BENHAM TARGET
MATURITIES TRUST
-------------
Semiannual Report
March 31, 1996
[picture of bull's eye
range]
[company logo] The Benham Group
Part of the Twentieth Century Family of Mutual Funds
<PAGE>
CONTENTS
U.S. ECONOMIC REVIEW.................................. 1
MARKET SUMMARY........................................ 2
2000 PORTFOLIO
Performance Information & Portfolio Statistics........ 4
Performance Comparison & Portfolio Composition........ 5
Management Discussion................................. 6
Financial Highlights..................................32
Schedule of Investments...............................52
2005 PORTFOLIO
Performance Information & Portfolio Statistics........ 8
Performance Comparison & Portfolio Composition........ 9
Management Discussion.................................10
Financial Highlights..................................34
Schedule of Investments...............................54
2010 PORTFOLIO
Performance Information & Portfolio Statistics........12
Performance Comparison & Portfolio Composition........13
Management Discussion.................................14
Financial Highlights..................................36
Schedule of Investments...............................56
2015 PORTFOLIO
Performance Information & Portfolio Statistics........16
Performance Comparison & Portfolio Composition........17
Management Discussion.................................18
Financial Highlights..................................38
Schedule of Investments...............................57
2020 PORTFOLIO
Performance Information & Portfolio Statistics........20
Performance Comparison & Portfolio Composition........21
Management Discussion.................................22
Financial Highlights..................................40
Schedule of Investments...............................58
2025 PORTFOLIO
Performance Information & Portfolio Statistics........24
Performance Comparison & Portfolio Composition........25
Management Discussion.................................26
Financial Highlights..................................41
Schedule of Investments...............................59
INVESTMENT FUNDAMENTALS...............................28
U.S. ECONOMIC REVIEW
JAMES M. BENHAM [photo of James
Chairman, Benham Funds M. Benham]
Slow economic growth and low inflation characterized the U.S. economy in 1995,
leading to expectations for similar economic performance in 1996. The U.S.
economy grew at a 2% annual rate in 1995, the weakest yearly performance since
the 1991 recession. U.S. inflation was just 2.5% in 1995, the lowest annual rate
since 1986.
The Federal Reserve's (the Fed's) success in slowing the economy and inhibiting
inflation by raising short-term interest rates from February 1994 to February
1995 eventually led to a new interest rate strategy. The Fed reduced the federal
funds rate target from 6.00% to 5.75% in July 1995, then lowered it twice
more--to 5.50% in December 1995 and to 5.25% in January 1996. Slowing corporate
and government spending, declining auto sales and housing activity, and
poorer-than-expected holiday season retail sales seemed to indicate lower
interest rates in 1996 and a possible recession.
[line/bar graph on left side of page. graph data described below]
Federal budget battles, which led to two government shutdowns, furthered the
cause of economic weakness. The shutdowns also delayed key economic reports,
causing confusion in the financial markets during the first quarter of 1996.
Amid the confusion and slow growth/low inflation expectations, the February
payroll employment report, showing the strongest job creation in 12 years,
exploded like a time bomb (see the graph above). It dashed hopes that the Fed
would cut interest rates at its policy meeting in March, triggering a bond
sell-off and higher interest rates.
The March payroll employment report and the government's estimate of first-
quarter U.S. economic growth were also unexpectedly strong. The strength of
these reports seems to indicate that the economy is picking up momentum, with no
immediate need for the Fed to reduce interest rates. Other signs of a stronger
economy include higher auto sales and factory orders, rising consumer confidence
and strong housing starts. But the economy still doesn't feel particularly
robust--layoffs are at historically high levels, wages are stagnant, capital
expenditures are slowing, and personal bankruptcies and loan delinquencies are
higher. Overall, we believe the evidence still suggests moderate economic growth
in 1996, with both growth and inflation around 3%.
[graph data]
U.S. Nonfarm Payroll Employment
(seasonally adjusted, in thousands)
Three-Month Moving Average Monthly Change
J 292 186
F 232 313
M 226 179
A 167 8
M 42 -62
J 82 299
J 88 28
A 197 263
S 128 94
O 142 68
N 125 212
D 142 145
J 70 -146
F 210 631
M 221 178
A 270 2
Source: Bloomberg Financial Markets
1
MARKET SUMMARY
ZERO-COUPON BONDS
by Dave Schroeder, Vice President & Senior Portfolio Manager
NOTE: WE SUGGEST THAT YOU REVIEW THE INVESTMENT FUNDAMENTALS AND U.S. ECONOMIC
REVIEW SECTIONS BEFORE YOU READ THIS SECTION. THE WORDS AND INVESTMENT TERMS
MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE INVESTMENT FUNDAMENTALS SECTION
BEGINNING ON PAGE 28.
PERFORMANCE PERSPECTIVE
The six-month period ended March 31, 1996, provided a vivid illustration of the
volatile nature of zero-coupon securities (zeros) in a changing interest rate
environment.
During the period, the Treasury market was whipsawed by interest rate movements
and increased supply. From October through January, Treasuries rallied and
yields fell in response to weak economic conditions. In a sudden turnaround,
Treasuries sold off in February and March in response to inflation fears (caused
by unexpectedly strong economic reports) and increasing supply (caused by
Treasury auctions in February and the unwinding of large currency trades
involving Treasuries).
These movements in the Treasury market were magnified in the zero-coupon bond
market. After posting total returns in excess of 60% in 1995, long-maturity
zeros suffered sharp declines as interest rates began trending upward in the
first quarter of 1996. From the end of January, when 30-year Treasury bond
yields bottomed at 6%, to the end of March, when yields neared 7%, long zeros
gave up most of the price appreciation they had garnered in the preceding four
months. The best-performing Target Portfolio during the six months ended March
31, 1996, was the relatively short-term Target 2000 Portfolio, which produced a
total return of 2.42%. The 2020 Portfolio, with its 24-year weighted average
maturity,* posted a total return of -2.58% for the same period.
YIELDS [line graph on right side of page. graph data described below.]
The yield curve* graph to the right illustrates the shifts that took place in
the Treasury zero yield curve over the six-month period. The gap between the
solid black line and the dotted black line shows the dramatic declines in zero
yields that drove zero prices up between September 1995 and January 1996 as the
Fed continued to cut short-term
[graph data]
The Shifting Yield Curve
For Treasury Zeros
Years to
Maturity 9/30/95 1/31/96 3/29/96
"1" 5.76% 4.96% 5.57%
"2" 5.92 5.03 5.82
"3" 5.99 5.11 5.98
"4" 6.02 5.21 6.07
"5" 6.05 5.3 6.15
"6" 6.12 5.43 6.25
"7" 6.19 5.55 6.35
"8" 6.28 5.65 6.44
"9" 6.36 5.75 6.54
"10" 6.45 5.85 6.63
"11" 6.49 5.9 6.68
"12" 6.54 5.96 6.73
"13" 6.58 6.01 6.78
"14" 6.63 6.06 6.83
"15" 6.67 6.12 6.89
"16" 6.71 6.17 6.94
"17" 6.76 6.22 6.99
"18" 6.8 6.27 7.04
"19" 6.85 6.33 7.09
"20" 6.89 6.38 7.14
"21" 6.88 6.35 7.1
"22" 6.86 6.31 7.07
"23" 6.85 6.28 7.03
"24" 6.83 6.25 6.99
"25" 6.82 6.22 6.96
"26" 6.8 6.18 6.92
"27" 6.79 6.15 6.88
"28" 6.77 6.12 6.84
"29" 6.76 6.08 6.81
"30" 6.74 6.05 6.77
Source: Bloomberg Financial Markets
2
MARKET SUMMARY
ZERO-COUPON BONDS
(Continued from the previous page)
interest rates. The gap between the dotted black line and the red line
illustrates the increase in zero rates that occurred between January and March
1996 as the Federal Reserve shifted to a neutral interest-rate policy, dashing
the U.S. financial markets' hopes for lower short-term interest rates. Rising
yields led to declining prices and total returns on zero-coupon securities.
SUPPLY AND DEMAND
Stripping activity (the creation of zeros by breaking whole Treasury bonds into
their component principal and coupon parts) remained slow. For all of 1995, only
$8 billion in Treasuries were net stripped, down from $23 billion in 1994. The
decline was driven by a dramatic change in stripping activity in the 30-year
maturity sector. In 1995, $6.5 billion in 30-year Treasury bonds were net
RECONSTITUTED compared to 1994, when $9 billion in 30-year bonds were net
STRIPPED.
"Reconstitution" of zeros occurs when bond dealers find it more profitable to
sell whole Treasury bonds rather than their component parts. Dealers match up
principal STRIPS* or receipt zeros* with coupon STRIPS or receipt zeros to
recreate or reconstitute a coupon Treasury bond. The six-month period ended
March 31, 1996, saw a continuation of the trend toward reconstitution of receipt
zeros that we discussed in our September 1995 annual report. Over the past year,
dealers have found it more advantageous to reconstitute rather than strip
Treasuries for two main reasons:
* The relatively flat configuration of the zero yield curve has made whole
Treasuries worth more than the value of their stripped principal and coupon
cash flows.
* Demand for zeros has declined significantly in the last few years. The strong
demand for zeros seen in the early 1990s was driven largely by (1)
municipalities who wanted to refinance outstanding debt at prevailing low
interest rates, and (2) a massive restructuring of less developed country
(LDC) debt into Brady bonds (discussed on page 28), which are typically
collateralized by zeros.
The trend toward reconstitution rather than stripping of Treasury bonds will
likely continue unless there is a significant steepening of the Treasury zero
yield curve or a significant increase in demand for long-maturity principal
STRIPS.
3
2000 PORTFOLIO
PERFORMANCE SUMMARY
For Periods Ended March 31, 1996
AVERAGE ANNUAL TOTAL RETURNS
NET ASSET VALUE RANGE --------------------------------------------
(10/1/95-3/31/96) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------
$76.94-$81.74 11.69% 5.79% 10.36% 8.80%
The Portfolio commenced operations on March 25, 1985.
PLEASE NOTE: Total returns are based on historical Portfolio performance and do
not guarantee future results. The Portfolio's share price and total returns will
vary, so that shares, when redeemed, may be worth more or less than their
original cost.
PERFORMANCE DEFINITIONS
NET ASSET VALUE (NAV) RANGE indicates the Portfolio's share price movements over
the stated period and can be used to gauge the stability of the Portfolio's
share price.
TOTAL RETURN figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Portfolio and assume that all of the
Portfolio's distributions are reinvested.
AVERAGE ANNUAL TOTAL RETURNS illustrate the annually compounded returns that
would have produced the Portfolio's cumulative total returns if the Portfolio's
performance had been constant over the entire period. Average annual total
returns smooth out variations in a fund's return; they are not the same as
year-by-year results. For fiscal year-by-year total returns, please refer to the
Portfolio's "Financial Highlights" on page 32.
KEY PORTFOLIO STATISTICS
3/31/96 9/30/95
Market Value: $277,532,580 $294,898,365
AGR: 5.43% 5.37%
WAM Date: 11/20/00 11/27/00
AVM: $100.95 $100.99
THESE STATISTICS ARE DEFINED ON PAGE 30. THEIR VALUE MAY CHANGE OVER TIME.
4
2000 PORTFOLIO
SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 4/1/86 in the Portfolio,
the Merrill Lynch Long-Term U.S. Treasury Index and the Portfolio`s Benchmark
[line graph - graph data]
Index ($23,452) Benchmark ($23,976) Portfolio ($23,241)
Mar-86 $10000 $10000 $10000
Apr-86 9918 9870 10050
May-86 9373 9041 9244
Jun-86 9956 9757 9835
Jul-86 9918 9638 9725
Aug-86 10345 10387 10552
Sep-86 9942 9628 9660
Oct-86 10128 9855 10074
Nov-86 10327 10256 10434
Dec-86 10311 10290 10464
Jan-87 10482 10483 10617
Feb-87 10645 10674 10833
Mar-87 10344 10525 10623
Apr-87 9911 9801 9867
May-87 9823 9543 9740
Jun-87 9937 9667 9779
Jul-87 9749 9352 9436
Aug-87 9589 9052 9114
Sep-87 9162 8570 8607
Oct-87 9835 9449 9463
Nov-87 9840 9395 9487
Dec-87 10036 9682 9840
Jan-88 10643 10496 10496
Feb-88 10774 10716 10720
Mar-88 10439 10210 10263
Apr-88 10271 9967 10053
May-88 10091 9847 9805
Jun-88 10517 10403 10372
Jul-88 10318 10091 10133
Aug-88 10357 10176 10165
Sep-88 10748 10678 10694
Oct-88 11064 11100 11101
Nov-88 10822 10827 10823
Dec-88 10960 10870 10971
Jan-89 11182 11307 11252
Feb-89 10957 10909 10871
Mar-89 11073 11030 11021
Apr-89 11333 11368 11384
May-89 11784 11868 11833
Jun-89 12452 12678 12636
Jul-89 12736 12960 12961
Aug-89 12397 12592 12580
Sep-89 12445 12634 12633
Oct-89 12944 13193 13120
Nov-89 13049 13307 13230
Dec-89 13031 13293 13144
Jan-90 12587 12713 12565
Feb-90 12532 12665 12556
Mar-90 12500 12651 12571
Apr-90 12179 12264 12167
May-90 12748 12889 12742
Jun-90 13039 13198 13052
Jul-90 13172 13362 13188
Aug-90 12603 12753 12595
Sep-90 12764 12865 12728
Oct-90 13048 13309 13085
Nov-90 13590 13873 13664
Dec-90 13873 14197 13974
Jan-91 14030 14349 14080
Feb-91 14085 14291 14133
Mar-91 14131 14398 14198
Apr-91 14317 14675 14402
May-91 14316 14589 14381
Jun-91 14204 14496 14284
Jul-91 14411 14737 14496
Aug-91 14915 15276 15078
Sep-91 15380 15817 15550
Oct-91 15430 15864 15686
Nov-91 15504 16168 15875
Dec-91 16430 17177 16861
Jan-92 15896 16462 16170
Feb-92 16009 16556 16274
Mar-92 15833 16295 16049
Apr-92 15838 16398 16043
May-92 16255 16756 16483
Jun-92 16488 17196 16917
Jul-92 17162 17966 17673
Aug-92 17307 18229 17888
Sep-92 17572 18709 18352
Oct-92 17223 18218 17897
Nov-92 17275 18128 17803
Dec-92 17734 18614 18290
Jan-93 18260 19215 18860
Feb-93 18865 19911 19542
Mar-93 18916 20034 19630
Apr-93 19054 20236 19825
May-93 19125 20167 19763
Jun-93 19928 20941 20525
Jul-93 20236 21023 20599
Aug-93 21047 21652 21216
Sep-93 21141 21836 21372
Oct-93 21271 21814 21384
Nov-93 20729 21438 21003
Dec-93 20791 21554 21118
Jan-94 21296 21995 21538
Feb-94 20406 21245 20791
Mar-94 19573 20505 20076
Apr-94 19273 20224 19813
May-94 19180 20256 19828
Jun-94 19008 20153 19713
Jul-94 19609 20577 20115
Aug-94 19487 20642 20180
Sep-94 18896 20214 19760
Oct-94 18813 20116 19645
Nov-94 18912 19986 19512
Dec-94 19245 20136 19663
Jan-95 19736 20614 20091
Feb-95 20291 21299 20726
Mar-95 20438 21378 20808
Apr-95 20798 21724 21154
May-95 22406 22851 22234
Jun-95 22677 23041 22432
Jul-95 22323 22931 22293
Aug-95 22804 23161 22512
Sep-95 23216 23294 22692
Oct-95 23899 23722 23043
Nov-95 24485 24146 23445
Dec-95 25147 24436 23740
Jan-96 25134 24720 23970
Feb-96 23908 24253 23528
Mar-96 23452 23976 23241
Past performance does not guarantee future results.
THE INDEX: This graph compares the Portfolio's performance with a broad-based
market index, the Merrill Lynch Long-Term U.S. Treasury Index, over the past 10
years.
SUPPLEMENTARY INDEX/PORTFOLIO BENCHMARK: Although the investment characteristics
of the Index are similar to those of the Portfolio, the securities owned by the
Portfolio and those composing the Index are different. For that reason, the SEC
encourages the use of narrower, supplementary indexes that more closely resemble
the funds with which they are compared. Because the Index does not include
zero-coupon bonds, we have selected the Portfolio's benchmark, a November 15,
2000 maturity coupon STRIPS issue, to be the Portfolio's supplementary index.
PLEASE NOTE: The line representing the Portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the lines representing the total returns of the Index and the
Portfolio's benchmark do not. Investors cannot invest directly in the Index.
