
Lakeland Electric and Water Rev.,
Series B, 6.00%, 10-1-09 (FGIC) 1,079 836 1,915
Miami Beach Florida Water and Sewer
Rev., 5.10%, 9-1-05 (FSA) 1,019 - 1,019
------ ------ ------
3,434 1,583 5,017
------ ------ ------
Atlanta Airport Facilities Rev., 7.00%, 1-1-01 1,084 - 1,084
Fulton County Water and Sewer
Rev. Refunding, 6.25%, 1-1-09
(FGIC) - 2,194 2,194
Georgia State GO, Series B, 6.30%, 3-1-08 554 - 554
Metropolitan Atlanta Rapid Transit Auth.
Sales Tax Rev., Series M, 6.05%, 7-1-01 1,061 - 1,061
------ ------ ------
2,699 2,194 4,893
------ ------ ------
Hawaii GO, Series A,
7.00%, 6-1-00 (FGIC)(1) - 1,086 1,086
------ ------ ------
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
Illinois--5.8%
2,000 - 2,000 Chicago O'Hare International Airport
Rev., Series A, 5.00%, 1-1-00 (MBIA)
- - 2,000 2,000 City of Chicago GO, (Emergency Telephone),
5.25%, 1-1-04 (FGIC)
- - 700 700 City of Chicago Metropolitan Water
Reclamation District GO, 7.25%, 1-1-99,
Prerefunded at 100% of Par
- - 1,000 1,000 Illinois Education Facility Auth. Rev., Series A,
(Loyola University), 6.30%, 7-1-98
2,250 - 2,250 Illinois State GO, 6.00%, 10-1-01
- - 30 30 Metropolitan Pier and Exposition Auth. Rev.,
(McCormick Place Project),
5.20%, 6-15-99(1)
Indiana--1.0%
- - 500 500 Indiana University Student Fee Rev.,
Series F, 7.10%, 8-1-97
- - 1,000 1,000 South Montgomery Industrial Building
Improvement Certificates of
Participation, 4.29%, 1-1-98 (AMBAC)(2)
Kentucky--0.7%
1,000 - 1,000 Kenton County Airport Rev., Series A,
(Cincinnati/Northern Kentucky),
6.00%, 3-1-03 (MBIA)
Maryland--0.8%
1,000 - 1,000 Maryland Health and Higher Educational
Facilities Auth. Rev., (Francis Scott Key
Hospital), 5.00%, 7-1-03 (FGIC)
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
-----------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Market
Market Market Value
Value Value (Note 1)
Chicago O'Hare International Airport
Rev., Series A, 5.00%, 1-1-00 (MBIA) 2,036 - 2,036
City of Chicago GO, (Emergency Telephone),
5.25%, 1-1-04 (FGIC) - 2,046 2,046
City of Chicago Metropolitan Water
Reclamation District GO, 7.25%, 1-1-99,
Prerefunded at 100% of Par - 744 744
Illinois Education Facility Auth. Rev., Series A,
(Loyola University), 6.30%, 7-1-98 1,035 1,035
Illinois State GO, 6.00%, 10-1-01 2,387 - 2,387
Metropolitan Pier and Exposition Auth. Rev.,
(McCormick Place Project),
5.20%, 6-15-99(1) - 31 31
------ ------ ------
4,423 3,856 8,279
------ ------ ------
Indiana University Student Fee Rev.,
Series F, 7.10%, 8-1-97 - 512 512
South Montgomery Industrial Building
Improvement Certificates of
Participation, 4.29%, 1-1-98 (AMBAC)(2) - 952 952
------ ------ ------
- 1,464 1,464
------ ------ ------
Kenton County Airport Rev., Series A,
(Cincinnati/Northern Kentucky),
6.00%, 3-1-03 (MBIA) 1,057 - 1,057
------ ------ ------
Maryland Health and Higher Educational
Facilities Auth. Rev., (Francis Scott Key
Hospital), 5.00%, 7-1-03 (FGIC) 1,017 - 1,017
------ ------ ------
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
Massachusetts--6.1%
2,605 - 2,605 Massachusetts Bay Transportation Auth.
Rev., Series C, 5.40%, 3-1-00
1,000 - 1,000 Massachusetts GO,
Series B, (Consolidated Loan),
5.50%, 6-1-05 (FGIC)
1,500 1,000 2,500 Massachusetts GO,
Series B, 5.40%, 11-1-07 (MBIA)
2,000 - 2,000 Massachusetts Housing Finance Agency
Rev., Series A, 5.90%, 1-1-03 (AMBAC)
360 - 360 Massachusetts Water Resources Auth.
Rev., Series A, 6.90%, 4-1-97(1)
Michigan--1.1%
- - 1,500 1,500 Detroit Water Supply System Rev.,
Series A, 5.30%, 7-1-09 (MBIA)
Mississippi--1.4%
2,000 - 2,000 Mississippi Hospital Equipment and Facilities
Auth. Rev., (North Miss. Health Service),
5.00%, 5-15-00 (AMBAC)
Missouri--0.7%
1,000 - 1,000 Missouri Board of Public Buildings State Office
Buildings Special Obligation Rev.,
Rev., 6.30%, 12-1-05
Nebraska--1.5%
2,000 - 2,000 Nebraska Investment Finance Auth. Hospital
Rev., (Methodist Health System),
6.55%, 3-1-99 (MBIA)
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
-----------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Market
Market Market Value
Value Value (Note 1)
Massachusetts Bay Transportation Auth.
Rev., Series C, 5.40%, 3-1-00 2,683 - 2,683
Massachusetts GO,
Series B, (Consolidated Loan),
5.50%, 6-1-05 (FGIC) 1,042 - 1,042
Massachusetts GO,
Series B, 5.40%, 11-1-07 (MBIA) 1,544 1,029 2,573
Massachusetts Housing Finance Agency
Rev., Series A, 5.90%, 1-1-03 (AMBAC) 2,053 - 2,053
Massachusetts Water Resources Auth.
Rev., Series A, 6.90%, 4-1-97(1) 365 - 365
------ ------ ------
7,687 1,029 8,716
------ ------ ------
Detroit Water Supply System Rev.,
Series A, 5.30%, 7-1-09 (MBIA) - 1,506 1,506
------ ------ ------
Mississippi Hospital Equipment and Facilities
Auth. Rev., (North Miss. Health Service),
5.00%, 5-15-00 (AMBAC) 2,029 - 2,029
------ ------ ------
Missouri Board of Public Buildings State Office
Buildings Special Obligation Rev.,
Rev., 6.30%, 12-1-05 1,062 - 1,062
------ ------ ------
Nebraska Investment Finance Auth. Hospital
Rev., (Methodist Health System),
6.55%, 3-1-99 (MBIA) 2,101 - 2,101
------ ------ ------
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
New Jersey--4.8%
1,030 - 1,030 Atlantic City Board of Education
GO, 6.00%, 12-1-06 (AMBAC)
1,410 - 1,410 New Jersey Educational Facility Auth. Rev.,
Series A, (N.J. Institute of Technology),
5.90%, 7-1-08 (MBIA)
1,000 - 1,000 New Jersey Health Care Facilities
Financing Auth. Rev., (Atlantic City
Medical Center), 6.15%, 7-1-99
1,000 - 1,000 New Jersey State Turnpike Auth. Rev.,
Series A, 6.20%, 1-1-00
1,000 - 1,000 New Jersey Transportation System Trust
Fund Auth. Rev., Series A,
6.25%, 12-15-03(1)
- - 1,000 1,000 New Jersey Transportation Trust
Fund Auth. Rev., Series A, 6.00%,
12-15-05 (MBIA)
New York--9.2%
1,950 - 1,950 City University of New York Certificates of
Participation, (John Jay College),
5.00%, 8-15-09 (AMBAC)
2,500 - 2,500 Nassau County, Series T,
5.20%, 9-1-05 (FGIC)
1,500 - 1,500 New York State Dorm. Auth. Rev.,
Series A, 6.50%, 5-15-04
1,000 - 1,000 New York State Dorm. Auth. Rev.,
Series A, 6.50%, 5-15-06
1,740 - 1,740 New York State Medical Care Facilities Finance
Agency Rev., (Hospital and Nursing Home),
5.95%, 8-15-09
685 - 685 New York State Thruway Auth. Rev.,
(Service Contract), 5.25%, 4-1-03
- - 1,000 1,000 New York State Thruway Auth Service
Contract, 5.30%, 4-1-04
- - 1,000 1,000 New York State Urban Development Corp.
Rev., 6.25%, 4-1-05 (MBIA)
1,260 - 1,260 New York State Urban Development Corp.
Rev., (Correctional Facilities),
5.40%, 1-1-06 (AMBAC)
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
-------------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Market
Market Market Value
Value Value (Note 1)
Atlantic City Board of Education
GO, 6.00%, 12-1-06 (AMBAC) 1,100 - 1,100
New Jersey Educational Facility Auth. Rev.,
Series A, (N.J. Institute of Technology),
5.90%, 7-1-08 (MBIA) 1,490 - 1,490
New Jersey Health Care Facilities
Financing Auth. Rev., (Atlantic City
Medical Center), 6.15%, 7-1-99 1,038 - 1,038
New Jersey State Turnpike Auth. Rev.,
Series A, 6.20%, 1-1-00 1,047 - 1,047
New Jersey Transportation System Trust
Fund Auth. Rev., Series A,
6.25%, 12-15-03(1) 1,094 - 1,094
New Jersey Transportation Trust
Fund Auth. Rev., Series A, 6.00%,
12-15-05 (MBIA) - 1,084 1,084
------ ------ ------
5,769 1,084 6,853
------ ------ ------
City University of New York Certificates of
Participation, (John Jay College),
5.00%, 8-15-09 (AMBAC) 1,883 - 1,883
Nassau County, Series T,
5.20%, 9-1-05 (FGIC) 2,556 - 2,556
New York State Dorm. Auth. Rev.,
Series A, 6.50%, 5-15-04 1,623 - 1,623
New York State Dorm. Auth. Rev.,
Series A, 6.50%, 5-15-06 1,087 - 1,087
New York State Medical Care Facilities Finance
Agency Rev., (Hospital and Nursing Home),
5.95%, 8-15-09 1,773 - 1,773
New York State Thruway Auth. Rev.,
(Service Contract), 5.25%, 4-1-03 690 - 690
New York State Thruway Auth Service
Contract, 5.30%, 4-1-04 - 1,005 1,005
New York State Urban Development Corp.
Rev., 6.25%, 4-1-05 (MBIA) - 1,090 1,090
New York State Urban Development Corp.
Rev., (Correctional Facilities),
5.40%, 1-1-06 (AMBAC) 1,298 - 1,298
------ ------ ------
10,910 2,095 13,005
------ ------ ------
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
North Carolina--1.5%
- - 2,000 2,000 North Carolina Eastern Municipal
Power Agency Rev., Series 1993,
6.00%, 1-1-06 (FSA)
Ohio--5.1%
1,450 - 1,450 Ohio Higher Educational Facility
Commission Rev., (University of
Dayton), 5.55%, 12-1-07 (FGIC)
1,000 - 1,000 Ohio Public Facility Commission Rev.,
Series IIA, (Mental Health Facility),
5.625%, 12-1-98
- - 1,000 1,000 Ohio State Building Auth. Rev., Series A,
Correctional Facility), 6.25%, 10-1-00
3,320 - 3,320 Ohio Water Development Auth.
Pollution Control Facilities Rev.,
6.00%, 12-1-05 (MBIA)
Oklahoma--2.0%
- - 2,500 2,500 Oklahoma Industrial Auth. Health System
Rev. Refunding, Series 1995 C, 7.00%,
8-15-04 (AMBAC)
Oregon--2.1%
1,805 - 1,805 Lane County School District #19 GO,
(Springfield), 6.375%, 10-15-05 (MBIA)
1,000 - 1,000 Oregon State Department Transportation Rev.,
5.50%, 6-1-00 (MBIA)
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
---------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Market
Market Market Value
Value Value (Note 1)
North Carolina Eastern Municipal
Power Agency Rev., Series 1993,
6.00%, 1-1-06 (FSA) - 2,136 2,136
------ ------ ------
Ohio Higher Educational Facility
Commission Rev., (University of
Dayton), 5.55%, 12-1-07 (FGIC) 1,495 - 1,495
Ohio Public Facility Commission Rev.,
Series IIA, (Mental Health Facility),
5.625%, 12-1-98 1,030 - 1,030
Ohio State Building Auth. Rev., Series A,
Correctional Facility), 6.25%, 10-1-00 - 1,064 1,064
Ohio Water Development Auth.
