BENHAM TARGET
MATURITIES TRUST
1995 Portfolio * 2000 Portfolio
2005 Portfolio * 2010 Portfolio
2015 Portfolio * 2020 Portfolio
2025 Portfolio
Prospectus * November 29, 1995
(revised February 15, 1996)
[picture of bullseye
range]
[company logo] The Benham Group
Part of the Twentieth Century Family of Mutual Funds
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[information in left margin of page]
The Benham Group
1665 Charleston Rd.
Mountain View
California 94043
Fund
Information
1-800-331-8331
1-415-965-4274
Investor Services
1-800-321-8321
1-415-965-4222
TDD Service
1-800-624-6338
1-415-965-4764
Benham Group
Representatives
are available
by telephone weekdays from
5 a.m. to 5 p.m. Pacific Time.
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BENHAM TARGET
MATURITIES TRUST
Prospectus o November 29, 1995
BENHAM TARGET MATURITIES TRUST is a no-load, open-end mutual fund that consists
of seven portfolios:
2000 PORTFOLIO 2010 PORTFOLIO 2020 PORTFOLIO
2005 PORTFOLIO 2015 PORTFOLIO 2025 PORTFOLIO
Each Portfolio seeks to provide the highest attainable investment return
consistent with the creditworthiness of U.S. Treasury securities and the
professional management of reinvestment and market risks. Each Portfolio invests
primarily in zero-coupon U.S. Treasury securities and will be liquidated shortly
after the conclusion of its target maturity year.
In all states, state tax-exempt interest income earned by the Portfolios is
passed through to the Portfolios' shareholders as state tax-free dividends. (See
page 31 for a discussion of the Portfolios' tax characteristics.)
Mutual Fund shares are not insured by the FDIC, the Federal Reserve Board, or
any other agency.
Please read this Prospectus carefully and retain it for future reference. It is
designed to help you decide whether the Portfolios' goals match your own. A
Statement of Additional Information (SAI) for the Trust (also dated November 29,
1995) has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference. For a free copy, call or write The Benham
Group.
AS WITH ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
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SUMMARY OF PORTFOLIO EXPENSES
The tables below illustrate the fees and expenses an investor in the Portfolios
would incur directly or indirectly. The figures shown for each Portfolio are
based on historical expenses, adjusted to reflect the expense limitation
agreement in effect as of November 29, 1995.
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A. SHAREHOLDER TRANSACTION EXPENSES
For All Portfolios Described in This Prospectus
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Sales load imposed on purchases ............................ None
Sales load imposed on reinvested dividends ................. None
Deferred sales load ........................................ None
Redemption fee ............................................. None
Exchange fee ............................................... None
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B. ANNUAL PORTFOLIO OPERATING EXPENSES*
As a Percentage of Average Daily Net Assets
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TOTAL
INVESTMENT PORTFOLIO
ADVISORY 12B-1 OTHER OPERATING
FEE FEE EXPENSES EXPENSES
2000 Portfolio .35 None .28 .63%
2005 Portfolio .34 None .37 .71%
2010 Portfolio .26 None .45 .71%
2015 Portfolio .30 None .41 .71%
2020 Portfolio .22 None .50 .72%
2025 Portfolio .35 None .53 .70%
*Benham Management Corporation (BMC) has agreed to limit each Portfolio's total
operating expenses to a specified percentage of each Portfolio's average daily
net assets. These expense limits are effective through May 31, 1996. The
operation of these expense limitations effectively requires the total expenses
paid by the Portfolios not exceed the following: 2000 Portfolio: .63%, 2005
Portfolio: .70%, 2010 Portfolio: .70%, 2015 Portfolio: .70%, 2015 Portfolio:
.70%, and 2020 Portfolio: .70%. Amounts which are paid by unaffiliated third
parties do not apply to these expense limits. The agreement provides that BMC
may recover amounts absorbed on behalf of the Portfolio during the preceding 11
months if, and to the extent that, for any given month, Portfolio expenses were
less than the expense limit in effect at that time. The expense limitation is
subject to annual renewal in June. If the expense limitations were not in
effect, each Fund's Advisory fee, other
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[information in right margin of page]
Please read this Prospectus carefully and retain it for future reference. It is
designed to help you decide if the Portfolio's goals match your own.
- -------------------
3
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expenses would be as follows: 2000 Portfolio: .35%, .28% and .63%, 2005
Portfolio: .35%, .36% and .71%, 2010 Portfolio: .35%, .45% and .80%, 2015
Portfolio: .35%, .41% and .76%, 2020 Portfolio: .35%, .49% and .84%.
Each Portfolio pays BMC investment advisory fees equal to an annualized
percentage of Portfolio average daily net assets. Other expenses include
administrative and transfer agent fees paid to Benham Financial Services, Inc.
(BFS).
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C. EXAMPLE OF EXPENSES
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The following table illustrates the expenses a shareholder would pay on a $1,000
investment in each of the Portfolios over periods of one, three, five, and ten
years. These figures are based on the expenses shown in Table B and assume (i) a
5% annual return and (ii) full redemption at the end of each time period.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
2000 Portfolio $6 $20 $35 $79
2005 Portfolio 7 22 39 87
2010 Portfolio 7 22 39 87
2015 Portfolio 7 22 39 87
2020 Portfolio 7 22 39 87
2025 Portfolio 7 22 N/A N/A
We include this table to help you understand the various costs and expenses that
you, as a shareholder, will bear either directly or indirectly. THIS EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
PERFORMANCE; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN, AND THE
FUND MAY NOT REALIZE THE 5% HYPOTHETICAL RATE OF RETURN REQUIRED BY THE SEC FOR
THIS EXAMPLE.
4
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FINANCIAL HIGHLIGHTS - The information presented on the following pages has been
audited by KPMG Peat Marwick LLP, independent auditors. Their unqualified report
on the financial statements and financial highlights are included in the
Portfolio's Annual Report, which is incorporated by reference to the Portfolio's
Statement of Additional Information.
5
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<TABLE>
<CAPTION>
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BENHAM TARGET MATURITIES TRUST: 2000 PORTFOLIO
Years ended September 30 (except as noted)+
- --------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989+ 1988 1987 1986
PER-SHARE DATA++
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $66.93 72.40 62.16 52.67 43.11 42.79 37.16 33.33 35.44 26.77
Income (Losses) From
Investment Operations
Net Investment Income 4.37 3.99 3.94 3.90 3.69 3.40 2.36 2.94 2.68 2.40
Net Realized and
Unrealized Gains
(Losses) on Investments 5.56 (9.46) 6.30 5.59 5.87 (3.08) 3.27 .89 (4.79) 6.27
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Total Income (Losses)
From Investment
Operations 9.93 (5.47) 10.24 9.49 9.56 .32 5.63 3.83 (2.11) 8.67
Less Distributions
Dividends from Net
Investment Income (3.42) (3.25) (2.34) (2.22) (2.09) (2.35) 0 (2.23) (4.72) (.64)
Distributions from Net
Realized Capital Gains 0 (2.95) (1.83) (.16) 0 (.10) 0 0 0 (2.81)
Distributions in
Excess of Net
Realized Capital Gains 0 (1.20) 0 0 0 0 0 0 0 0
----- ----- ------ ----- ----- ----- ----- ----- ----- -----
Total Distributions (3.42) (7.40) (4.17) (2.38) (2.09) (2.45) 0 (2.23) (4.72) (3.45)
Reverse Share Split 3.42 7.40 4.17 2.38 2.09 2.45 0 2.23 4.72 3.45
Net Asset Value at
End of Period $76.86 66.93 72.40 62.16 52.67 43.11 42.79 37.16 33.33 35.44
===== ===== ====== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN* 14.84 (7.54) 16.46 18.02 22.18 .75 15.15 11.49 (5.95) 32.39
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SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of
Period (in millions
of dollars) $294.7 243.9 291.4 190.1 89.7 53.2 34.8 14.1 6.3 5.1
Ratio of Expenses to
Average Daily
Net Assets .63% .59 .60 .66 .66 .70 .70** .70 .70 .70
Ratio of Net Investment
Income to Average
Daily Net Assets 6.13% 5.74 5.94 6.90 7.67 7.84 7.81** 8.33 8.08 7.34
Portfolio
Turnover Rate 52.64% 89.35 76.59 92.59 67.39 78.76 9.14 162.54 72.70 39.40
- ----------------------------
+ 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.
</TABLE>
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<TABLE>
<CAPTION>
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BENHAM TARGET MATURITIES TRUST: 2005 PORTFOLIO
Years ended September 30 (except as noted)+
- ---------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989+ 1988 1987 1986
PER-SHARE DATA++
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $45.22 51.84 41.18 35.13 27.74 28.61 24.36 21.28 23.74 16.69
Income (Losses) From
Investment Operations
Net Investment Income 3.33 3.11 2.90 2.69 2.47 2.27 1.54 1.90 1.77 1.59
Net Realized and
Unrealized Gains
(Losses) on Investments 8.06 (9.73) 7.76 3.36 4.92 (3.14) 2.71 1.18 (4.23) 5.46
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Total Income (Losses)
From Investment
Operations 11.39 (6.62) 10.66 6.05 7.39 (.87) 4.25 3.08 (2.46) 7.05
Less Distributions
Dividends from Net
Investment Income (2.41) (2.70) (2.51) (1.75) (.86) (1.60) 0 (1.53) (3.52) (.35)
Distributions from Net
Realized Capital Gains (.67) (8.47) (1.01) (.37) 0 (.07) 0 0 (.13) (2.18)
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Total Distributions (3.08) (11.17) (3.52) (2.12) (.86) (1.67) 0 (1.53) (3.65) (2.53)
Reverse Share Split 3.08 11.17 3.52 2.12 .86 1.67 0 1.53 3.65 2.53
Net Asset Value at
End of Period $56.61 45.22 51.84 41.18 35.13 27.74 28.61 24.36 21.28 23.74
====== ===== ====== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN* 25.16% (12.75) 25.89 17.22 26.64 (3.04) 17.45 14.48 (10.36) 42.24
- ------------
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of
Period (in millions
of dollars) $183.5 96.2 149.9 168.7 161.4 46.3 25.0 8.9 3.7 2.9
Ratio of Expenses to
Average Daily
Net Assets .71% .64 .62 .63 .70 .70 .70** .70 .70 .70
Ratio of Net
Investment Income
to Average Daily
Net Assets 6.58% 6.37 6.44 7.27 7.80 7.93 7.66** 8.44% 8.31 7.25
Portfolio
Turnover Rate 34.23% 68.11 49.89 64.38 85.38 186.02 71.98 27.25 68.11 50.47
- ----------------------------
+ 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 istributions to shareholders.
* Total return figures assume reinvestment of dividends and capital gain
distributions and are not annualized.
** Annualized.
</TABLE>
7
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<TABLE>
<CAPTION>
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BENHAM TARGET MATURITIES TRUST: 2010 PORTFOLIO
Years ended September 30 (except as noted)+
- ---------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989+ 1988 1987 1986
PER-SHARE DATA++
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $31.67 38.13 28.53 25.08 19.18 20.59 17.31 14.96 17.65 11.43
Income (Losses) From
Investment Operations
Net Investment Income 2.41 2.24 2.05 1.88 1.72 1.61 1.08 1.29 1.23 1.09
Net Realized and
Unrealized Gains
(Losses) on Investments 8.06 (8.70) 7.55 1.57 4.18 (3.02) 2.20 1.06 (3.92) 5.13
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Total Income (Losses)
From Investment
Operations 10.47 (6.46) 9.60 3.45 5.90 (1.41) 3.28 2.35 (2.69) 6.22
Less Distributions
Dividends from Net
Investment Income (1.48) (1.46) (1.58) (1.14) (1.05) (1.50) 0 (.42) (.90) (.16)
Distributions from
Net Realized
Capital Gains (.48) (4.31) (1.14) 0 0 (.09) 0 0 0 (1.36)
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Total Distributions (1.96) (5.77) (2.72) (1.14) (1.05) (1.59) 0 (.42) (.90) (1.52)
Reverse Share Split 1.96 5.77 2.72 1.14 1.05 1.59 0 .42 .90 1.52
Net Asset Value at
End of Period $ 42.14 31.67 38.13 28.53 25.08 19.18 20.59 17.31 14.96 17.65
====== ===== ====== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN* 33.06% (16.92) 33.61 13.76 30.76 (6.85) 18.95 15.71 (15.24) 54.42
- ------------
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of
Period (in thousands
of dollars) $95,057 46,312 70,551 55,565 47,661 37,222 42,439 9,617 9,297 4,884
Ratio of Expenses to
Average Daily
Net Assets .71% .68 .66 .70 .70 .70 .70** .70 .70 .70
Ratio of Net Investment
Income to Average
Daily Net Assets 6.56% 6.35 6.32 7.20 7.73 7.82 7.34** 8.11 8.13 6.71
Portfolio
Turnover Rate 26.00% 35.35 131.50 95.25 130.91 191.16 88.43 258.70 83.59 91.01
- ---------------------------
+ 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.