PORTFOLIO COMPOSITION BY SECURITY TYPE
[pie charts]
3/31/96 9/30/95
STRIPS: 69% STRIPS: 67%
TRs: 23% TRs: 28%
Other: 8% Other: 5%
For definitions of these security types, see page 29. The composition of the
Portfolio may change over time.
5
2000 PORTFOLIO
MANAGEMENT DISCUSSION
with Dave Schroeder, Vice President & Senior Portfolio Manager
NOTE: WE SUGGEST THAT YOU REVIEW THE INVESTMENT FUNDAMENTALS, U.S. ECONOMIC
REVIEW, MARKET SUMMARY AND PORTFOLIO PERFORMANCE AND COMPOSITION SECTIONS BEFORE
YOU READ THIS DISCUSSION. TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE
INVESTMENT FUNDAMENTALS SECTION BEGINNING ON PAGE 28.
Q: How did the Portfolio perform during the six months ended March 31,
1996?
A: The portfolio posted a total return of 2.42% for the six-month period.
Because of its shorter WAM,* the 2000 Portfolio suffered less price
depreciation than the other Target portfolios as interest rates rose in
February and March. The Portfolio's benchmark, a November 15, 2000
maturity coupon STRIPS* issue, returned 2.93% for the six-month period.
Q: Why did the Portfolio underperform its benchmark?
A: The Portfolio's return was reduced by operating expenses (such as
transaction costs and management fees), while the benchmark's was not.
Before expenses, the Portfolio underperformed its benchmark by about 15
basis points,* primarily because of the strong performance of the
benchmark. Due to limited stripping activity in this maturity sector,
the coupon STRIPS issue that serves as the Portfolio's benchmark
remained expensive relative to similar-maturity principal STRIPS.
Q: How did you position the Portfolio during the six-month period?
A: We shifted the Portfolio's WAM date* closer to the benchmark's November
15, 2000 maturity date, which should allow the Portfolio to more
closely track the performance of the benchmark. We exchanged some of
the Portfolio's TRs* for principal STRIPS, which are more liquid
(easier to buy and sell). Because we exchanged the securities with a
receipt zero program custodian, we were able to add liquidity to the
Portfolio without sacrificing any yield and without realizing a taxable
capital gain.
The Portfolio experienced some cash outflows during the period, which
we used as opportunities to sell some of the Portfolio's coupon STRIPS.
As I mentioned earlier, coupon STRIPS have been significantly more
expensive than like-maturity principal STRIPS, so we've been taking
profits by selling these securities.
6
2000 PORTFOLIO
MANAGEMENT DISCUSSION
(Continued from the previous page)
Q: What is your strategy going forward?
A: In the near term, we plan to add value to the Portfolio by taking
advantage of a Treasury program that allows us to convert the
Portfolio's 2% holding of Treasury bond interest coupons (PHYSICALs*)
into zero-coupon securities called CUBES.* Because the current market
price of CUBES is higher than that of the PHYSICALs, the conversion is
expected to boost the Portfolio's share price.
We will also continue to look for opportunities to improve the
Portfolio's liquidity by replacing TRs with STRIPS, when we can do so
without sacrificing yield.
7
2005 PORTFOLIO
PERFORMANCE SUMMARY
For Periods Ended March 31, 1996
AVERAGE ANNUAL TOTAL RETURNS
NET ASSET VALUE RANGE --------------------------------------------
(10/1/95-3/31/96) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------
$56.48-$61.43 15.94% 8.25% 12.56% 9.57%
The Portfolio commenced operations on March 25, 1985.
PLEASE NOTE: Total returns are based on historical Portfolio performance and do
not guarantee future results. The Portfolio's share price and total returns will
vary, so that shares, when redeemed, may be worth more or less than their
original cost.
PERFORMANCE DEFINITIONS
NET ASSET VALUE (NAV) RANGE indicates the Portfolio's share price movements over
the stated period and can be used to gauge the stability of the Portfolio's
share price.
TOTAL RETURN figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Portfolio and assume that all of the
Portfolio's distributions are reinvested.
AVERAGE ANNUAL TOTAL RETURNS illustrate the annually compounded returns that
would have produced the Portfolio's cumulative total returns if the Portfolio's
performance had been constant over the entire period. Average annual total
returns smooth out variations in a fund's return; they are not the same as
year-by-year results. For fiscal year-by-year total returns, please refer to the
Portfolio's "Financial Highlights" on page 34.
KEY PORTFOLIO STATISTICS
3/31/96 9/30/95
Market Value: $233,943,365 $182,221,648
AGR: 5.94% 5.75%
WAM Date: 11/22/05 11/08/05
AVM: $100.66 $100.32
These statistics are defined on page 30. Their value may change over time.
8
2005 PORTFOLIO
SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 4/1/86 in the Portfolio, the
Merrill Lynch Long-Term U.S. Treasury Index and the Portfolio`s Benchmark Past
performance does not guarantee future results.
[line graph]
Index ($23,452) Benchmark ($25,416) Portfolio ($24,932)
Mar-86 $10000 $10000 $10000
Apr-86 9918 9786 9887
May-86 9373 8774 8981
Jun-86 9956 9627 9721
Jul-86 9918 9464 9547
Aug-86 10345 10390 10536
Sep-86 9942 9405 9416
Oct-86 10128 9736 9895
Nov-86 10327 10162 10314
Dec-86 10311 10181 10340
Jan-87 10482 10398 10523
Feb-87 10645 10444 10627
Mar-87 10344 10149 10261
Apr-87 9911 9332 9460
May-87 9823 9119 9238
Jun-87 9937 9305 9255
Jul-87 9749 8849 8833
Aug-87 9589 8436 8441
Sep-87 9162 7798 7809
Oct-87 9835 8899 8886
Nov-87 9840 8802 8881
Dec-87 10036 9196 9268
Jan-88 10643 10259 10157
Feb-88 10774 10351 10336
Mar-88 10439 9649 9604
Apr-88 10271 9272 9365
May-88 10091 9102 9047
Jun-88 10517 9917 9901
Jul-88 10318 9427 9443
Aug-88 10357 9507 9500
Sep-88 10748 10128 10088
Oct-88 11064 10700 10658
Nov-88 10822 10348 10293
Dec-88 10960 10612 10611
Jan-89 11182 11026 10929
Feb-89 10957 10664 10541
Mar-89 11073 10848 10706
Apr-89 11333 11167 11055
May-89 11784 11801 11608
Jun-89 12452 12774 12662
Jul-89 12736 12922 12849
Aug-89 12397 12435 12427
Sep-89 12445 12478 12462
Oct-89 12944 13265 13167
Nov-89 13049 13413 13311
Dec-89 13031 13293 13146
Jan-90 12587 12394 12270
Feb-90 12532 12307 12161
Mar-90 12500 12228 12139
Apr-90 12179 11624 11617
May-90 12748 12557 12418
Jun-90 13039 12983 12801
Jul-90 13172 13022 12845
Aug-90 12603 12001 11930
Sep-90 12764 12154 12083
Oct-90 13048 12557 12418
Nov-90 13590 13471 13289
Dec-90 13873 13821 13616
Jan-91 14030 13978 13707
Feb-91 14085 13870 13777
Mar-91 14131 13942 13799
Apr-91 14317 14143 14021
May-91 14316 14027 13925
Jun-91 14204 13886 13747
Jul-91 14411 14206 13991
Aug-91 14915 14801 14683
Sep-91 15380 15502 15302
Oct-91 15430 15418 15280
Nov-91 15504 15537 15363
Dec-91 16430 16793 16539
Jan-92 15896 16069 15824
Feb-92 16009 16144 15907
Mar-92 15833 15794 15624
Apr-92 15838 15653 15498
May-92 16255 16230 16077
Jun-92 16488 16491 16360
Jul-92 17162 17451 17323
Aug-92 17307 17630 17484
Sep-92 17572 18124 17937
Oct-92 17223 17537 17384
Nov-92 17275 17606 17440
Dec-92 17734 18324 18120
Jan-93 18260 18962 18712
Feb-93 18865 19928 19692
Mar-93 18916 19954 19653
Apr-93 19054 20213 19923
May-93 19125 20293 19940
Jun-93 19928 21549 21173
Jul-93 20236 21843 21461
Aug-93 21047 22758 22354
Sep-93 21141 23087 22580
Oct-93 21271 23155 22689
Nov-93 20729 22272 21853
Dec-93 20791 22456 22027
Jan-94 21296 23191 22789
Feb-94 20406 21914 21500
Mar-94 19573 20612 20420
Apr-94 19273 20295 20215
May-94 19180 20201 20102
Jun-94 19008 20005 19901
Jul-94 19609 20669 20524
Aug-94 19487 20650 20476
Sep-94 18896 19851 19701
Oct-94 18813 19741 19548
Nov-94 18912 19869 19697
Dec-94 19245 20262 20067
Jan-95 19736 20808 20572
Feb-95 20291 21577 21326
Mar-95 20438 21767 21504
Apr-95 20798 22237 21957
May-95 22406 24206 23878
Jun-95 22677 24518 24183
Jul-95 22323 24092 23730
Aug-95 22804 24600 24227
Sep-95 23216 25043 24658
Oct-95 23899 25689 25268
Nov-95 24485 26437 25991
Dec-95 25147 27088 26618
Jan-96 25134 27149 26653
Feb-96 23908 25869 25403
Mar-96 23452 25416 24932
THE INDEX: This graph compares the Portfolio's performance with a broad-based
market index, the Merrill Lynch Long-Term U.S. Treasury Index, over the past 10
years.
SUPPLEMENTARY INDEX/PORTFOLIO BENCHMARK: Although the investment characteristics
of the Index are similar to those of the Portfolio, the securities owned by the
Portfolio and those composing the Index are different. For that reason, the SEC
encourages the use of narrower, supplementary indexes that more closely resemble
the funds with which they are compared. Because the Index does not include
zero-coupon bonds, we have selected the Portfolio's benchmark, a November 15,
2005 maturity coupon STRIPS issue, to be the Portfolio's supplementary index.
PLEASE NOTE: The line representing the Portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the lines representing the total returns of the Index and the
Portfolio's benchmark do not. Investors cannot invest directly in the Index.
PORTFOLIO COMPOSITION BY SECURITY TYPE
[pie charts]
3/31/96 9/30/95
STRIPS: 49% STRIPS: 48%
REFCORPs: 31% REFCORPs: 21%
CATS: 9% CATS: 11%
TRs: 6% TRs: 9%
Other: 5% TIGRs: 5%
Other: 6%
For definitions of these security types, see page 29. The composition of the
Portfolio may change over time.
9
2005 PORTFOLIO
MANAGEMENT DISCUSSION
with Dave Schroeder, Vice President & Senior Portfolio Manager
NOTE: WE SUGGEST THAT YOU REVIEW THE INVESTMENT FUNDAMENTALS, U.S. ECONOMIC
REVIEW, MARKET SUMMARY AND PORTFOLIO PERFORMANCE AND COMPOSITION SECTIONS BEFORE
YOU READ THIS DISCUSSION. TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE
INVESTMENT FUNDAMENTALS SECTION BEGINNING ON PAGE 28.
Q: How did the Portfolio perform during the six months ended March 31,
1996?
A: Reflecting the unfavorable U.S. bond market conditions that prevailed
in February and March, the portfolio's total return for the six-month
period was 1.11%. The Portfolio's benchmark, a November 15, 2005
maturity coupon STRIPS* issue, returned 1.49% for the six-month period.
Q: Why did the Portfolio underperform its benchmark?
A: The Portfolio's return was reduced by operating expenses (such as
transaction costs and management fees), while the benchmark's was not.
Before expenses, the Portfolio's total return was virtually the same as
that of its benchmark.
Q: How did you position the Portfolio during the six-month period?
A: We extended the Portfolio's WAM date* to November 22, 2005, keeping it
close to its benchmark's November 15, 2005 maturity date. We sold the
Portfolio's holdings of principal TIGRs* and invested the proceeds in
REFCORPs.* TIGRs and other receipt zeros* are currently attractive to
dealers interested in reconstituting Treasury securities (see the
discussion on page 3). This was a very favorable trade for the
Portfolio because the higher-yielding REFCORPs added about $0.30 to the
Portfolio's anticipated value at maturity (AVM*).
Because REFCORPs offered higher yields than STRIPS, we continued to
sell STRIPS for REFCORPs, and we invested any new money that came into
the fund in REFCORPs. We have also been working to keep the Portfolio's
transaction costs down. We have reduced Portfolio turnover by using the
inflows and outflows of cash that typically occur as opportunities to
buy or sell securities, adjusting the Portfolio's average maturity at
the same time.
10
2005 PORTFOLIO
MANAGEMENT DISCUSSION
(Continued from the previous page)
Q: What is your strategy going forward?
A: We will likely keep the Portfolio's WAM date close to the benchmark's
November 15, 2005 maturity date. We will look for opportunities to add
liquidity to the Portfolio when we can do so without giving up yield.
We would like to sell more of the Portfolio's receipt zeros,
specifically its TRs* and callable CATS.* Currently, it would not be
profitable to sell the CATS because the underlying Treasury securities
are trading at relatively low prices.
11
2010 PORTFOLIO
PERFORMANCE SUMMARY
For Periods Ended March 31, 1996
AVERAGE ANNUAL TOTAL RETURNS
NET ASSET VALUE RANGE --------------------------------------------
(10/1/95-3/31/96) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------
$41.52-$46.93 19.11% 9.60% 13.32% 9.43%
The Portfolio commenced operations on March 25, 1985.
PLEASE NOTE: Total returns are based on historical Portfolio performance and do
not guarantee future results. The Portfolio's share price and total returns will
vary, so that shares, when redeemed, may be worth more or less than their
original cost.
PERFORMANCE DEFINITIONS
NET ASSET VALUE (NAV) RANGE indicates the Portfolio's share price movements over
the stated period and can be used to gauge the stability of the Portfolio's
share price.
TOTAL RETURN figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Portfolio and assume that all of the
Portfolio's distributions are reinvested.
AVERAGE ANNUAL TOTAL RETURNS illustrate the annually compounded returns that
would have produced the Portfolio's cumulative total returns if the Portfolio's
performance had been constant over the entire period. Average annual total
returns smooth out variations in a fund's return; they are not the same as
year-by-year results. For fiscal year-by-year total returns, please refer to the
Portfolio's "Financial Highlights" on page 36.
KEY PORTFOLIO STATISTICS
3/31/96 9/30/95
Market Value: $114,244,637 $94,630,578
AGR: 6.25% 6.04%
WAM Date: 8/23/10 6/15/10
AVM: $102.32 $101.02
These statistics are defined on page 30. Their value may change over time.