Pollution Control Facilities Rev.,
6.00%, 12-1-05 (MBIA) 3,579 - 3,579
------ ------ ------
6,104 1,064 7,168
------ ------ ------
Oklahoma Industrial Auth. Health System
Rev. Refunding, Series 1995 C, 7.00%,
8-15-04 (AMBAC) - 2,851 2,851
------ ------ ------
Lane County School District #19 GO,
(Springfield), 6.375%, 10-15-05 (MBIA) 1,997 - 1,997
Oregon State Department Transportation Rev.,
5.50%, 6-1-00 (MBIA) 1,037 - 1,037
------ ------ ------
3,034 3,034
------ ------ ------
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
Pennsylvania--4.6%
1,000 - 1,000 Harrisburg Auth. Lease Rev.,
6.25%, 6-1-00 (FSA)(1)
1,500 - 1,500 Pennsylvania Turnpike Commission Rev.,
Series L, 6.25%, 6-1-01 (AMBAC)
2,000 - 2,000 Philadelphia Gas Works Rev.,
14th Series, 5.70%, 7-1-00 (FSA)
1,000 845 1,845 Philadelphia Water & Wastewater Rev.,
5.00%, 6-15-12 (FGIC)
Puerto Rico--0.7%
1,000 - 1,000 Puerto Rico Electric Power Auth. Rev.,
Series R, 5.70%, 7-1-00 (MBIA)
South Carolina--1.4%
1,000 - 1,000 Richland Lexington Airport District Rev.,
Series C, 5.25%, 1-1-06 (AMBAC)
- - 1,000 1,000 South Carolina Public Service Rev.,
6.25%, 1-1-00 (AMBAC)
Texas--14.0%
- - 115 115 Austin County GO, 6.75%, 9-1-00 ,
Prerefunded at Par(1)
- - 885 885 Austin County GO, Series C, 6.75%, 9-1-01
535 - 535 Austin Utility System Rev.,
Series A, 7.50%, 11-15-98
(Acquired 2-3-95, Cost $547)(1)(3)
2,000 - 2,000 Brazos Higher Education Auth. Rev.,
Series A-1, 5.50%, 12-1-98
1,875 - 1,875 Brownsville Utility System Rev.,
6.00%, 9-1-08 (AMBAC)
1,000 - 1,000 Dallas-Fort Worth Regional Airport Rev.,
Series A, 5.90%, 11-1-08 (MBIA)
1,340 - 1,340 Harris County Health Facilities Development
Corp. (St. Luke's Episcopal
Hospital), 6.40%, 2-15-00
- - 1,500 1,500 Harris County Health Facility Memorial
Hospital Rev., (Systems Project),
6.80%, 6-1-01
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
-----------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Market
Market Market Value
Value Value (Note 1)
Harrisburg Auth. Lease Rev.,
6.25%, 6-1-00 (FSA)(1) 1,055 - 1,055
Pennsylvania Turnpike Commission Rev.,
Series L, 6.25%, 6-1-01 (AMBAC) 1,609 - 1,609
Philadelphia Gas Works Rev.,
14th Series, 5.70%, 7-1-00 (FSA) 2,081 - 2,081
Philadelphia Water & Wastewater Rev.,
5.00%, 6-15-12 (FGIC) 952 805 1,757
------ ------ ------
5,697 805 6,502
------ ------ ------
Puerto Rico Electric Power Auth. Rev.,
Series R, 5.70%, 7-1-00 (MBIA) 1,047 - 1,047
------ ------ ------
Richland Lexington Airport District Rev.,
Series C, 5.25%, 1-1-06 (AMBAC) 1,001 - 1,001
South Carolina Public Service Rev.,
6.25%, 1-1-00 (AMBAC) - 1,055 1,055
------ ------ ------
1,001 1,055 2,056
------ ------ ------
Austin County GO, 6.75%, 9-1-00 ,
Prerefunded at Par(1) - 124 124
Austin County GO, Series C, 6.75%, 9-1-01 - 953 953
Austin Utility System Rev.,
Series A, 7.50%, 11-15-98 571 - 571
(Acquired 2-3-95, Cost $547)(1)(3)
Brazos Higher Education Auth. Rev.,
Series A-1, 5.50%, 12-1-98 2,046 - 2,046
Brownsville Utility System Rev.,
6.00%, 9-1-08 (AMBAC) 2,019 - 2,019
Dallas-Fort Worth Regional Airport Rev.,
Series A, 5.90%, 11-1-08 (MBIA) 1,041 - 1,041
Harris County Health Facilities Development
Corp. (St. Luke's Episcopal
Hospital), 6.40%, 2-15-00 1,416 - 1,416
Harris County Health Facility Memorial
Hospital Rev., (Systems Project),
6.80%, 6-1-01 - 1,618 1,618
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
- - 1,000 1,000 Houston Independent School District GO,
(Guaranteed by Texas Permanent
School Fund), 8.375%, 8-15-98
- - 1,500 1,500 Houston Water and Sewer System Rev.,
5.60%, 12-1-02 (MBIA)
- - 500 500 North Texas Higher Education Student Loan
Rev., 6.875%, 4-1-02 (AMBAC)
1,000 - 1,000 Tarrant County Health Facility Development
Corporation Health System
Rev., (Harris Methodist Health System),
5.00%, 9-1-07 (AMBAC)
- - 2,000 2,000 Texas Municipal Power Agency Rev.,
5.75%, 9-1-02 (MBIA)
- - 1,000 1,000 Texas Public Financing Agency GO, Series
1995, (Systems Project), 6.50%, 10-1-03
1,500 - 1,500 Texas State Public Finance Auth. Building
Rev., (Technical College),
6.25%, 8-1-09 (MBIA)
- - 1,000 1,000 Texas Turnpike Auth. Rev., Series 1990 A,
7.00%, 1-1-99, Prerefunded at 102%
of Par (AMBAC)(1)
Utah--2.6%
1,000 - 1,000 Salt Lake County Municipal Building Auth.
Lease Rev., Series A, 6.00%, 10-1-07 (MBIA)
- - 1,600 1,600 Utah Housing Finance Agency Single Family
Mortgage Rev., 5.65%, 7-1-06
- - 1,000 1,000 Utah State MFC University Rev., Series 1991,
(Utah Hospital), 6.60%, 5-15-00
Virginia--1.7%
1,275 - 1,275 Metropolitan Washington D.C. Airports Auth.
Rev., Series A, 6.30%, 10-1-03 (MBIA)
- - 1,000 1,000 Virginia State Public Building Auth. Rev.
Refunding, Series A, 5.70%, 8-1-00
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
--------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Market
Market Market Value
Value Value (Note 1)
Houston Independent School District GO,
(Guaranteed by Texas Permanent
School Fund), 8.375%, 8-15-98 - 1,076 1,076
Houston Water and Sewer System Rev.,
5.60%, 12-1-02 (MBIA) - 1,580 1,580
North Texas Higher Education Student Loan
Rev., 6.875%, 4-1-02 (AMBAC) - 529 529
Tarrant County Health Facility Development
Corporation Health System
Rev., (Harris Methodist Health System),
5.00%, 9-1-07 (AMBAC) 979 - 979
Texas Municipal Power Agency Rev.,
5.75%, 9-1-02 (MBIA) - 2,118 2,118
Texas Public Financing Agency GO, Series
1995, (Systems Project), 6.50%, 10-1-03 - 1,109 1,109
Texas State Public Finance Auth. Building
Rev., (Technical College),
6.25%, 8-1-09 (MBIA) 1,640 - 1,640
Texas Turnpike Auth. Rev., Series 1990 A,
7.00%, 1-1-99, Prerefunded at 102%
of Par (AMBAC)(1) - 1,078 1,078
------ ------ ------
9,712 10,185 19,897
------ ------ ------
Salt Lake County Municipal Building Auth.
Lease Rev., Series A, 6.00%, 10-1-07 (MBIA) 1,063 - 1,063
Utah Housing Finance Agency Single Family
Mortgage Rev., 5.65%, 7-1-06 - 1,637 1,637
Utah State MFC University Rev., Series 1991,
(Utah Hospital), 6.60%, 5-15-00 - 1,066 1,066
------ ------ ------
1,063 2,703 3,766
------ ------ ------
Metropolitan Washington D.C. Airports Auth.
Rev., Series A, 6.30%, 10-1-03 (MBIA) 1,382 - 1,382
Virginia State Public Building Auth. Rev.
Refunding, Series A, 5.70%, 8-1-00 - 1,045 1,045
------ ------ ------
1,382 1,045 2,427
------ ------ ------
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
Washington--7.1%
- - 1,000 1,000 Pierce County School District No. 3 GO,
Series B, 5.80%, 12-1-99
- - 1,000 1,000 Pierce County School District #320 GO,
5.75%, 12-1-02
- - 2,000 2,000 Snohomish County Public Utility District Rev.,
Series 1993, 5.625%, 1-1-05 (FGIC)
- - 1,000 1,000 Snohomish County School District #15 GO,
6.125%, 12-1-03
1,000 - 1,000 Tacoma Electric System
Rev., 6.10%, 1-1-07 (FGIC)
- - 1,000 1,000 Washington Public Power Supply System Rev.,
(Project #1), 5.50%, 7-1-04 (FGIC)
- - 1,000 1,000 Washington Public Power Supply System Rev.,
(Project #1), 7.10%, 7-1-01 (FGIC)
- - 500 500 Washington Public Power Supply System Rev.,
Series C, 7.00%, 7-1-01 (FGIC)
1,000 - 1,000 Washington State Public Power Supply Rev.,
Series C, (Project 2), 7.30%, 7-1-00
Wisconsin--2.7%
1,590 1,000 2,590 Wisconsin State Health and Educational Facility
Auth. Rev., (Aurora Medical Group),
6.00%, 11-15-10 (FSA)
- - 1,060 1,060 Wisconsin State Health Facility Rev., Series B,
(Wausau Hospital), 6.30%, 8-15-00 (AMBAC)
Total Municipal Securities--98.6%
MUNICIPAL DERIVATIVES--1.4%
2,000 - 2,000 Philadelphia Water and Wastewater
Rev., Inverse Floater,
(Fixed Airs), 5.15%, 6-15-04 (4)
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
----------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Market
Market Market Value
Value Value (Note 1)
Pierce County School District No. 3 GO,
Series B, 5.80%, 12-1-99 - 1,041 1,041
Pierce County School District #320 GO,
5.75%, 12-1-02 - 1,050 1,050
Snohomish County Public Utility District Rev.,
Series 1993, 5.625%, 1-1-05 (FGIC) - 2,083 2,083
Snohomish County School District #15 GO,
6.125%, 12-1-03 - 1,059 1,059
Tacoma Electric System
Rev., 6.10%, 1-1-07 (FGIC) 1,068 - 1,068
Washington Public Power Supply System Rev.,
(Project #1), 5.50%, 7-1-04 (FGIC) - 1,025 1,025
Washington Public Power Supply System Rev.,
(Project #1), 7.10%, 7-1-01 (FGIC) - 1,096 1,096
Washington Public Power Supply System Rev.,
Series C, 7.00%, 7-1-01 (FGIC) - 547 547
Washington State Public Power Supply Rev.,
Series C, (Project 2), 7.30%, 7-1-00 1,084 - 1,084
------ ------ ------
2,152 7,901 10,053
------ ------ ------
Wisconsin State Health and Educational Facility
Auth. Rev., (Aurora Medical Group),
6.00%, 11-15-10 (FSA) 1,692 1,064 2,756
Wisconsin State Health Facility Rev., Series B,
(Wausau Hospital),
6.30%, 8-15-00 (AMBAC) - 1,125 1,125
------ ------ ------
1,692 2,189 3,881
------ ------ ------
77,935 62,240 140,175
------ ------ ------
Philadelphia Water and Wastewater
Rev., Inverse Floater,
(Fixed Airs), 5.15%, 6-15-04 (4) 2,017 - 2,017
------ ------ ------
continued
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
TEMPORARY CASH INVESTMENTS
7,000 Units of Participation in Provident
Institutional Funds (Muni Fund Portfolio)
Pro Forma Combining
Benham Intermediate-Term Tax-Exempt Fund and
Benham Intermediate-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
--------------------------------------
Benham
Benham Inter-
Inter- mediate- Pro
mediate- Term Forma
Term Tax- Tax-Free Combined
Exempt Fund Fund Market
Market Market Value
Value Value (Note 1)
7,000 Units of Participation in Provident
Institutional Funds (Muni Fund Portfolio) 7 - 7
------ ------ ------
TOTAL INVESTMENT SECURITIES--100.0% $79,959 $62,240 $142,199
====== ====== ======
Notes
AMBAC = AMBAC Indemnity Corp.