</TABLE>
8
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<TABLE>
<CAPTION>
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BENHAM TARGET MATURITIES TRUST: 2015 PORTFOLIO
Years ended September 30 (except as noted)+
- ---------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989++ 1988 1987 1986+
PER-SHARE DATA+++
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $22.79 29.04 20.39 18.44 13.75 15.62 12.63 11.37 14.24 12.58
Income (Losses) From
Investment Operations
Net Investment Income 1.71 1.57 1.46 1.33 1.26 1.18 .79 .94 .90 .26
Net Realized and
Unrealized Gains
(Losses) on Investments 7.70 (7.82) 7.19 .62 3.43 (3.05) 2.20 .32 (3.77) 1.40
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Total Income (Losses)
From Investment
Operations 9.41 (6.25) 8.65 1.95 4.69 (1.87) 2.99 1.26 (2.87) 1.66
Less Distributions
Dividends from Net
Investment Income (.87) (1.19) (1.45) (1.23) (.97) (.50) 0 (.55) (.22) 0
Distributions from Net
Realized Capital Gains 0 (7.08) (.34) 0 0 (.01) 0 0 0 0
Distributions in Excess
of Net Realized
Capital Gains 0 (.37) 0 0 0 0 0 0 0 0
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Total Distributions (.87) (8.64) (1.79) (1.23) (.97) (.51) 0 (.55) (.22) 0
Reverse Share Split .87 8.64 1.79 1.23 .97 .51 0 .55 .22 0
Net Asset Value at
End of Period $32.20 22.79 29.04 20.39 18.44 13.75 15.62 12.63 11.37 14.24
====== ===== ====== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN* 41.29 (21.52) 42.42 10.57 34.11 (11.97) 23.67 11.08 (20.15) 13.20
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SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of
Period (in millions
of dollars) $114.6 66.1 89.0 131.1 222.1 295.6 233.8 11.8 2.0 .528
Ratio of Expenses to
Average Daily
Net Assets .71% .68 .63 .62 .61 .70 .70** .70 .70 .70**
Ratio of Net Investment
Income to Average
Daily Net Assets 6.40% 5.97 6.28 7.04 7.79 7.74 7.02** 7.97 7.99 6.06**
Portfolio
Turnover Rate 69.97% 64.90 138.34 103.25 39.91 81.27 48.31 188.24 508.59 21.59
- ---------------------------------------
+ From September 1, 1986 (commencement of operations), through December 31, 1986.
++ 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.
</TABLE>
9
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<TABLE>
<CAPTION>
============================================================================================================
BENHAM TARGET MATURITIES TRUST: 2020 PORTFOLIO
Years ended September 30 (except as noted)+
- ------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990+
PER-SHARE DATA++
- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $15.28 20.72 13.63 12.54 9.63 12.00
Income (Losses) From
Investment Operations
Net Investment Income 1.19 1.13 1.00 .92 .85 .60
Net Realized and Unrealized
Gains (Losses) on Investments 6.00 (6.57) 6.09 .17 2.06 (2.97)
----- ----- ----- ----- ----- -----
Total Income (Losses) From
Investment Operations 7.19 (5.44) 7.09 1.09 2.91 (2.37)
Less Distributions
Dividends from
Net Investment Income (.21) (0.28) (.53) (.63) (.21) 0
Distributions from
Net Realized Capital Gains 0 (1.31) (.72) (.08) 0 0
Distributions in Excess of
Net Realized Capital Gains 0 (1.18) 0 0 0 0
----- ----- ----- ----- ----- -----
Total Distributions (.21) (2.77) (1.25) (.71) (.21) 0
Reverse Share Split .21 2.77 1.25 .71 .21 0
Net Asset Value at End of Period $22.47 15.28 20.72 13.63 12.54 9.63
===== ===== ===== ===== ===== =====
TOTAL RETURN* 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) $574,702 58,535 56,125 41,793 88,332 53,198
Ratio of Expenses to
Average Daily Net Assets .72% .70 .70 .66 .67 .70**
Ratio of Net Investment
Income to Average Daily Net Assets 6.24% 6.28 6.10 7.19 7.50 7.79**
Portfolio Turnover Rate 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.
</TABLE>
10
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INVESTMENT OBJECTIVES
Benham Target Maturities Trust currently consists of six Portfolios with target
maturity years of 2000, 2005, 2010, 2015, 2020, and 2025, respectively. Each
Portfolio will be liquidated shortly after the conclusion of its target maturity
year. Additional portfolios may be introduced from time to time.
The Portfolio's investment objective is fundamental and may not be changed
without shareholder approval. Unless otherwise noted, all other investment
policies are nonfundamental and may be changed by the board of trustees. There
is no guarantee that the Portfolios will achieve their investment objective.
Each Portfolio seeks to provide the highest attainable investment return
consistent with the creditworthiness of U.S. Treasury securities and the
professional management of reinvestment and market risks.
INVESTMENT POLICIES
Each Portfolio invests primarily in zero-coupon U.S. Treasury securities (a
"zero"). Unlike U.S. Treasury securities with coupons attached, which pay
interest periodically, zeros pay no interest. Instead, these securities are
issued at a substantial discount from their maturity value, and this discount is
amortized over the life of the security. Investment return comes from the
difference between the price at which a zero is issued (or purchased) and the
price at which it matures (or is sold).
To approximate the experience an investor would have if he or she purchased
zeros directly, BMC manages each Portfolio to track as closely as possible the
price behavior of a zero with the same term to maturity. To correct for factors
such as shareholder purchases and redemptions (and related transaction costs)
that differentiate investing in a portfolio of zeros from investing directly in
a zero, BMC executes portfolio transactions necessary to accommodate shareholder
activity each business day. To limit reinvestment risk, BMC adjusts each
Portfolio's weighted average maturity ("WAM") to fall within the Portfolio's
target maturity year so that, normally, at least 90% of the securities held
mature within one year of the Portfolio's target maturity year.
- -------------------
[information in right margin of page]
Each Portfolio invests primarily in zero-coupon U.S. Treasury securities.
- -------------------
11
<PAGE>
By adhering to these investment parameters, BMC expects that shareholders who
hold their shares until a Portfolio's WAM*, and who reinvest all dividends and
capital gain distributions, will realize an investment return and a maturity
value that does not differ substantially from the anticipated growth rate
("AGR") and anticipated value at maturity ("AVM") calculated on the day the
shares were purchased.
BMC calculates each Portfolio's AGR and AVM each day the Trust is open for
business. AGR and AVM daily calculations assume, among other factors, that the
Portfolio's expense ratio and portfolio composition remain constant for the life
of the Portfolio.
Transaction costs, interest rate changes, and BMC's efforts to improve total
return by taking advantage of market opportunities also cause the Portfolios'
AGRs and AVMs to vary from day to day. Despite these so-called "destabilizing"
factors, however, each Portfolio's AGR and AVM tend to fluctuate within narrow
ranges. The following table shows each Portfolio's AVM as of September 30 for
each of the past five years. (AGRs are illustrated in the Statement of
Additional Information.)
ANTICIPATED VALUE AT MATURITY
9/30/91 9/30/92 9/30/93 9/30/94 9/30/95
------------------------------------------
2000 Portfolio 98.28 101.01 100.69 100.86 100.99
2005 Portfolio 98.72 99.78 100.21 100.58 100.32
2010 Portfolio 98.54 100.11 100.94 101.38 101.02
2015 Portfolio 105.13 107.05 106.84 107.95 109.62
2020 Portfolio 94.04 101.83 100.76 102.11 102.31
The Portfolios' share prices and growth rates are not guaranteed by the Trust,
The Benham Group, or any of their affiliates. There is no guarantee that the
Portfolios' AVMs will fluctuate as little in the future as they have in the
past.
* A Portfolio's weighted average maturity date can be calculated at any point in
time by adding its WAM to the current date. For example, if today were November
17, 1995, and the Portfolio's WAM were six years, the Portfolio's weighted
average maturity date would be November 17, 2001. Please note that a Portfolio's
weighted average maturity date typically precedes the date on which the
Portfolio will be liquidated. For details on Portfolio liquidation, see page 30.
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ZERO-COUPON SECURITIES
Zero-coupon U.S. Treasury securities are the unmatured interest coupons and
underlying principal portions of U.S. Treasury bonds. Originally, these
securities were created by broker-dealers who bought Treasury bonds and
deposited these securities with a custodian bank. The broker-dealers then sold
receipts representing ownership interests in the coupons or principal portions
of the bonds. Some examples of zero-coupon securities sold through custodial
receipt programs are CATS (Certificates of Accrual on Treasury Securities),
TIGRs (Treasury Investment Growth Receipts), and generic TRs (Treasury
Receipts).
The U.S. Treasury subsequently introduced a program called Separate Trading of
Registered Interest and Principal of Securities ("STRIPS"), through which it
exchanges eligible securities for their component parts and then allows the
component parts to trade in book-entry form. (Book-entry trading eliminates the
bank credit risks associated with broker-dealer-sponsored custodial receipt
programs.) STRIPS are direct obligations of the U.S. government and have the
same credit risks as other U.S. Treasury securities.
Principal and interest on bonds issued by the Resolution Funding Corporation
("REFCORP") have also been separated and issued as zero-coupon securities. The
U.S. government and its agencies may issue securities in zero-coupon form. These
securities are referred to as "original issue zero-coupon securities."
OTHER INVESTMENTS
As a Portfolio's target maturity year approaches, BMC may buy coupon-bearing
securities whose duration and price characteristics are similar to those of
aging zero-coupon securities. Towards the end of a Portfolio's target maturity
year and until the Portfolio is liquidated, the proceeds of maturing zero-coupon
securities are invested in U.S. Treasury bills.
13
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INVESTMENT PRACTICES
COUPON-BEARING U.S. TREASURY SECURITIES. U.S. Treasury bills, notes, and bonds
are direct obligations of the U.S. Treasury. Historically, they have involved no
risk of loss of principal if held to maturity. Between issuance and maturity,
however, the prices of these securities change in response to changes in market
interest rates. Coupon-bearing securities generate current interest payments,
and part of a Portfolio's return may come from reinvesting interest earned on
these securities.
REFCORP BONDS. REFCORP issues bonds whose interest payments are guaranteed by
the U.S. Treasury and whose principal amounts are secured by zero-coupon U.S.
Treasury securities held in a separate custodial account at the Federal Reserve
Bank of New York. The principal amount and maturity date of REFCORP bonds are
the same as the par amount and maturity date of the corresponding zeros; upon
maturity, REFCORP bonds are repaid from the proceeds of the zeros.
CASH MANAGEMENT
For cash management purposes, each Portfolio may invest up to 5% of its total
assets in any Benham money market fund, provided that the investment is
consistent with the Portfolio's investment policies and restrictions.
SECURITIES LENDING
The Portfolios may lend portfolio securities to broker-dealers to earn
additional income. This practice could result in a loss or a delay in recovering
the Fund's securities. Securities loans are subject to guidelines prescribed by
the board of trustees, which are set forth in the Statement of Additional
Information. Loans are limited to 331/3% of the Fund's total assets and are
fully collateralized.
PORTFOLIO TURNOVER RATES
To maximize total return, BMC expects to engage in regular trading on behalf of
the Portfolios. No brokerage commissions are incurred on these trades. However,
higher turnover rates can increase transaction costs and the incidence of
short-term capital gains or losses. The Portfolios' annual portfolio turnover
rates are not expected to exceed 150% and may vary from year to year. An annual
portfolio turnover rate of 100% or more is considered high.
14
<PAGE>
INVESTMENT CONSIDERATIONS
The Portfolios are designed for investors with long-term financial goals that
correspond to one or more of the target maturities offered. Investors who use
zeros or the Portfolios for short-term speculative purposes should understand
that, although most of the reinvestment risk associated with coupon-bearing
bonds has been eliminated, the prices of zeros can fluctuate dramatically
between issuance and maturity. When interest rates rise, the price of a zero
falls more sharply than the price of a coupon-bearing security of the same
maturity. Correspondingly, when interest rates fall, the price of a zero rises
more sharply than the price of a coupon-bearing security.
Each Portfolio's share price will fluctuate daily in response to portfolio
activity and changes in the market value of its investments. Due to the price
volatility of zeros, redemptions made prior to a Portfolio's target maturity
year may result in unanticipated capital gains or losses for the Portfolios.
These capital gains and losses will be distributed to shareholders regardless of
whether they have redeemed shares. Although shareholders have the option to
redeem shares on any business day, those seeking to minimize their exposure to
share price volatility should plan to hold their shares until the end of their
Portfolio's target maturity year.
Investing in a portfolio of zeros is different from investing directly in a
zero. Although BMC adheres to investment policies designed to assure close
correspondence between the price behavior of a Portfolio and that of a zero with
the same maturity characteristics, precise forecasts of maturity value and yield
to maturity are not possible.
PERFORMANCE
Mutual Fund performance is commonly expressed in terms of historical yield or
total return and may be quoted in advertising or sales literature. Past
performance is no guarantee of future results.
YIELD calculations show the rate of income a Portfolio earns on its investments
as a percentage of its share price. To calculate yield, a Portfolio takes the
interest it earned from its portfolio of investments for a 30-day period (net of
expenses), divides it by the average
- -------------------
[information in right margin of page]
The Portfolios are designed for investors with long-term financial goals that
correspond to one or more of the target maturities offered.
- -------------------
15
<PAGE>
- -------------------
[information in left margin of page]
Performance data and a discussion of factors that affected performance during a
Portfolio's most recent reporting period are included in the Trust's semiannual
and annual reports to shareholders.
- -------------------
number of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on the Portfolio's share price at the end of
the 30-day period.