12
2010 PORTFOLIO
SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 4/1/86 in the Portfolio, the
Merrill Lynch Long-Term U.S. Treasury Index and the Portfolio`s Benchmark
[line graph - graph data]
Index ($23,452) Benchmark ($25,763) Portfolio ($24,629)
Mar-86 $10000 $10000 $10000
Apr-86 9918 9947 9918
May-86 9373 8903 8949
Jun-86 9956 9731 9679
Jul-86 9918 9373 9358
Aug-86 10345 10379 10374
Sep-86 9942 9438 9247
Oct-86 10128 9771 9813
Nov-86 10327 10131 10210
Dec-86 10311 10019 10304
Jan-87 10482 10202 10350
Feb-87 10645 10407 10607
Mar-87 10344 10061 10163
Apr-87 9911 9129 9177
May-87 9823 8848 8850
Jun-87 9937 8916 8856
Jul-87 9749 8346 8365
Aug-87 9589 7957 7992
Sep-87 9162 7072 7034
Oct-87 9835 8278 8289
Nov-87 9840 8289 8347
Dec-87 10036 8689 8733
Jan-88 10643 9911 9720
Feb-88 10774 10070 10000
Mar-88 10439 9201 9019
Apr-88 10271 8724 8709
May-88 10091 8426 8307
Jun-88 10517 9348 9165
Jul-88 10318 8739 8663
Aug-88 10357 8794 8687
Sep-88 10748 9501 9375
Oct-88 11064 10178 9965
Nov-88 10822 9788 9574
Dec-88 10960 10090 10105
Jan-89 11182 10645 10397
Feb-89 10957 10068 9831
Mar-89 11073 10292 10064
Apr-89 11333 10688 10414
May-89 11784 11505 11214
Jun-89 12452 12836 12440
Jul-89 12736 12923 12586
Aug-89 12397 12263 12002
Sep-89 12445 12368 12020
Oct-89 12944 13263 12849
Nov-89 13049 13403 13030
Dec-89 13031 13352 12936
Jan-90 12587 12098 11792
Feb-90 12532 11984 11623
Mar-90 12500 11902 11529
Apr-90 12179 11169 10934
May-90 12748 12412 11868
Jun-90 13039 12943 12335
Jul-90 13172 12936 12259
Aug-90 12603 11354 11033
Sep-90 12764 11610 11197
Oct-90 13048 11953 11570
Nov-90 13590 13047 12633
Dec-90 13873 13393 12971
Jan-91 14030 13487 13176
Feb-91 14085 13344 13164
Mar-91 14131 13433 13182
Apr-91 14317 13685 13357
May-91 14316 13527 13292
Jun-91 14204 13265 12989
Jul-91 14411 13542 13211
Aug-91 14915 14332 14005
Sep-91 15380 15055 14641
Oct-91 15430 14938 14524
Nov-91 15504 14762 14407
Dec-91 16430 16133 15703
Jan-92 15896 15411 14997
Feb-92 16009 15506 15102
Mar-92 15833 15201 14816
Apr-92 15838 14954 14588
May-92 16255 15623 15242
Jun-92 16488 15679 15324
Jul-92 17162 16642 16276
Aug-92 17307 16694 16346
Sep-92 17572 17008 16655
Oct-92 17223 16591 16252
Nov-92 17275 16848 16462
Dec-92 17734 17645 17239
Jan-93 18260 18184 17776
Feb-93 18865 19250 18786
Mar-93 18916 19213 18710
Apr-93 19054 19328 18891
May-93 19125 19502 19037
Jun-93 19928 20993 20461
Jul-93 20236 21757 21191
Aug-93 21047 22854 22248
Sep-93 21141 22899 22253
Oct-93 21271 23246 22539
Nov-93 20729 22328 21670
Dec-93 20791 22437 21769
Jan-94 21296 23367 22668
Feb-94 20406 21731 21092
Mar-94 19573 20386 19796
Apr-94 19273 19958 19463
May-94 19180 19633 19119
Jun-94 19008 19342 18827
Jul-94 19609 20304 19737
Aug-94 19487 20017 19434
Sep-94 18896 18962 18488
Oct-94 18813 18858 18336
Nov-94 18912 19219 18669
Dec-94 19245 19839 19253
Jan-95 19736 20484 19831
Feb-95 20291 21158 20479
Mar-95 20438 21391 20677
Apr-95 20798 21922 21162
May-95 22406 24444 23532
Jun-95 22677 24912 23958
Jul-95 22323 24269 23339
Aug-95 22804 24993 24005
Sep-95 23216 25646 24600
Oct-95 23899 26712 25546
Nov-95 24485 27622 26433
Dec-95 25147 28633 27356
Jan-96 25134 28438 27204
Feb-96 23908 26421 25271
Mar-96 23452 25763 24629
Past performance does not guarantee future results.
THE INDEX: This graph compares the Portfolio's performance with a broad-based
market index, the Merrill Lynch Long-Term U.S. Treasury Index, over the past 10
years.
SUPPLEMENTARY INDEX/PORTFOLIO BENCHMARK: Although the investment characteristics
of the Index are similar to those of the Portfolio, the securities owned by the
Portfolio and those composing the Index are different. For that reason, the SEC
encourages the use of narrower, supplementary indexes that more closely resemble
the funds with which they are compared. Because the Index does not include
zero-coupon bonds, we have selected the Portfolio's benchmark, a November 15,
2010 maturity coupon STRIPS issue, to be the Portfolio's supplementary index.
PLEASE NOTE: The line representing the Portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the lines representing the total returns of the Index and the
Portfolio's benchmark do not. Investors cannot invest directly in the Index.
PORTFOLIO COMPOSITION BY SECURITY TYPE
[pie charts]
3/31/96 9/30/95
STRIPS: 59% STRIPS: 60%
REFCORPs: 31% REFCORPs: 28%
ETRs: 10% ETRs: 12%
For definitions of these security types, see page 29. The composition of the
Portfolio may change over time.
13
2010 PORTFOLIO
MANAGEMENT DISCUSSION
with Dave Schroeder, Vice President & Senior Portfolio Manager
NOTE: WE SUGGEST THAT YOU REVIEW THE INVESTMENT FUNDAMENTALS, U.S. ECONOMIC
REVIEW, MARKET SUMMARY AND PORTFOLIO PERFORMANCE AND COMPOSITION SECTIONS BEFORE
YOU READ THIS DISCUSSION. TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE
INVESTMENT FUNDAMENTALS SECTION BEGINNING ON PAGE 28.
Q: How did the Portfolio perform during the six months ended March 31,
1996?
A: Reflecting the unfavorable U.S. bond market conditions that prevailed
in February and March, the portfolio's total return for the six-month
period was 0.12%. The Portfolio's benchmark, a November 15, 2010
maturity coupon STRIPS* issue, returned 0.45% for the six-month period.
Q: Why did the Portfolio underperform its benchmark?
A: The Portfolio's return was reduced by operating expenses (such as
transaction costs and management fees), while the benchmark's was not.
Before expenses, the Portfolio's total return was virtually the same as
that of its benchmark.
Q: How did you position the Portfolio during the six-month period?
A: We extended the Portfolio's WAM date* to August 23, 2010, bringing it
significantly closer to the November 15, 2010 maturity date of its
benchmark. We accomplished this by using incoming cash to purchase
2011-maturity REFCORPs* to offset the shorter-maturity 2009 principal
STRIPS held in the Portfolio. We originally purchased the November 2009
principal STRIPS because they offered higher yields than coupon STRIPS,
and we believe that they will outperform other similar-maturity STRIPS
going forward.
We have also been working to keep the Portfolio's transaction costs
down. We have reduced Portfolio turnover by using the inflows and
outflows of cash that typically occur as opportunities to buy or sell
securities, adjusting the Portfolio's average maturity at the same
time.
14
2010 PORTFOLIO
MANAGEMENT DISCUSSION
(Continued from the previous page)
Q: What is your strategy going forward?
A: We will continue to move the Portfolio's WAM date closer to the
maturity date of its benchmark. We plan to maintain the Portfolio's
current asset allocation, keeping the majority of its assets invested
in STRIPS and REFCORPs, the most liquid zeros. We plan to buy
higher-yielding REFCORPs when they become available, ideally keeping
30-35% of the Portfolio's assets in REFCORPs. As always, we will
continue to monitor the relative values of coupon STRIPS and principal
STRIPS, shifting the Portfolio's assets toward the more attractively
priced sector.
Currently, the majority of the Portfolio's STRIPS are coupon STRIPS.
We also expect to continue to hold the Portfolio's principal ETRs* (see
Portfolio composition graphs at the bottom of page 13), which were
purchased when their yield was 30 basis points* higher than STRIPS of
comparable maturity. This yield spread has narrowed, resulting in some
price appreciation. However, the ETRs still offer a yield of 20 basis
points over same-maturity STRIPS. We think that the ETRs have the
potential for future price appreciation compared to STRIPS if they
become reconstitutable with coupon STRIPS or if their underlying
Treasury bond appreciates in value relative to other maturity sectors.
15
2015 PORTFOLIO
PERFORMANCE SUMMARY
For Periods Ended March 31, 1996
AVERAGE ANNUAL TOTAL RETURNS
NET ASSET VALUE RANGE ----------------------------------------------
(10/1/95-3/31/96) 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
----------------------------------------------
$31.37-$36.87 21.29% 10.86% 13.97% 10.14%
The Portfolio commenced operations on September 1, 1986.
PLEASE NOTE: Total returns are based on historical Portfolio performance and do
not guarantee future results. The Portfolio's share price and total returns will
vary, so that shares, when redeemed, may be worth more or less than their
original cost.
PERFORMANCE DEFINITIONS
NET ASSET VALUE (NAV) RANGE indicates the Portfolio's share price movements over
the stated period and can be used to gauge the stability of the Portfolio's
share price.
TOTAL RETURN figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Portfolio and assume that all of the
Portfolio's distributions are reinvested.
AVERAGE ANNUAL TOTAL RETURNS illustrate the annually compounded returns that
would have produced the Portfolio's cumulative total returns if the Portfolio's
performance had been constant over the entire period. Average annual total
returns smooth out variations in a fund's return; they are not the same as
year-by-year results. For fiscal year-by-year total returns, please refer to the
Portfolio's "Financial Highlights" on page 38.
KEY PORTFOLIO STATISTICS
3/31/96 9/30/95
Market Value: $119,050,024 $114,297,012
AGR: 6.44% 6.21%
WAM Date: 10/27/15 10/18/15
AVM: $109.72 $109.62
These statistics are defined on page 30. Their value may change over time.
16
2015 PORTFOLIO
SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 9/1/86 in the Portfolio, the
Merrill Lynch Long-Term U.S. Treasury Index and the Portfolio`s Benchmark
[line graph - graph data]
Index ($23,589) Benchmark ($25,409) Portfolio ($24,333)
Sep-86 $10000 $10000 $10000
Oct-86 10187 10469 10729
Nov-86 10387 10859 10905
Dec-86 10371 10635 10920
Jan-87 10543 11003 11066
Feb-87 10707 11316 11442
Mar-87 10405 10810 10782
Apr-87 9969 9696 9824
May-87 9880 9215 9187
Jun-87 9995 9359 8980
Jul-87 9806 8618 8512
Aug-87 9645 8028 7991
Sep-87 9216 7224 6925
Oct-87 9893 8103 8160
Nov-87 9897 8165 8275
Dec-87 10095 8701 8720
Jan-88 10705 9852 10009
Feb-88 10837 10353 10293
Mar-88 10500 9229 9135
Apr-88 10331 8769 8582
May-88 10150 8167 8160
Jun-88 10578 9066 8934
Jul-88 10378 8289 8305
Aug-88 10418 8271 8198
Sep-88 10811 9125 8988
Oct-88 11129 9885 9717
Nov-88 10886 9236 9080
Dec-88 11024 9670 9686
Jan-89 11247 10283 10008
Feb-89 11021 9709 9548
Mar-89 11138 9957 9816
Apr-89 11399 10229 10016
May-89 11853 11096 10928
Jun-89 12525 12778 12508
Jul-89 12811 12993 12700
Aug-89 12470 12250 12017
Sep-89 12517 12266 11979
Oct-89 13020 13349 12830
Nov-89 13125 13468 13129
Dec-89 13107 13251 12930
Jan-90 12660 12026 11664
Feb-90 12606 11720 11503
Mar-90 12573 11485 11243
Apr-90 12250 10567 10338
May-90 12822 11765 11557
Jun-90 13115 12315 12010
Jul-90 13249 12314 12017
Aug-90 12676 10625 10422
Sep-90 12838 10775 10545
Oct-90 13124 11313 10967
Nov-90 13669 12419 12117
Dec-90 13954 12748 12493
Jan-91 14112 13054 12746
Feb-91 14167 13012 12638
Mar-91 14213 13005 12654
Apr-91 14401 13318 12868
May-91 14400 12947 12684
Jun-91 14287 12610 12301
Jul-91 14496 12977 12577
Aug-91 15002 13783 13497
Sep-91 15470 14504 14141
Oct-91 15520 14270 13919
Nov-91 15595 13906 13628
Dec-91 16526 15637 15299
Jan-92 15989 14731 14433
Feb-92 16103 14924 14609
Mar-92 15925 14625 14333
Apr-92 15931 14362 14042
May-92 16350 15088 14732
Jun-92 16584 14958 14632
Jul-92 17262 16216 15829
Aug-92 17408 16035 15660
Sep-92 17675 16032 15637
Oct-92 17323 15575 15207
Nov-92 17376 16209 15829
Dec-92 17838 16903 16488
Jan-93 18366 17500 17056
Feb-93 18975 18511 18022
Mar-93 19026 18353 17861
Apr-93 19165 18506 18014
May-93 19236 18897 18398
Jun-93 20045 20252 19701
Jul-93 20354 21313 20714
Aug-93 21170 23166 22462
Sep-93 21264 22970 22271
Oct-93 21395 23389 22669
Nov-93 20850 22308 21657
Dec-93 20912 22225 21519
Jan-94 21420 23146 22393
Feb-94 20526 21438 20737
Mar-94 19688 20007 19410
Apr-94 19386 19529 18927
May-94 19292 18961 18367
Jun-94 19119 18579 18007
Jul-94 19723 19901 19257
Aug-94 19601 19217 18605
Sep-94 19007 18013 17477
Oct-94 18923 17955 17416
Nov-94 19023 18425 17869
Dec-94 19357 19095 18490
Jan-95 19851 19872 19195
Feb-95 20409 20373 19717
Mar-95 20557 20752 20062
Apr-95 20920 21207 20438
May-95 22537 24346 23413
Jun-95 22809 24653 23728
Jul-95 22454 23821 22915
Aug-95 22938 24942 23973
Sep-95 23352 25696 24694
Oct-95 24039 27132 26013
Nov-95 24628 28107 26995
Dec-95 25294 29416 28237
Jan-96 25280 29073 27907
Feb-96 24047 26432 25315
Mar-96 23589 25409 24333
Past performance does not guarantee future results.
THE INDEX: This graph compares the Portfolio's performance with a broad-based
market index, the Merrill Lynch Long-Term U.S. Treasury Index, over the life of
the Portfolio.
SUPPLEMENTARY INDEX/PORTFOLIO BENCHMARK: Although the investment characteristics
of the Index are similar to those of the Portfolio, the securities owned by the
Portfolio and those composing the Index are different. For that reason, the SEC
encourages the use of narrower, supplementary indexes that more closely resemble
the funds with which they are compared. Because the Index does not include
zero-coupon bonds, we have selected the Portfolio's benchmark, a November 15,
2015 maturity coupon STRIPS issue, to be the Portfolio's supplementary index.
PLEASE NOTE: The line representing the Portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the lines representing the total returns of the Index and the
Portfolio's benchmark do not. Investors cannot invest directly in the Index.
PORTFOLIO COMPOSITION BY SECURITY TYPE
[pie charts]
3/31/96 9/30/95
STRIPS: 57% STRIPS: 57%
REFCORPs: 43% REFCORPs: 43%
For definitions of these security types, see page 29. The composition of the
Portfolio may change over time.
17
2015 PORTFOLIO
MANAGEMENT DISCUSSION
with Dave Schroeder, Vice President & Senior Portfolio Manager
NOTE: WE SUGGEST THAT YOU REVIEW THE INVESTMENT FUNDAMENTALS, U.S. ECONOMIC
REVIEW, MARKET SUMMARY AND PORTFOLIO PERFORMANCE AND COMPOSITION SECTIONS BEFORE
YOU READ THIS DISCUSSION. TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE
INVESTMENT FUNDAMENTALS SECTION BEGINNING ON PAGE 28.
Q: How did the Portfolio perform during the six months ended March 31,
1996?
A: Reflecting the unfavorable U.S. bond market conditions that prevailed
in February and March, the portfolio's total return for the six-month
period was -1.46%. The Portfolio's benchmark, a November 15, 2015
maturity coupon STRIPS* issue, returned -1.12% for the six-month
period.
Q: Why did the Portfolio underperform its benchmark?
A: The Portfolio's return was reduced by operating expenses (such as
transaction costs and management fees), while the benchmark's was not.
Before expenses, the Portfolio's total return was virtually the same as
that of its benchmark.
Q: How did you position the Portfolio during the six-month period?
A: We extended the Portfolio's WAM date* to October 27, 2015, bringing it
closer to the November 15, 2015 maturity date of its benchmark. This
shift improved the Portfolio's ability to track the performance of the
benchmark. We have also been working to keep the Portfolio's
transaction costs down. We have reduced Portfolio turnover by using the
inflows and outflows of cash that typically occur as opportunities to
buy or sell securities, adjusting the Portfolio's average maturity at
the same time.
The Portfolio did not require much active management during the period.
This is reflected in the Portfolio composition graphs at the bottom of
page 17, which show that the Portfolio's asset allocation was virtually
unchanged. The Portfolio continues to hold STRIPS and REFCORPs,* the
only types of zeros available in this maturity sector. When the STRIPS
program was created in 1985, dealers stopped issuing receipt zeros.* As
a result, the effective maturities of existing receipt zeros do not
extend beyond 2009.
18
2015 PORTFOLIO
MANAGEMENT DISCUSSION
(Continued from the previous page)
Q: What is your strategy going forward?
A: We plan to maintain the Portfolio's current WAM date and the
Portfolio's current asset allocation, with roughly 60% of its assets
invested in STRIPS and the remaining 40% in REFCORPs.