FGIC = Financial Guaranty Insurance Company
FSA = Financial Security Association
GO = General Obligation
MBIA = Municipal Bond Insurance Association
(1) Escrowed in U.S. Government Securities.
(2) This security is a zero-coupon municipal bond. The yield to maturity at
current market value is shown instead of a stated coupon rate. Zero-coupon
securities are purchased at a substantial discount from their value at
maturity.
(3) Security was purchased under Rule 144A of the Securities Act of 1933 and,
unless registered under the Act or exempted from registration, may only be
sold to qualified institutional investors. The aggregate value of
restricted securities at October 31, 1996, was $571,129, which represented
0.7% of the net assets of the Intermediate-Term Tax-Exempt Fund.
(4) Inverse floaters bear interest rates that move inversely to market interest
rates. Inverse floaters typically have durations twice as long as long-term
bonds, which may cause their value to be twice as volatile as long-term
bonds when market interest rates change.
END SCHEDULE OF INVESTMENTS
</TABLE>
<TABLE>
<CAPTION>
BENHAM LONG-TERM TAX-EXEMPT FUND
BENHAM LONG-TERM TAX-FREE FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
Benham Benham Pro Forma
October 31, 1996 (Unaudited) Long-Term Long-Term Combined
Tax-Exempt Fund Tax-Free Fund Adjustments (Note 1)
---------------($ in Thousands, Except Per-Share Amounts)---------------
-----------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C>
Investment securities, at value (identified cost of
$57,253 and $50,587, respectively) $60,223 $53,431 $113,654
Interest receivable 1,023 1,029 2,052
-----------------------------------------------------------------------
61,246 54,460 0 115,706
-----------------------------------------------------------------------
LIABILITIES
Disbursements in excess of demand deposit cash 391 5 396
Payable for capital shares redeemed - 35 35
Dividends payable 52 46 98
Payable to affiliates - 30 (30) (b) -
Accrued management fee 31 - 23 (b) 54
Accrued expenses and other liabilities - 1 (1) (b) -
-----------------------------------------------------------------------
474 117 (8) 583
-----------------------------------------------------------------------
Net Assets Applicable to Outstanding Shares $60,772 $54,343 $8 $115,123
=======================================================================
CAPITAL SHARES (NOTE 3)
Outstanding 5,744 4,694 442 (a) 10,880
=======================================================================
Net Asset Value Per Share $10.58 $11.58 $10.58
=================================== ==================
NET ASSETS CONSIST OF:
Capital paid in $57,802 $51,687 $8 (b) $109,497
Accumulated undistributed net realized 0
gain (loss) from investment transactions - (188) (188)
Net unrealized appreciation (depreciation) on investments 2,970 2,844 5,814
-----------------------------------------------------------------------
$60,772 $54,343 $8 $115,123
=======================================================================
(a) Adjustment to reflect the issuance of Long-Term Tax-Free shares (at the
Long-Term Tax-Exempt net asset value per share since this fund is the
accounting survivor) in connection with the proposed reorganization.
(b) Adjustment restates the funds' accrued management fees to reflect the
unitary fee structure at the proposed rate of the reorganized entity.
See Notes to Pro Forma Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BENHAM LONG-TERM TAX-EXEMPT FUND
BENHAM LONG-TERM TAX-FREE FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
Benham Benham Pro Forma
Year Ended October 31, 1996 (Unaudited) Long-Term Long-Term Combined
Tax-Exempt Fund Tax-Free Fund Adjustments (Note 1)
----------------------------($ in Thousands)-----------------------------
INVESTMENT INCOME
Income:
<S> <C> <C> <C> <C>
Interest $3,361 $3,168 $6,529
------------------------------------ ------------------
Expenses:
Management fees 353 - 271 (a) 624
Investment advisory fees - 234 (234) (a) -
Administrative fees - 52 (52) (a) -
Transfer agency fees - 42 (42) (a) -
Custodian fees - 11 (11) (a) -
Printing and postage - 16 (16) (a) -
Registration and filing fees - 21 (21) (a) -
Directors' fees and expenses 1 4 (4) (a) 1
Auditing and legal fees - 15 (15) (a) -
Other operating expenses - 12 (12) (a) -
------------------------------------------------------------------------
Total expenses 354 407 (136) 625
Amount waived - (35) 35 (a) -
Custodian earnings credits - (4) 4 (a) -
------------------------------------------------------------------------
Net expenses 354 368 (97) 625
------------------------------------------------------------------------
Net investment income 3,007 2,800 97 5,904
------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) 27 642 669
Change in net unrealized appreciation (depreciation) 134 (595) (461)
------------------------------------ ------------------
Net realized and unrealized gain (loss) on investments 161 47 208
------------------------------------ ------------------
Net Increase in Net Assets
Resulting from Operations $3,168 $2,847 $97 $6,112
========================================================================
(a) Adjustment restates the funds' management fees to reflect the unitary fee
structure at the proposed rate of the reorganized entity and the expected
savings when the two funds become one.
See Notes to Pro Forma Financial Statements
</TABLE>
Notes to Pro Forma Financial Statements (unaudited)
1. Basis of Combination-The unaudited Pro Forma Combining Schedules of
Investments, Pro Forma Combining Statements of Assets and Liabilities and
Pro Forma Combining Statements of Operations reflect the accounts of the
Benham Short-Term Government Fund and Benham Adjustable Rate Government
Securities Fund; Benham Intermediate-Term Tax-Exempt Fund and Benham
Intermediate-Term Tax-Free Fund and Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund, at and for the year ended October 31, 1996.
The pro forma statements give effect to the proposed transfer of the assets
and stated liabilities of the non-surviving fund, in exchange for shares of
the surviving entity as stated below:
Non-Surviving Fund: Surviving Fund:
Benham Adjustable Rate Government Benham Short-Term Government Fund
Securities Fund
Benham Intermediate-Term Benham Intermediate-Term
Tax-Free Fund Tax-Exempt Fund
Benham Long-Term Tax-Free Fund Benham Long-Term Tax-Exempt Fund
In accordance with generally accepted accounting principles, the historical
cost of investment securities will be carried forward to the surviving fund
and the results of operations for pre-combination periods for the surviving
fund will not be restated. The pro forma statements do not reflect the
expenses of either fund in carrying out its obligation under the Agreement
and Plan of Reorganization. Under the terms of the Plan of Reorganization,
the combination of the funds will be treated as a tax-free business
combination and accordingly will be accounted for by a method of accounting
for tax-free mergers of investment companies (sometimes referred to as the
pooling without restatement method).
The Pro Forma Combining Schedules of Investments, Statements of Assets and
Liabilities and Statements of Operations should be read in conjunction with
the historical financial statements of the funds which are incorporated by
reference in the Statement of Additional Information.
2. Portfolio Valuation-Securities are valued through valuations obtained from
a commercial pricing service or at the mean of the most recent bid and
asked prices. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by
the Board of Trustees.
3. Capital Shares-The pro forma net asset value per share assumes the
issuance of shares of the surviving fund which would have been issued at
October 31, 1996, in connection with the proposed reorganization. The
number of shares assumed to be issued is equal to the net asset value of
shares of the non-surviving fund, as of October 31, 1996, divided by the
net asset value per share of the shares of the surviving fund as of October
31, 1996. The pro forma total number of shares outstanding for each
combined fund consists of the following at October 31, 1996:
Additional Shares
Combined Total Outstanding Shares of Assumed Issued
Fund Shares Surviving Fund in Reorganization
Short-Term
Government Fund 64,215,708 36,940,713 27,274,995
Intermediate-Term
Tax-Exempt Fund 13,898,329 7,787,666 6,110,663
Long-Term
Tax-Exempt Fund 10,879,856 5,743,483 5,136,373
4. Investments-At October 31, 1996, the funds had the following net capital
loss carryforwards available to offset future capital gains. To the extent
that those carryforward losses are used to offset capital gains, it is
probable that any gains so offset will not be distributed.
Fund Net Capital Loss Carryforward
Adjustable Rate Government
Securities Fund $69,205,630
Short-Term Government Fund $19,957,873
Intermediate-Term Tax-Free Fund $420,126
Long-Term Tax-Free Fund $427,920
<TABLE>
<CAPTION>
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments
October 31, 1996 (Unaudited)
($ In Thousands)
-----------------------------------------------------
Benham Benham
Long-Term Long-Term Pro Forma
Tax-Exempt Tax-Free Combined
Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
MUNICIPAL SECURITIES
<S> <C> <C> <C>
Alaska--0.1%
$60 - $60 Alaska State Housing Finance Corp Rev.
Series B, 8.75%, 12-1-16
(LOC: Swiss Bank)
Alabama--1.6%
- - $2,000 2,000 Alabama Special Care Facility
Financing Auth. Rev., (Daughters
of Charity), 5.00%, 11-1-25
Arizona--1.6%
- - 1,750 1,750 Phoenix Civic Improvement Corporation
Water System Rev., 6.00%, 7-1-19
California--11.2%
1,000 - 1,000 California Educational Facilities Auth. Rev.,
(Pooled College & University Project)
5.60%, 12-1-20
2,000 - 2,000 California State Public Works Lease Rev.,
(Department Corrections Prisons A), 5.00%
12-1-19 (AMBAC)
1,000 - 1,000 California State Public Works Lease Rev.,
(University Project A), 6.20%, 10-1-08
1,225 - 1,225 Long Beach Water Rev., 6.125%, 5-1-19
1,500 - 1,500 Los Angeles Community Redevelopment
Agency Rev., (Bunker Hill), 6.50%
12-1-14 (FSA)
- - 1,700 1,700 Los Angeles Wastewater Rev., Series
1993 D, 4.70%, 11-1-19 (FGIC)
1,500 - 1,500 Metropolitan Water District Rev.,
Series A, (Southern California)
5.75%, 7-1-21
1,850 - 1,850 Northern California Power Agency Rev., Series A,
(Hydroelectric Project #1), 6.25%
7-1-12 (MBIA)
1,000 - 1,000 San Jose Redevelopment Agency
Tax Allocation, Series D, 5.75%, 8-1-24
Colorado--0.3%
300 - 300 Colorado Housing Finance Auth. Rev.,
Series C, (Single Family Residential)
8.70%, 9-1-07
continued
<PAGE>
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (Continued)
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
------------------------------------------------
Benham Benham Pro
Long-Term Long-Term Forma
Tax-Exempt Tax-Free Combined
Fund Fund Market
Market Market Value
Value Value (Note 1)
Alaska State Housing Finance Corp Rev.