EACH PORTFOLIO MAY QUOTE STATE TAX-EQUIVALENT YIELDS, which show the state
taxable yields an investor would have to earn before taxes to equal the
Portfolio's state tax-free yields. You can calculate your state tax-equivalent
yield for any state tax-free fund using the following equation:
Fund's State Tax-Free Yield = Your State Tax-
--------------------------- Equivalent Yield
100% - Your State Tax Rate
For example, if your state tax rate were 11% and the fund's state tax-free yield
were 5%, your calculation would be as follows:
.05
------- = .056 = 5.6%
1 - .11
In this example, your return would be higher from a state tax-free investment
yielding 5% if state taxable yields (on investments with comparable quality and
maturity characteristics) were below 5.6%. If only a portion of a Portfolio's
income were state tax-exempt, only that portion would be adjusted in the
calculation.
TOTAL RETURN represents the Portfolio's changes over a specified time period,
assuming reinvestment of dividends and capital gains, if any. CUMULATIVE TOTAL
RETURN illustrates a Portfolio's actual performance over a stated period of
time. AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that
illustrates the annually compounded return that would have produced the same
cumulative total return if the Portfolio's performance had been constant over
the entire period. Average annual total returns smooth out variations in a
Portfolio's return; they are not the same as year-by-year results.
Performance data and a discussion of factors that affected performance during a
Portfolio's most recent reporting period are included in the Trust's semiannual
and annual reports to shareholders. These reports are routinely delivered to the
Portfolios' shareholders. To receive a free copy, call one of the Fund
Information numbers listed on page 18.
16
<PAGE>
SHARE PRICE
The price of your shares is their net asset value ("NAV") next determined after
receipt of your instruction to purchase, convert or redeem. NAV is determined by
calculating the total value of a Fund's assets, deducting total liabilities and
dividing the result by the number of shares outstanding. NAV is determined on
each day that the New York Stock Exchange (the "Exchange") is open.
Investments and requests to redeem shares will receive the share price next
determined after receipt by Benham of the investment or redemption request. For
example, investments and requests to redeem shares received by Benham before the
close of business on the Exchange are effective on, and will receive the price
determined, that day as of the close of the Exchange. Redemption requests
received thereafter are effective on, and receive the price determined as of the
close of the Exchange on, the next day the Exchange is open.
Investments are considered received only when your check or wired funds are
received by Benham. Wired funds are considered received on the day they are
deposited in Benham's bank account if they are deposited before the close of
business on the Exchange, usually 1:00 p.m. Pacific Time.
Investment and transaction instructions recieved by Benham on any business day
by mail at its office prior to the close of business on the Exchange, usually
1:00 p.m. Pacific Time, will receive that day's price. Investments and
instructions received after that time, will receive the price deteremined on the
next business day.
17
<PAGE>
- -------------------
[information in left margin of page]
Overnight and special delivery mail (e.g., Federal Express, Express Mail,
Priority Mail) should be sent to our street address: 1665 Charleston Rd.
Mountain View California 94043. Failure to do so may result in transaction
delays.
- -------------------
HOW TO INVEST
To open an account, you must complete and sign an application. If an application
is not enclosed with this Prospectus, you may request one by calling one of the
Fund Information numbers listed below. If you prefer, we will fill out your
application over the telephone and mail it to you for your signature. Separate
forms are required to establish Benham-Sponsored Retirement Plan accounts (see
pages 28 and 29).
Your investment will be credited to your account at the next NAV calculated
after The Benham Group or an authorized subtransfer agent receives and accepts
your order. Payment of redemption proceeds may be delayed until we have your
completed application on file and your investment matures (i.e. clears). See
page 25 for details.
Benham Group Representatives are available at the telephone numbers listed below
weekdays from 5:00 a.m. to 5:00 p.m. Pacific Time. For your protection, Benham
records all telephone conversations with its telephone representatives.
FUND INFORMATION: for information about any Benham fund or other investment
product, call 1-800-331-8331 or 1-415-965-4274.
INVESTOR SERVICES: to open an account, receive a Prospectus or Statement of
Additional Information for a Benham fund or make transactions in an existing
account, call 1-800-321-8321 or 1-415-965-4222.
Benham shareholders may make transactions and obtain prices, yields, and total
return information for all Benham funds with TeleServ, our 24-hour automated
telephone information service. Dial 1-800-321-8321 and press 1.
18
<PAGE>
HOW TO BUY SHARES (Retirement investors, see pages 28 and 29).
================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------
BY CHECK Minimum initial investment: $1,000
Minimum additional investment: $100
MAKE YOUR INVESTMENT CHECK PAYABLE TO THE BENHAM GROUP. Mail
the check with your completed application to
The Benham Group
P.O. Box 7730
San Francisco, California 94120-9853
FOR ADDITIONAL INVESTMENTS, enclose an investment slip
preprinted with the account number to which your investment
should be credited. If the payee information provided on the
check does not agree with the information preprinted on the
investment slip, we will follow the instructions preprinted on
the slip.
If you do not have a preprinted investment slip, send your
check with separate written instructions indicating the fund
name and the account number. If the payee information provided
on the check does not agree with the written instructions, we
will follow the written instructions.
You may also invest your check in person at a Benham Investor
Center. One is located at 1665 Charleston Road in Mountain
View, California; the other is located at 2000 South Colorado
Boulevard, Suite 1000, in Denver, Colorado.
WE WILL NOT ACCEPT CASH INVESTMENTS OR THIRD-PARTY CHECKS. We
will, however, accept properly endorsed second-party checks
made payable to the investor(s) to whose account the investment
is to be credited.
We will also accept checks drawn on foreign banks or foreign
branches of domestic banks and checks that are not drawn in
U.S. dollars (U.S. $100 minimum). The cost of collecting
payment on such checks will be passed on to the investor. These
costs may be substantial, and settlement may involve
considerable delays.
Investors will be charged $5 for every investment check
returned unpaid.
19
<PAGE>
================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------
BY BANK WIRE Minimum initial investment: $25,000
Minimum additional investment: $100
If you wish to OPEN AN ACCOUNT BY BANK WIRE, please call our
Investor Services Department for more information and an
account number. Bank wire investments should be addressed as
follows:
State Street Bank and Trust Company
Boston, Massachusetts
ABA Routing Number 011000028
Beneficiary = Benham Target Maturities Trust: [Name of
Portfolio]
AC [State Street Portfolio Account Number]
FBO [Your Name, Your Target Portfolio Account Number]
Portfolio Names and State Street Portfolio Account Numbers:
2000 Portfolio..........................0505 933 2
2005 Portfolio..........................0505 934 0
2010 Portfolio..........................0505 935 7
2015 Portfolio..........................0505 936 5
2020 Portfolio..........................0505 937 3
2025 Portfolio..........................0506 094 2
- --------------------------------------------------------------------------------
BY EXCHANGE Minimum initial investment: $1,000
Minimum additional investment: $100
You may exchange your shares for shares of any other Benham
fund registered for sale in your state if you have received the
fund's prospectus. Exchanges may be made by telephone (for
identically registered accounts only), by written request, or
in person. Certain restrictions apply; please see page 22 for
details. You may open a new account by exchange, provided that
you meet the minimum initial investment requirement.
- --------------------------------------------------------------------------------
AUTOMATIC Minimum: $25
INVESTMENT
SERVICES These services are offered with respect to additional
investments only. See details on page 23.
20
<PAGE>
PROCESSING YOUR PURCHASE
Shares will be purchased at the next NAV calculated after your investment is
received and accepted by The Benham Group or an authorized subtransfer agent. An
investment received and accepted before the close of business of the Exchange,
normally 1:00 p.m. Pacific Time, will be included in your account balance the
same day. If the investment is received after the close of business of the
Exchange, usually 1:00 Pacific Time, they will be credited the following
business day. The Funds reserve the right to refuse any investment.
TELEPHONE TRANSACTIONS
Shareholders may order certain transactions (e.g., exchanges, wires, some types
of redemptions) by telephone. This privilege is granted to Benham fund
shareholders automatically; you need not specifically request this service, and
you may not specifically decline it. ONCE YOUR TELEPHONE ORDER HAS BEEN PLACED,
IT MAY NOT BE MODIFIED OR CANCELLED.
The Benham Group will not be liable for losses resulting from unauthorized or
fraudulent instructions if it follows procedures designed to verify the caller's
identity. BMC will request personal identification, record telephone calls, and
send confirmation statements for every telephone transaction to the
shareholder's record address. The Portfolios reserve the right to revise or
terminate telephone transaction privileges at any time.
CONFIRMATION AND QUARTERLY STATEMENTS
All transactions are summarized on quarterly account statements. In addition,
for every transaction that you request, a confirmation statement will be mailed
to your record address. Please review these statements carefully. If you believe
we have processed the transaction you requested incorrectly, please notify us as
soon as possible. If you fail to notify us of an error with reasonable
promptness, i.e., within 30 days of the date of your confirmation statement, we
will deem you to have ratified the transaction.
21
<PAGE>
- -------------------
[information in left margin of page]
The free exchange privilege is a convenient way to buy shares in other Benham
funds if your investment goals change.
Benham Open Orders allow investors to utilize a "buy low, sell high" investment
strategy.
- -------------------
ACCOUNT SERVICES
EXCHANGE PRIVILEGE
You may exchange your shares for shares of equivalent value in any other Benham
fund registered for sale in your state. An exchange request will be processed
the same day if it is received before the funds' NAVs are calculated, which is
one hour prior to the close of the Exchange, usually 12:00 p.m. Pacific Time for
Benham Target Maturities Trust; and at the close of the Exchange, usually 1:00
p.m. Pacific Time, for all other Benham funds.
The Benham Group discourages trading in response to short-term market
fluctuations. Such activity may interfere with BMC's ability to invest the
funds' assets in accordance with their respective investment objectives and
policies and may be disadvantageous to other shareholders. In addition, an
exchange out of variable-price funds generally will generate taxable gains or
losses to the shareholder. More than six exchanges per calendar year out of a
variable-price fund may be deemed an abuse of the exchange privilege. For
purposes of determining the number of exchanges made, accounts under common
ownership or control will be aggregated.
Each Benham fund reserves the right to modify or revoke the exchange privilege
of any shareholder or to limit or reject any exchange. Although each fund will
attempt to give shareholders prior notice whenever it is reasonably able to do
so, it may impose these restrictions at any time.
OPEN ORDER SERVICE
The Benham Group's Open Order Service allows you to designate a price at which
to buy or sell shares of a variable-price fund by exchange from a money market
fund. To place a "buy" order, you designate a purchase price that is equal to or
lower than the current NAV. To place a "sell" order, designate a sales price
that is equal to or higher than the current NAV. If the designated price is met
within 90 calendar days, we will automatically execute your order. If you are
buying shares of a variable-price fund, we will exchange money from your money
market account to purchase them. If you are selling shares of a variable-price
fund, we will transfer
22
<PAGE>
the proceeds of that sale to your money market account. If you do not have a
money market account, we will open one for you when we execute your Open Order.
If the fund you have selected deducts a distribution from its share price, your
order price will be adjusted accordingly so that the distribution does not
inadvertently trigger an Open Order transaction on your behalf. If you close or
reregister the account from which shares are to be redeemed, your Open Order
will be canceled. Because of their time-sensitive nature, Open Order
transactions may only be made by telephone or in person. All orders and
cancellation of orders received by one hour prior to the close of the Exchange,
usually 12:00 p.m. Pacific Time, will be considered to be effective the same
day. All orders and cancellation of orders not received one hour prior to the
close of the Exchange, usually 12:00 p.m. Pacific Time, will be considered
effective the following business day.
AUTOMATIC INVESTMENT SERVICES (AIS)
TREASURY DIRECT allows you to deposit interest and principal payments from
Treasury securities directly into a Benham fund account.
PAYROLL DIRECT allows you to deposit any amount of your paycheck directly into a
Benham fund account.
GOVERNMENT DIRECT allows you to deposit your entire U.S. government payment
directly into a Benham fund account.
BANK DIRECT allows you to deposit a fixed amount from your bank account directly
into a Benham fund account on the 1st and/or the 15th of each month (or the next
business day).
DIRECTED DIVIDENDS allow you to invest all or part of your dividend earnings
from one Benham fund account in one or more other Benham fund accounts. You may
choose to receive a portion of your dividends in cash and to invest the
remainder in another Benham fund account.
SYSTEMATIC EXCHANGES allow you to exchange from one Benham fund account to
another Benham fund account on the 1st and/or the 15th of each month (or the
next business day).
23
<PAGE>
- -------------------
[information in left margin of page]
Yo may redeem shares without charge.
- -------------------
For more information about any of these services, call our Investor Services
Department at 1-800-321-8321 or 1-415-965-4222.
BROKER-DEALER TRANSACTIONS
The Benham Group charges no sales commissions, or "loads" of any kind. However,
investors may purchase and sell shares through registered broker-dealers and
other qualified institutions, who may charge fees for their services.
The Benham Group will accept orders for the purchase of shares from such
institutions who agree in writing to pay in full for such shares in immediately
available funds no later than 1:00 p.m. Pacific Time the following business day.
TDD SERVICE FOR THE HEARING IMPAIRED
TDD users may contact The Benham Group at 1-800-624-6338 or 1-415-965-4764.
California residents may wish to contact us through the California Relay Service
("CRS") at 1-800-735-2929.
Your transaction requests via CRS will be handled on a recorded line. The Benham
Group cannot accept responsibility for instructions miscommunicated by CRS.
EMERGENCY SERVICES
The Benham Group has established an alternate operations site from which we can
access customer accounts and the mainframe computers used by the Benham funds in
the event of an emergency. Telephone lines and terminals are currently in place.