As always, we will continue to monitor the relative values of coupon
STRIPS and principal STRIPS, shifting the Portfolio's assets toward the
more attractively priced sector. Currently, all of the Portfolio's
zeros are coupon zeros. With coupon and principal zeros currently
trading at similar prices in this maturity sector, we prefer to own
coupon zeros.
The relative values of coupon and principal zeros in the Portfolio's
maturity sector are based on several factors, including (1) the value
of the underlying Treasury bonds maturing in 2014-2016 compared to
other maturity sectors; (2) the level of stripping* or reconstitution*
activity in the Treasury market; and (3) investor and dealer activity
in the Portfolio's maturity sector. We focus on each of these factors
when tracking the relative values of principal and coupon zeros.
19
2020 PORTFOLIO
PERFORMANCE SUMMARY
For Periods Ended March 31, 1996
AVERAGE ANNUAL TOTAL RETURNS
NET ASSET VALUE RANGE ----------------------------------------------
(10/1/95-3/31/96) 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
----------------------------------------------
$21.63-$26.29 23.53% 10.94% 13.43% 10.09%
The Portfolio commenced operations on December 29, 1989.
PLEASE NOTE: Total returns are based on historical Portfolio performance and do
not guarantee future results. The Portfolio's share price and total returns will
vary, so that shares, when redeemed, may be worth more or less than their
original cost.
PERFORMANCE DEFINITIONS
NET ASSET VALUE (NAV) RANGE indicates the Portfolio's share price movements over
the stated period and can be used to gauge the stability of the Portfolio's
share price.
TOTAL RETURN figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Portfolio and assume that all of the
Portfolio's distributions are reinvested.
AVERAGE ANNUAL TOTAL RETURNS illustrate the annually compounded returns that
would have produced the Portfolio's cumulative total returns if the Portfolio's
performance had been constant over the entire period. Average annual total
returns smooth out variations in a fund's return; they are not the same as
year-by-year results. For fiscal year-by-year total returns, please refer to the
Portfolio's "Financial Highlights" on page 40.
KEY PORTFOLIO STATISTICS
3/31/96 9/30/95
Market Value: $763,199,156 $569,757,799
AGR: 6.46% 6.20%
WAM Date: 8/26/20 8/11/20
AVM: $103.20 $102.31
These statistics are defined on page 30. Their value may change over time.
20
2020 PORTFOLIO
SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 12/29/89 in the Portfolio, the
Merrill Lynch Long-Term U.S. Treasury Index and the Portfolio`s Benchmark
[line graph - graph data]
Index ($17,997) Benchmark ($16,276) Portfolio ($18,242)
Dec-89 $10000 $10000 $10000
Jan-90 9659 9063 9083
Feb-90 9617 8518 8767
Mar-90 9593 8407 8658
Apr-90 9346 7781 7967
May-90 9783 8351 8917
Jun-90 10006 8818 9258
Jul-90 10108 9237 9308
Aug-90 9671 7837 7950
Sep-90 9795 7976 8025
Oct-90 10013 8356 8458
Nov-90 10429 8845 9275
Dec-90 10646 9080 9550
Jan-91 10766 9373 9800
Feb-91 10809 9275 9850
Mar-91 10844 9257 9717
Apr-91 10987 9399 9808
May-91 10986 9133 9633
Jun-91 10900 8774 9208
Jul-91 11059 9058 9458
Aug-91 11446 9601 10117
Sep-91 11803 10012 10450
Oct-91 11841 9551 10117
Nov-91 11898 8671 9792
Dec-91 12608 9950 11208
Jan-92 12199 9371 10558
Feb-92 12285 9454 10742
Mar-92 12150 9338 10592
Apr-92 12154 9196 10408
May-92 12474 9642 10942
Jun-92 12653 9578 10842
Jul-92 13170 10406 11708
Aug-92 13281 10194 11533
Sep-92 13485 10012 11358
Oct-92 13217 9652 10925
Nov-92 13257 10172 11508
Dec-92 13609 10747 12142
Jan-93 14013 11225 12675
Feb-93 14477 11910 13383
Mar-93 14516 11831 13358
Apr-93 14622 11808 13300
May-93 14676 12130 13708
Jun-93 15293 12976 14692
Jul-93 15529 14015 15775
Aug-93 16152 15623 17542
Sep-93 16223 15380 17267
Oct-93 16324 15706 17583
Nov-93 15907 14857 16625
Dec-93 15955 14635 16467
Jan-94 16342 15224 17100
Feb-94 15660 14034 15800
Mar-94 15021 12806 14508
Apr-94 14790 12508 14142
May-94 14719 12133 13750
Jun-94 14587 11813 13375
Jul-94 15048 12760 14417
Aug-94 14954 12168 13767
Sep-94 14501 11215 12733
Oct-94 14437 11082 12608
Nov-94 14513 11437 12992
Dec-94 14768 11965 13558
Jan-95 15146 12552 14175
Feb-95 15571 12878 14533
Mar-95 15684 13042 14767
Apr-95 15961 13346 15075
May-95 17195 15648 17642
Jun-95 17402 15931 17933
Jul-95 17131 15242 17117
Aug-95 17500 16021 18008
Sep-95 17816 16686 18725
Oct-95 18340 17769 19917
Nov-95 18790 18413 20667
Dec-95 19298 19539 21875
Jan-96 19288 19182 21492
Feb-96 18347 17004 19067
Mar-96 17997 16276 18242
Past performance does not guarantee future results.
THE INDEX: This graph compares the Portfolio's performance with a broad-based
market index, the Merrill Lynch Long-Term U.S. Treasury Index, over the life of
the Portfolio.
SUPPLEMENTARY INDEX/PORTFOLIO BENCHMARK: Although the investment characteristics
of the Index are similar to those of the Portfolio, the securities owned by the
Portfolio and those composing the Index are different. For that reason, the SEC
encourages the use of narrower, supplementary indexes that more closely resemble
the funds with which they are compared. Because the Index does not include
zero-coupon bonds, we have selected the Portfolio's benchmark to be the
Portfolio's supplementary index. From December 1989 through April 1990, the
benchmark was an August 15, 2019 maturity coupon STRIPS issue; from May 1990
through October 1991, it was a November 15, 2019 maturity coupon STRIPS issue;
and from November 1991 to the present, it has been a November 15, 2020 maturity
coupon STRIPS issue.
PLEASE NOTE: The line representing the Portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the lines representing the total returns of the Index and the
Portfolio's benchmark do not. Investors cannot invest directly in the Index.
PORTFOLIO COMPOSITION BY SECURITY TYPE
[pie charts]
3/31/96 9/30/95
STRIPS: 72% STRIPS: 80%
REFCORPs: 28% REFCORPs: 20%
For definitions of these security types, see page 29. The composition of the
Portfolio may change over time.
21
2020 PORTFOLIO
MANAGEMENT DISCUSSION
with Dave Schroeder, Vice President & Senior Portfolio Manager
NOTE: WE SUGGEST THAT YOU REVIEW THE INVESTMENT FUNDAMENTALS, U.S. ECONOMIC
REVIEW, MARKET SUMMARY AND PORTFOLIO PERFORMANCE AND COMPOSITION SECTIONS BEFORE
YOU READ THIS DISCUSSION. TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE
INVESTMENT FUNDAMENTALS SECTION BEGINNING ON PAGE 28.
Q: How did the Portfolio perform during the six months ended March 31,
1996?
A: Reflecting the unfavorable U.S. bond market conditions that prevailed
in February and March, the portfolio's total return for the six-month
period was -2.58%. The Portfolio's benchmark, a November 15, 2020
maturity coupon STRIPS* issue, returned -2.46% for the six-month
period.
Q: Why did the Portfolio underperform its benchmark?
A: The Portfolio's return was reduced by operating expenses (such as
transaction costs and management fees), while the benchmark's was not.
Before expenses, the Portfolio outperformed the benchmark by nearly 25
basis points.* This was primarily due to the fact that the Portfolio's
WAM date* was several months short of the benchmark's maturity date,
making the Portfolio less vulnerable to rising interest rates than the
benchmark.
Q: How did you position the Portfolio during the six-month period?
A: We extended the Portfolio's WAM date slightly, from August 11, 2020, to
August 26, 2020. The Portfolio continued to hold STRIPS and REFCORPs,*
the only types of zeros available in this maturity sector. When the
STRIPS program was created in 1985, dealers stopped issuing receipt
zeros.* As a result, the effective maturities of existing receipt zeros
do not extend beyond 2009.
The Portfolio composition graphs at the bottom of page 21 show a
significant decrease in the percentage of STRIPS and a corresponding
increase in REFCORPs held in the Portfolio over the period. A large
number of STRIPS were purchased in the third quarter of 1995 when the
Portfolio experienced heavy asset growth and STRIPS were more readily
available than REFCORPs. We began selling STRIPS for REFCORPs as
interest rates rose in February and March and yields on long-term
REFCORPs topped 7%. This move into higher-yielding REFCORPs was
reflected in the Portfolio's higher AVM* (see the Key Portfolio
Statistics at the bottom of page 20).
22
2020 PORTFOLIO
MANAGEMENT DISCUSSION
(Continued from the previous page)
We also sold some of the Portfolio's coupon STRIPS for principal STRIPS
during the period. Because the Portfolio owns a significant percentage
of the outstanding supply of 2020 coupon STRIPS, they have become
relatively scarce and consequently more expensive. This has made the
price of principal STRIPS more attractive by comparison.
Q: What is your strategy going forward?
A: We plan to shift the Portfolio's WAM date closer to its benchmark's
maturity date. This will improve the Portfolio's ability to track the
performance of the benchmark. We plan to maintain the Portfolio's
current asset allocation, with the majority of its assets invested in
STRIPS and the remainder in REFCORPs. We will look for opportunities to
shift more of the Portfolio's assets from coupon STRIPS into principal
STRIPS as long as coupon STRIPS prices remain relatively high.
23
2025 PORTFOLIO
PERFORMANCE SUMMARY
For Periods Ended March 31, 1996
NET ASSET VALUE RANGE CUMULATIVE TOTAL RETURN
(2/15/96-3/31/96) SINCE INCEPTION
$17.75-$19.85 -8.77%
The Portfolio commenced operations on February 15, 1996.
PLEASE NOTE: Total returns are based on historical Portfolio performance and do
not guarantee future results. The Portfolio's share price and total returns will
vary, so that shares, when redeemed, may be worth more or less than their
original cost.
PERFORMANCE DEFINITIONS
NET ASSET VALUE (NAV) RANGE indicates the Portfolio's share price movements over
the stated period and can be used to gauge the stability of the Portfolio's
share price.
TOTAL RETURN figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Portfolio and assume that all of the
Portfolio's distributions are reinvested. A CUMULATIVE TOTAL RETURN illustrates
the Fund's performance over a stated period of time.
KEY PORTFOLIO STATISTICS
As of March 31, 1996
Market Value: $16,713,447
AGR: 6.29%
WAM Date: 6/16/25
AVM: $110.70
These statistics are defined on page 30. Their value may change over time.
24
2025 PORTFOLIO
SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 2/15/96 in the Portfolio, the
Merrill Lynch Long-Term U.S. Treasury Index and the Portfolio`s Benchmark
[line graph - graph data]
Index ($9,393) Benchmark ($8,965) Portfolio ($9,123)
"2/15/96" $10000 $10000 $10000
"2/29/96" 9576 9307 9542
"3/31/96" 9393 8965 9123
Past performance does not guarantee future results.
THE INDEX: This graph compares the Portfolio's performance with a broad-based
market index, the Merrill Lynch Long-Term U.S. Treasury Index, over the life of
the Portfolio.
SUPPLEMENTARY INDEX/PORTFOLIO BENCHMARK: Although the investment characteristics
of the Index are similar to those of the Portfolio, the securities owned by the
Portfolio and those composing the Index are different. For that reason, the SEC
encourages the use of narrower, supplementary indexes that more closely resemble
the funds with which they are compared. Because the Index does not include
zero-coupon bonds, we have selected the Portfolio's benchmark, an August 15,
2025 maturity coupon STRIPS issue, to be the Portfolio's supplementary index.
PLEASE NOTE: The line representing the Portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the lines representing the total returns of the Index and the
Portfolio's benchmark do not. Investors cannot invest directly in the Index.
PORTFOLIO COMPOSITION BY SECURITY TYPE
As of March 31, 1996
[pie chart]
REFCORPs: 76%
STRIPS: 24%
For definitions of these security types, see page 29. The composition of the
Portfolio may change over time.
25
2025 PORTFOLIO
MANAGEMENT DISCUSSION
with Dave Schroeder, Vice President & Senior Portfolio Manager
NOTE: WE SUGGEST THAT YOU REVIEW THE INVESTMENT FUNDAMENTALS, U.S. ECONOMIC
REVIEW, MARKET SUMMARY AND PORTFOLIO PERFORMANCE AND COMPOSITION SECTIONS BEFORE
YOU READ THIS DISCUSSION. TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED IN THE
INVESTMENT FUNDAMENTALS SECTION BEGINNING ON PAGE 28.
With the closing of the Target 1995 Portfolio, a new Portfolio was opened on
February 15, 1996, to complete the Benham Target Maturities lineup. The 2025
Portfolio offers an investment in some of the longest-term U.S. Treasury
zero-coupon securities available. Because the Portfolio commenced operations on
February 15, 1996, performance data for the entire six-month period is not
available.
Q: How did the Portfolio perform from its inception to March 31, 1996?
A: At the time of the Portfolio's inception, interest rates were trending
upward, driven by forces discussed on page 1. The extreme sensitivity
of long-term zero-coupon bonds to changes in interest rates was clearly
reflected in the portfolio's -8.77% total return for the period from
February 15 to March 31, 1996. However, the Portfolio's return compares
favorably with the -10.56% total return of its benchmark, an August 15,
2025 maturity coupon STRIPS* issue, over the same period.
Q: Why did the Portfolio outperform its benchmark?
A: First, the Portfolio's June 16, 2025 WAM date* was shorter than the
August 15, 2025 maturity date of its benchmark, making the Portfolio
less vulnerable to rising interest rates. More significantly, we
maintained a sizable cash position for two to three weeks in February
as we looked for opportunities to invest new money that came into the
Portfolio. This delay limited the Portfolio's losses by nearly 200
basis points* for the period.
Q: How did you position the Portfolio?
A: All of the Portfolio's assets are invested in STRIPS and REFCORPs,* the
only types of zeros available in this maturity sector. When the STRIPS
program was created in 1985, dealers stopped issuing receipt zeros.* As
a result, the effective maturities of existing receipt zeros do not
extend beyond 2009.
26
2025 PORTFOLIO
MANAGEMENT DISCUSSION
(Continued from the previous page)
Q: Why is such a significant portion of the Portfolio's assets in
REFCORPs? This is a complete reversal of the 2020 Portfolio mix, where
most of the assets are invested in STRIPS.
A: The yield spread* between REFCORPs and STRIPS in the 2025 maturity
sector is significantly wider than it is in the 2020 maturity
sector--that is, you gain more additional yield from a 2025 REFCORP
over a like-maturity STRIPS than you gain from a 2020 REFCORP over a
like-maturity STRIPS.
Q: Why the big difference in yield spreads between the two maturity
sectors?
A: If you look at the Treasury zero yield curves on page 2, you can see
that there is typically an inversion at the long end of the curve--that
is, yields move lower after you reach the 20-year maturity sector of
the curve. This inversion mirrors the shape of the Treasury coupon
curve and is caused by strong demand for the 30-year Treasury coupon
bond. The yield curves for STRIPS and REFCORPs also mirror this
inversion, but it is much sharper at the long end of the STRIPS curve
than it is at the long end of the REFCORPs curve. That means that you
lose less yield as you move farther out on the REFCORPs curve than you
do on the STRIPS curve.
Q: Is there is less demand for 2025 REFCORPs than 2025 STRIPS?
A: No. The key factor is that there is more stripping activity in 2030
maturity REFCORP bonds. Because the current shape of the Treasury
coupon yield curve makes it unprofitable for dealers to strip 2025 and
2026 maturity Treasuries, they strip longer-maturity REFCORPs.
Stripping a 2030 REFCORP coupon bond produces a series of zero-coupon
REFCORPs that mature from 1996 to 2030. The availability of 2025
maturity zero-coupon REFCORPs was a key factor in positioning the
Portfolio's WAM date in the middle of 2025.
Q: What is your strategy going forward?
A: Keeping the Portfolio fully invested will require some careful shopping
in the months ahead because supply at the extreme long end of the
zero-coupon curve is not consistent. We will continue to concentrate
the bulk of the Portfolio's assets in REFCORPs, investing the remainder
in STRIPS.