Series B, 8.75%, 12-1-16
(LOC: Swiss Bank) $62 - $62
------ ------ ------
Alabama Special Care Facility
Financing Auth. Rev., (Daughters
of Charity), 5.00%, 11-1-25 - $1,783 1,783
------ ------ ------
Phoenix Civic Improvement Corporation
Water System Rev., 6.00%, 7-1-19 - 1,787 1,787
------ ------ ------
California Educational Facilities Auth. Rev.,
(Pooled College & University Project)
5.60%, 12-1-20 974 - 974
California State Public Works Lease Rev.,
(Department Corrections Prisons A), 5.00%
12-1-19 (AMBAC) 1,869 - 1,869
California State Public Works Lease Rev.,
(University Project A), 6.20%, 10-1-08 1,066 - 1,066
Long Beach Water Rev., 6.125%, 5-1-19 1,261 - 1,261
Los Angeles Community Redevelopment
Agency Rev., (Bunker Hill), 6.50%
12-1-14 (FSA) 1,634 - 1,634
Los Angeles Wastewater Rev., Series
1993 D, 4.70%, 11-1-19 (FGIC) - 1,475 1,475
Metropolitan Water District Rev.,
Series A, (Southern California)
5.75%, 7-1-21 1,553 - 1,553
Northern California Power Agency Rev., Series A,
(Hydroelectric Project #1), 6.25%
7-1-12 (MBIA) 1,956 - 1,956
San Jose Redevelopment Agency
Tax Allocation, Series D, 5.75%, 8-1-24 987 - 987
------ ------ ------
11,300 1,475 12,775
------ ------ ------
Colorado Housing Finance Auth. Rev.,
Series C, (Single Family Residential)
8.70%, 9-1-07 315 - 315
------ ------ ------
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham Benham
Long-Term Long-Term Pro Forma
Tax-Exempt Tax-Free Combined
Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
Connecticut--2.7%
1,000 - 1,000 Connecticut GO, Series E, 6.00%, 3-15-12
1,880 - 1,880 Connecticut State Development Auth. Rev.,
Series A, 6.375%, 10-15-24
District of Columbia--0.9%
1,000 - 1,000 Metropolitan Area Transportation Auth. Rev.,
6.00%, 7-1-10 (FGIC)
Florida--5.3%
- - 890 890 Broward County Resource Recovery
Facility Rev., Series 1984, (South
Project), 7.95%, 12-1-08
- - 1,000 1,000 Orlando Water and Electric Auth.
Rev., Series D, 6.75%, 10-1-17
1,500 - 1,500 Reedy Creek Utility Rev.,
Series 1, 5.00%, 10-1-19 (MBIA)
- - 1,000 1,000 St. Petersburg Health Auth. Rev.,
(Allegheny Health), 7.00%, 12-1-15
(MBIA)
1,350 - 1,350 Tampa Sports Auth. Sales Tax Rev.,
(Tampa Bay Arena Project)
5.75%, 10-1-25 (MBIA)
Georgia--1.0%
- - 1,000 1,000 Georgia Municipal Electric Auth.
Rev., 6.50%, 1-1-12 (MBIA)
Illinois--13.1%
1,000 - 1,000 City of Chicago Rev., (Peoples Gas,
Light and Coke Co.), 7.50%, 3-1-15
- - 1,965 1,965 Chicago Metropolitan Water
Reclamation District Capital
Improvement, 6.25%, 12-1-14
1,000 - 1,000 Cook County GO, 7.00%, 11-1-10,
Prerefunded 11-1-00 at 102% of Par
(MBIA)(1)
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (Continued)
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
------------------------------------------
Benham Benham Pro
Long-Term Long-Term Forma
Tax-Exempt Tax-Free Combined
Fund Fund Market
Market Market Value
Value Value (Note 1)
Connecticut GO, Series E, 6.00%, 3-15-12 1,072 - 1,072
Connecticut State Development Auth. Rev.,
Series A, 6.375%, 10-15-24 1,998 - 1,998
------ ------ ------
3,070 - 3,070
------ ------ ------
Metropolitan Area Transportation Auth. Rev.,
6.00%, 7-1-10 (FGIC) 1,075 - 1,075
------ ------ ------
Broward County Resource Recovery
Facility Rev., Series 1984, (South
Project), 7.95%, 12-1-08 - 981 981
Orlando Water and Electric Auth.
Rev., Series D, 6.75%, 10-1-17 - 1,171 1,171
Reedy Creek Utility Rev.,
Series 1, 5.00%, 10-1-19 (MBIA) 1,385 - 1,385
St. Petersburg Health Auth. Rev.,
(Allegheny Health), 7.00%, 12-1-15 - 1,117 1,117
(MBIA)
Tampa Sports Auth. Sales Tax Rev.,
(Tampa Bay Arena Project)
5.75%, 10-1-25 (MBIA) 1,406 - 1,406
------ ------ ------
2,791 3,269 6,060
------ ------ ------
Georgia Municipal Electric Auth.
Rev., 6.50%, 1-1-12 (MBIA) - 1,116 1,116
------ ------ ------
City of Chicago Rev., (Peoples Gas,
Light and Coke Co.), 7.50%, 3-1-15 1,091 - 1,091
Chicago Metropolitan Water
Reclamation District Capital
Improvement, 6.25%, 12-1-14 - 2,067 2,067
Cook County GO, 7.00%, 11-1-10,
Prerefunded 11-1-00 at 102% of Par
(MBIA)(1) 1,111 - 1,111
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham Benham
Long-Term Long-Term Pro Forma
Tax-Exempt Tax-Free Combined
Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
500 1,500 2,000 Illinois Dedicated Tax Rev.,
(Civic Center Project)
6.25%, 12-15-20 (AMBAC)
- - 1,500 1,500 Illinois Development Finance Auth.
Pollution Control Rev., Series B,
(Central Illinois Public Service),
7.60%, 3-1-14
- - 1,840 1,840 Illinois Health Facilities Auth. Rev.
Refunding, Series C,
(Evangelical Hospital), 6.75%, 4-15-12
1,500 - 1,500 Illinois GO, 6.25%, 10-1-06
1,000 - 1,000 Illinois Regional Transportation Auth. Rev.,
Series A, 7.20%, 11-1-20 (AMBAC)
- - 2,000 2,000 Springfield Water Rev., 6.50%, 3-1-15
Indiana--2.9%
- - 1,000 1,000 Indiana Municipal Power Agency Rev.,
Series A, 7.10%, 1-1-00, Prerefunded
at 102% of Par (AMBAC)(1)
1,000 - 1,000 Indiana State Toll Finance Auth. Rev.,
6.875%, 7-1-12,
Prerefunded 1-1-97 at 102% of Par
(FGIC)(1)
- - 1,000 1,000 Indiana Transportation Financing Auth.
Highway Rev., Series A, 7.25%, 6-1-15
Kansas--0.9%
1,000 - 1,000 Kansas City Utility System Rev.,
6.375%, 9-1-23 (FGIC)
Kentucky--1.3%
1,000 - 1,000 Carroll County Pollution Control Rev., Series A,
(Kentucky Utilities Company Project),
7.45%, 9-15-16
270 - 270 Kentucky Housing Corp. Rev., Series C,
7.90%, 1-1-21 (FHA)
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (Continued)
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
-----------------------------------------
Benham Benham Pro
Long-Term Long-Term Forma
Tax-Exempt Tax-Free Combined
Fund Fund Market
Market Market Value
Value Value (Note 1)
Illinois Dedicated Tax Rev.,
(Civic Center Project)
6.25%, 12-15-20 (AMBAC) 546 1,638 2,184
Illinois Development Finance Auth.
Pollution Control Rev., Series B,
(Central Illinois Public Service),
7.60%, 3-1-14 - 1,637 1,637
Illinois Health Facilities Auth. Rev.
Refunding, Series C,
(Evangelical Hospital), 6.75%, 4-15-12 - 1,939 1,939
Illinois GO, 6.25%, 10-1-06 1,609 - 1,609
Illinois Regional Transportation Auth. Rev.,
Series A, 7.20%, 11-1-20 (AMBAC) 1,217 - 1,217
Springfield Water Rev., 6.50%, 3-1-15 - 2,091 2,091
------ ------ ------
5,574 9,372 14,946
------ ------ ------
Indiana Municipal Power Agency Rev.,
Series A, 7.10%, 1-1-00, Prerefunded
at 102% of Par (AMBAC)(1) - 1,099 1,099
Indiana State Toll Finance Auth. Rev.,
6.875%, 7-1-12,
Prerefunded 1-1-97 at 102% of Par
(FGIC)(1) 1,025 - 1,025
Indiana Transportation Financing Auth.
Highway Rev., Series A, 7.25%, 6-1-15 - 1,192 1,192
------ ------ ------
1,025 2,291 3,316
------ ------ ------
Kansas City Utility System Rev.,
6.375%, 9-1-23 (FGIC) 1,071 - 1,071
------ ------ ------
Carroll County Pollution Control Rev., Series A,
(Kentucky Utilities Company Project),
7.45%, 9-15-16 1,143 - 1,143
Kentucky Housing Corp. Rev., Series C,
7.90%, 1-1-21 (FHA) 285 - 285
------ ------ ------
1,428 - 1,428
------ ------ ------
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham Benham
Long-Term Long-Term Pro Forma
Tax-Exempt Tax-Free Combined
Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
Massachusetts--7.1%
1,000 - 1,000 Boston GO, Series B,
5.875%, 8-1-12 (AMBAC)
1,000 - 1,000 Boston GO, Series B,
5.875%, 8-1-13 (AMBAC)
1,000 - 1,000 Massachusetts GO,
Series A, (Consolidated Loan)
5.40%, 11-1-06
- - 1,000 1,000 Massachusetts Health and Education Auth.
Rev., Series F, 6.25%, 7-1-12 (AMBAC)
- - 1,115 1,115 Massachusetts Housing Finance Agency
Rev., Series 1993 A, 6.375%, 4-1-21
- - 1,690 1,690 Massachusetts Housing Finance Agency
Rev., Series 1992 H, 6.75%, 11-15-12
(FNMA)
1,000 - 1,000 Massachusetts Water Resources Auth. Rev.,
Series B, 5.50%, 11-1-15
Michigan--2.1%
1,500 - 1,500 Detroit Sewer Disposal Rev.,
Series B, 5.25%, 7-1-21 (MBIA)
1,000 - 1,000 University of Michigan Hospital Rev.,
Series A, 5.75%, 12-1-12
Montana--1.6%
1,650 - 1,650 Montana State Board Investment Payroll Tax
Rev., 6.875%, 6-1-20(1)
New York--7.8%
1,000 - 1,000 Municipal Assistance Corp. Rev.,
Series 67, 7.625%, 7-1-08
1,000 - 1,000 New York Local Government Assistance Corp.
Rev., Series D, 6.75%, 4-1-07
1,000 - 1,000 New York State Dorm Auth. Rev.
City University, 6.00%, 7-1-26
1,000 - 1,000 New York State Environmental Facilities Corp.
Pollution Control Rev., Series E
6.30%, 6-15-02
1,000 2,000 3,000 New York State Urban Development Corp. Rev.,
Series 4, (Correctional Facilities)
5.375%, 1-1-23
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (Continued)
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
------------------------------------------
Benham Benham Pro
Long-Term Long-Term Forma
Tax-Exempt Tax-Free Combined
Fund Fund Market
Market Market Value
Value Value (Note 1)
Boston GO, Series B,
5.875%, 8-1-12 (AMBAC) 1,032 - 1,032
Boston GO, Series B,
5.875%, 8-1-13 (AMBAC) 1,028 - 1,028
Massachusetts GO,
Series A, (Consolidated Loan)
5.40%, 11-1-06 1,028 - 1,028
Massachusetts Health and Education Auth.
Rev., Series F, 6.25%, 7-1-12 (AMBAC) - 1,088 1,088
Massachusetts Housing Finance Agency
Rev., Series 1993 A, 6.375%, 4-1-21 - 1,133 1,133
Massachusetts Housing Finance Agency
Rev., Series 1992 H, 6.75%, 11-15-12
(FNMA) - 1,786 1,786
Massachusetts Water Resources Auth. Rev.,
Series B, 5.50%, 11-1-15 981 - 981
------ ------ ------
4,069 4,007 8,076
------ ------ ------
Detroit Sewer Disposal Rev.,
Series B, 5.25%, 7-1-21 (MBIA) 1,422 - 1,422
University of Michigan Hospital Rev.,
Series A, 5.75%, 12-1-12 1,006 - 1,006
------ ------ ------
2,428 - 2,428
------ ------ ------
Montana State Board Investment Payroll Tax
Rev., 6.875%, 6-1-20(1) 1,819 - 1,819
------ ------ ------
Municipal Assistance Corp. Rev.,
Series 67, 7.625%, 7-1-08 1,096 - 1,096
New York Local Government Assistance Corp.
Rev., Series D, 6.75%, 4-1-07 1,111 - 1,111
New York State Dorm Auth. Rev.
City University, 6.00%, 7-1-26 992 - 992
New York State Environmental Facilities Corp.