If our regular service is interrupted, the following numbers will automatically
connect you to this site.
From within the U.S., including Alaska and Hawaii: 1-800-321-8321.
From all foreign countries, call collect: 1-303-759-9337 or 1-510-820-1409. The
operator will request your Benham fund account number before accepting the call.
HOW TO REDEEM YOUR INVESTMENT
When you place an order to redeem shares, your shares will be redeemed at the
next NAV calculated after The Benham Group or an authorized subtransfer agent
has received your redemption request. The Portfolios' NAVs
24
<PAGE>
are normally calculated at the close of business of the Exchange, usually 1:00
p.m. Pacific Time. See page 26 for details.
Barring extraordinary circumstances prescribed by law, redemption proceeds are
mailed within seven calendar days. However, The Benham Group reserves the right
to withhold the proceeds until the investment has matured (i.e., your payment
has cleared); see maturity periods below.
================================================================================
DRAWN FROM A MATURITY PERIOD
TYPE OF INVESTMENT CALIFORNIA BANK? (IN BUSINESS DAYS)
- --------------------------------------------------------------------------------
Checks, cashiers' checks,
and bank money orders Yes 5 days
- --------------------------------------------------------------------------------
Same as above No 8 days
- --------------------------------------------------------------------------------
U.S. Treasury checks,
Traveler's checks,
U.S. Postal money orders,
Benham checks, bank wires,
and AIS Deposits* N/A 1 day
*Does not include bank direct deposits, which take 8 business days to mature.
================================================================================
If you hold shares in certificate form, redemption requests must be accompanied
by properly endorsed certificates.
If you want to keep your account open, please maintain a balance of shares worth
at least $1,000. If your account balance falls to less than $1,000 due to
redemption, your account may be closed, but not without at least 30 days' notice
and an opportunity to increase your account balance to the $1,000 minimum. Your
shares will be redeemed at the NAV calculated on the day your account is closed.
Proceeds will be mailed to the record address.
This policy applies to Benham's Individual Retirement Accounts (IRAs), excluding
SEP-IRAs, except that shareholders will receive at least 120 days' written
notice and an opportunity to increase their account balance before their
accounts are closed. Investors wishing to open a Benham-Sponsored Retirement
Plan account should see pages 28 and 29 for details.
UNCASHED CHECKS
We may reinvest at the Portfolio's current NAV any distribution or redemption
check that remains uncashed for six months. Until we receive instructions to the
contrary, subsequent distributions will be reinvested in the original account.
Uncashed redemption checks may be reinvested in an identically registered
account if the original account is closed.
25
<PAGE>
HOW TO REDEEM SHARES (Retirement investors, see pages 28 and 29).
================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------
BY TELEPHONE The Benham Group will accept telephone redemption requests for
any amount if the proceeds are to be sent to your
predesignated bank account. Redemptions of $25,000 or less
payable to the registered account owner(s) may also be ordered
by telephone. All other redemption requests must be made in
writing. ONCE YOUR TELEPHONE ORDER HAS BEEN PLACED, IT MAY NOT
BE MODIFIED OR CANCELLED.
- --------------------------------------------------------------------------------
IN WRITING Send a letter of instruction to
The Benham Group
Investor Services Department
1665 Charleston Road
Mountain View, California 94043
Your letter of instruction should specify
* Your name
* Your account number
* The name of the Fund from which you wish to redeem shares
* The dollar amount or number of shares you wish to redeem
For your protection, written redemption requests must be
accompanied by SIGNATURE GUARANTEES under the following
circumstances
* Redemption proceeds go to a party other than the registered
account owner(s)
* Redemption proceeds go to an account other than your
predesignated bank account
* Redemption proceeds go to the registered account owner(s),
but the amount exceeds $25,000
If you have instructed The Benham Group to require more than
one signature on written redemption requests, each of the
required number of signers must have his or her signature
guaranteed on the redemption requests. Signature guarantees
may be provided by banks, savings and loan associations,
savings banks, credit unions, stock brokerage firms, or a
Benham Investor Center.
26
<PAGE>
================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------
IN WRITING Shareholders must appear in person with identification to
(continued) obtain a signature guarantee. Notary public certifications are
not accepted in lieu of signature guarantees.
BFS may require written consent of all account owners prior to
acting on the written instructions of any account owner.
- --------------------------------------------------------------------------------
BY BANK WIRE If you included bank wire information on your account
application or made subsequent arrangements to accommodate
bank wire redemptions, you may wire funds to your bank by
calling 1-800-321-8321 or 1-415-965-4222. The minimum amount
for a bank wire redemption is $1,000. Allow at least two
business days for redemption proceeds to be credited to your
bank account.
- --------------------------------------------------------------------------------
BY EXCHANGE See details on page 22.
- --------------------------------------------------------------------------------
AUTOMATIC DIRECTED PAYMENTS. You may arrange for periodic redemp-
REDEMPTION tions from your Benham fund account to your bank account or to
SERVICES another designated payee.
SYSTEMATIC EXCHANGES. You may arrange for periodic exchange
redemptions from one Benham fund account to another Benham
fund account.
27
<PAGE>
ABOUT BENHAM-SPONSORED RETIREMENT PLANS
Retirement plans offer investors a number of benefits, including the chance to
reduce current taxable income and to take advantage of tax-deferred compounding.
Retirement plan accounts require a special application; please let our Investor
Services Department know if you want to establish this type of account. We
suggest that you consult your tax advisor before establishing a retirement plan
account. The minimum account balance for all Benham Individual Retirement
Accounts (IRAs), excluding SEP-IRAs, is $1,000. If your balance falls below the
$1,000 per fund account
================================================================================
PLAN TYPE AVAILABLE TO MAXIMUM ANNUAL CONTRIBUTION
PER PARTICIPANT
- --------------------------------------------------------------------------------
Contributory An employed indi- $2,000 or 100% of compensation
IRA vidual under age 70 1/2. (whichever is less).
- --------------------------------------------------------------------------------
Spousal IRA A nonworking spouse $2,250 (can be split between
(under age 70 1/2) of a Spousal and Contributory IRAs,
wage earner. provided that no IRA receives
more than a total of $2,000).
- --------------------------------------------------------------------------------
Rollover IRA An individual with a None, as long as total amount is
distribution from an eligible.
employer's retirement
plan or a rollover IRA.
- --------------------------------------------------------------------------------
SEP-IRA A self-employed indi- $22,500 or 15% of compensation
vidual or a business. (whichever is less).*
- --------------------------------------------------------------------------------
Money Same as for SEP-IRA. $30,000 or 25% of compensation
Purchase Plan (whichever is less). Annual
(Keogh) contribution is mandatory.*
- --------------------------------------------------------------------------------
Profit Same as for SEP-IRA. $22,500 or 15% of compensation
Sharing Plan (whichever is less). Annual
(Keogh) contribution is optional.*
- --------------------------------------------------------------------------------
* Self-employed individuals should consult IRS Publication 560 for their annual
contribution limits.
28
<PAGE>
minimum, your account may be closed (see page 25 for details). This distribution
may result in a taxable event and a possible penalty for early withdrawal. The
minimum fund account balance for all other Benham-Sponsored Retirement Plan
accounts is $100. Benham charges no fees for its IRAs but does charge low
maintenance fees for its Keoghs.
YOU MUST COMPLETE SPECIFIC FORMS TO TAKE DISTRIBUTIONS (I.E., REDEEM SHARES)
FROM A BENHAM-SPONSORED RETIREMENT PLAN ACCOUNT. PLEASE CALL OUR INVESTOR
SERVICES DEPARTMENT AT 1-800-321-8321 FOR ASSISTANCE.
================================================================================
DEADLINE FOR
OPENING ACCOUNT CONTRIBUTION DEADLINES
- --------------------------------------------------------------------------------
You may open an account anytime, Annual contributions can be made
but the deadline for establishing from January 1 through April 15 of
and funding an IRA for the prior the following tax year up to the
tax year is April 15. year you turn age 70 1/2.
- --------------------------------------------------------------------------------
Same as for Contributory IRA. Same as for Contributory IRA.
- --------------------------------------------------------------------------------
You may open a Rollover IRA Eligible rollover contributions must
anytime. be made within 60 days of receiv-
ing your distribution. There is no
age limit on rollover contributions.
- --------------------------------------------------------------------------------
You may open an account anytime, Must be made by employer's tax
but the deadline for establishing and filing deadline (including
funding an account for the prior tax extensions).
year is the employer's tax deadline
(including extensions).
- --------------------------------------------------------------------------------
The end of the employer's plan Same as for SEP-IRA.
year, usually December 31.
- --------------------------------------------------------------------------------
The end of the employer's plan Same as for SEP-IRA.
year, usually December 31.
- --------------------------------------------------------------------------------
For all Benham-Sponsored Retirement Plans, you may begin taking distributions at
age 59 1/2. You must begin to take required distributions by April 1 of the year
after you turn age 70 1/2. You may take distributions from your IRA or SEP-IRA
before you reach age 59 1/2; however, a penalty may apply.
29
<PAGE>
- -------------------
[information in left margin of page]
Each January, you will e informed of the tax status of dividends and capital
gain distributions for the previous year.
- -------------------
DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Typically, each Portfolio declares an ordinary income dividend (and a capital
gain distribution, if necessary) in December.
REVERSE SHARE SPLITS
At the same time that the Portfolios' annual dividends (and capital gain
distributions, if any) are declared, the board of trustees also declares a
reverse share split for each Portfolio that exactly offsets the per-share amount
of the Portfolio's dividends (and capital gain distributions).
Following a reverse share split, shareholders who have chosen to reinvest
dividends and capital gain distributions own exactly the same number of shares
they owned prior to the distribution and reverse share split. Shareholders who
have elected to take distributions in cash own fewer shares. Reverse share
splits cause the Portfolios' share prices to behave similarly to the prices of
directly held zero-coupon securities with comparable maturity characteristics.
Although the trustees intend to declare a reverse share split each time a
dividend or capital gain distribution is declared, they reserve the right not to
do so.
DISTRIBUTION OPTIONS. You may choose to receive dividends and capital gain
distributions in cash or to reinvest them in additional shares (see "Directed
Dividends" on page 23 for further information). Please indicate your choice on
your account application or contact our Investor Services Department. See page
25 for a description of our policy regarding uncashed distribution checks.
PORTFOLIO LIQUIDATION
During a Portfolio's target maturity year, shareholders will be asked if they
wish to receive payment of the liquidation proceeds in cash or to exchange their
shares for those of another Benham fund or another Portfolio. If the Trust has
not received instructions by December 31 of the Portfolio's target maturity
year, shares will be exchanged for shares of Capital Preservation Fund ("CPF")
or, if CPF is not available, for shares of a similar Fund offered by The Benham
Group.
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TAXES
Each Portfolio intends to qualify and elect to be treated annually as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986 (the "Code"), as amended, by distributing all, or substantially all of its
net investment income and net realized capital gains to shareholders each year.
Zero-coupon securities purchased by the Portfolios accrue interest (commonly
referred to as "imputed income") for federal income tax purposes even though
zeros do not pay current interest. The Portfolios must distribute this imputed
income to shareholders as ordinary income dividends, which are subject to
federal taxes but exempt from state taxes.
CAPITAL GAINS. Under certain circumstances, a Portfolio may realize a capital
gain by selling its holdings for a net profit. In addition to trading securities
for regular portfolio management purposes, BMC may be forced to sell portfolio
holdings to raise cash. For example, if a Portfolio's daily redemptions exceed
the inflow of cash, BMC may need to sell a portion of portfolio holdings to make
up the difference. Similarly, BMC may sell portfolio holdings to increase
available cash if a Portfolio is required to pay dividends greater than the
amount of cash, interest, and other income it received during a given year.
Gains realized upon the sale of appreciated securities generally are distributed
to shareholders as taxable capital gains in December, regardless of when shares
were purchased. Because of this, even if rising interest rates cause a decline
in the value of an investment in a Portfolio, you could still receive a capital
gain distribution on securities sold by the Portfolio during that year.
The Portfolios' dividends and capital gain distributions are subject to federal
income tax whether they are received in cash or reinvested in additional shares.
Dividends from net investment income (including net short-term capital gains)
are taxable as ordinary income. Distributions of net long-term capital gains, if
any, are taxable as long-term capital gains, regardless of how long you have
held your shares. Portfolio distributions do not qualify for the
dividends-received deduction available to corporations.
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STATE TAXES. The Portfolios' dividend distributions are exempt from state taxes.
Capital gain distributions, however, are generally subject to state and local
taxes. Some states and localities apply an intangibles tax on shares owned
rather than taxing dividends received. Tax laws vary from state to state; you
may wish to consult your tax advisor or state or local tax authorities regarding
the tax status of distributions from the Portfolios.
BUYING A DIVIDEND. The timing of your investment could have undesirable tax
consequences. If you open a new account or buy more shares for your current
account just before the day a dividend or distribution is reflected in your
Fund's share price, you will receive a portion of your investment back as a
taxable dividend or distribution.
BACKUP WITHHOLDING. The Portfolios are required by federal law to withhold 31%
of reportable dividends and capital gain distribution or redemptions payable to
shareholders who have not complied with IRS regulations. These regulations
require you to certify on your account application or on IRS Form W-9 that your
social security or taxpayer identification number (TIN) is correct and that you
are not subject to backup withholding from previous underreporting to the IRS,
or that you are exempt from backup withholding.