27
INVESTMENT FUNDAMENTALS
ZERO-COUPON BONDS
Q: What is the general investment strategy of the Target Portfolios?
A: The Portfolios pursue the highest attainable return consistent with the
creditworthiness of U.S. Treasury and government securities and the
professional management of reinvestment and market risks. To attempt to
minimize these risks, each Portfolio is managed so that its weighted
average maturity (WAM, defined on page 30) falls within the target
maturity year, and at least 90% of the securities held by each
Portfolio mature within 12 months of the target year. The Portfolios
invest primarily in U.S. Treasury zero-coupon bonds or zero-coupon
bonds collateralized by U.S. Treasury securities.
Q: What are zero-coupon bonds (zeros)?
A: Unlike ordinary bonds, which pay interest periodically, zeros pay no
interest. Instead, these securities are issued at a deep discount and
then redeemed for their full face value at maturity. When held to
maturity, a zero's entire return comes from the difference between its
purchase price and its value at maturity.
Q: What is "stripping?"
A: An ordinary U.S. Treasury bond consists of several components--
a series of coupons, which represent interest payments at predetermined
intervals, and the ultimate principal repayment at maturity. A zero is
created by stripping an ordinary Treasury bond into its separate
components and then selling each coupon and principal payment as an
individual bond. Accordingly, the zero-coupon bond market consists of
principal zeros (which represent the principal payments of stripped
bonds) and coupon zeros (which represent the interest payments of
stripped bonds).
Q: How are zeros used?
A: Demand for zeros comes primarily from: (1) bond investors, who use
zeros to add interest rate sensitivity to their portfolios or to meet
future cash flow needs without reinvestment risk; (2) mortgage-backed
securities investors, who use zeros to offset accelerated mortgage
prepayments; (3) municipalities, who use zeros to refinance
high-yielding bonds; and (4) issuers of Brady bonds (bonds used for
foreign debt restructuring, named after former U.S. Treasury Secretary
Nicholas Brady), who use zeros as collateral to fund future principal
and interest payments.
28
INVESTMENT FUNDAMENTALS
ZERO-COUPON BONDS
(Continued from the previous page)
TYPES OF ZEROS
STRIPS (Separate Trading of Registered Interest and Principal of
Securities)--the U.S. Treasury Department program that allows broker-dealers to
"strip" Treasury securities into their component parts. The securities created
by this "stripping" activity are also known as STRIPS. STRIPS are direct
obligations of the U.S. government and are the most liquid (easily bought and
sold) Treasury zeros.
REFCORPs (Resolution Funding Corporation zeros)--zeros created from bonds issued
by the Resolution Funding Corporation, a U.S. government agency. The principal
portions of these bonds are secured by Treasury zeros, and the interest portions
are guaranteed by the U.S. Treasury. REFCORPs are also relatively liquid.
Receipt Zeros--zeros created and issued by broker-dealers before the STRIPS
program was implemented. Broker-dealers created receipt zeros by purchasing
Treasury bonds, depositing them in a custodian bank, and then selling receipts
representing ownership interests in the coupons or principal portions of the
bonds. The custodial accounts that hold the underlying Treasury bonds are kept
separate from the bank's assets. The types of receipt zeros include:
TRs (Treasury Receipts)--generic receipt zeros.
CATS (Certificates of Accrual of Treasury Securities)--issued by Salomon
Brothers, Inc.
TIGRs (Treasury Investment Growth Receipts)--issued by Merrill Lynch Pierce
Fenner & Smith.
ETRs (Easy-growth Treasury Receipts)--issued by Dean Witter Reynolds, Inc.
COUGARs (Coupon Government Accrual Receipts)--issued by A.G. Becker Paribas
(now defunct).
GATORs (Government and Agency Term Obligations)--issued by Moseley
Hallgarten Easterbrook & Weeden, Inc. (now defunct).
TBRs (Treasury Bond Receipts)--issued by E.F. Hutton & Co. (now defunct).
CUBES (Coupons Under Book Entry Safekeeping)--a Treasury program that allowed
conversion of Treasury bond interest coupons into zero-coupon securities. CUBES
is also the name of the securities created by this conversion.
PHYSICALs (U.S. Treasury Bearer Bond Coupons and Corpus)--stripped coupons and
corpus from U.S. Treasury bearer bonds that are traded in physical form.
29
INVESTMENT FUNDAMENTALS
ZERO-COUPON BONDS
(Continued from the previous page)
OTHER SECURITIES HELD BY THE PORTFOLIOS
Treasury bills (T-bills)--short-term debt securities issued by the U.S. Treasury
and backed by the direct "full faith and credit" pledge of the U.S. government.
T-bills are issued with maturities ranging from three months to one year.
Treasury notes (T-notes)--intermediate-term debt securities issued by the U.S.
Treasury and backed by the direct "full faith and credit" pledge of the U.S.
government. T-notes are issued with maturities ranging from two to 10 years.
KEY PORTFOLIO STATISTICS
Market Value--the market value of a Portfolio's investments on a given date.
WAM (Weighted Average Maturity)--the average amount of time that will pass until
a Portfolio matures, weighted by the market value of the securities in the
Portfolio.
WAM Date (Weighted Average Maturity Date)--an average of the maturity dates of a
Portfolio's securities, weighted by the market value of each security. The WAM
date is calculated based on the WAM of the Portfolio's investments on a given
day.
AVM (Anticipated Value at Maturity)--the calculated redemption value of a
Portfolio share on the Portfolio's WAM date. The Portfolios are managed to have
an AVM of approximately $100.
AGR (Anticipated Growth Rate)--the annualized rate of return that an investor
"locks in" after investing in a Portfolio on a specific day. The AGR is
calculated based on the Portfolio's WAM date, AVM and share price on that day.
30
INVESTMENT FUNDAMENTALS
ZERO-COUPON BONDS
(Continued from the previous page)
INVESTMENT TERMS
Basis Points--a basis point equals one one-hundredth of a percentage point (or
0.01%). Therefore, 100 basis points equals one percentage point (or 1%). Basis
points are used to clearly describe interest rate changes. For example, if a
news report indicates that interest rates rose by 1%, does that mean 1% of the
previous rate or one percentage point? It is more accurate to state that
interest rates rose by 100 basis points.
Reconstitution--in the same way that broker-dealers can "strip" a Treasury bond
into its principal and coupon pieces to create zeros, dealers can accumulate the
stripped principal and coupon pieces and "reconstitute" them into a whole
Treasury bond.
Yield Curve--a graphic representation of the relationship between maturity and
yield for fixed-income securities. Yield curve graphs plot lengthening
maturities along the horizontal axis and rising yields along the vertical axis.
Most "normal" yield curves start in the lower left corner of the graph and rise
to the upper right corner, indicating that yields rise as maturities lengthen.
This upward sloping yield curve illustrates a normal risk/return
relationship--more return (yield) for more risk (a longer maturity). Conversely,
a "flat" yield curve provides little or no extra return for taking on more risk.
This typically occurs after the Fed has raised short-term interest rates several
times (to fight inflation when the economy is strong) or when the bond market
expects the Fed to lower short-term interest rates (in a weaker economic
environment).
Yield Spread--the difference between the yields of STRIPS and non-STRIPS with
comparable maturities. It is used by the portfolio manager as a measure of
relative value to determine whether or not to purchase non-STRIPS zeros for the
Target Portfolios. In general, non-STRIPS have higher yields than STRIPS with
comparable maturities because they are less liquid (not as easy to buy and sell)
than STRIPS. When yield spreads are considered to be narrow (i.e., non-STRIPS
yield little more than comparable STRIPS), the portfolio manager will tend to
avoid non-STRIPS because their yields are not enough to compensate for the
reduced liquidity. Conversely, when yield spreads are considered to be wide
(i.e., non-STRIPS yield substantially more than comparable STRIPS), the
portfolio manager will tend to buy non-STRIPS because yields are high enough to
compensate for the reduced liquidity.
31
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST
2000 PORTFOLIO
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Six Months Ended March 31
and Years Ended September 30 (except as noted)
(Unaudited)
MAR.31, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, DEC.31, DEC.31,
1996 1995 1994 1993 1992 1991 1990 1989+ 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
PER-SHARE DATA++
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING
OF PERIOD..................... $76.86 66.93 72.40 62.16 52.67 43.11 42.79 37.16 33.33 35.44
Income (Losses) From
Investment Operations
Net Investment Income......... 2.30 4.37 3.99 3.94 3.90 3.69 3.40 2.36 2.94 2.68
Net Realized and Unrealized
Gains (Losses) on Investments (.44) 5.56 (9.46) 6.30 5.59 5.87 (3.08) 3.27 .89 (4.79)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Income (Losses) From
Investment Operations...... 1.86 9.93 (5.47) 10.24 9.49 9.56 .32 5.63 3.83 (2.11)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions
Dividends from Net
Investment Income............ (3.87) (3.42) (3.25) (2.34) (2.22) (2.09) (2.35) 0 (2.23) (4.72)
Distributions from Net
Realized Capital Gains....... 0 0 (2.95) (1.83) (.16) 0 (.10) 0 0 0
Distributions in Excess of Net
Realized Capital Gains....... 0 0 (1.20) 0 0 0 0 0 0 0
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Distributions.......... (3.87) (3.42) (7.40) (4.17) (2.38) (2.09) (2.45) 0 (2.23) (4.72)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Reverse Share Split........... 3.87 3.42 7.40 4.17 2.38 2.09 2.45 0 2.23 4.72
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE AT
END OF PERIOD................... $78.72 76.86 66.93 72.40 62.16 52.67 43.11 42.79 37.16 33.33
====== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN*................... 2.42% 14.84% (7.54)% 16.46% 18.02% 22.18% .75% 15.15% 11.49% (5.95)%
- -------------
</TABLE>
32
<TABLE>
<CAPTION>
MAR.31, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, DEC.31, DEC.31,
1996 1995 1994 1993 1992 1991 1990 1989+ 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets at End of Period (in
thousands of dollars).........$277,298 294,736 243,895 291,418 190,063 89,655 53,216 34,820 14,073 6,285
Ratio of Expenses to
Average Daily Net Assets...... .61%** .63% .59% .60% .66% .66% .70% .70%** .70% .70%
Ratio of Net Investment Income
to Average Daily Net Assets... 5.78%** 6.13% 5.74% 5.94% 6.90% 7.67% 7.84% 7.81%** 8.33% 8.08%
Portfolio Turnover Rate......... 7.46% 52.64% 89.35% 76.59% 92.59% 67.39% 78.76% 49.14% 162.54% 72.70%
- -------------------
+ In 1989, the fiscal year-end for Benham Target Maturities Trust was changed from December 31 to September 30.
++ Per-share data in this table are calculated using the average shares outstanding during the year. Dividends and
distributions shown in the table will be different than the actual per-share distributions to shareholders.
* Total return figures assume reinvestment of dividends and capital gain distributions and are not annualized.
** Annualized.
See the accompanying notes to financial statements.
</TABLE>
33
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST
2005 PORTFOLIO
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Six Months Ended March 31
and Years Ended September 30 (except as noted)
(Unaudited)
MAR.31, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, DEC.31, DEC.31,
1996 1995 1994 1993 1992 1991 1990 1989+ 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
PER-SHARE DATA++
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING
OF PERIOD..................... $56.61 45.22 51.84 41.18 35.13 27.74 28.61 24.36 21.28 23.74
Income (Losses) From
Investment Operations
Net Investment Income......... 1.69 3.33 3.11 2.90 2.69 2.47 2.27 1.54 1.90 1.77
Net Realized and Unrealized
Gains (Losses) on Investments (1.06) 8.06 (9.73) 7.76 3.36 4.92 (3.14) 2.71 1.18 (4.23)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Income (Losses) From
Investment Operations...... .63 11.39 (6.62) 10.66 6.05 7.39 (.87) 4.25 3.08 (2.46)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions
Dividends from Net
Investment Income............ (2.14) (2.41) (2.70) (2.51) (1.75) (.86) (1.60) 0 (1.53) (3.52)
Distributions from Net
Realized Capital Gains....... (.60) (.67) (8.47) (1.01) (.37) 0 (.07) 0 0 (.13)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Distributions.......... (2.74) (3.08) (11.17) (3.52) (2.12) (.86) (1.67) 0 (1.53) (3.65)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Reverse Share Split........... 2.74 3.08 11.17 3.52 2.12 .86 1.67 0 1.53 3.65
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE AT END
OF PERIOD....................... $57.24 56.61 45.22 51.84 41.18 35.13 27.74 28.61 24.36 21.28
====== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN*................... 1.11% 25.16% (12.75)% 25.89% 17.22% 26.64% (3.04)% 17.45% 14.48% (10.36)%
- ------------
</TABLE>
34
<TABLE>
<CAPTION>
MAR.31, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, DEC.31, DEC.31,
1996 1995 1994 1993 1992 1991 1990 1989+ 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets at End of Period (in
thousands of dollars)......... $234,007 183,452 96,207 149,890 168,697 161,388 46,303 24,955 8,948 3,680
Ratio of Expenses to Average
Daily Net Assets.............. .67%** .71% .64% .62% .63% .70% .70% .70%** .70% .70%
Ratio of Net Investment Income
to Average Daily Net Assets... 5.71%** 6.58% 6.37% 6.44% 7.27% 7.80% 7.93% 7.66%** 8.44% 8.31%
Portfolio Turnover Rate......... 17.84% 34.23% 68.11% 49.89% 64.38% 85.38% 186.02% 71.98% 27.25% 68.11%
- -------------------
+ In 1989, the fiscal year-end for Benham Target Maturities Trust was changed from December 31 to September 30.
++ Per-share data in this table are calculated using the average shares outstanding during the year. Dividends and
distributions shown in the table will be different than the actual per-share distributions to shareholders.
* Total return figures assume reinvestment of dividends and capital gain distributions and are not annualized.
** Annualized.
See the accompanying notes to financial statements.
</TABLE>
35
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST
2010 PORTFOLIO
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Six Months Ended March 31
and Years Ended September 30 (except as noted)
(Unaudited)
MAR.31, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, DEC.31, DEC.31,
1996 1995 1994 1993 1992 1991 1990 1989+ 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
PER-SHARE DATA++
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING
OF PERIOD..................... $42.14 31.67 38.13 28.53 25.08 19.18 20.59 17.31 14.96 17.65
Income (Losses) From
Investment Operations
Net Investment Income......... 1.25 2.41 2.24 2.05 1.88 1.72 1.61 1.08 1.29 1.23
Net Realized and Unrealized
Gains (Losses) on Investments (1.20) 8.06 (8.70) 7.55 1.57 4.18 (3.02) 2.20 1.06 (3.92)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Income (Losses) From
Investment Operations...... .05 10.47 (6.46) 9.60 3.45 5.90 (1.41) 3.28 2.35 (2.69)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions
Dividends from Net
Investment Income............ (1.58) (1.48) (1.46) (1.58) (1.14) (1.05) (1.50) 0 (.42) (.90)
Distributions from Net
Realized Capital Gains....... 0 (.48) (4.31) (1.14) 0 0 (.09) 0 0 0
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Distributions........ (1.58) (1.96) (5.77) (2.72) (1.14) (1.05) (1.59) 0 (.42) (.90)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Reverse Share Split........... 1.58 1.96 5.77 2.72 1.14 1.05 1.59 0 .42 .90
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE AT END OF
PERIOD.......................... $42.19 42.14 31.67 38.13 28.53 25.08 19.18 20.59 17.31 14.96
====== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN*................... .12% 33.06% (16.92)% 33.61% 13.76% 30.76% (6.85)% 18.95% 15.71% (15.24)%
- ------------
</TABLE>
36
<TABLE>
<CAPTION>
MAR.31, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, DEC.31, DEC.31,
1996 1995 1994 1993 1992 1991 1990 1989+ 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets at End of Period (in
thousands of dollars).........$114,095 95,057 46,312 70,551 55,565 47,661 37,222 42,439 9,617 9,297
Ratio of Expenses to Average
Daily Net Assets.............. .71%** .71% .68% .66% .70% .70% .70% .70%** .70% .70%
Ratio of Net Investment Income
to Average Daily Net Assets... 5.60%** 6.56% 6.35% 6.32% 7.20% 7.73% 7.82% 7.34%** 8.11% 8.13%
Portfolio Turnover Rate......... 16.77% 26.00% 35.35% 131.50% 95.25% 130.91% 191.16% 88.43% 258.70% 83.59%
- -------------------
+ In 1989, the fiscal year-end for Benham Target Maturities Trust was changed from December 31 to September 30.
++ Per-share data in this table are calculated using the average shares outstanding during the year. Dividends and
distributions shown in the table will be different than the actual per-share distributions to shareholders.