Pollution Control Rev., Series E
6.30%, 6-15-02 1,083 - 1,083
New York State Urban Development Corp. Rev.,
Series 4, (Correctional Facilities)
5.375%, 1-1-23 906 1,813 2,719
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham Benham
Long-Term Long-Term Pro Forma
Tax-Exempt Tax-Free Combined
Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
2,000 - 2,000 New York State Urban Development Corp. Rev.,
Series 6, (Correctional Facilities)
5.375%, 1-1-15
North Carolina--1.5%
520 - 520 North Carolina Eastern Municipal Power
Agency System Rev., Series A, 7.50%,
1-1-10, Prerefunded 1-1-09 at 100% of Par(1)
1,000 - 1,000 North Carolina Municipal Power Agency #1
Rev., (Catawba Electric)
6.00%, 1-1-10 (MBIA)
Ohio--1.2%
750 - 750 Ohio Higher Educational Facility Commission
Rev., (Case Western Reserve University)
6.50%, 10-1-20
500 - 500 Ohio Higher Educational Facility Commission
Rev., (University of Dayton)
5.80%, 12-1-14 (FGIC)
Pennsylvania--5.0%
1,125 3,000 4,125 Pennsylvania Intergovernmental
Cooperative Auth.
Special Tax Rev., Series A
5.00%, 6-15-22 (MBIA)
1,000 - 1,000 Philadelphia Gas Works Rev.,
15th Series, 5.375%, 8-1-07 (FSA)
1,000 - 1,000 Philadelphia Water & Wastewater Rev.,
5.25%, 6-15-23 (MBIA)
Puerto Rico--0.5%
500 - 500 Puerto Rico Commonwealth, GO, 6.45%, 7-1-17
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (Continued)
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
------------------------------------------
Benham Benham Pro
Long-Term Long-Term Forma
Tax-Exempt Tax-Free Combined
Fund Fund Market
Market Market Value
Value Value (Note 1)
New York State Urban Development Corp. Rev.,
Series 6, (Correctional Facilities)
5.375%, 1-1-15 1,870 - 1,870
------ ------ ------
7,058 1,813 8,871
------ ------ ------
North Carolina Eastern Municipal Power
Agency System Rev., Series A, 7.50%,
1-1-10, Prerefunded 1-1-09 at 100% of Par(1) 620 - 620
North Carolina Municipal Power Agency #1
Rev., (Catawba Electric)
6.00%, 1-1-10 (MBIA) 1,074 - 1,074
------ ------ ------
1,694 - 1,694
------ ------ ------
Ohio Higher Educational Facility Commission
Rev., (Case Western Reserve University)
6.50%, 10-1-20 848 - 848
Ohio Higher Educational Facility Commission
Rev., (University of Dayton)
5.80%, 12-1-14 (FGIC) 503 - 503
------ ------ ------
1,351 - 1,351
------ ------ ------
Pennsylvania Intergovernmental
Cooperative Auth.
Special Tax Rev., Series A
5.00%, 6-15-22 (MBIA) 1,016 2,709 3,725
Philadelphia Gas Works Rev.,
15th Series, 5.375%, 8-1-07 (FSA) 1,014 - 1,014
Philadelphia Water & Wastewater Rev.,
5.25%, 6-15-23 (MBIA) 938 - 938
------ ------ ------
2,968 2,709 5,677
------ ------ ------
Puerto Rico Commonwealth, GO, 6.45%, 7-1-17 533 - 533
------ ------ ------
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham Benham
Long-Term Long-Term Pro Forma
Tax-Exempt Tax-Free Combined
Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
Rhode Island--3.0%
- - 11,000 11,000 Rhode Island Clean Water Safe
Drinking, 6.70%, 1-1-15 (AMBAC)
1,000 1,000 2,000 Rhode Island Depositors Economic
Protection Corp.
Special Obligation Rev., Series A
6.25%, 8-1-16 (MBIA)
South Carolina--3.5%
- - 1,000 1,000 Columbia Water and Sewer Rev.,
7.10%, 2-1-01, Prerefunded at
102% of Par(1)
- - 1,500 1,500 Piedmont Municipal Power Agency
Electric Rev., 6.75%, 1-1-19 (FGIC)
- - 860 860 Piedmont Municipal Power Agency
Electric Rev. Refunding, Series 1991 A,
6.50%, 1-1-16 (FGIC)
- - 140 140 Piedmont Municipal Power Agency
Electric Rev. Refunding, Series 1991 A,
6.50%, 1-1-16(1)
Texas--8.6%
1,000 - 1,000 Alliance Airport Auth. Special Facilities Rev.,
(American Airlines Project), 7.00%, 12-1-11
1,000 - 1,000 Denton Utility System Rev.,
Series A, 5.95%, 12-1-14 (MBIA)
- - 600 600 Lower Colorado River Auth. Rev
Refunding, 5.25%, 1-1-15(1)
- - 2,000 2,000 San Antonio Electric and Gas System
Rev., 5.54%, 2-1-09 (FGIC)(2)
- - 1,000 1,000 Tarrant County Health Facility Rev.,
Series A, 6.75%, 9-1-12 (AMBAC)
2,500 1,960 4,460 Texas Municipal Power Agency Rev.,
Series A, 6.75%, 9-1-12 (AMBAC)
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (Continued)
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
------------------------------------------
Benham Benham Pro
Long-Term Long-Term Forma
Tax-Exempt Tax-Free Combined
Fund Fund Market
Market Market Value
Value Value (Note 1)
Rhode Island Clean Water Safe
Drinking, 6.70%, 1-1-15 (AMBAC) - 1,213 1,213
Rhode Island Depositors Economic
Protection Corp.
Special Obligation Rev., Series A
6.25%, 8-1-16 (MBIA) 1,086 1,086 2,172
------ ------ ------
1,086 2,299 3,385
------ ------ ------
Columbia Water and Sewer Rev.,
7.10%, 2-1-01, Prerefunded at
102% of Par(1) - 1,120 1,120
Piedmont Municipal Power Agency
Electric Rev., 6.75%, 1-1-19 (FGIC) - 1,748 1,748
Piedmont Municipal Power Agency
Electric Rev. Refunding, Series 1991 A,
6.50%, 1-1-16 (FGIC) - 965 965
Piedmont Municipal Power Agency
Electric Rev. Refunding, Series 1991 A,
6.50%, 1-1-16(1) - 158 158
------ ------ ------
- 3,991 3,991
------ ------ ------
Alliance Airport Auth. Special Facilities Rev.,
(American Airlines Project), 7.00%, 12-1-11 1,100 - 1,100
Denton Utility System Rev.,
Series A, 5.95%, 12-1-14 (MBIA) 1,033 - 1,033
Lower Colorado River Auth. Rev
Refunding, 5.25%, 1-1-15(1) - 590 590
San Antonio Electric and Gas System
Rev., 5.54%, 2-1-09 (FGIC)(2) - 1,024 1,024
Tarrant County Health Facility Rev.,
Series A, 6.75%, 9-1-12 (AMBAC) - 1,061 1,061
Texas Municipal Power Agency Rev.,
Series A, 6.75%, 9-1-12 (AMBAC) 2,774 2,175 4,949
------ ------ ------
4,907 4,850 9,757
------ ------ ------
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham Benham
Long-Term Long-Term Pro Forma
Tax-Exempt Tax-Free Combined
Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
Utah--1.1%
- - 1,000 1,000 Salt Lake City Hospital Rev. Refunding,
Series A, (Intermountain Health
Corporation), 8.125%, 5-15-15(1)
Virginia--3.0%
- - 1,000 1,000 Hampton Industrial Development Auth.
Rev., Series A, (Sentara General
Hospital), 6.50%, 11-1-12
500 - 500 Norfolk Hospital Development Auth.
Rev., (Children's Hospital),
7.00%, 6-1-11, Prerefunded 6-1-01
at 102% of Par (AMBAC)(1)
- - 1,750 1,750 Virginia State Housing Development Auth.
Rev., Series F, (Single Family Mortgage),
7.10%, 1-1-17
Washington--6.6%
- - 1,405 1,405 Port of Seattle Rev., 7.50%, 12-1-00 ,
Prerefunded at 102% of Par
(AMBAC)(1)
- - 1,625 1,625 Seattle Metropolitan Sewer Rev.,
Series T, 6.875%, 1-1-13
- - 1,000 1,000 Washington Public Power Supply
System Rev., Series 1990 C,
5.70%, 7-1-12 (AMBAC)
- - 1,000 1,000 Washington State GO, Series A,
6.75%, 2-1-15
1,000 - 1,000 Washington State GO,
Series B, 5.375%, 5-1-08
1,000 - 1,000 Washington State Public Power Supply Rev.,
Series A, (Nuclear Project #1)
5.75%, 7-1-12 (MBIA)
Wisconsin--3.1%
1,180 - 1,180 Winneconne Community School
District GO, 6.75%, 4-1-14 (FGIC)
- - 1,900 1,900 Wisconsin State Clean Water Rev.,
6.875%, 6-1-11
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (Continued)
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
------------------------------------------
Benham Benham Pro
Long-Term Long-Term Forma
Tax-Exempt Tax-Free Combined
Fund Fund Market
Market Market Value
Value Value (Note 1)
Salt Lake City Hospital Rev. Refunding,
Series A, (Intermountain Health
Corporation), 8.125%, 5-15-15(1) - 1,198 1,198
------ ------ ------
Hampton Industrial Development Auth.
Rev., Series A, (Sentara General
Hospital), 6.50%, 11-1-12 - 1,044 1,044
Norfolk Hospital Development Auth.
Rev., (Children's Hospital),
7.00%, 6-1-11, Prerefunded 6-1-01
at 102% of Par (AMBAC)(1) 560 - 560
Virginia State Housing Development Auth.
Rev., Series F, (Single Family Mortgage),
7.10%, 1-1-17 - 1,849 1,849
------ ------ ------
560 2,893 3,453
------ ------ ------
Port of Seattle Rev., 7.50%, 12-1-00 ,
Prerefunded at 102% of Par
(AMBAC)(1) - 1,589 1,589
Seattle Metropolitan Sewer Rev.,
Series T, 6.875%, 1-1-13 - 1,740 1,740
Washington Public Power Supply
System Rev., Series 1990 C,
5.70%, 7-1-12 (AMBAC) - 1,002 1,002
Washington State GO, Series A,
6.75%, 2-1-15 - 1,151 1,151
Washington State GO,
Series B, 5.375%, 5-1-08 1,019 - 1,019
Washington State Public Power Supply Rev.,
Series A, (Nuclear Project #1)
5.75%, 7-1-12 (MBIA) 1,006 - 1,006
------ ------ ------
2,025 5,482 7,507
------ ------ ------
Winneconne Community School
District GO, 6.75%, 4-1-14 (FGIC) 1,285 - 1,285
Wisconsin State Clean Water Rev.,
6.875%, 6-1-11 - 2,196 2,196
------ ------ ------
1,285 2,196 3,481
------ ------ ------
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
($ In Thousands)
------------------------------------------------
Benham Benham
Long-Term Long-Term Pro Forma
Tax-Exempt Tax-Free Combined
Fund Fund Principal
Principal Principal Amount
Amount Amount (Note 1)
Wyoming--0.2%
220 - 220 Wyoming Community Development Auth. Rev.,
Series B, (Single Family Mortgage),
8.125%, 6-1-21 (FHA)
Total Municipal Bonds--98.8%
Short-Term Tax-Exempt Securities
Arizona--0.1%
- - 100 100 Phoenix Industrial Dev. Auth.
Multifamily Housing Rev. Refunding,
(Ventana Palms Apartments), VRDN, 3.60%
11-6-1996, resets monthly,
final maturity 2-1-24
California--0.4%
500 - 500 Ontario California Industrial Development
Auth. Rev., Series A, (Erenberg Partners),
4.00%, VRDN, 11-6-96, resets
weekly, final maturity 9-1-08
(LOC: Tokai Bank of California Ltd.)
New Jersey--0.7%
- - 800 800 New Jersey Economic Development
Auth. Rev., Series 1984A,
(Merck & Co., Inc.), VRDN, 4.00%,
11-6-96, resets weekly,
final maturity 10-1-19
Total Short-Term Tax-Exempt Securities--1.2%
TOTAL INVESTMENT SECURITIES--100.0%
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (Continued)
October 31, 1996 (Unaudited)
CONTINUATION OF COLUMN
($ In Thousands)
------------------------------------------
Benham Benham Pro
Long-Term Long-Term Forma
Tax-Exempt Tax-Free Combined
Fund Fund Market
Market Market Value
Value Value (Note 1)
Wyoming Community Development Auth. Rev.,
Series B, (Single Family Mortgage),
8.125%, 6-1-21 (FHA) 229 - 229
------ ------ ------
59,723 52,531 112,254
------ ------ ------
Phoenix Industrial Dev. Auth.