The Benham Group may refuse to sell shares to investors who have not complied
with the certification requirement, either before or at the time of purchase.
Until we receive your certified TIN, we may redeem your shares at any time.
MANAGEMENT INFORMATION
ABOUT THE TRUST
Benham Target Maturities Trust is a registered open-end management investment
company that was organized as a Massachusetts business trust on November 8,
1984. The Trust consists of six series, as described in this prospectus;
additional series may be created from time to time.
A board of trustees oversees the Portfolios' activities and is responsible for
protecting shareholders' interests in the Portfolios. The Trust is neither
required nor expected to hold annual meetings, although special meetings may be
called for purposes such as electing or removing trustees
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or amending a Portfolio's advisory agreement or investment policies. The number
of votes you are entitled to is based upon the dollar value of your investment.
Each Portfolio votes separately on matters that pertain to it exclusively.
Voting rights are not cumulative.
THE BENHAM GROUP
BMC is investment advisor to the funds in The Benham Group, which currently
constitute more than $12 billion in assets. BMC, incorporated in California in
1971, became a wholly owned subsidiary of Twentieth Century Companies, Inc.
(TCC), a Delaware corporation, on June 1, 1995, upon the merger of Benham
Management International, Inc., BMC's former parent, into TCC. TCC is a holding
company that owns the operating companies that provide the investment
management, transfer agency, shareholder service, and other services for the
Twentieth Century family of funds, which now includes The Benham Group. The
combined company offers 62 mutual funds and as of January 22, 1996, has combined
assets under management in excess of $46 billion.
BMC supervises and manages the investment portfolios of The Benham Group and
directs the purchase and sale of its investment securities. BMC utilizes teams
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the portfolios. The teams meet regularly to review
portfolio holdings and to discuss purchase and sale activity. The teams adjust
holdings in the funds' portfolios deemed appropriate in pursuit of the funds'
investment objectives. Individual portfolio manager members of the team may also
adjust portfolio holdings of the funds as necessary between team meetings.
The portfolio manager member of the team managing the funds described in this
prospectus and their work experience for the last five years is as follows:
DAVID SCHROEDER is a Vice President for Benham Management Corporation. He
manages Benham Target Maturities Trust, Treasury Note Fund and the Short-Term
and Long-Term Treasury and Agency Funds. Mr. Schroeder joined Benham in 1990,
and prior to that was a Vice President and Proprietary Trader with Pacific
Securities in San Francisco, from 1988-1990. Mr. Schroeder has a Bachelor of
Arts degree from Pomona College.
- -------------------
[information in right margin of page]
The Benham Group serves more than 350,000 investors.
Benham Management Corporation provides investment advice and portfolio
management services to the Funds.
- -------------------
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- -------------------
[information in left margin of page]
Benham Financial Services, Inc. provides administrative and transfer agent
services to the Portfolios.
- -------------------
BMC has adopted a Code of Ethics (the "Code"), which restricts personal
investing practices. Among other provisions, the Code requires that employees
with access to information about the purchase and sale of securities in the
funds' portfolios obtain preclearance before executing personal trades. With
respect to portfolio managers and other investment personnel, the Code prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage the funds.
ADVISORY AND SERVICE FEES
For investment advice and portfolio management services, each Portfolio pays BMC
a monthly investment advisory fee equal to its pro rata share of the dollar
amount derived from applying the Trust's average daily net assets to an
investment advisory fee schedule.
The investment advisory fee rate cannot exceed .35% of average daily net assets,
and it drops to a marginal rate of .19% of average daily net assets as Trust
assets increase.
The following table illustrates investment advisory fees paid by the Portfolios
for the fiscal year ended September 30, 1995. For each Portfolio, the figures
shown represent investment advisory fees as a percentage of the Portfolio's
average daily net assets and as a dollar amount per $1,000 of the Portfolio's
average daily net assets.
INVESTMENT ADVISORY FEES*
2000 Portfolio .35 3.50
2005 Portfolio .34 3.40
2010 Portfolio .26 2.60
2015 Portfolio .30 3.00
2020 Portfolio .22 2.20
* Net of expense limitation as described on page 3.
To avoid duplicative investment advisory fees, the Portfolios do not pay BMC
investment advisory fees with respect to assets invested in shares of money
market funds advised by BMC.
BFS, a wholly owned subsidiary of TCC, is the Funds'
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agent for transfer and administrative services. For administrative services,
each Portfolio pays BFS a monthly fee equal to its pro rata share of the dollar
amount derived from applying the average daily net assets of all of the funds in
The Benham Group. The administrative fee rate ranges from .11% to .08% of
average daily net assets, dropping as Benham Group assets increase. For transfer
agent services, each Portfolio pays BFS a monthly fee for each shareholder
account maintained and for each shareholder transaction executed during that
month.
Each Portfolio pays certain operating expenses directly, including but not
limited to: custodian, audit, and legal fees; fees of the independent trustees;
costs of printing and mailing prospectuses, statements of additional
information, proxy statements, notices, and reports to shareholders; insurance
expenses; and costs of registering the Funds' shares for sale under federal and
state securities laws. See the Statement of Additional Information for a more
detailed discussion of independent trustee compensation.
EXPENSE LIMITATION AGREEMENT
An expense limitation agreement between BMC and the Portfolios is described on
page 3.
The following table illustrates each Portfolio's total operating expenses for
the fiscal year ended September 30, 1995, as a percentage of the Portfolio's
average daily net assets and as a dollar amount per $1000 of the Portfolio's
average daily net assets.
TOTAL OPERATING EXPENSES*
2000 Portfolio .63% $6.30
2005 Portfolio .71 7.10
2010 Portfolio .71 7.10
2015 Portfolio .71 7.10
2020 Portfolio .72 7.20
* Net of expense limitation as described on page 3.
In compliance with rules promulgated by the SEC, the total operating expenses
include amounts paid by third parties under expense offset arrangements with the
Portfolios.
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DISTRIBUTION OF SHARES
Benham Distributors, Inc. (BDI), and BMC distribute and market Benham products
and services. BMC pays all expenses for promoting sales of and distributing the
Portfolios' shares. The Portfolios do not pay commissions to, or receive
compensation from, broker-dealers.
BDI is a wholly owned subsidiary of TCC.
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INVESTMENT ADVISOR
BENHAM MANAGEMENT CORPORATION
1665 Charleston Road
Mountain View, California 94043
DISTRIBUTOR
BENHAM DISTRIBUTORS, INC.
1665 Charleston Road
Mountain View, California 94043
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, Massachusetts 02101
TRANSFER AGENT
BENHAM FINANCIAL SERVICES, INC.
1665 Charleston Road
Mountain View, California 94043
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
3 Embarcadero Center
San Francisco, California 94111
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
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THE BENHAM GROUP OF INVESTMENT COMPANIES
Capital Preservation Fund
Capital Preservation Fund II
Benham Government Agency Fund
Benham Prime Money Market Fund
Benham Short-Term Treasury and Agency Fund
Benham Treasury Note Fund
Benham Long-Term Treasury and Agency Fund
Benham Adjustable Rate Government Securities Fund
Benham GNMA Income Fund
Benham Target Maturities Trust
Benham California Tax-Free and Municipal Funds*
Benham National Tax-Free Money Market Fund
Benham National Tax-Free Intermediate-Term Fund
Benham National Tax-Free Long-Term Fund
Benham Florida Municipal Money Market Fund**
Benham Florida Municipal Intermediate-Term Fund**
Benham Arizona Municipal Intermediate-Term Fund***
Benham Global Gold Fund
Benham Income & Growth Fund
Benham Equity Growth Fund
Benham Utilities Income Fund
Benham Global Natural Resources Index Fund
Benham European Government Bond Fund
Benham Capital Manager Fund
* Available only to residents of California, Arizona, Colorado, Hawaii, Nevada,
New Mexico, Oregon, Texas, Utah, and Washington.
** Available only to residents of Florida, California, Georgia, Illinois,
Michigan, New Jersey, New York, and Pennsylvania.
***Available only to residents of Arizona, California, Colorado, Nevada, Oregon,
Washington, and Texas.
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CONTENTS
Summary of Portfolio Expenses ............. 3
Financial Highlights ...................... 5
Investment Objectives ..................... 11
Investment Policies ....................... 11
Investment Considerations ................. 15
Performance ............................... 15
Share Price ............................... 17
How to Invest ............................. 18
Account Services .......................... 22
Exchange Privilege ..................... 22
Open Order Service ..................... 22
Automatic Investment Services .......... 23
Broker-Dealer Transactions ............. 24
TDD Service ............................ 24
Emergency Services ..................... 24
How to Redeem Your Investment ............. 24
About Benham-Sponsored Retirement Plans ... 28
Distributions ............................. 30
Dividends and Capital Gain Distributions 30
Reverse Share Splits ................... 30
Distribution Options ................... 30
Portfolio Liquidation .................. 30
Taxes ..................................... 31
Capital Gains .......................... 31
State Taxes ............................ 32
Buying a Dividend ...................... 32
Backup Withholding ..................... 32
Management Information .................... 32
About the Trust ........................ 32
The Benham Group ....................... 33
Advisory and Service Fees .............. 34
Expense Limitation Agreement ........... 35
Distribution of Shares ................. 36
<PAGE>
BENHAM TARGET MATURITIES TRUST
2000 PORTFOLIO
2005 PORTFOLIO
2010 PORTFOLIO
2015 PORTFOLIO
2020 PORTFOLIO
2025 PORTFOLIO
THE BENHAM GROUP (R)
1665 Charleston Road
Mountain View, California 94043
Investor Services: 1-800-321-8321 or 1-415-965-4222
Fund Information: 1-800-331-8331 or 1-415-965-4274
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 29, 1995
(REVISED FEBRUARY 15, 1996)
This Statement is not a prospectus, but should be read in conjunction with the
Trust's current Prospectus dated November 29, 1995. The Trust's Annual Report
for the fiscal year ended September 30, 1995, is incorporated herein by
reference. To obtain a copy of the Prospectus or the Annual Report, call or
write The Benham Group.
TABLE OF CONTENTS
Page
----
Investment Policies and Techniques ........... 2
Investment Restrictions ...................... 2
Portfolio Transactions ....................... 4
Valuation of Portfolio Securities ............ 5
Predictability of Return ..................... 6
Performance .................................. 8
Taxes ........................................ 10
About the Trust .............................. 11
Trustees and Officers ........................ 12
Investment Advisory Services ................. 14
Administrative and Transfer Agent Services ... 15
Direct Portfolio Expenses .................... 16
Expense Limitation Agreement ................. 16
Additional Purchase and Redemption Information 17
Other Information ............................ 18
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INVESTMENT POLICIES AND TECHNIQUES
The following paragraphs provide a more detailed description of the securities
and investment practices identified in the Prospectus. Unless otherwise noted,
the policies described in this Statement of Additional Information are not
fundamental and may be changed by the board of trustees.
LOANS OF PORTFOLIO SECURITIES
Each Portfolio may lend its portfolio securities to earn additional income. If a
borrower defaults on a securities loan, the lending Portfolio could experience
delays in recovering the securities it loaned; if the value of the loaned
securities increased in the meantime, the Portfolio could suffer a loss. To
minimize the risk of default on securities loans, Benham Management Corporation
(BMC) adheres to the following guidelines established by the board of trustees:
TYPE AND AMOUNT OF COLLATERAL. At the time a loan is made, the Portfolio must
receive, from or on behalf of a borrower, collateral consisting of any
combination of cash and full faith and credit U.S. government securities equal
to not less than 102% of the market value of the securities loaned. Cash
collateral received by a Portfolio in connection with loans of portfolio
securities may be commingled by the Portfolio's custodian with other cash and
marketable securities, provided that the loan agreement expressly allows such
commingling.
ADDITIONS TO COLLATERAL. Collateral must be marked to market daily, and the
borrower must agree to add to collateral to the extent necessary to maintain the
102% level specified in guideline (1) above. The borrower must deposit
additional collateral not later than the business day following the business day
on which a collateral deficiency occurs or collateral appears to be inadequate.
TERMINATION OF LOAN. The Portfolio must have the ability to terminate a loan of
portfolio securities at any time. The borrower must be obligated to redeliver
the borrowed securities within the normal settlement period following receipt of
the termination notice. The normal settlement period for U.S. government
securities is two trading days.
REASONABLE RETURN ON LOAN. The borrower must agree that the Portfolio (a) will
receive all dividends, interest, or other distributions on loaned securities and
(b) will be paid a reasonable return on such loans either in the form of a loan
fee or premium or from the retention by the Portfolio of part or all of the
earnings and profits realized from the investment of cash collateral in full
faith and credit U.S. government securities.
LIMITATIONS ON PERCENTAGE OF PORTFOLIO ASSETS ON LOAN. A Portfolio's loans may
not exceed 33 % of its total assets.
CREDIT ANALYSIS. As part of the regular monitoring procedures it follows to
evaluate banks and broker-dealers in connection with, for example, repurchase
agreements and municipal securities credit issues, BMC, the Portfolios'
investment advisor, analyzes and monitors the creditworthiness of all borrowers
with whom securities lending agreements are contemplated or entered into.
INVESTMENT RESTRICTIONS
The Portfolios' investment restrictions set forth below are fundamental and may
not be changed without approval of a majority of the outstanding votes of
shareholders of the Portfolio as determined in accordance with the Investment
Company Act of 1940 (the "1940 Act").