* Total return figures assume reinvestment of dividends and capital gain distributions and are not annualized.
** Annualized.
See the accompanying notes to financial statements.
</TABLE>
37
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST
2015 PORTFOLIO
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Six Months Ended March 31
and Years Ended September 30 (except as noted)
(Unaudited)
MAR.31, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, DEC.31, DEC.31,
1996 1995 1994 1993 1992 1991 1990 1989+ 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
PER-SHARE DATA++
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING
OF PERIOD......................$32.20 22.79 29.04 20.39 18.44 13.75 15.62 12.63 11.37 14.24
Income (Losses) From
Investment Operations
Net Investment Income......... .89 1.71 1.57 1.46 1.33 1.26 1.18 .79 .94 .90
Net Realized and Unrealized
Gains (Losses) on Investments (1.36) 7.70 (7.82) 7.19 .62 3.43 (3.05) 2.20 .32 (3.77)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Income (Losses) From
Investment Operations...... (.47) 9.41 (6.25) 8.65 1.95 4.69 (1.87) 2.99 1.26 (2.87)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions
Dividends from Net
Investment Income............ (1.27) (.87) (1.19) (1.45) (1.23) (.97) (.50) 0 (.55) (.22)
Distributions from Net
Realized Capital Gains....... (1.59) 0 (7.08) (.34) 0 0 (.01) 0 0 0
Distributions in Excess of Net
Realized Capital Gains....... 0 0 (.37) 0 0 0 0 0 0 0
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Distributions.......... (2.86) (.87) (8.64) (1.79) (1.23) (.97) (.51) 0 (.55) (.22)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Reverse Share Split........... 2.86 .87 8.64 1.79 1.23 .97 .51 0 .55 .22
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE AT END OF PERIOD $31.73 32.20 22.79 29.04 20.39 18.44 13.75 15.62 12.63 11.37
====== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN*................... 1.46% 41.29% (21.52)% 42.42% 10.57% 34.11% (11.97)% 23.67% 11.08% (20.15)%
- ------------
</TABLE>
38
<TABLE>
<CAPTION>
MAR.31, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, DEC.31, DEC.31,
1996 1995 1994 1993 1992 1991 1990 1989+ 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets at End of Period (in
thousands of dollars)......... $119,108 114,647 66,073 89,023 131,106 222,118 295,577 233,792 11,790 2,006
Ratio of Expenses to Average
Daily Net Assets.............. .71%** .71% .68% .63% .62% .61% .70% .70%** .70% .70%
Ratio of Net Investment Income
to Average Daily Net Assets... 5.17%** 6.40% 5.97% 6.28% 7.04% 7.79% 7.74% 7.02%** 7.97% 7.99%
Portfolio Turnover Rate......... 9.25% 69.97% 64.90% 138.34% 103.25% 39.91% 81.27% 48.31% 188.24% 508.59%
- -------------------
+ In 1989, the fiscal year-end for Benham Target Maturities Trust was changed from December 31 to September 30.
++ Per-share data in this table are calculated using the average shares outstanding during the year. Dividends and
distributions shown in the table will be different than the actual per-share distributions to shareholders.
* Total return figures assume reinvestment of dividends and capital gain distributions and are not annualized.
** Annualized.
See the accompanying notes to financial statements.
</TABLE>
39
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST
2020 PORTFOLIO
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Six Months Ended March 31
and Years Ended September 30 (except as noted)
(Unaudited)
MAR.31, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30, SEPT.30,
1996 1995 1994 1993 1992 1991 1990+
---- ---- ---- ---- ---- ---- ----
PER-SHARE DATA++
- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD..................... $22.47 15.28 20.72 13.63 12.54 9.63 12.00
Income (Losses) From Investment Operations
Net Investment Income.................................... .67 1.19 1.13 1.00 .92 .85 .60
Net Realized and Unrealized Gains (Losses) on Investments (1.25) 6.00 (6.57) 6.09 .17 2.06 (2.97)
----- ----- ----- ----- ----- ----- -----
Total Income (Losses) From Investment Operations........ (.58) 7.19 (5.44) 7.09 1.09 2.91 (2.37)
----- ----- ----- ----- ----- ----- -----
Less Distributions
Dividends from Net Investment Income..................... (.48) (.21) (0.28) (.53) (.63) (.21) 0
Distributions from Net Realized Capital Gains............ (.05) 0 (1.31) (.72) (.08) 0 0
Distributions in Excess of Net Realized Capital Gains.... 0 0 (1.18) 0 0 0 0
----- ----- ----- ----- ----- ----- -----
Total Distributions..................................... (.53) (.21) (2.77) (1.25) (.71) (.21) 0
----- ----- ----- ----- ----- ----- -----
Reverse Share Split...................................... .53 .21 2.77 1.25 .71 .21 0
----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE AT END OF PERIOD........................... $21.89 22.47 15.28 20.72 13.63 12.54 9.63
===== ===== ===== ===== ===== ===== =====
TOTAL RETURN*.............................................. (2.58)% 47.05% (26.25)% 52.02% 8.69% 30.22% (19.75)%
- -------------
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Period (in thousands of dollars)......$768,720 574,702 58,535 56,125 41,793 88,332 53,198
Ratio of Expenses to Average Daily Net Assets.............. .71%** .72% .70% .70% .66% .67% .70%**
Ratio of Net Investment Income to Average Daily Net Assets. 5.55%** 6.24% 6.28% 6.10% 7.19% 7.50% 7.79%**
Portfolio Turnover Rate.................................... 33.85% 78.08% 116.46% 178.52% 144.05% 151.44% 188.60%
- -------------------
+ From December 29, 1989 (commencement of operations), through September 30, 1990.
++ Per-share data in this table are calculated using the average shares outstanding during the year. Dividends and distributions
shown in the table will be different than the actual per-share distributions to shareholders.
* Total return figures assume reinvestment of dividends and capital gain distributions and are not annualized.
** Annualized.
See the accompanying notes to financial statements.
</TABLE>
40
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST
2025 PORTFOLIO
FINANCIAL HIGHLIGHTS
For a Share Outstanding From February 15, 1996 (commencement of operations),
through March 31, 1996
(Unaudited)
1996
----
PER-SHARE DATA+
<S> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD.......................................... $19.85
Income (Losses) From Investment Operations
Net Investment Income......................................................... .14
Net Realized and Unrealized Gains (Losses) on Investments..................... (1.88)
-----
Total Income (Losses) From Investment Operations............................. (1.74)
-----
Less Distributions
Dividends from Net Investment Income.......................................... 0
Distributions from Net Realized Capital Gains................................. 0
Distributions in Excess of Net Realized Capital Gains......................... 0
-----
Total Distributions.......................................................... 0
-----
Reverse Share Split........................................................... 0
-----
NET ASSET VALUE AT END OF PERIOD................................................ $18.11
=====
TOTAL RETURN*................................................................... (8.77)%
- ------------
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Period (in thousands of dollars)........................... $17,428
Ratio of Expenses to Average Daily Net Assets................................... .70%**
Ratio of Net Investment Income to Average Daily Net Assets...................... 6.14%**
Portfolio Turnover Rate......................................................... 49.46%
- -------------------
+ Per-share data in this table are calculated using the average shares outstanding during the year. Dividends and
distributions shown in the table will be different than the actual per-share distributions to shareholders.
* Total return figures assume reinvestment of dividends and capital gain distributions and are not annualized.
** Annualized.
See the accompanying notes to financial statements.
</TABLE>
41
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1996
(Unaudited)
2000 2005 2010 2015 2020 2025
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------- -------- -------- -------- -------- --------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Investment securities at value (cost of
$268,591,872,$223,078,177, $108,481,873,
$95,420,745, $738,480,507, and $17,193,772,
respectively)................................ $277,532,580 233,943,365 114,244,637 119,050,024 763,199,156 16,713,447
Cash........................................... 0 0 0 51,360 0 680,116
Receivable for fund shares sold................ 89,686 254,091 131,238 77,288 7,386,087 44,403
Prepaid expenses and other assets.............. 5,497 5,768 4,001 5,662 4,303 120
----------- ----------- ----------- ----------- ----------- -----------
Total assets................................. 277,627,763 234,203,224 114,379,876 119,184,334 770,589,546 17,438,086
----------- ----------- ----------- ----------- ----------- -----------
LIABILITIES
Payable for fund shares redeemed............... 31,496 49,730 19,502 5,406 55,975 0
Payable to affiliates (Note 2)................. 144,751 126,822 69,449 68,949 387,299 4,200
Accrued expenses and other liabilities......... 153,531 19,936 196,340 2,101 1,425,984 6,031
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities............................ 329,778 196,488 285,291 76,456 1,869,258 10,231
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS....................................... 277,297,985 234,006,736 114,094,585 119,107,878 768,720,288 17,427,855
=========== =========== =========== =========== =========== ===========
Net assets consist of:
Capital paid in................................ 267,686,730 217,050,668 104,719,662 93,745,640 730,419,803 18,187,963
Undistributed accumulated net realized
gain (loss) on investments.................... (3,566,947) 2,653,613 1,919,261 39,497 3,866,811 (374,385)
Undistributed net investment income............ 4,237,494 3,437,267 1,692,898 1,693,462 9,715,025 94,602
Net unrealized appreciation (depreciation)
on investments............................... 8,940,708 10,865,188 5,762,764 23,629,279 24,718,649 (480,325)
----------- ----------- ----------- ----------- ----------- -----------
Net assets..................................... $277,297,985 234,006,736 114,094,585 119,107,878 768,720,288 17,427,855
=========== =========== =========== =========== =========== ===========
Shares of beneficial interest outstanding
(unlimited number of shares authorized)...... 3,522,665 4,088,228 2,704,576 3,753,487 35,124,699 962,290
=========== =========== =========== =========== =========== ===========
Net asset value, offering price and
redemption price per share................... $78.72 57.24 42.19 31.73 21.89 18.11
====== ===== ===== ===== ===== =====
- -------------------
See the accompanying notes to financial statements.
</TABLE>
42
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 1996
(Unaudited)
2000 2005 2010 2015 2020 2025
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------- -------- -------- -------- -------- --------
INVESTMENT INCOME
<S> <C> <C> <C> <C> <C> <C>
Interest Income.................................. $9,394,078 7,139,898 3,618,251 3,848,576 21,543,968 105,352
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES (NOTE 2):
Investment advisory fees....................... 514,038 389,340 199,726 227,940 1,197,590 5,204
Transfer agency fees........................... 139,388 134,713 91,312 90,460 417,340 5,754
Administrative fees............................ 141,096 106,844 54,813 62,625 328,698 1,424
Printing and postage........................... 40,058 30,082 15,922 18,042 98,743 467
Custodian fees................................. 22,200 17,148 10,624 11,779 45,245 13
Telephone...................................... 4,998 3,144 3,112 4,791 35,036 783
Auditing and legal fees........................ 7,188 5,407 3,264 3,642 14,081 13
Registration and filing fees................... 17,675 37,600 18,197 16,462 113,300 7,296
Directors' fees and expenses................... 5,170 4,558 3,748 3,892 7,858 4
Other operating expenses....................... 8,215 5,851 4,078 4,775 12,575 397
----------- ----------- ----------- ----------- ----------- -----------
Total expenses............................... 900,026 734,687 404,796 444,408 2,270,466 21,355
Amount recouped (waived) (Note 2)................ 0 18,404 2,259 20,204 168,115 (10,593)
Custodian earnings credits (Note 6).............. (11,109) (12,637) (7,272) (8,191) (41,876) (12)
----------- ----------- ----------- ----------- ----------- -----------
Net expenses................................... 888,917 740,454 399,783 456,421 2,396,705 10,750
----------- ----------- ----------- ----------- ----------- -----------
Net investment income........................ 8,505,161 6,399,444 3,218,468 3,392,155 19,147,263 94,602
----------- ----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 4)
Net realized gain (loss)
Proceeds from sales............................ 37,984,315 39,343,798 19,018,888 11,873,665 233,153,357 6,960,160
Cost of securities sold........................ 35,892,020 36,545,934 16,406,832 11,758,583 228,554,877 7,334,545
----------- ----------- ----------- ----------- ----------- -----------
Net realized gain (loss)..................... 2,092,295 2,797,864 2,612,056 115,082 4,598,480 (374,385)
----------- ----------- ----------- ----------- ----------- -----------
Unrealized appreciation (depreciation) of
investments:
Beginning of period............................ 12,247,158 19,892,664 12,573,133 29,140,688 67,202,404 0
End of period.................................. 8,940,708 10,865,188 5,762,764 23,629,279 24,718,649 (480,325)
----------- ----------- ----------- ----------- ----------- -----------
Net change in unrealized depreciation for
the period..................................... (3,306,450) (9,027,476) (6,810,369) (5,511,409) (42,483,755) (480,325)
----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized loss on
investments.................................. (1,214,155) (6,229,612) (4,198,313) (5,396,327) (37,885,275) (854,710)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in assets resulting from
operations....................................... 7,291,006 169,832 (979,845) (2,004,172) (18,738,012) (760,108)
----------- ----------- ----------- ----------- ----------- -----------
- -------------------
* For the period from February 15, 1996 (commencement of operations), through March 31, 1996.
See the accompanying notes to financial statements.
</TABLE>
43
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended March 31, 1996 and Year Ended September 30, 1995
(Unaudited)
2000 PORTFOLIO 2005 PORTFOLIO 2010 PORTFOLIO
------------------ ------------------ ------------------
MAR. 31, SEPT. 30, MAR. 31, SEPT. 30, MAR. 31, SEPT.30,
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- --------
FROM INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net investment income.......................... $8,505,161 17,278,323 6,399,444 8,229,184 3,218,468 4,394,547
Net change in unrealized appreciation
(depreciation) of investments................ (3,306,450) 23,502,271 (9,027,476) 18,383,144 (6,810,369) 15,921,350
Net realized gain (loss) on investments........ 2,092,295 (984,607) 2,797,864 2,132,519 2,612,056 (692,795)
----------- ----------- ----------- ----------- ---------- ----------
Change in net assets derived from investment
activities..................................... 7,291,006 39,795,987 169,832 28,744,847 (979,845) 19,623,102
----------- ----------- ----------- ----------- ---------- ----------
FROM DISTRIBUTION TO SHAREHOLDERS:
Net investment income.......................... (14,295,441) (13,492,533) (8,101,012) (5,945,697) (4,075,907) (2,702,956)
Net realized gains on investments.............. 0 0 (2,276,770) (1,662,910) 0 (883,926)
----------- ----------- ----------- ----------- ---------- ----------
Total distributions to shareholders............ (14,295,441) (13,492,533) (10,377,782) (7,608,607) (4,075,907) (3,586,882)
----------- ----------- ----------- ----------- ---------- ----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from sale of shares................... 42,810,242 121,453,561 93,374,999 105,349,198 48,568,549 69,841,156
Net asset value of dividends reinvested........ 13,909,269 13,316,579 10,138,688 7,448,375 3,967,590 3,479,335
Cost of shares redeemed........................ (67,153,071) (110,232,771) (42,751,076) (46,688,274) (28,442,420) (40,612,245)
----------- ----------- ----------- ----------- ---------- ----------
Change in net assets derived from
capital share transactions................... (10,433,560) 24,537,369 60,762,611 66,109,299 24,093,719 32,708,246
----------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net assets........ (17,437,995) 50,840,823 50,554,661 87,245,539 19,037,967 48,744,466
NET ASSETS:
Beginning of period............................ 294,735,980 243,895,157 183,452,075 96,206,536 95,056,618 46,312,152
----------- ----------- ----------- ----------- ---------- ----------
End of period.................................. $277,297,985 294,735,980 234,006,736 183,452,075 114,094,585 95,056,618
=========== =========== =========== =========== ========== ==========
Undistributed net investment..................... $4,237,494 13,250,335 3,437,267 6,438,410 1,692,898 3,484,946
=========== =========== =========== =========== ========== ==========
- -------------------
* For the period from February 15, 1996 (commencement of operations), through March 31, 1996.
See the accompanying notes to financial statements.