Multifamily Housing Rev. Refunding,
(Ventana Palms Apartments), VRDN, 3.60%
11-6-1996, resets monthly,
final maturity 2-1-24 - 100 100
Ontario California Industrial Development
Auth. Rev., Series A, (Erenberg Partners),
4.00%, VRDN, 11-6-96, resets
weekly, final maturity 9-1-08
(LOC: Tokai Bank of California Ltd.) 500 - 500
New Jersey Economic Development
Auth. Rev., Series 1984A,
(Merck & Co., Inc.), VRDN, 4.00%,
11-6-96, resets weekly,
final maturity 10-1-19
- 800 800
------ ------ ------
500 900 1,400
------ ------ ------
$60,223 $53,431 $113,654
======= ======= =======
continued
Pro Forma Combining
Benham Long-Term Tax-Exempt Fund and
Benham Long-Term Tax-Free Fund
Schedule of Investments (continued)
October 31, 1996 (Unaudited)
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Indemnity Corp.
FGIC = Financial Guaranty Insurance Company
FHA = Federal Housing Authority
FNMA = Federal National Mortgage Association
FSA = Financial Security Association
GO = General Obligation
LOC = Letter of Credit
MBIA = Municipal Bond Insurance Association
resets = The frequency with which a fixed-income security's coupon changes,
based on current market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon will vary
significantly from current market rates.
VRDN = Variable Rate Demand Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is effective
October 31, 1996.
(1) Escrowed in U.S. Government Securities
(2) This security is a zero-coupon municipal bond. The yield to maturity at
current market value is shown instead of a stated coupon rate. Zero-coupon
securities are purchased at a substantial discount from their value at
maturity.
END SCHEDULE OF INVESTMENTS
</TABLE>
<PAGE>
BY AND AMONG
AMERICAN CENTURY GOVERNMENT INCOME TRUST,
AMERICAN CENTURY MUNICIPAL TRUST
and
AMERICAN CENTURY MUTUAL FUNDS, INC.
DATED ------------------, 1997
TABLE OF CONTENTS
1. Transfer of Assets of the Acquired Funds.............................
2. Liquidating Distributions and Termination of the Acquired Fund.......
3. Valuation Times......................................................
4. Certain Representatins, Warranties and Agreements of the
Acquired Company...................................................
5. Certain Representations, Warranties and Agreements of the
Acquiring Companies................................................
6. Shareholder Action on Behalf of the Acquired Funds...................
7. Registration Statement and Proxy Solicitation Materials..............
8. Effective Times of the Reorganization................................
9. The Acquiring Companies' Conditions..................................
10. The Acquired Company's Conditions...................................
11. Tax Documents.......................................................
12. Further Assurances..................................................
13. Termination of Representations and Warranties.......................
14. Termination of Agreement............................................
15. Amendment and Waiver................................................
16. Governing Law.......................................................
17. Successors and Assigns..............................................
18. Beneficiaries.......................................................
19. Acquiring Company Liability.........................................
20. Acquired Companies Liability........................................
21. Notices.............................................................
22. Expenses............................................................
23. Entire Agreement....................................................
24. Counterparts........................................................
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION made as of ----------------, 1997
by and among American Century Government Income Trust and American Century
Municipal Trust, each a Massachusetts business trust (the "Acquiring
Companies"), and American Century Mutual Funds, Inc., a Maryland corporation
(the "Acquired Company").
WHEREAS, the parties desire that substantially all of the assets and
liabilities of the Acquired Company be transferred to, and be acquired and
assumed by, corresponding portfolios of the Acquiring Companies in exchange for
shares of the Acquiring Companies' portfolios which shall thereafter be
distributed by the Acquired Company to the holders of shares of its portfolios,
all as described in this Agreement (the "Reorganization");
WHEREAS, the parties intend that the transfers of assets, assumptions
of liabilities and distributions of shares in the Acquired Funds (as defined in
Section 1.2) be treated as a tax-free reorganization under Section 368(a)(1)(C),
368(a)(1)(D) or 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, the parties intend that in connection with the Reorganization
the Acquired Funds shall be terminated under state law and de-registered as
described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and subject to the terms and conditions hereof, and
intending to be legally bound hereby, the Acquired Company and the Acquiring
Companies agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUNDS.
1.1. At the Effective Time of the Reorganization (as defined in
Section 8) with respect to the Acquired Funds, all property of
every description, and all interests, rights, privileges and
powers of the Acquired Funds other than cash in an amount
necessary to pay any unpaid dividends and distributions as
provided in Section 4.7 (such assets, the "Acquired Fund
Assets") shall be transferred and conveyed by the Acquired
Funds to the Acquiring Companies on behalf of corresponding
portfolios set forth in Section 1.2 (the "Acquiring Funds"),
and shall be accepted by the Acquiring Companies on behalf of
such Acquiring Funds, and the Acquiring Companies, on behalf
of such Acquiring Funds, shall assume all known liabilities
whether accrued, absolute, contingent or otherwise, of the
Acquired Funds reflected in the calculation of such Acquired
Funds' net asset values (the "Acquired Fund Liabilities"), so
that at and after the Effective Time of the Reorganization
with respect to the Acquired Funds: (i) all assets of the
Acquired Funds shall become and be the assets of its Acquiring
Funds; and (ii) all known liabilities of the Acquired Funds
reflected as such in the calculation of an Acquired Fund's net
asset value shall attach to the corresponding Acquiring Fund
as aforesaid and may thenceforth be enforced against the
Acquiring Fund to the extent as if the same had been incurred
by it. Without limiting the generality of the foregoing, the
Acquired Fund Assets shall include all property and assets of
any nature whatsoever, including, without limitation, all
cash, cash equivalents, securities, other investments, claims
and receivables (including dividend and interest receivables)
owned by an Acquired Fund, and any deferred or prepaid
expenses shown as an asset on the Acquired Fund's books, at
the Effective Time of the Reorganization of the Acquired Fund,
and all good will, all other intangible property and all books
and records belonging to the Acquired Fund. Recourse by any
person for the Acquired Fund Liabilities assumed by the
Acquiring Funds shall, at and after the Effective Time of the
Reorganization of the Acquired Funds, be limited to the
Acquiring Funds.
1.2. The assets of the Acquired Funds shall be acquired by the
Acquiring Funds identified below opposite its name, and the
holders of the Acquired Funds shall receive the of common
stock of the Acquiring Fund identified below opposite its
name:
Acquired Funds Acquiring Funds
-------------- ---------------
AMERICAN CENTURY MUTUAL FUNDS, INC. AMERICAN CENTURY GOVERNMENT INCOME TRUST
Short-Term Government Fund Adjustable Rate Government Securities Fund
Intermediate-Term Government Fund Intermediate-Term Treasury Fund
AMERICAN CENTURY MUNICIPAL TRUST
Limited-Term Tax-Exempt Fund Limited-Term Tax-Free Fund
Intermediate-Term Tax-Exempt Fund Intermediate-Term Tax-Free Fund
Long-Term Tax-Exempt Fund Long-Term Tax-Free Fund
1.3. In exchange for the transfer of the Acquired Fund Assets and
the assumption of the Acquired Fund Liabilities, the Acquiring
Companies shall simultaneously issue at the applicable
Effective Time of the Reorganization to the Acquired Funds a
number of full and fractional shares to the third decimal
place of the Acquiring Funds specified in Section 1.2 all
determined and adjusted as provided in this Agreement. The
number of shares of the Acquiring Funds so issued will have an
aggregate net asset value equal to the value of the Acquired
Fund Assets that are represented by shares of the
corresponding Acquired Funds, the holders of which shall
receive shares of the Acquiring Funds, as specified in Section
1.2, all determined and adjusted as provided in this
Agreement.
1.4. The net asset value of such shares of the Acquiring Funds and
the net asset value of the Acquired Funds shall be determined
as of the applicable Valuation Time with respect to the
Acquired Funds specified in Section 3.
1.5. The net asset value of shares of the Acquiring Funds shall be
computed in the manner set forth in the Acquiring Funds' then
current prospectuses under the Securities Act of 1933, as
amended (the "1933 Act"). The net asset value of the Acquired
Fund Assets to be transferred by the Acquired Company shall be
computed by the Acquired Company and shall be subject to
adjustment by the amount, if any, agreed to by the Acquiring
Companies and the Acquired Company. In determining the value
of the securities transferred by the Acquired Funds to the
Acquiring Funds, each security shall be priced in accordance
with the policies and procedures of the Acquiring Companies as
described in their then current prospectuses and statement of
additional information and adopted by the Acquiring Companies'
Board of Trustees, which are and shall be consistent with the
policies now in effect for the Acquired Company. Price
quotations and the security characteristics relating to
establishing such quotations shall be determined by the
Acquiring Companies, provided that such determination shall be
subject to the approval of the Acquired Company.
2. LIQUIDATING DISTRIBUTIONS AND TERMINATION OF THE ACQUIRED FUNDS.
Immediately after the Effective Time of the Reorganization with respect
to the Acquired Funds, the Acquired Funds shall distribute in complete
liquidation pro rata to the record holders of its shares at the
applicable Effective Time of the Reorganization the shares of the
Acquiring Funds identified in Section 1.2 to be received by the record
holders of such Acquired Funds. In addition, each shareholder of record
of the Acquired Funds shall have the right to receive any unpaid
dividends or other distributions which were declared before the
applicable Effective Time of the Reorganization with respect to the
shares of the Acquired Funds that are held by the shareholder at the
applicable Effective Time of the Reorganization. In accordance with
instructions they receive from the Acquired Company, the Acquiring
Companies shall record on their books the ownership of shares of the
Acquiring Funds by the record holders of shares of the Acquired Funds
identified in Section 1.2. All of the issued and outstanding shares of
the Acquired Funds shall be redeemed and canceled on the books of the
Acquired Company at the Effective Time of the Reorganization of the
Acquired Funds and shall thereafter represent only the right to receive
the shares of the Acquiring Funds identified in Section 1.2, and the
Acquired Funds' transfer books shall be closed permanently. As soon as
practicable after the Effective Time of the Reorganization with respect
to the Acquired Funds, the Acquired Company shall take all steps as
shall be necessary and proper to effect the dissolution of the Acquired
Funds under federal and state law. After the Effective Time of the
Reorganization with respect solely to the Acquired Funds, the Acquired
Company shall not conduct any business except in connection with the
Acquired Funds' liquidation and dissolution.
3. VALUATION TIMES.
Subject to Section 1.5 hereof, the Valuation Time for the
Reorganization with respect to the Acquired Funds shall be as set forth
in the Acquired Funds' prospectuses, on such date as may be agreed in
writing by the duly authorized officers of both parties hereto.
4. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ACQUIRED
COMPANY.
The Acquired Company, on behalf of itself and the Acquired Funds,
represents and warrants to, and agrees with, the Acquiring Companies as
follows:
4.1. The Acquired Company is a Maryland corporation duly created
pursuant to its Articles of Incorporation for the purpose of
acting as a management investment company under the 1940 Act
and is validly existing under the laws of, and duly authorized
to transact business in, the State of Maryland. The Acquired
Funds are registered with the Securities and Exchange
Commission (the "SEC") as open-end management investment
companies under the 1940 Act and such registration is in full
force and effect.
4.2. It has power to own all of its properties and assets and,
subject to the approvals of shareholders referred to herein,
to carry out and consummate the transactions contemplated
hereby, and has all necessary federal, state and local
authorizations to carry on its business as now being conducted
and to consummate the transactions contemplated by this
Agreement.
4.3. This Agreement has been duly authorized, executed and
delivered by the Acquired Company, and represents the Acquired
Company's valid and binding contract, enforceable in
accordance with its terms, subject as to enforcement to
bankruptcy, insolvency reorganization, arrangement,
moratorium, and other similar laws of general applicability
relating to or affecting creditors' rights and to general
principles of equity. The execution and delivery of this
Agreement does not and will not, and the consummation of the
transactions contemplated by this Agreement will not, violate
the Acquired Company's Articles of Incorporation, By-laws, or
any agreement or arrangement to which it is a party or by
which it is bound.