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EACH PORTFOLIO MAY NOT
(1) Purchase the securities of any issuer (other than obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities) if,
as a result, (a) more than 5% of the value of its total assets would be
invested in the securities of that issuer, or (b) the Portfolio would hold
more than 10% of the outstanding voting securities of that issuer.
(2) Purchase the securities of any issuer (other than obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities) if,
as a result, 25% or more of the value of its total assets would be invested
in securities of issuers having their principal business activities in the
same industry.
(3) Purchase the securities of any issuer (other than obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities) if,
as a result, more than 5% of the value of its total assets would be
invested in the securities (taken at cost) of issuers which, at the time of
purchase, had been in operation less than three years, including
predecessors and unconditional guarantors.
(4) Purchase any equity securities in any companies, including warrants or
bonds with warrants attached, or any preferred stocks, convertible bonds,
or convertible debentures.
(5) Engage in transactions involving puts, calls, straddles, or spreads.
(6) Invest in securities that are not readily marketable or the disposition of
which is restricted under federal securities laws (collectively, "illiquid
securities") if, as a result, more than 10% of the Portfolio's net assets
would be invested in illiquid securities.
(7) Acquire or retain the securities of any other investment company if, as a
result, more than 3% of such investment company's outstanding shares would
be held by the Trust, more than 5% of the value of the Trust's assets would
be invested in shares of such investment company, or more than 10% of the
value of the Trust's assets would be invested in shares of investment
companies in the aggregate, except in connection with a merger,
consolidation, acquisition, or reorganization.
(8) Purchase or retain securities of any issuer if, to the knowledge of the
Trust's management, those officers and trustees of the Trust and of its
investment advisor, who each own beneficially more than 0.5% of the
outstanding securities of such issuer, together own beneficially more than
5% of such securities.
(9) Acquire securities for the purpose of exercising control over management of
the issuer.
(10) Issue or sell any class of senior security as defined in the Investment
Company Act of 1940.
(11) Purchase, sell, or invest in real estate, commodities, commodity contracts,
foreign exchange, or interests in oil, gas, or other mineral exploration or
development programs.
(12) Portfolio may not engage in any short-selling operations.
(13) Purchase securities on margin, except for such short-term credits as are
necessary for the clearance of purchases of portfolio securities.
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(14) Act as an underwriter of securities issued by others, except to the extent
that the purchase of portfolio securities may be deemed to be an
underwriting.
(15) Borrow money in excess of 33 % of the market value of its total assets, and
then only from a bank and as a temporary measure to satisfy redemption
requests or for extraordinary or emergency purposes, and provided that
immediately after any such borrowing there is an asset coverage of at least
300 per centum for all such borrowings. To secure any such borrowing, a
Portfolio may not mortgage, pledge, or hypothecate in excess of 33 % of the
value of its total assets. A Portfolio will not purchase any security while
borrowings representing more than 5% of its total assets are outstanding. A
Portfolio will not borrow in order to increase income (leverage), but only
to facilitate redemption requests that might require untimely disposition
of portfolio securities.
(16) Make loans to others, except for the lending of portfolio securities
pursuant to guidelines established by the board of trustees or for the
purchase of debt securities in accordance with its investment objectives
and policies.
Unless otherwise indicated, percentage limitations included in the restrictions
apply at the time the transactions are entered into. Accordingly, any later
increase or decrease beyond the specified limitation resulting from a change in
the Portfolio's net assets will not be considered in determining whether it has
complied with these investment restrictions.
PORTFOLIO TRANSACTIONS
Each Portfolio's assets are invested by BMC in a manner consistent with the
Portfolio's investment objective, policies and restrictions, and with any
instructions that the board of trustees may issue from time to time. Within this
framework, BMC is responsible for making all determinations as to the purchase
and sale of portfolio securities and for taking all steps necessary to implement
securities transactions on behalf of the Portfolios. In placing orders for the
purchase and sale of portfolio securities, BMC will use its best possible price
and execution and will otherwise place orders with broker-dealers subject to and
in accordance with any instructions that the board of trustees may issue from
time to time. BMC will select broker-dealers to execute portfolio transactions
on behalf of the Portfolios solely on the basis of best price and execution.
U.S. government securities generally are traded in the over-the-counter (OTC)
market through broker-dealers. A broker-dealer is a securities firm or bank that
makes a market for securities by offering to buy at one price and sell at a
slightly higher price. The difference between these prices is known as a spread.
BMC expects to execute most transactions on a net basis through broker-dealers
unless it is determined that a better price or execution can be obtained on a
commission basis through a broker. Portfolio securities may also be purchased
directly from the issuer. The Portfolios paid no brokerage commissions during
the fiscal years ended September 30, 1995, 1994 and 1993.
Each Portfolio may hold portfolio securities until they mature, or it may sell
or otherwise dispose of these securities, replacing them with other securities
consistent with its investment objective and policies. The Portfolios' turnover
rates for the fiscal years ended September 30, 1995 and 1994, are indicated in
the following table.
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PORTFOLIO TURNOVER RATES
FISCAL FISCAL
PORTFOLIO 1995 1994
1995 Portfolio 32.26% 177.33%
2000 Portfolio 52.64 89.35
2005 Portfolio 34.23 68.11
2010 Portfolio 26.00 35.35
2015 Portfolio 69.97 64.90
2020 Portfolio 78.08 116.46
1995 Portfolio's turnover rate exceeded 150% in fiscal 1994, because a rise in
interest rates created an opportunity to buy U.S. Treasury securities offering
higher yields than those held by the Portfolio.
VALUATION OF PORTFOLIO SECURITIES
Each Portfolio's net asset value per share ("NAV") is normally calculated by
Benham Financial Services, Inc. (BFS) at 12:00 noon Pacific Time each day the
New York Stock Exchange (the "Exchange") is open for business. The Exchange
designated the following holiday closings for 1996: New Year's Day (observed),
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. Although BFS expects the same holiday schedule to be observed in
the future, the Exchange may modify its holiday schedule at any time.
BMC typically completes its trading on behalf of each Portfolio in various
markets before the Exchange closes for the day.
Each Portfolio's share price is calculated by adding the value of all portfolio
securities and other assets, deducting liabilities, and dividing the result by
the number of shares outstanding. Expenses and interest on portfolio securities
are accrued daily.
Most securities held by the Portfolios are priced at market value using prices
obtained from an independent pricing service. Because of the large number of
zero-coupon Treasury obligations available, many do not trade each day. In
valuing these securities, the pricing service generally takes into account
institutional trading, trading in similar groups of securities, and any
developments related to specific securities.
The methods used by the pricing service and the valuations so established are
reviewed by BMC under the general supervision of the board of trustees. There
are a number of pricing services available. BMC, on the basis of ongoing
evaluation of these services, may use other pricing services or discontinue the
use of any pricing service in whole or in part.
Securities maturing within 60 days of the valuation date may be valued at
amortized cost, which is cost plus or minus any amortized discount or premium,
unless the trustees determine that this would not result in fair valuation of a
given security. Other assets and securities for which quotations are not readily
available are valued in good faith at their fair market value using methods
approved by the board of trustees.
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PREDICTABILITY OF RETURN
ANTICIPATED VALUE AT MATURITY. The maturity values of zero-coupon bonds are
specified at the time the bonds are issued, and this feature, combined with the
ability to calculate yield to maturity, has made these instruments popular
investment vehicles for investors seeking reliable investments to meet long-term
financial goals.
To provide a comparable investment opportunity while allowing investors the
flexibility to purchase or redeem shares each day the Trust is open for
business, each Portfolio consists primarily of zero-coupon bonds but is actively
managed to accommodate shareholder activity and to take advantage of perceived
market opportunities. Because of this active management approach, BMC does not
guarantee that a certain price per share will be attained by the time a
Portfolio is liquidated. Instead, BMC attempts to track the price behavior of a
directly held zero-coupon bond by
(1) Maintaining a weighted average maturity within the Portfolio's target
maturity year;
(2) Investing at least 90% of assets in securities that mature within one year
of the Portfolio's target maturity year;
(3) Investing a substantial portion of assets in Treasury STRIPS (the most
liquid Treasury zero);
(4) Under normal conditions, maintaining a cash balance of less than 1%;
(5) Executing portfolio transactions necessary to accommodate net shareholder
purchases or redemptions on a daily basis;
and
(6) Whenever feasible, contacting several U.S. government securities dealers
for each intended transaction in an effort to obtain the best price on each
transaction.
These measures enable the advisor to calculate an anticipated value at maturity
(AVM) for each Portfolio that approximates the price per share the Portfolio
will achieve by its weighted average maturity date. The AVM calculation is as
follows:
AVM = P(1+AGR/2)2T
where P = the Portfolio's current price per share; T = the Portfolio's weighted
average term to maturity in years; and AGR = the anticipated growth rate.
This calculation assumes that the shareholder will reinvest all dividend and
capital gain distributions (if any). It also assumes an expense ratio and a
portfolio composition that remain constant for the life of the Portfolio.
Because Portfolio expenses and composition do not remain constant, however, BMC
calculates AVM for each Portfolio each day the Trust is open for business.
In addition to the measures described above, which BMC believes are adequate to
assure close correspondence between the price behavior of each Portfolio and the
price behavior of directly held zero-coupon bonds with comparable maturities,
the Trust has made an undertaking to the staff of the Securities and Exchange
Commission (SEC) that each Portfolio will invest at least 90% of its net assets
in zero-coupon bonds until it is within four years of its target maturity year
and at least 80%
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of its net assets in zero-coupon securities while the Portfolio is within two to
four years of its target maturity year. This undertaking may be revoked if the
market supply of zero-coupon securities diminishes unexpectedly, although it
will not be revoked without prior consultation with the SEC staff. In addition,
BMC has undertaken that any coupon-bearing bond purchased on behalf of a
Portfolio will have a duration that falls within the Portfolio's target maturity
year.
ANTICIPATED GROWTH RATE. BMC also calculates an anticipated growth rate (AGR)
for each Portfolio each day the Trust is open for business. AGR is a calculation
of the annualized rate of growth an investor may expect from his or her purchase
date to the Portfolio's target maturity date. As is the case with calculations
of AVM, the AGR calculation assumes that the investor will reinvest all
dividends and capital gain distributions (if any) and that the Portfolio's
expense ratio and portfolio composition will remain constant. Each Portfolio's
AGR changes from day to day primarily because of changes in interest rates and,
to a lesser extent, to changes in portfolio composition and other factors that
affect the value of the Portfolio's investments.
BMC expects that shareholders who hold their shares until a Portfolio's weighted
average maturity date and who reinvest all dividends and capital gain
distributions (if any), will realize an investment return and maturity value
that do not differ substantially from the AGR and AVM calculated on the day his
or her shares were purchased.
The following table illustrates investor experience with the 1990 Portfolio, a
series of the Trust that was first offered on March 25, 1985, and that was
liquidated on January 25, 1991. This table is not indicative of the future
performance of the existing Portfolios.
DATE SHARE PRICE (P) AGR WEIGHTED AVERAGE AVM
(in $) MATURITY (T) (in $)
April 1985 56.03 10.58 5.64 100.25
June 60.62 9.68 5.42 101.17
September 62.72 9.44 5.08 100.23
December 67.75 8.26 4.95 101.15
March 1986 73.60 6.86 4.69 100.98
June 74.80 6.83 4.38 100.38
September 76.82 6.59 4.16 100.63
December 79.01 6.27 3.86 100.26
March 1987 79.88 6.34 3.59 99.93
June 79.01 7.21 3.27 99.63
September 77.28 8.57 3.14 100.62
December 81.02 7.52 2.7 99.33
March 1988 83.61 6.98 2.51 99.33
June 83.97 6.55 2.62 99.42
September 84.96 6.97 2.09 98.04
December 85.70 8.39 1.68 98.38
March 1989 86.76 9.18 1.50 99.25
June 90.47 7.57 1.23 99.16
September 91.91 7.81 0.98 99.08
December 94.00 7.38 0.74 99.17
7
<PAGE>
DATE SHARE PRICE (P) AGR WEIGHTED AVERAGE AVM
(in $) MATURITY (T) (in $)
March 1990 95.62 7.68 0.52 99.44
June 97.48 7.44 0.32 99.82
September 99.32 6.73 0.15 100.31
December 101.13 4.33 0.07 101.43
Calculations in the table on the previous page may not reconcile precisely due
to rounding of share price, AGR, and weighted average maturity to two decimal
points.
Note that the 1990 Portfolio's share price on December 31, 1990, was not the
same as its AVM on that date because the Portfolio had not yet been liquidated
and still held short-term Treasury securities with a 25-day maturity. The
Portfolio was liquidated on January 25, 1991, at a final share price of $101.46.
As a further demonstration of how the Portfolios have behaved over time, the
following table shows each Portfolio's AGR and AVM as of September 30 for each
of the past five years.
<TABLE>
<CAPTION>
9/30/91 9/30/92 9/30/93 9/30/94 9/30/95
AGR AVM AGR AVM AGR AVM AGR AVM AGR AVM
---- ---- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 Portfolio 7.14% $ 98.28 6.01% $101.01 4.66% $100.21 6.76% $100.86 5.37% $100.99
2005 Portfolio 7.49 98.72 6.89 99.78 5.53 100.21 7.33 100.58 5.75 100.32
2010 Portfolio 7.56 98.54 7.21 100.11 5.92 100.94 7.54 101.38 6.04 101.02
2015 Portfolio 7.52 105.13 7.43 107.05 6.04 106.84 7.56 107.95 6.21 109.62
2020 Portfolio 7.34 94.04 7.37 101.87 6.02 100.76 7.52 102.11 6.20 102.31
</TABLE>
The Portfolios' share prices and growth rates are not guaranteed by the Trust,
The Benham Group, or any of their affiliates. There is no guarantee that the
Portfolios' AVMs will fluctuate as little in the future as they have in the
past.