</TABLE>
44
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended March 31, 1996 and Year Ended September 30, 1995
(Unaudited)
2015 PORTFOLIO 2020 PORTFOLIO 2025 PORTFOLIO
------------------ ------------------ ------------------
MAR. 31, SEPT. 30, MAR. 31, SEPT. 30, MAR. 31,
1996 1995 1996 1995 1996
-------- -------- -------- -------- ------------------
FROM INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net investment income.......................... 3,392,155 7,142,488 19,147,263 12,063,511 94,602
Net change in unrealized appreciation
(depreciation) of investments................ (5,511,409) 26,781,279 (42,483,755) 71,846,823 (480,325)
Net realized gain (loss) on investments........ 115,082 6,882,220 4,598,480 4,003,419 (374,385)
----------- ----------- ----------- ----------- ----------
Change in net assets derived from investment
activities..................................... (2,004,172) 40,805,987 (18,738,012) 87,913,753 (760,108)
----------- ----------- ----------- ----------- ----------
FROM DISTRIBUTION TO SHAREHOLDERS:
Net investment income.......................... (4,803,254) (3,641,185) (13,777,349) (2,135,107) 0
Net realized gains on investments.............. (6,017,851) 0 (1,324,633) 0 0
----------- ----------- ----------- ----------- ----------
Total distributions to shareholders............ (10,821,105) (3,641,185) (15,101,982) (2,135,107) 0
----------- ----------- ----------- ----------- ----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from sale of shares................... 52,725,223 124,552,148 632,155,077 765,545,539 28,278,202
Net asset value of dividends reinvested........ 10,455,098 3,457,901 14,532,555 2,018,337 0
Cost of shares redeemed........................ (45,894,577) (116,600,252) (418,828,869) (337,176,432) (10,090,239)
----------- ----------- ----------- ----------- ----------
Change in net assets derived from
capital share transactions................... 17,285,744 11,409,797 227,858,763 430,387,444 18,187,963
----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets........ 4,460,467 48,574,599 194,018,769 516,166,090 17,427,855
NET ASSETS:
Beginning of period............................ 114,647,411 66,072,812 574,701,519 58,535,429 0
----------- ----------- ----------- ----------- ----------
End of period.................................. 119,107,878 114,647,411 768,720,288 574,701,519 17,427,855
=========== =========== =========== =========== ==========
Undistributed net investment..................... 1,693,462 5,341,888 9,715,025 10,171,858 94,602
=========== =========== =========== =========== ==========
- -------------------
* For the period from February 15, 1996 (commencement of operations), through March 31, 1996.
See the accompanying notes to financial statements.
</TABLE>
45
BENHAM TARGET MATURITIES TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
Benham Target Maturities Trust (the Trust) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
Each Portfolio invests primarily in zero-coupon U.S. securities and will be
liquidated shortly after the conclusion of its target maturity year. Currently,
there are six series of the Trust, as follows: 2000 Portfolio, 2005 Portfolio,
2010 Portfolio, 2015 Portfolio, 2020 Portfolio, and 2025 Portfolio. Significant
accounting policies followed by the Trust are summarized below.
VALUATION OF INVESTMENT SECURITIES--Portfolio securities are valued at market as
provided by an independent pricing service and from broker quotations.
Securities for which market quotations are not readily available are stated at
fair value following procedures approved by the Board of Trustees. Security
transactions are recorded on the date the order to buy or sell is executed.
Realized gains and losses from security transactions are determined on the basis
of identified cost.
INCOME TAXES--Each Portfolio of the Trust intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. By complying
with these provisions, each Portfolio will not be subject to federal or state
income or franchise taxes to the extent that it distributes its net investment
income and net realized capital gains to shareholders. Accordingly, no provision
for income taxes has been made.
As of September 30, 1995, the 2000 Portfolio and 2010 Portfolio had capital loss
carryovers of $4,837,224, and $36,315, respectively. No capital gain
distributions will be made by either Portfolio until the loss carryovers have
been offset or expired. The capital loss carryovers will expire on September 30,
2003.
Due to the timing of dividend distributions and the differences in accounting
for gains and losses for financial statement and federal income tax purposes,
the fiscal year in which amounts are distributed may differ from the year in
which the income and realized gains (losses) were recorded by each Portfolio.
The differences between capital gains distributed on a book versus tax basis are
shown as excess distributions of realized capital gains in the accompanying
Financial Highlights.
46
On the Statements of Assets and Liabilities, as a result of permanent
book-to-tax differences, reclassification adjustments have been made for
equalization to decrease undistributed net investment income and increase
capital by $3,222,561 (2000 Portfolio), $1,299,575 (2005 Portfolio), $934,609
(2010 Portfolio), $2,237,327 (2015 Portfolio), and $5,826,747 (2020 Portfolio).
SHARE VALUATION--Each Portfolio's net asset value per share is computed by
dividing the value of the Portfolio's total assets, less its liabilities, by the
total number of shares outstanding at the beginning of each business day. The
Portfolios' net asset values fluctuate daily in response to changes in the
market value of their investments.
INVESTMENT INCOME, PREMIUM, AND DISCOUNT--Interest income and expenses are
accrued daily. Discounts on zero-coupon securities are accrued daily using the
effective interest rate method. Premium or discount on coupon-bearing Treasury
securities are amortized using the effective interest rate method.
DIVIDENDS AND OTHER DISTRIBUTIONS--Annual dividends based on distributable net
investment income, determined on a calendar year basis, are paid on the
ex-dividend date. Distributable net investment income is the undistributed net
investment income adjusted for net short-term gains, and equalization charges
relating to redemptions of shares during the period. In addition, net realized
long-term capital gains are distributed annually. The next dividend will be
declared and paid in December 1996.
OTHER LIABILITIES--As of March 31, 1996, the funds had the following bank
overdrafts: $152,583 (2000 Portfolio), $1,620 (2005 Portfolio), $189,308 (2010
Portfolio), and $1,355,930 (2020 Portfolio).
REVERSE SHARE SPLITS--The trustees may authorize reverse share splits
immediately after and of a size that exactly offsets the per share amount of the
annual dividend and capital gain distribution (if any). After taking into
account the reverse share split, a shareholder reinvesting dividends and capital
gain distributions will hold exactly the same number of shares owned prior to
the distributions and reverse share split. A shareholder electing to receive
dividends in cash will own fewer shares.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from those estimates.
47
(2) INVESTMENT ADVISORY FEES AND OTHER
TRANSACTIONS WITH AFFILIATES
Benham Management Corporation (BMC) is a wholly owned subsidiary of Twentieth
Century Companies, Inc. (TCC). BMC's former parent company, Benham Management
International, Inc., merged into TCC on June 1, 1995. Each Portfolio pays BMC a
monthly investment advisory fee based on its pro rata share of the dollar amount
derived from applying BTMT's average daily net assets to the following fee
schedule.
.35% of the first $750 million
.25% of the next $750 million
.24% of the next $1 billion
.23% of the next $1 billion
.22% of the next $1 billion
.21% of the next $1 billion
.20% of the next $1 billion
.19% of average daily net assets over $6.5 billion
BMC provides the Trust with all investment advice. Twentieth Century Services,
Inc. pays all compensation of Trust officers and trustees who are officers or
directors of TCC or any of its subsidiaries. In addition, promotion and
distribution expenses are paid by BMC.
The Trust has an Administrative Services and Transfer Agency Agreement with
Benham Financial Services, Inc. (BFS), a wholly owned subsidiary of TCC. Under
the agreement, BFS provides substantially all administrative and transfer agency
services necessary to operate the Trust. Fees for these services are based on
transaction volume, number of accounts, and average net assets of all funds in
The Benham Group.
The Trust has an additional agreement with BMC pursuant to which BMC established
a contractual expense guarantee that limits each Portfolio's expenses (excluding
extraordinary expenses such as brokerage commissions and taxes and the impact of
custodian earning credits) to .70% of each Portfolio's average daily net assets.
The agreement provides that BMC may recover amounts (representing expenses in
excess of the Portfolio's expense guarantee rate) absorbed during the preceding
11 months if, and to the extent that, for any given month, the Portfolio's
expenses were less than the .70% limit. The expense guarantee rate is subject to
renewal in June 1996.
48
The payables (receivables) to affiliates as of March 31, 1996, based on the
above agreements were as follows:
2000 2005 2010
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------
Investment Advisor.................... $ 83,455 69,916 37,037
Administrative Services............... 22,839 19,134 9,389
Transfer Agent........................ 38,457 37,772 23,023
-------- ------- -------
$144,751 126,822 69,449
======== ======= =======
2015 2020 2025
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------
Investment Advisor.................... $35,571 185,661 (2,784)
Administrative Services............... 9,795 59,316 1,260
Transfer Agent........................ 23,583 142,322 5,724
-------- ------- -------
$68,949 387,299 4,200
======== ======= =======
The Trust has a distribution agreement with Benham Distributors, Inc. (BDI),
which is responsible for promoting sales of and distributing the Trust's shares.
BDI is a wholly owned subsidiary of TCC.
(3) SHARE TRANSACTIONS
Transactions for each of the Portfolios for the six months ended March 31, 1996,
and year ended September 30, 1995, were as follows:
2000 2005 2010
Portfolio Portfolio Portfolio
------------------ ---------------- ----------------
Mar. 31, Sept. 30, Mar. 31, Sept. 30, Mar. 31, Sept. 30
1996 1995 1996 1995 1996 1995
-------- --------- ------- ------- ------- -------
Shares sold.... 538,463 283,425 1,574,971 1,710,037 1,091,909 2,027,040
Reinvestment of
dividends..... 183,642 35,505 177,478 211,374 89,942 175,507
--------- --------- -------- -------- -------- --------
722,105 318,930 1,752,449 1,921,411 1,181,851 2,202,547
Less shares
redeemed......(845,487) (526,372) (723,231)(1,516,891) (640,527) (910,391)
Reverse share
split.........(188,515) (37,416) (181,450) (214,028) (92,308) (178,997)
--------- --------- -------- -------- -------- --------
Net increase
(decrease) in
shares........(311,897) ( 244,858) 847,768 190,492 449,016 1,113,159
========= ========= ======== ======== ======== ========
49
2015 2020 2025
Portfolio Portfolio Portfolio
------------------ ---------------- --------
Mar. 31, Sept. 30, Mar. 31, Sept. 30, Mar. 31,
1996 1995 1996 1995 1996*
-------- --------- ------- ------- -------
Shares sold....... 1,535,826 1,894,844 26,756,431 4,976,479 1,507,212
Reinvestment of
dividends........ 318,306 113,861 585,620 148,497 0
--------- --------- --------- -------- --------
1,854,132 2,008,705 27,342,051 5,124,976 1,507,212
Less shares
redeemed.........(1,331,945)(1,098,272) (17,184,256) (4,307,665) (544,922)
Reverse share
split............ (328,626) (117,148) (608,060) (156,322) 0
--------- --------- -------- -------- --------
Net increase
in shares....... 193,561 793,285 9,549,735 660,989 962,290
========= ========= ======== ======== ========
*For the period from February 15, 1996 (commencement of operations), through
March 31, 1996.
(4) INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term securities, for the six months
ended March 31, 1996, were as follows:
<TABLE>
<CAPTION>
2000 2005 2010 2015 2020 2025
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Purchases.....$21,832,684 97,295,127 42,831,260 22,023,005 464,479,989 24,528,317
========== ========== ========== ========== =========== ==========
Sales
proceeds.....$37,984,315 39,343,798 19,018,888 11,873,665 233,153,357 6,960,160
========== ========== ========== ========== =========== =========
*For the period from February 15, 1996 (commencement of operations), through March 31, 1996.
As of March 31, 1996, unrealized appreciation (depreciation) was as follows:
2000 2005 2010 2015 2020 2025
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Appreciated
securities $ 9,544,748 13,062,180 7,502,448 23,629,279 35,885,204 0
Depreciated
securities (604,040) (2,196,992) (1,739,684) 0 (11,166,555) (480,325)
---------- ---------- --------- ---------- ----------- --------
Net unrealized
appreciation
(depreciation)$8,940,708 10,865,188 5,762,764 23,629,279 24,718,649 (480,325)
========== ========== ========= ========= ========== =========
The cost of securities for financial reporting and federal income tax purposes
is the same.
</TABLE>
50
During the year ended March 31, 1996, the Trust paid no brokerage commissions.
Each Portfolio invests principally in zero-coupon U.S. Treasury securities and
may also invest in U.S. Treasury bills and coupon-bearing U.S. Treasury notes
and bonds, all of which are guaranteed by the direct "full faith and credit"
pledge of the U.S. government, and Resolution Funding Corporation (REFCORP)
zero-coupon bonds, whose principal is secured by zero-coupon U.S. Treasury
securities and whose interest payments are guaranteed by the U.S. Treasury.
Zero-coupon U.S. Treasury securities held by the Portfolios include:
Certificates of Accrual of Treasury Securities (CATS), Treasury Bond Receipts
(TBR), Treasury Receipts (TR), Treasury Investment Growth Receipts (TIGR),
Coupon Government Accrual Receipts (COUGAR), Treasury Obligation Certificates
(TOC), Coupons Under Book Entry Safekeeping (CUBES), U.S. Treasury Bearer Bond
Coupons and Corpus (PHYSICAL), Government and Agency Term Obligations (GATOR),
Easy Growth Treasury Receipts (ETRS), and Separate Trading of Registered
Interest and Principal of Securities (STRIPS). CATS, TBRs, TRs, TIGRs, COUGARs,
GATORs, TOCs and ETRs are instruments offered by broker-dealers who separate
(strip) the principal portions (corpus) from the coupon portions of U.S.
Treasury bonds and notes and sell them separately in the form of receipts or
certificates representing undivided interests in these instruments. PHYSICALs
are stripped U.S. Treasury bearer bonds that are traded in physical form. STRIPS
describes the program by which the U.S. Treasury Department has facilitated the
stripping of Treasury notes and bonds by permitting the separated corpus and
coupons to be transferred directly through the Federal Reserve Bank's book entry
system.
(5) EXPENSE OFFSET ARRANGEMENTS
Each Fund's Statement of Operations reflects custodian earnings credits. These
amounts are used to offset the custody fees payable by the Funds to the
custodian bank. The credits are earned when the Fund maintains a balance of
uninvested cash at the custodian bank. Beginning with the year ending March 31,
1996, the ratios of expenses to average daily net assets shown in the Financial
Highlights are calculated as if these credits had not been earned.
51
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST -- 2000 PORTFOLIO
Schedule of Investment Securities
March 31, 1996
(Unaudited)
ZERO-COUPON U.S. TREASURY YIELD TO MATURITY FACE VALUE
SECURITIES (NOTE 4) MATURITY* DATE AMOUNT (NOTE 1) PERCENT
- ------------------------------------------------------------------------ ----- ----- ------- ----- ----
<S> <C> <C> <C> <C> <C>
CUBES................................................................... 6.07% 08/15/99 $ 71,250 58,233 .02%
ETR..................................................................... 6.18 11/15/99 75,000 60,176 .02
STRIPS-- COUPON......................................................... 6.02 11/15/99 153,000 123,453 .04
TBR..................................................................... 6.19 11/15/99 2,836,700 2,275,232 .82
TR...................................................................... 6.10 11/15/99 424,800 341,798 .12
CATS.................................................................... 6.11 02/16/00 133,000 105,343 .04
CUBES................................................................... 6.12 02/16/00 88,125 69,773 .03
STRIPS-- PRINCIPAL...................................................... 6.08 02/16/00 14,069,000 11,155,873 4.02
TBR..................................................................... 6.20 02/16/00 306,945 242,293 .09
TR...................................................................... 6.11 02/16/00 30,036,209 23,790,180 8.58
CATS.................................................................... 6.13 05/15/00 149,000 116,178 .04
PHYSICAL COUPONS........................................................ 6.22 05/15/00 5,850,000 4,544,982 1.64
TBR..................................................................... 6.22 05/15/00 1,494,525 1,161,126 .42
STRIPS-- PRINCIPAL...................................................... 6.12 08/15/00 63,667,000 48,911,536 17.64
TBR..................................................................... 6.24 08/15/00 894,045 683,354 .25
COUGAR.................................................................. 6.20 11/15/00 3,932,000 2,965,397 1.07
CUBES................................................................... 6.18 11/15/00 410,625 309,956 .11
STRIPS-- PRINCIPAL...................................................... 6.14 11/15/00 120,191,000 90,888,434 32.78
TIGR.................................................................... 6.17 11/15/00 3,754,000 2,834,946 1.02
TR...................................................................... 6.17 11/15/00 2,252,886 1,701,335 .61
CATS.................................................................... 6.20 02/15/01 75,000 55,709 .02
STRIPS-- PRINCIPAL...................................................... 6.15 02/15/01 12,684,000 9,441,589 3.40
TIGR.................................................................... 6.20 02/15/01 4,657,000 3,459,173 1.25
TR...................................................................... 6.20 02/15/01 20,422,328 15,169,501 5.47
COUGARS................................................................. 6.25 05/15/01 1,400,000 1,021,804 .37
PHYSICAL COUPONS........................................................ 6.31 05/15/01 1,496,250 1,088,806 .39
STRIPS-- COUPON......................................................... 6.14 05/15/01 5,907,000 4,334,911 1.56
TR...................................................................... 6.22 05/15/01 24,350,000 17,798,389 6.42
</TABLE>
52
<TABLE>
<CAPTION>
ZERO-COUPON U.S. TREASURY YIELD TO MATURITY FACE VALUE
SECURITIES (NOTE 4) (CONTINUED) MATURITY* DATE AMOUNT (NOTE 1) PERCENT
- ------------------------------------------------------------------------ ----- ----- ------- ----- ----
<S> <C> <C> <C> <C> <C>
TIGR.................................................................... 6.22% 05/15/01 $ 44,000 32,161 .01%
STRIPS-- PRINCIPAL...................................................... 6.20 08/15/01 20,450,000 14,729,931 5.31
TR...................................................................... 6.24 08/15/01 7,060,020 5,074,672 1.83
STRIPS-- PRINCIPAL...................................................... 6.23 11/15/01 10,000,000 7,085,300 2.56
STRIPS-- COUPON......................................................... 6.21 02/15/02 8,449,000 5,901,036 2.13
------------ ----------- ------
Total Investment Securities (cost $268,591,872)............................................. $367,783,708 277,532,580 100.08%
============ ----------- ------
Liabilities less other assets............................................................... (234,595) (.08)
----------- ------
Net assets.................................................................................. $277,297,985 100.00%
=========== ======
- -------------------
* The yield to maturity is based on current market values as of March 31, 1996.