4.4. The Acquired Funds have elected to qualify and have qualified
as "regulated investment companies" under Subtitle A, Chapter
1, Subchapter M, Part I of the Code, as of and since their
first taxable years; have been such regulated investment
companies at all times since the end of their first taxable
years when they so qualified; and qualifies and shall continue
to qualify as regulated investment companies until the
Effective Time of the Reorganization with respect to the
Acquired Funds.
4.5. All federal, state, local and foreign income, profits,
franchise, sales, withholding, customs, transfer and other
taxes, including interest, additions to tax and penalties
(collectively, "Taxes") relating to the Acquired Fund Assets
or properly shown to be due on any return filed by any
Acquired Funds with respect to taxable periods ending on or
prior to, and the portion of any interim period up to, the
date hereof have been fully and timely paid or provided for;
and there are no levies, liens, or other encumbrances relating
to Taxes existing, threatened or pending with respect to the
Acquired Fund Assets.
4.6. The financial statements of the Acquired Funds for the fiscal
year ended October 31, 1996, examined by Baird, Kurtz &
Dobson, independent certified public accountants, copies of
which have been previously furnished to the Acquiring
Companies, present fairly the financial position of the
Acquired Funds as of October 31, 1996 and the results of its
operations for the year then ending, in conformity with
generally accepted accounting principles.
4.7. Prior to the Valuation Time, the Acquired Funds shall have
declared a dividend or dividends, with a record date and
ex-dividend date prior to such Valuation Time, which, together
with all previous dividends, shall have the effect of
distributing to their shareholders all of their investment
company taxable income, if any, for the taxable periods or
years ended on or before the Acquired Funds' most recent
fiscal year end, and for the periods from said date to and
including the Effective Time of the Reorganization applicable
to the Acquired Funds (computed without regard to any
deduction for dividends paid), and all of their net capital
gain, if any, realized in taxable periods or years ended on or
before each Acquired Fund's fiscal year end and for the period
from said date to and including the Effective Time of the
Reorganization applicable to the Acquired Funds.
4.8. At both the Valuation Time and the Effective Time of the
Reorganization with respect to the Acquired Funds, there shall
be no known liabilities of the Acquired Funds, whether
accrued, absolute, contingent or otherwise, not reflected in
the net asset values per share of its outstanding shares.
4.9. There are no legal, administrative or other proceedings
pending or, to the Acquired Company's knowledge threatened,
against the Acquired Company or the Acquired Funds which could
result in liability on the part of the Acquired Company or the
Acquired Funds.
4.10. Subject to the approvals of shareholders, at both the
Valuation Time and the Effective Time of the Reorganization
with respect to the Acquired Funds, it shall have full right,
power and authority to sell, assign, transfer and deliver the
Acquired Fund Assets of such Acquired Funds and, upon delivery
and payment for the Acquired Fund Assets as contemplated
herein, the Acquiring Funds shall acquire good and marketable
title thereto, free and clear of all liens and encumbrances,
and subject to no restrictions on the ownership or transfer
thereof (except as imposed by federal or state securities
laws).
4.11. No consent, approval, authorization or order of any court or
mutual authority is required for the consummation by the
Acquired Company of the transactions contemplated by this
Agreement, except such as may be required under the 1933 Act,
the Securities Exchange Act of 1934, as amended ("1934 Act"),
the 1940 Act, the rules and regulations under those Acts, and
state securities laws.
4.12. Insofar as the following relate to the Acquired Company, the
registration statement filed by the Acquiring Companies on
Form N-14 relating to the shares of the Acquiring Funds that
will be registered with the SEC pursuant to this Agreement,
which, without limitation, shall include a proxy statement of
the Acquired Company and the prospectuses of the Acquiring
Companies with respect to the transactions contemplated by
this Agreement, and any supplement or amendment thereto or to
the documents contained or incorporated therein by reference
(the "N-14 Registration Statement"), on the effective date of
the N-14 Registration Statement, at the time of any
shareholders' meeting referred to herein and at each Effective
Time of the Reorganization: (i) shall comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and
the 1940 Act, the rules and regulations thereunder, and state
securities laws, and (ii) shall not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
representations and warranties in this subsection shall apply
only to statements in or omissions from the N-14 Registration
Statement made in reliance upon and in conformity with
information furnished by the Acquired Company for use in the
N-14 Registration Statement.
4.13. All of the issued and outstanding shares of the Acquired Funds
have been duly and validly issued, are fully paid and
non-assessable, and were offered for sale and sold in
conformity with all applicable federal and state securities
laws, and no shareholder of the Acquired Funds has any
preemptive right of subscription or purchase in respect of
such shares.
5. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ACQUIRING
COMPANIES.
The Acquiring Companies, on behalf of themselves and the Acquiring
Funds, represent and warrant to, and agree with, the Acquired Company
as follows:
5.1. They are each a Massachusetts business trust duly created
pursuant to a Declaration of Trust for the purpose of acting
as a management investment company under the 1940 Act and are
validly existing under the laws of, and duly authorized to the
Commonwealth of Massachusetts. The Acquiring Funds are
registered with the SEC as open-end management investment
companies under the 1940 Act and such registrations are in
full force and effect.
5.2. They have the power to own all of their properties and assets
and to carry out and consummate the transactions contemplated
herein, and have all necessary federal, state and local
authorizations to carry on their business as now being
conducted and to consummate the transactions contemplated by
this Agreement.
5.3. This Agreement has been duly authorized, executed and
delivered by the Acquiring Companies, and represents the
Acquiring Companies valid and binding contract, enforceable in
accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, arrangement,
moratorium, and other similar laws of general applicability
relating to or affecting creditors' rights and to general
principles of equity. The execution and delivery of this
Agreement did not, and the consummation of the transactions
contemplated by this Agreement will not, violate the Acquiring
Companies' Declarations of Trust or By-laws or any agreement
or arrangement to which it is a party or by which they are
bound.
5.4. The Acquiring Funds, other than the Limited-Term Tax-Free
Fund, have elected to qualify, and have qualified, as
"regulated investment companies" under Subtitle A, Chapter 1,
Subchapter M, Part I of the Code, as of and since their first
taxable years; the Acquiring Funds, other than the
Limited-Term Tax-Free Fund, have been such regulated
investment companies at all times since the end of their first
taxable years when they so qualified and intend to continue to
qualify as regulated investment companies; and the
Limited-Term Tax-Free Fund will elect to qualify as a
regulated investment company and intend to continued to
qualify as a regulated investment company.
5.5. The financial statements of the Acquiring Funds for their
fiscal years ended March 31, 1996 with respect to the
Adjustable Rate Government Securities Fund and
Intermediate-Term Treasury Fund and May 31, 1996 with respect
to the Intermediate-Term Tax-Free Fund and Long-Term Tax-Free
Fund, examined by KPMG Peat Marwick LLP, copies of which have
been previously furnished to the Acquired Company, present
fairly the financial position of the Acquiring Funds as of
March 31, 1996 and May 31, 1996, respectively, and the results
of their operations for the years then ending, in conformity
with generally accepted accounting principles.
5.6. At both the Valuation Time and the Effective Time of the
Reorganization with respect to the Acquiring Funds, there
shall be no known liabilities of the Acquiring Funds, whether
accrued, absolute, contingent or otherwise, not reflected in
the net asset values per share of its shares to be issued
pursuant to this Agreement.
5.7. There are no legal, administrative or other proceedings
pending or, to their knowledge, threatened against the
Acquiring Companies or the Acquiring Funds which could result
in liability on the part of the Acquiring Companies or the
Acquiring Funds.
5.8. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Companies of the transactions contemplated by this
Agreement, except such as may be required under the 1933 Act,
the 1934 Act, the 1940 Act, the rules and regulations under
those Acts, and state securities laws.
5.9. Insofar as the following relate to the Acquiring Companies,
the N-14 Registration Statement on its effective date, at the
time of any shareholders' meetings referred to herein and at
each Effective Time of the Reorganization: (i) shall comply in
all material respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act, the rules and regulations
thereunder, and state securities laws, and (ii) shall not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, however, that the representations and warranties in
this subsection shall apply only to statements in or omissions
from the N-14 Registration Statement made in reliance upon and
in conformity with information furnished by the Acquiring
Companies for use in the N-14 Registration Statement.
5.10. The shares of the Acquiring Funds to be issued and delivered
to the Acquired Funds for the account of record holders of
shares of the Acquired Funds pursuant to the terms hereof
shall have been duly authorized as of the Effective Time of
the Reorganization applying to the Acquiring Funds and, when
so issued and delivered, shall be registered under the 1933
Act and under applicable state securities laws, duly and
validly issued, fully paid and non-assessable, and no
shareholder of the Acquiring Companies shall have any
preemptive right of subscription or purchase in respect
thereto.
6. SHAREHOLDER ACTION ON BEHALF OF THE ACQUIRED FUNDS.
6.1. As soon as practicable after the effective date of the N-14
Registration Statement, but in any event prior to the
Effective Time of the Reorganization applicable to the
Acquired Funds and as a condition to the Reorganization, the
Board of Directors of the Acquired Company shall call, and the
Acquired Company shall hold, a meeting of the shareholders of
the Acquired Funds for the purpose of considering and voting
upon:
6.1.1. Approval of this Agreement and the transactions
contemplated hereby, including, without limitation:
6.1.1.1. The transfer of the Acquired Funds Assets
belonging to the Acquired Funds to an
Acquiring Funds, and the assumption by the
Acquiring Funds of the Acquired Funds
Liabilities of such Acquired Funds, in
exchange for shares of the Acquiring Funds,
as set forth in Section 1.2;
6.1.1.2. The liquidation of the Acquired Funds
through the distribution to its record
holders of shares of the shares of Acquiring
Funds as described in this Agreement; and
6.1.2. Such other matters as may be determined by the Board
of Directors or authorized officers of the parties.
6.2. Approval of this Reorganization Agreement by the shareholders
of the Acquired Funds shall constitute the waiver of the
application of any fundamental policy of the Acquired Funds
that might be deemed to prevent them from taking the actions
necessary to effectuate the Reorganization as described, and
such policies, if any, shall be deemed to have been amended
accordingly.
7. REGISTRATION STATEMENT AND PROXY SOLICITATION MATERIALS.
The Acquiring Companies shall file the N-14 Registration Statement
under the 1933 Act, and the Acquired Company shall file the combined
prospectus/proxy statement contained therein under the 1934 Act and
1940 Act proxy rules, with the SEC as promptly as practicable. The
Acquiring Companies and the Acquired Company have cooperated and shall
continue to cooperate with the other, and have furnished and shall
continue to furnish the other with the information relating to itself
that is required by the 1933 Act, the 1934 Act, the 1940 Act, the rules
and regulations under each of those Acts and state securities laws, to
be included in the N-14 Registration Statement.
8. EFFECTIVE TIMES OF THE REORGANIZATION.
Delivery of the Acquired Fund Assets of the Acquired Funds and the
shares of the Acquiring Funds to be issued pursuant to Section 1 and
the liquidation of the Acquired Funds pursuant to Section 2 shall occur
at the opening of business on the next business day following the
Valuation Time applicable to the Acquired Funds, or on such other date,
and at such place and time and date, as may be determined by the
President or any Vice President of each party hereto. The respective
date and time at which such actions are taken with respect to the
Acquired Funds are referred to herein as the "Effective Time of the
Reorganization." To the extent any Acquired Fund Assets are, for any
reason, not transferred at the applicable Effective Time of the
Reorganization, the Acquired Company shall cause such Acquired Funds
Assets to be transferred in accordance with this Agreement at the
earliest practicable date thereafter.
9. THE ACQUIRING COMPANIES' CONDITIONS.
The obligations of the Acquiring Companies hereunder with respect to
the Acquiring Funds shall be subject to the following conditions
precedent:
9.1. This Agreement and the transactions contemplated by this
Agreement shall have been approved by the shareholders of the
Acquired Funds, in the manner required by law.
9.2. The Acquired Company shall have duly executed and delivered to
the Acquiring Companies such bills of sale, assignments,
certificates and other instruments of transfer ("Transfer
Documents") as may be necessary or desirable to transfer all
right, title and interest of the Acquired Company and the
Acquired Funds in and to the Acquired Funds Assets of the
Acquired Funds. The Acquired Fund Assets shall be accompanied
by all necessary state stock transfer stamps or cash for the
appropriate purchase price therefor.