PERFORMANCE
The Portfolios yields and total returns may be quoted in advertising and sales
literature. These figures, as well as the Portfolio`s share price will vary.
Past performance should not be considered as indicative of future results.
Yield quotations are based on the investment income per share earned during a
particular 30-day period, less expenses accrued during the period (net
investment income), and are computed by dividing a Portfolio's net investment
income by its share price on the last day of the period, according to the
following formula:
YIELD = 2 [(a - b + 1)6 - 1]
cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends, and d =
the maximum offering price per share on the last day of the period.
8
<PAGE>
Each Portfolio's yield for the 30-day period ended September 30, 1995,
calculated using the SEC yield formula described above, is indicated below.
30-DAY YIELD
PORTFOLIO (THROUGH 9/30/95)
2000 Portfolio 5.49%
2005 Portfolio 5.85
2010 Portfolio 6.13
2015 Portfolio 6.29
2020 Portfolio 6.33
Total returns quoted in advertising and sales literature reflect all aspects of
a Portfolio's return, including the effect of reinvesting dividends and capital
gain distributions and any change in the Portfolio's NAV during the period.
Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in a Portfolio over a stated
period and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative return of 100% over
ten years would produce an average annual return of 7.18%, which is the steady
annual rate that would result in 100% growth on a compounded basis in ten years.
While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that a Portfolio's performance
is not constant over time but changes from year to year and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.
The Portfolios' average annual total returns for the one-year, five-year,
ten-year, and life-of-portfolio periods ended September 30, 1995, are indicated
in the following table.
AVERAGE ANNUAL TOTAL RETURNS
PORTFOLIO ONE-YEAR FIVE-YEAR TEN-YEAR LIFE-OF-PORTFOLIO*
2000 Portfolio 14.84% 12.26% 13.60% 13.92%
2005 Portfolio 25.16 15.33 16.04 16.00
2010 Portfolio 33.06 17.05 17.43 17.33
2015 Portfolio 41.29 18.55 N/A 10.90
2020 Portfolio 47.05 18.47 N/A 11.52
* The 2000, 2005, and 2010 Portfolios commenced operations on March 25, 1985.
The 2015 Portfolio commenced operations on September 1, 1986. The 2020 Portfolio
commenced operations on December 29, 1989.
In addition to average annual total returns, each Portfolio may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total returns may
be quoted as percentages or as dollar amounts and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return.
9
<PAGE>
The Portfolios' performances may be compared with the performance of other
mutual funds tracked by mutual fund rating services or with other indexes of
market performance. This may include comparisons with funds that, unlike Benham
funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be considered in making such comparisons may include, but
are not limited to, U.S. Treasury bill, note, and bond yields, money market fund
yields, U.S. government debt and percentage held by foreigners, the U.S. money
supply, net free reserves, and yields on current-coupon GNMAs (source: Board of
Governors of the Federal Reserve System); the federal funds and discount rates
(source: Federal Reserve Bank of New York); yield curves for U.S. Treasury
securities and AA/AAA-rated corporate securities (source: Bloomberg Financial
Markets); yield curves for AAA-rated tax-free municipal securities (source:
Telerate); yield curves for foreign government securities (sources: Bloomberg
Financial Markets and Data Resources, Inc.); total returns on foreign bonds
(source: J.P. Morgan Securities Inc.); various U.S. and foreign government
reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper Analytical Services, Inc. or Morningstar,
Inc.; mutual fund rankings published in major, nationally distributed
periodicals; data provided by the Investment Company Institute; Ibbotson
Associates, Stocks, Bonds, Bills, and Inflation; major indexes of stock market
performance; and indexes and historical data supplied by major securities
brokerage or investment advisory firms. The Portfolios may also utilize reprints
from newspapers and magazines furnished by third parties to illustrate the
Portfolios' historical performances.
The Portfolios' shares are sold without a sales charge (or "load"). No-load
funds offer an advantage to investors when compared to load funds with
comparable investment objectives and strategies. For example, if you invest
$10,000 in a no-load fund, 100% of your investment is used to buy shares. If you
invest $10,000 in a fund with a 5.5% load, only $9,450 ($10,000 minus $550) is
used to buy shares. Over time, this difference can have a significant effect on
total return. Assuming a compounded annual growth rate of 10% for both
investments, the no-load fund investment would be worth $25,937 after ten years,
while the load fund investment would be worth only $24,511.
The Benham Group has distinguished itself as an innovative provider of low-cost,
true no-load mutual funds. Among other innovations, The Benham Group established
the first no-load fund that invests primarily in zero-coupon U.S. Treasury
securities, the first no-load double tax-free California short-term bond fund,
the first no-load adjustable rate government securities fund, and the first
no-load utilities fund designed to pay monthly dividends.
TAXES
Each Portfolio intends to qualify annually as a "regulated investment company"
under Subchapter M of the Internal Revenue Code (the "Code"). By so qualifying,
each Portfolio will be exempt from federal and California income taxes to the
extent that it distributes substantially all of its net investment income and
net realized capital gains to shareholders.
As holders of zero-coupon Treasury securities ("zeros"), the Portfolios receive
no cash payments of interest prior to the dates these securities mature.
However, portfolio holdings that include zeros accrue interest (commonly
referred to as "imputed income") for federal income tax purposes.
10
<PAGE>
Under the Code, dividends derived from interest, imputed income, and any
short-term capital gains are federally taxable to shareholders as ordinary
income, regardless of whether such dividends are taken in cash or reinvested in
additional shares. Distributions designated as being made from a Portfolio's net
realized long-term capital gains are taxable to shareholders as long-term
capital gains, regardless of the length of time shares are held. Corporate
investors are not eligible for the dividends-received deduction with respect to
distributions from the Portfolios.
Upon redeeming, selling, or exchanging shares of a Portfolio, shareholders will
realize a taxable gain or loss depending upon their basis in the shares
liquidated. The gain or loss generally will be long-term or short-term depending
on the length of time the shares were held. However, a loss recognized by a
shareholder in the disposition of shares on which capital gain dividends were
paid (or deemed paid) before the shareholder had held his or her shares for more
than six months would be treated as a long-term capital loss for tax purposes.
Dividends paid by each Portfolio are exempt from state personal income taxes in
all states because the Portfolios derive their income from debt securities of
the U.S. government whose interest payments are state tax-exempt. Distributions
of capital gains are generally not exempt from state and local taxes.
The information above is only a summary of some of the tax considerations
affecting the Portfolios and their shareholders; no attempt has been made to
discuss individual tax consequences. A prospective investor should consult his
or her tax advisor or state or local tax authorities to determine whether the
Portfolios are suitable investments based on his or her tax situation.
ABOUT THE TRUST
Benham Target Maturities Trust (the "Trust") was organized as a Massachusetts
business trust on November 8, 1984. The Declaration of Trust permits the
trustees to issue an unlimited number of full and fractional shares of
beneficial interest without par value, which may be issued in series
(Portfolios). Currently, there are six series of the Trust, as follows: 2000
Portfolio, 2005 Portfolio, 2010 Portfolio, 2015 Portfolio, 2020 Portfolio and
2025 Portfolio. The board of trustees may create additional series from time to
time. In addition, the board of trustees may liquidate a series at the
conclusion of its target maturity year.
Shares of each Portfolio have equal voting rights, although each Portfolio votes
separately on matters affecting it exclusively. Voting rights are not
cumulative; investors holding more than 50% of the Trust's (i.e., all
Portfolios') outstanding shares may elect a board of trustees. The Trust has
instituted dollar-based voting, meaning that the number of votes you are
entitled to is based upon the dollar amount of the their investment. The
election of trustees is determined by the votes received from all Trust
shareholders without regard to whether a majority of shares of any one series
voted in favor of a particular nominee or all nominees as a group. Each
shareholder has rights to dividends and distributions declared by a Portfolio
and to the net assets of such Portfolio upon its liquidation or dissolution
proportionate to his or her share ownership interest in the Portfolio.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust. The Declaration of Trust also provides for
indemnification and reimbursement of expenses of any shareholder held personally
liable for obligations of the Trust. The Declaration of Trust provides that the
Trust will, upon request,
11
<PAGE>
assume the defense of any claim made against any shareholder for any act or
obligation of the Trust and satisfy any judgment thereon. The Declaration of
Trust further provides that the Trust may maintain appropriate insurance (for
example, fidelity, bonding, and errors and omissions insurance) for the
protection of the Trust, its shareholders, trustees, officers, employees, and
agents to cover possible tort and other liabilities. Thus, the likelihood that a
shareholder would incur financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance exists and the Trust
itself is unable to meet its obligations.
CUSTODIAN: State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, is custodian of the Trust's assets. Services provided by
the custodian bank include (i) settling portfolio purchases and sales, (ii)
reporting failed trades, (iii) identifying and collecting portfolio income, and
(iv) providing safekeeping of securities. The custodian takes no part in
determining the Fund's investment policies or in determining which securities
are sold or purchased by the Fund.
INDEPENDENT AUDITORS: KPMG Peat Marwick LLP, 3 Embarcadero Center, San
Francisco, California 94111, serve as the Fund's independent auditors. KPMG
audits the annual report and provides tax and other services as auditors.
TRUSTEES AND OFFICERS
The Trust's activities are overseen by a board of trustees, including seven
independent trustees. The individuals listed below whose names are marked by an
asterisk (*) are "interested persons" of the Trust (as defined in the Investment
Company Act of 1940) by virtue of, among other considerations, their affiliation
with either the Trust; the Trust's investment advisor, Benham Management
Corporation (BMC); the Trust's agent for transfer and administrative services,
Benham Financial Services, Inc. (BFS); the Trust's distribution agent, Benham
Distributors, Inc. (BDI); the parent corporation, Twentieth Century Companies,
Inc. (TCC) or TCC's subsidiaries; or other funds advised by BMC. Each trustee
listed below serves as a trustee or director of other funds in The Benham Group.
Unless otherwise noted, dates in parentheses indicate the dates the trustee or
officer began his or her service in a particular capacity. The trustees' and
officers', with the exception of Mr. Stowers III, address is 1665 Charleston
Road, Mountain View, California 94043 and Mr. Stowers III address is 4500 Main
Street, Kansas City, Missouri 64111.
TRUSTEES
*JAMES M. BENHAM, chairman of the board of trustees (1985). Mr. Benham is also
chairman of the boards of BFS (1985), BMC (1971), and BDI (1988); president of
BMC (1971), and BDI (1988); and a member of the board of governors of the
Investment Company Institute (1988). Mr. Benham has been in the securities
business since 1963, and he frequently comments through the media on economic
conditions, investment strategies, and the securities markets.
ALBERT A. EISENSTAT, independent trustee (1995). Mr. Eisenstat is an independent
director of each of Commercial Metals Co. (1982), Sungard Data Systems (1991)
and Business Objects S/A (1994). Previously, he served as vice president of
corporate development and corporate secretary of Apple Computer and served on
its Board of Directors (1985 to 1993).
RONALD J. GILSON, independent trustee (1995); Charles J. Meyers Professor of Law
and Business at Stanford Law School (1979) and the Mark and Eva Stern Professor
of Law and Business at Columbia University School of Law (1992); counsel to
Marron, Reid & Sheehy (a San Francisco law firm, 1984).
12
<PAGE>
MYRON S. SCHOLES, independent trustee (1985). Mr. Scholes is a principal of
Long-Term Capital Management (1993). He is also Frank E. Buck Professor of
Finance at the Stanford Graduate School of Business (1983) and a director of
Dimensional Fund Advisors (1982) and the Smith Breeden Family of Funds (1992).
From August 1991 to June 1993, Mr. Scholes was a managing director of Salomon
Brothers Inc. (securities brokerage).
KENNETH E. SCOTT, independent trustee (1985). Mr. Scott is Ralph M. Parsons
Professor of Law and Business at Stanford Law School (1972) and a director of
RCM Capital Funds, Inc. (June 1994).
EZRA SOLOMON, independent trustee (1985). Mr. Solomon is Dean Witter Professor
of Finance Emeritus at the Stanford Graduate School of Business, where he served
as Dean Witter Professor of Finance from 1965 to 1990, and a director of
Encyclopedia Britannica.
ISAAC STEIN, independent trustee (1992). Mr. Stein is former chairman of the
board (1990 to 1992) and chief executive officer (1991 to 1992) of Esprit de
Corp. (clothing manufacturer). He is a member of the board of Raychem
Corporation (electrical equipment, 1993), president of Waverley Associates, Inc.
(private investment firm, 1983), and a director of ALZA Corporation
(pharmaceuticals, 1987). He is also a trustee of Stanford University (1994) and
chairman of Stanford Health Services (hospital, 1994).
*JAMES E. STOWERS III, trustee (1995), president and chief executive officer
(1996); Mr. Stowers is president and director, Twentieth Century Investors,
Inc., TCI Portfolios, Inc., Twentieth Century World Investors, Inc., Twentieth
Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc.,
Twentieth Century Companies, Inc., Investors Research Corporation and Twentieth
Century Services, Inc.