See the accompanying notes to financial statements.
</TABLE>
53
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST -- 2005 PORTFOLIO
Schedule of Investment Securities
March 31, 1996
(Unaudited)
ZERO-COUPON U.S. TREASURY YIELD TO MATURITY FACE VALUE
SECURITIES (NOTE 4) MATURITY* DATE AMOUNT (NOTE 1) PERCENT
- ------------------------------------------------------------------------ ----- ----- ------- ----- ----
<S> <C> <C> <C> <C> <C>
ETR..................................................................... 6.68% 11/15/04 $ 87,000 49,395 .02%
TIGR.................................................................... 6.59 11/15/04 27,000 15,445 .01
PHYSICAL COUPONS........................................................ 6.69 11/15/04 693,750 393,557 .17
REFCORP STRIPS-- COUPON................................................. 6.64 01/15/05 11,500,000 6,477,145 2.77
STRIPS-- COUPON......................................................... 6.52 02/15/05 15,000,000 8,488,500 3.63
U.S. Treasury Corpus, Maturity 02/15/10, Callable 02/15/05.............. 6.75 02/15/05 3,200,000 1,775,488 .76
TR, Maturity 05/15/10, Callable 05/15/05................................ 6.72 05/15/05 5,150,000 2,819,573 1.20
ETR..................................................................... 6.72 05/15/05 1,000,000 547,490 .23
STRIPS-- PRINCIPAL...................................................... 6.56 05/15/05 24,059,000 13,359,482 5.71
CUBES................................................................... 6.64 05/15/05 4,615,672 2,544,943 1.09
STRIP-- COUPON.......................................................... 6.55 05/15/05 35,644,000 19,809,866 8.46
TBR..................................................................... 6.74 05/15/05 428,750 234,325 .10
REFCORP STRIPS-- COUPON................................................. 6.69 07/15/05 12,500,000 6,783,500 2.90
STRIP-- COUPON.......................................................... 6.56 08/15/05 24,000,000 13,105,200 5.60
STRIPS-- PRINCIPAL...................................................... 6.56 08/15/05 33,800,000 18,456,490 7.89
CATS.................................................................... 6.65 11/15/05 170,000 90,596 .04
TBR..................................................................... 6.76 11/15/05 2,247,000 1,185,270 .51
STRIPS-- COUPON......................................................... 6.57 11/15/05 22,330,000 11,989,200 5.12
U.S. Treasury Corpus, Maturity 11/15/10, Callable 11/15/05.............. 6.80 11/15/05 10,900,000 5,728,277 2.45
CUBES................................................................... 6.66 11/15/05 491,519 261,699 .11
REFCORP STRIPS-- COUPON................................................. 6.74 01/15/06 46,429,000 24,265,653 10.37
TR...................................................................... 6.70 02/15/06 19,415,340 10,133,448 4.33
STRIPS-- COUPON......................................................... 6.61 02/15/06 29,056,000 15,296,241 6.54
REFCORP STRIPSCOUPON.................................................... 6.76 04/15/06 56,800,000 29,141,808 12.45
TR, Maturity 05/15/11, Callable 05/15/06................................ 6.80 05/15/06 1,000,000 508,250 .22
CATS.................................................................... 6.71 05/15/06 107,000 54,864 .02
CATS, Maturity, 5/15/11, Callable 05/15/06.............................. 6.80 05/15/06 38,699,000 19,668,767 8.41
TBR..................................................................... 6.82 05/15/06 410,000 207,977 .09
</TABLE>
54
<TABLE>
<CAPTION>
ZERO-COUPON U.S. TREASURY YIELD TO MATURITY FACE VALUE
SECURITIES (NOTE 4) (CONTINUED) MATURITY* DATE AMOUNT (NOTE 1) PERCENT
- ------------------------------------------------------------------------ ----- ----- ------- ----- ----
<S> <C> <C> <C> <C> <C>
CUBES................................................................... 6.72% 05/15/06 $ 566,500 290,190 .12%
STRIPS-- COUPON......................................................... 6.63 05/15/06 14,718,000 7,605,968 3.25
TR...................................................................... 6.72 05/15/06 146,346 74,966 .03
REFCORP STRIPS-- COUPON................................................. 6.77 07/15/06 1,428,000 719,841 .31
TR...................................................................... 6.74 08/15/06 1,299,780 653,789 .28
STRIPS-- COUPON......................................................... 6.65 08/15/06 2,000,000 1,015,140 .43
REFCORP STRIPS-- COUPON................................................. 6.79 10/15/06 8,100,000 4,007,637 1.71
STRIPS-- COUPON......................................................... 6.66 11/15/06 12,400,000 6,183,385 2.64
------------ ----------- ------
Total Investment Securities (cost $223,078,177)............................................. $440,418,657 233,943,365 99.97%
============ ----------- ------
Liabilities less other assets............................................................... 63,371 .03
----------- ------
Net Assets.................................................................................. $234,006,736 100.00%
=========== ======
- -------------------
* The yield to maturity is based on current market values as of March 31, 1996.
See the accompanying notes to financial statements.
</TABLE>
55
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST -- 2010 PORTFOLIO
Schedule of Investment Securities
March 31, 1996
(Unaudited)
ZERO-COUPON U.S. TREASURY YIELD TO MATURITY FACE VALUE
SECURITIES (NOTE 4) MATURITY* DATE AMOUNT (NOTE 1) PERCENT
- ------------------------------------------------------------------------ ----- ----- ------- ----- ----
<S> <C> <C> <C> <C> <C>
ETR, Maturity 05/15/14, Callable 05/15/09............................... 7.05% 05/15/09 $ 28,385,000 11,443,413 10.03%
REFCORP STRIPS-- COUPON................................................. 6.97 10/15/09 4,000,000 1,582,080 1.39
STRIPS-- PRINCIPAL, Maturity 11/15/14, Callable 11/15/09................ 6.94 11/15/09 33,500,000 13,236,185 11.60
REFCORP STRIPS-- COUPON................................................. 7.00 01/15/10 5,772,000 2,235,207 1.96
STRIPS-- COUPON......................................................... 6.86 02/15/10 2,500,000 980,700 .86
REFCORP STRIPS-- COUPON................................................. 7.02 04/15/10 30,728,000 11,664,963 10.22
STRIPS-- COUPON......................................................... 6.88 05/15/10 587,000 226,001 .20
REFCORP STRIPS-- COUPON................................................. 7.04 07/15/10 15,000,000 5,581,350 4.89
STRIPS-- COUPON......................................................... 6.89 08/15/10 25,777,000 9,735,973 8.53
STRIPS-- COUPON......................................................... 6.91 11/15/10 46,500,000 17,234,760 15.11
R0FCORP STRIPS-- COUPON................................................. 7.08 01/15/11 20,500,000 7,326,495 6.42
STRIPS-- COUPON......................................................... 6.93 02/15/11 29,860,000 10,847,541 9.51
REFCORP STRIPS-- COUPON................................................. 7.09 04/15/11 18,850,000 6,611,261 5.79
STRIPS-- COUPON......................................................... 6.94 05/15/11 10,000,000 3,567,000 3.13
STRIPS-- COUPON......................................................... 6.95 08/15/11 8,715,000 3,048,768 2.67
STRIPS-- COUPON......................................................... 6.97 11/15/11 26,000,000 8,922,940 7.82
------------ ----------- ------
Total Investment Securities (cost $108,481,873)............................................. $306,674,000 114,244,637 100.13%
============ ----------- ------
Liabilities less other assets............................................................... (150,052) (.13)
----------- ------
Net assets.................................................................................. $114,094,585 100.00%
=========== ======
- -------------------
* The yield to maturity is based on current market values as of March 31, 1996.
See the accompanying notes to financial statements.
</TABLE>
56
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST -- 2015 PORTFOLIO
Schedule of Investment Securities
March 31, 1996
(Unaudited)
ZERO-COUPON U.S. TREASURY YIELD TO MATURITY FACE VALUE
SECURITIES (NOTE 4) MATURITY* DATE AMOUNT (NOTE 1) PERCENT
- ------------------------------------------------------------------------ ----- ----- ------- ----- ----
<S> <C> <C> <C> <C> <C>
STRIPS-- COUPON......................................................... 7.09% 02/15/15 $ 26,350,000 7,081,035 5.95%
REFCORP STRIPS-- COUPON................................................. 7.23 04/15/15 35,440,000 9,167,619 7.70
STRIPS-- COUPON......................................................... 7.09 05/15/15 48,408,000 12,774,871 10.73
REFCORP STRIPS-- COUPON................................................. 7.24 07/15/15 29,644,000 7,519,201 6.31
STRIPS-- COUPON......................................................... 7.10 08/15/15 47,550,000 12,317,828 10.34
REFCORP STRIPS-- COUPON................................................. 7.24 10/15/15 48,421,000 12,065,545 10.13
STRIPS-- COUPON......................................................... 7.10 11/15/15 89,808,000 22,845,359 19.18
STRIPS-- COUPON......................................................... 7.11 02/15/16 36,300,000 9,063,747 7.61
REFCORP STRIPS-- COUPON................................................. 7.27 04/15/16 44,788,000 10,708,363 8.99
STRIPS-- COUPON......................................................... 7.11 05/15/16 17,700,000 4,339,686 3.64
REFCORP STRIPS-- COUPON................................................. 7.27 07/15/16 25,000,000 5,871,250 4.93
REFCORP STRIPS-- COUPON................................................. 7.28 10/15/16 23,000,000 5,295,520 4.44
------------ ----------- ------
Total Investment Securities (cost $95,420,745).............................................. $472,409,000 119,050,024 99.95%
============ ----------- ------
Liabilities less other assets............................................................... 57,854 .05
----------- ------
Net assets.................................................................................. $119,107,878 100.00%
=========== ======
- -------------------
* The yield to maturity is based on current market values as of March 31, 1996.
See the accompanying notes to financial statements.
</TABLE>
57
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST -- 2020 PORTFOLIO
Schedule of Investment Securities
March 31, 1996
(Unaudited)
ZERO-COUPON U.S. TREASURY YIELD TO MATURITY FACE VALUE
SECURITIES (NOTE 4) MATURITY* DATE AMOUNT (NOTE 1) PERCENT
- ------------------------------------------------------------------------ ----- ----- ------- ----- ----
<S> <C> <C> <C> <C> <C>
REFCORP STRIPS-- COUPON................................................. 7.29% 07/15/19 $ 12,000,000 2,267,160 .30%
REFCORP STRIPS-- COUPON................................................. 7.29 01/15/20 77,823,000 14,170,012 1.84
STRIPS-- COUPON......................................................... 7.15 02/15/20 604,000,000 113,020,480 14.70
REFCORP STRIPS-- COUPON................................................. 7.29 04/15/20 43,344,000 7,752,074 1.01
STRIPS-- COUPON......................................................... 7.15 05/15/20 957,700,000 176,121,030 22.91
REFCORP STRIPS-- PRINCIPAL.............................................. 7.27 07/15/20 327,000,000 57,715,500 7.51
REFCORP STRIPS-- COUPON................................................. 7.29 07/15/20 47,400,000 8,326,758 1.08
STRIPS-- COUPON......................................................... 7.15 08/15/20 176,135,000 31,822,311 4.14
REFCORP STRIPS-- COUPON................................................. 7.29 10/15/20 139,165,000 24,014,312 3.12
REFCORP STRIPS-- PRINCIPAL.............................................. 7.27 10/15/20 365,000,000 63,283,700 8.23
STRIPS-- COUPON......................................................... 7.15 11/15/20 486,707,000 86,419,695 11.24
REFCORP STRIPS-- COUPON................................................. 7.29 01/15/21 42,505,000 7,204,598 .94
REFCORP STRIPS-- PRINCIPAL.............................................. 7.26 01/15/21 190,195,000 32,470,090 4.22
STRIPS-- COUPON......................................................... 7.15 02/15/21 377,000,000 65,760,110 8.56
STRIPS-- COUPON......................................................... 7.14 05/15/21 374,500,000 64,357,825 8.37
STRIPS-- COUPON......................................................... 7.11 08/15/21 50,000,000 8,493,501 1.11
------------- ----------- ------
Total Investment Securities (cost $738,480,507)............................................. $4,270,474,000 763,199,156 99.28%
============= ----------- ------
Liabilities less other assets............................................................... 5,521,132 .72
----------- ------
Net assets.................................................................................. $768,720,288 100.00%
=========== ======
- -------------------
* The yield to maturity is based on current market values as of March 31, 1996.
See the accompanying notes to financial statements.
</TABLE>
58
<TABLE>
<CAPTION>
BENHAM TARGET MATURITIES TRUST -- 2025 PORTFOLIO
Schedule of Investment Securities
March 31, 1996
(Unaudited)
ZERO-COUPON U.S. TREASURY YIELD TO MATURITY FACE VALUE
SECURITIES (NOTE 4) MATURITY* DATE AMOUNT (NOTE 1) PERCENT
- ------------------------------------------------------------------------ ----- ----- ------- ----- ----
<S> <C> <C> <C> <C> <C>
REFCORP STRIPS-- COUPON................................................. 7.09% 10/15/24 $ 6,300,000 862,596 4.95%
STRIPS-- COUPON......................................................... 6.91 11/15/24 5,000,000 715,450 4.11
REFCORP STRIPS-- COUPON................................................. 7.07 01/15/25 7,000,000 947,170 5.43
STRIPS-- PRINCIPAL...................................................... 6.85 02/15/25 9,000,000 1,289,070 7.40
STRIPS-- COUPON......................................................... 6.86 02/15/25 13,500,000 1,925,505 11.05
REFCORP STRIPS-- COUPON................................................. 7.07 04/15/25 13,700,000 1,821,826 10.45
REFCORP STRIPS-- COUPON................................................. 7.07 07/15/25 8,500,000 1,110,865 6.37
REFCORP STRIPS-- COUPON................................................. 7.06 10/15/25 62,425,000 8,040,965 46.14
------------ ----------- ------
Total Investment Securities (cost $17,193,772)............................................. $125,425,000 16,713,447 95.90%
============ ----------- ------
Liabilities less other assets............................................................... 714,408 4.10
----------- ------
Net assets.................................................................................. $17,427,855 100.00%
=========== ======
- -------------------
* The yield to maturity is based on current market values as of March 31, 1996.
See the accompanying notes to financial statements.
</TABLE>
59
TRUSTEES
James M. Benham
Albert A. Eisenstat
Ronald J. Gilson
Myron S. Scholes
Kenneth E. Scott
Ezra Solomon
Isaac Stein
James E. Stowers, III
Jeanne D. Wohlers
OFFICERS
James M. Benham
Chairman of the Board
Maryanne Roepke
Treasurer and Chief Financial Officer
Douglas A. Paul
Vice President, Secretary
and General Counsel
Ann N. McCoid
Controller
[company logo] The Benham Group
Part of the Twentieth Century Family of Mutual Funds
1665 Charleston Road
Mountain View, CA 94043
1-800-321-8321
Not authorized for distribution unless preceded or
accompanied by a current fund prospectus.
Benham Distributors, Inc. 5/96 Q068