9.3. All representations and warranties made in this Agreement
shall be true and correct in all material respects as if made
at and as of each Valuation Time and each Effective Time of
the Reorganization. As of the Valuation Time and the Effective
Time of the Reorganization applicable to the Acquired Funds,
there shall have been no material adverse change in the
financial position of the Acquired Funds since October 31,
1996 other than those changes incurred in the ordinary course
of business as an investment company. No action, suit or other
proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein.
9.4. The Acquiring Companies shall have received an opinion of
Dechert Price & Rhoads addressed to the Acquiring Companies
and the Acquired Company in a form reasonably satisfactory to
them and dated the Effective Time of the Reorganization
applicable to the Acquired Funds, substantially to the effect
that for federal income tax purposes: (i) the transfers of all
of the Acquired Funds Assets hereunder, and the assumption by
the Acquiring Funds of Acquired Fund Liabilities, in exchange
for shares of the Acquiring Funds, and the distribution of
said shares to the shareholders of the Acquired Funds, as
provided in this Agreement, will each constitute a
reorganization within the meaning of Section 368(a)(1)(C),
368(a)(1)(D) or 368(a)(1)(F) of the Code and with respect to
each reorganization, the Acquired Funds and the Acquiring
Funds will each be considered "a party to a reorganization"
within the meaning of Section 368(b) of the Code; (ii) in
accordance with Sections 361(a), 361(c)(1) and 357(a) of the
Code, no gain or loss will be recognized by the Acquired Funds
as a result of such transactions; (iii) in accordance with
Section 1032(a) of the Code, no gain or loss will be
recognized by the Acquiring Funds as a result of such
transactions; (iv) in accordance with Section 354(a)(1) of the
Code, no gain or loss will be recognized by the shareholders
of the Acquired Funds on the distribution to them by the
Acquired Funds of shares of the Acquiring Funds in exchange
for their shares of the Acquired Funds; (v) in accordance with
Section 358(a)(1) of the Code, the aggregate basis of
Acquiring Fund shares received by each shareholder of the
Acquired Funds will be the same as the aggregate basis of the
shareholder's Acquired Fund shares immediately prior to the
transactions; (vi) in accordance with Section 362(b) of the
Code, the basis of the Acquired Fund Assets to the Acquiring
Funds will be the same as the basis of the Acquired Fund
Assets in the hands of the Acquired Funds immediately prior to
the exchange; (vii) in accordance with Section 1223(1) of the
Code, a shareholder's holding period for Acquiring Fund shares
will be determined by including the period for which the
shareholder held the shares of the Acquired Fund exchanged
therefor, provided that the shareholder held such shares of
the Acquired Fund as a capital asset; and (viii) in accordance
with Section 1223(2) of the Code, the holding period of the
Acquiring Funds with respect to the Acquired Fund Assets will
include the period for which the Acquired Fund Assets were
held by the Acquired Funds.
9.5. With respect only to the reorganization of the Short-Term
Government Fund and Adjustable Rate Government Securities
Fund, the Acquiring Company shall have submitted to the
shareholders of the Adjustable Rate Government Securities
Fund, and such shareholders shall have approved, a revised
name, investment objective and investment strategies to those
identical to the Short-Term Government Fund.
9.6. The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any
proceeding seeking to enjoin consummation of the transactions
contemplated by this Agreement under Section 25(c) of the 1940
Act.
9.7. The N-14 Registration Statement shall have become effective
under the 1933 Act and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge
of the Acquiring Companies, contemplated by the SEC and the
parties shall have received all permits and other
authorizations necessary under state securities laws to
consummate the transactions contemplated by this Agreement.
9.8. The President or a Vice President of the Acquired Company
shall have certified that the Acquired Company has performed
and complied in all material respects with each of its
agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at each Valuation
Time and each Effective Time of the Reorganization.
10. THE ACQUIRED COMPANY'S CONDITIONS.
The obligations of the Acquired Company hereunder with respect to the
Acquired Funds shall be subject to the following conditions precedent:
10.1. This Agreement and the transactions contemplated by this
Agreement shall have been approved by the shareholders of the
Acquired Funds, in the manner required by law.
10.2. All representations and warranties of the Acquiring Companies
made in this Agreement shall be true and correct in all
material respects as if made at and as of each Valuation Time
and each Effective Time of the Reorganization. As of the
Valuation Time and the Effective Time of the Reorganization
applicable to the Acquired Funds, there shall have been no
material adverse change in the financial condition of the
Acquiring Funds since March 31, 1996 with respect to the
Adjustable Rate Government Securities Fund and
Intermediate-Term Treasury Fund and May 31, 1996 with respect
to the Intermediate-Term Tax-Free Fund and Long-Term Tax-Free
Fund other than those changes incurred in the ordinary course
of business as an investment company. No action, suit or other
proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein.
10.3. The Acquired Company shall have received an opinion of
Dechert, Price & Rhoads, addressed to the Acquiring Companies
and the Acquired Company in a form reasonably satisfactory to
them and dated the Effective Time of the Reorganization
applicable to the Acquired Funds, with respect to the matters
specified in Section 9.4.
10.4. The N-14 Registration Statement shall have become effective
under the 1933 Act and no stop order suspending such
effectiveness shall have been instituted, or to the knowledge
of the Acquiring Companies, contemplated by the SEC and the
parties shall have received all permits and other
authorizations necessary under state securities laws to
consummate the transactions contemplated by this Agreement.
10.5. The Acquired Company shall not sell or otherwise dispose of
any shares of the Acquiring Funds to be received in the
transactions contemplated herein, except in distribution to
its shareholders as contemplated herein.
10.6. The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any
proceeding seeking to enjoin consummation of the transactions
contemplated by this Agreement under Section 25(c) of the 1940
Act.
10.7. The President or a Vice President of the Acquiring Companies
shall have certified that the Acquiring Companies have
performed and complied in all material respects with each of
their agreements and covenants required by this Agreement to
be performed or complied with by it prior to or at each
Valuation Time and each Effective Time of the Reorganization.
11. TAX DOCUMENTS.
The Acquired Company shall deliver to the Acquiring Companies at the
Effective Time of the Reorganization confirmations or other adequate
evidence as to the adjusted tax basis of the Acquired Fund Assets then
delivered to the Acquiring Funds in accordance with the terms of this
Agreement.
12. FURTHER ASSURANCES.
Subject to the terms and conditions herein provided, each of the
parties hereto shall use its best efforts to take, or cause to be
taken, such action, to execute and deliver, or cause to be executed and
delivered, such additional documents and instruments, and to do, or
cause to be done, all things necessary, proper or advisable under the
provisions of this Agreement and under applicable law to consummate and
make effective the transactions contemplated by this Agreement.
13. TERMINATION OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the parties set forth in this
Agreement shall terminate at the Effective Time of the Reorganization.
14. TERMINATION OF AGREEMENT.
14.1. This Agreement may be terminated as to one or more investment
portfolios prior to the Effective Time of the Reorganization
by the Boards of Trustees of the Acquiring Companies or the
Board of Directors of the Acquired Company, as provided below:
14.1.1. By the Acquiring Companies, or either of them, if the
conditions set forth in Section 9 are not satisfied
as specified in said Section;
14.1.2. By the Acquired Company if the conditions set forth
in Section 10 are not satisfied as specified in said
Section;
14.1.3. By the mutual consent of the parties.
14.2. If a party terminates this Agreement as to any investment
portfolio because one or more of its conditions precedent have
not been fulfilled, or if this Agreement is terminated by
mutual consent, this Agreement will become null and void
without any liability of either party or any of their
investment portfolios to the other; provided, however, that if
such termination is by the Acquiring Companies, or either of
them, pursuant to Section 14.1.1 as a result of a breach by
the Acquired Company of any of its representations, warranties
or covenants in this Agreement, or such termination is by the
Acquired Company pursuant to Section 14.1.2 as a result of a
breach by the Acquiring Companies, or either of them, of any
of their representations, warranties or covenants in this
Agreement, nothing herein shall affect the non-breaching
party's right to damages on account of such other party's
breach.
15. AMENDMENT AND WAIVER.
At any time prior to or (to the fullest extent permitted by law) after
approval of this Agreement by the shareholders of the Acquired Company,
(a) the parties hereto may, by written agreement authorized by their
respective Board of Directors or Trustees, as the case may be, or their
respective Presidents or any Vice Presidents, and with or without the
approval of their shareholders, amend any of the provisions of this
Agreement, and (b) either party may waive any breach by the other party
or the failure to satisfy any of the conditions to its obligations
(such waiver to be in writing and executed by the President or Vice
President of the waiving party with or without the approval of such
party's shareholders).
16. GOVERNING LAW.
This Agreement and the transactions contemplated hereby shall be
governed, construed and enforced in accordance with the laws of
Massachusetts without giving effect to the conflicts of law principles
otherwise applicable therein.
17. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the respective successors and
permitted assigns of the parties hereto. This Agreement and the rights,
obligations and liabilities hereunder may not be assigned by either
party without the consent of the other party.
18. BENEFICIARIES.
Nothing contained in this Agreement shall be deemed to create rights in
persons not parties hereto, other than the successors and permitted
assigns of the parties.
19. ACQUIRING COMPANIES LIABILITY.
19.1. The name "American Century Government Income Trust and
"American Century Municipal Trust" and "Trustees of American
Century Government Income Trust" and "Trustees of American
Century Municipal Trust" refer respectively to the trusts
created and the trustees, as trustees but not individually or
personally, acting from time to time under Declarations of
Trust dated May 1, 1984, which are hereby referred to and
copies of which are on file at the office of the State
Secretary of the Commonwealth of Massachusetts and at the
principal office of the Acquiring Companies. The obligations
of the Acquiring Companies entered into in the name or on
behalf thereof by any of the trustees, representatives or
agents are made not individually, but in such capacities, and
are not binding upon any of the trustees, shareholders or
representatives of the Acquiring Companies personally, but
bind only the trust property, and all persons dealing with any
portfolio of the Acquiring Companies must look solely to the
trust property belonging to such portfolio for the enforcement
of any claims against the Acquiring Companies.
19.2. Both parties specifically acknowledge and agree that any
liability of the Acquiring Companies under this Agreement with
respect to the Acquiring Funds, or in connection with the
transactions contemplated herein with respect to the Acquiring
Funds, shall be discharged only out of the assets of the
particular Acquiring Funds and that no other portfolio of the
Acquiring Companies, if any, shall be liable with respect
thereto.
20. ACQUIRED COMPANY LIABILITY.
20.1. Both parties specifically acknowledge and agree that any
liability of the Acquired Company under this Agreement with
respect to the Acquired Funds, or in connection with the
transactions contemplated herein with respect to the Acquired
Funds, shall be discharged only out of the assets of that
particular Acquired Fund and that no other portfolio of the
Acquired Company shall be liable with respect thereto.
21. NOTICES.
All notices required or permitted herein shall be in writing and shall
be deemed to be properly given when delivered personally or by
telecopier to the party entitled to receive the notice or when sent by
certified or registered mail, postage prepaid, or delivered to a
nationally recognized overnight courier service, in each case properly
addressed to the party entitled to receive such notice at the address
or telecopier number stated below or to such other address or
telecopier number as may hereafter be furnished in writing by notice
similarly given by one party to the other party hereto:
If to American Century Government Income Trust, American Century
Municipal Trust or American Century Mutual Funds, Inc.:
Pat Looby
4500 Main Street
Kansas City, Missouri 64111
22. EXPENSES.
Each party represents to the other that its expenses incurred in
connection with the Reorganization will be borne by American Century
Investment Management, Inc. or one or more of its affiliates.
23. ENTIRE AGREEMENT.
This Agreement embodies the entire agreement and understanding of the
parties hereto and supersedes any and all prior agreements,
arrangements and understandings relating to matters provided for
herein.
24. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered shall be deemed to be an original,
but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers designated below as of the date
first written above.
AMERICAN CENTURY GOVERNMENT INCOME TRUST
ATTEST:
- ----------------------------------------- By:----------------------------
AMERICAN CENTURY MUNICIPAL TRUST
ATTEST:
- ----------------------------------------- By:----------------------------
AMERICAN CENTURY MUTUAL FUNDS, INC.
ATTEST:
- ----------------------------------------- By:----------------------------
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American
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SH-BKT-8970 Recycled