JEANNE D. WOHLERS, independent trustee (1985). Ms. Wohlers is a private investor
and an independent director and partner of Windy Hill Productions, LP.
Previously, she served as vice president and chief financial officer of Sybase,
Inc. (software company, 1988 to 1992).
OFFICERS
*JAMES E. STOWERS III, president, and chief executive officer (1996).
*ANN N. MCCOID, controller (1987).
*DOUGLAS A. PAUL, secretary (1988), vice president (1990), and general counsel
(1990).
*MARYANNE ROEPKE, chief financial officer and treasurer (1995).
As of September 30 1995, the Trust's officers and trustees, as a group, owned
less than 1% of each Portfolio's total shares outstanding.
The table on the next page summarizes the compensation that the trustees of the
Funds received for the Portfolio's fiscal year ended September 30, 1995, as well
as the compensation received for serving as a director or trustee of all other
Benham funds.
13
<PAGE>
<TABLE>
<CAPTION>
TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED
September 30, 1995
- ----------------------------------------------------------------------------------------------------------------
NAME OF AGGREGATE PENSION OR ESTIMATED TOTAL
TRUSTEE COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS COMPENSATION
FROM ACCRUED AS PART OF UPON RETIREMENT FROM FUND AND
THE FUND FUND EXPENSES FUND COMPLEX
PAID TO TRUSTEES
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert A. Eisenstat $0 (1995 Portfolio) Not Applicable Not Applicable $64,375
$0 (2000 Portfolio)
$0 (2005 Portfolio)
$0 (2010 Portfolio)
$0 (2015 Portfolio)
$0 (2020 Portfolio)
- ----------------------------------------------------------------------------------------------------------------
Ronald J. Gilson $ 259 (1995 Portfolio) Not Applicable Not Applicable $41,083
$ 357 (2000 Portfolio)
$ 284 (2005 Portfolio)
$ 255 (2010 Portfolio)
$ 271 (2015 Portfolio)
$ 324 (2020 Portfolio)
- ----------------------------------------------------------------------------------------------------------------
Myron S. Scholes $ 802 (1995 Portfolio) Not Applicable Not Applicable $64,375
$ 1113 (2000 Portfolio)
$ 856 (2005 Portfolio)
$ 767 (2010 Portfolio)
$ 847 (2015 Portfolio)
$ 922 (2020 Portfolio)
- ----------------------------------------------------------------------------------------------------------------
Kenneth E. Scott $ 770 (1995 Portfolio) Not Applicable Not Applicable $64,625
$ 1018 (2000 Portfolio)
$ 870 (2005 Portfolio)
$ 768 (2010 Portfolio)
$ 808 (2015 Portfolio)
$ 888 (2020 Portfolio)
- ----------------------------------------------------------------------------------------------------------------
Ezra Solomon $ 809 (1995 Portfolio) Not Applicable Not Applicable $62,045
$ 1128 (2000 Portfolio)
$ 858 (2005 Portfolio)
$ 768 (2010 Portfolio)
$ 856 (2015 Portfolio)
$ 909 (2020 Portfolio)
- ----------------------------------------------------------------------------------------------------------------
Isaac Stein $ 771 (1995 Portfolio) Not Applicable Not Applicable $62,375
$ 1007 (2000 Portfolio)
$ 862 (2005 Portfolio)
$ 763 (2010 Portfolio)
$ 808 (2015 Portfolio)
$ 866 (2020 Portfolio)
- ----------------------------------------------------------------------------------------------------------------
Jeanne D. Wohlers $ 816 (1995 Portfolio) Not Applicable Not Applicable $66,875
$ 1161 (2000 Portfolio)
$ 876 (2005 Portfolio)
$ 777 (2010 Portfolio)
$ 868 (2015 Portfolio)
$ 946 (2020 Portfolio)
- ----------------------------------------------------------------------------------------------------------------
* Interested trustees receive no compensation for their services as such.
</TABLE>
14
<PAGE>
INVESTMENT ADVISORY SERVICES
Each Portfolio has an investment advisory agreement with BMC dated June 1, 1995,
that was approved by shareholders on May 31, 1995.
BMC is a California corporation and a wholly owned subsidiary of Twentieth
Century Companies (TCC), a Delaware corporation. BMC, as well as BFS and BDI,
became wholly owned subsidiaries of TCC on June 1, 1995, upon the merger of
Benham Management International (BMI), the former parent of BMC, BFS and BDI,
into TCC. BMC has served as investment advisor to the Fund since the Fund's
inception. TCC is a holding company that owns all of the stock of the operating
companies that provide the investment management, transfer agency, shareholder
service, and other services for the Twentieth Century family of funds. James E.
Stowers, Jr., controls TCC by virtue of his ownership of a majority of its
common stock. BMC has been a registered investment advisor since 1971 and is
investment advisor to other funds in The Benham Group.
Each Portfolio's agreement with BMC continues for an initial period of two years
and thereafter from year to year provided that, after the initial two-year
period, it is approved at least annually by vote of a majority of the
Portfolio's outstanding shares, or by vote of a majority of the Trust's
trustees, including a majority of those trustees who are neither parties to the
agreement nor interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
Each investment advisory agreement is terminable on sixty days' written notice,
either by the Portfolio or by BMC, to the other party and terminates
automatically in the event of its assignment.
Each investment advisory agreement stipulates that BMC will provide the
Portfolio with investment advice and portfolio management services in accordance
with the Portfolio's investment objective, policies, and restrictions. Each
agreement also provides that BMC will determine what securities will be
purchased and sold by the Portfolio and assist the Trust's officers in carrying
out decisions made by the board of trustees.
Under the investment advisory agreements, each Portfolio pays BMC a monthly
investment advisory fee equal to its pro rata share of the dollar amount derived
from applying the Trust's average daily net assets to the following annual
investment advisory fee schedule:
INVESTMENT ADVISORY FEE SCHEDULE FOR THE TARGET PORTFOLIOS
.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 net assets over $6.5 billion
Investment advisory fees paid by each Portfolio for the fiscal years ended
September 30, 1995, 1994, and 1993, are indicated in the following table. Fee
amounts are net of amounts reimbursed and recouped as described on the following
page.
15
<PAGE>
INVESTMENT ADVISORY FEES
FISCAL FISCAL FISCAL
PORTFOLIO 1995 1994 1993
2000 Portfolio $984,031 $943,356 $820,950
2005 Portfolio 420,328 400,711 564,663
2010 Portfolio 175,368 186,373 212,938
2015 Portfolio 336,887 224,852 363,795
2020 Portfolio 422,436 152,691 143,370
*Net of reimbursements
ADMINISTRATIVE AND TRANSFER AGENT SERVICES
BFS, a wholly owned subsidiary of TCC, is the Trust's agent for transfer and
administrative services. For administrative services, each Portfolio pays BFS a
monthly fee based on its pro rata share of the dollar amount derived from
applying the average daily net assets of all of the funds in The Benham Group to
the following annual administrative fee schedule:
GROUP ASSETS ADMINISTRATIVE FEE RATE
up to $4.5 billion .11%
up to $6 billion .10
up to $9 billion .09
over $9 billion .08
For transfer agent services, each Portfolio pays BFS monthly fees of $1.1875 for
each shareholder account maintained and $1.35 for each shareholder transaction
executed during that month.
Administrative service and transfer agent fees paid by each Portfolio to BFS for
the fiscal years ended September 30, 1995, 1994, and 1993, are indicated in the
following tables. Fee amounts are net of reimbursements as described below.
ADMINISTRATIVE FEES
FISCAL FISCAL FISCAL
PORTFOLIO 1995 1994 1993
2000 Portfolio $274,835 $265,769 $217,868
2005 Portfolio 121,534 113,361 148,149
2010 Portfolio 64,928 54,429 54,803
2015 Portfolio 108,475 66,096 94,959
2020 Portfolio 185,592 50,714 39,598
16
<PAGE>
TRANSFER AGENT FEES
FISCAL FISCAL FISCAL
PORTFOLIO 1995 1994 1993
2000 Portfolio $285,145 $170,682 $147,151
2005 Portfolio 183,211 104,835 113,016
2010 Portfolio 130,450 67,306 54,491
2015 Portfolio 202,013 78,543 78,654
2020 Portfolio 350,332 69,631 41,881
DIRECT PORTFOLIO EXPENSES
Each Portfolio pays certain operating expenses that are not assumed by BMC or
BFS. These include fees and expenses of the independent trustees; custodian,
audit, tax preparation, and pricing fees; fees of outside counsel and counsel
employed directly by the Trust; costs of printing and mailing prospectuses,
statements of additional information, proxy statements, notices, confirmations,
and reports to shareholders; fees for registering the Portfolio's shares under
federal and state securities laws; brokerage fees and commissions (if any);
trade association dues; costs of fidelity and liability insurance policies
covering the Portfolio; costs for incoming WATS lines maintained to receive and
handle shareholder inquiries; and organizational costs.
EXPENSE LIMITATION AGREEMENT
BMC may recover amounts absorbed on behalf of the Portfolios during the
preceding 11 months if, and to the extent that, for any given month, the
Portfolios expense limit in effect at that time. BMC has agreed to limit the
Portfolios' expenses to .70% of the Portfolios' average daily net assets during
the year ending May 31, 1996.
The Portfolios' contractual expense limit is subject to annual renewal. The
expense limit for the year ended September 30, 1995, was .70% of average daily
net assets.
Net amounts absorbed and recouped for the fiscal years ended September 30, 1995,
1994, and 1993, are indicated in the table below.
NET REIMBURSEMENTS (RECOUPMENTS) BY BMC AND BFS
FISCAL FISCAL FISCAL
PORTFOLIO 1995 1994 1993
2000 Portfolio $0 $0 $0
2005 Portfolio 15,078 1,904 0
2010 Portfolio 57,258 6,924 (5,399)
2015 Portfolio 51,419 9,885 0
2020 Portfolio 243,519 27,220 6,370
17
<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Portfolios' shares are continuously offered at net asset value. The Benham
Group may reject or limit the amount of an investment to prevent any one
shareholder or affiliated group from controlling the Trust or one of its series;
to avoid jeopardizing a series' tax status; or whenever, in management's
opinion, such rejection is in the Trust's or series' best interest.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
FUND SHAREHOLDER # OF SHARE HOLD % OF TOTAL
NAME AND ADDRESS SHARES OUTSTANDING
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000 Charles Schwab & Co. 527,838.828 13.77
Portfolio 101 Montgomery Street
San Francisco, CA 94104-4122
- -------------------------------------------------------------------------------------------
2005 Charles Schwab & Co. 633,085.699 19.63
Portfolio 101 Montgomery Street
San Francisco, CA 94104-4122
- -------------------------------------------------------------------------------------------
2010 National Financial Services Corp. 124,541.031 5.54
Portfolio P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Charles Schwab & Co. 513,815.264 22.84
101 Montgomery Street
San Francisco, CA 94104-4122
- -------------------------------------------------------------------------------------------
2015 National Financial Services Corp. 197,889.673 5.56
Portfolio P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Charles Schwab & Co. 779,998.649 21.93
101 Montgomery Street
San Francisco, CA 94104-4122
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2020 National Financial Services Corp. 3,639,710.741 14.50
Portfolio P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Charles Schwab & Co. 8,540,372.863 33.97
101 Montgomery Street
San Francisco, CA 94104-4122
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The Benham Group charges neither fees nor commissions on the purchase and sale
of Benham fund shares. However, BFS may charge fees for special services
requested by a shareholder or necessitated by acts or omissions of a
shareholder. For example, BFS may charge a fee for processing dishonored
investment checks or stop-payment requests. BFS charges $10 per hour for account
research requested by investors. This charge will be assessed, for example, when
a shareholder request requires more than one hour of research on historical
account records. The fees charged are based on the estimated costs of performing
shareholder-requested services and are not intended to increase income.
Share purchases and redemptions are governed by California law.
PORTFOLIO LIQUIDATIONS. On or before January 31 of the year following a
Portfolio's target maturity year, its investments will be sold or allowed to
mature; its liabilities will be discharged, or a provision will be made for
their discharge; and its accounts will be closed. A shareholder may choose to
redeem his or her shares in one of the following ways: (i) by receiving
redemption proceeds or (ii) by exchanging shares for shares of another Benham
fund. If the Portfolio receives no instructions from a shareholder, his or her
shares will be exchanged for shares of Capital Preservation Fund (or a similar
fund if Capital Preservation Fund is not available). The estimated expenses of
terminating and liquidating a Portfolio will be accrued ratably over its target
maturity year. These expenses, which are charged to income (as are all
expenses), are not expected to exceed significantly the ordinary annual expenses
incurred by a Portfolio and, therefore, should have little or no effect on the
maturity value of the Portfolio.
OTHER INFORMATION
The Funds' investment advisor, BMC, has been continuously registered with the
SEC under the Investment Advisers Act of 1940 since December 14, 1971. The Trust
has filed a registration statement under the Securities Act of 1933 and the
Investment Company Act of 1940 with respect to the shares offered. Such
registrations do not imply approval or supervision of the Trust or the advisor
by the SEC.
For further information, refer to registration statements and exhibits on file
with the SEC in Washington, D.C. These documents are available upon payment of a
reproduction fee. Statements in the Prospectus and in this Statement of
Additional Information concerning the contents of contracts or other documents,
copies of which are filed as exhibits to the registration statement, are
qualified by reference to such contracts or documents.
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