BENHAM EQUITY FUNDS, N-30D, 1996-02-22

BENHAM EQUITY FUNDS
N-30D, 1996-02-22

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BENHAM EQUITY
INDEX FUNDS

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

Annual Report
December 31, 1995

[picture of book with compass,
bag with gold nuggets, and a mining
company deed]

Gold Equities Index Fund
Global Natural Resources Index Fund

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

<PAGE>

CONTENTS

GLOBAL ECONOMIC REVIEW............................... 1

GOLD EQUITIES INDEX FUND
Performance Information.............................. 2
Portfolio Composition and Lipper Statistics.......... 3
Market Summary....................................... 4
Management Discussion................................ 6
Financial Highlights..................................18
Financial Statements and Notes........................20
Schedule of Investments...............................28

GLOBAL NATURAL RESOURCES INDEX FUND
Performance Information.............................. 9
Portfolio Information.................................10
Market Summary........................................11
Management Discussion and Lipper Statistics...........12
Financial Highlights..................................19
Financial Statements and Notes........................20
Schedule of Investments...............................29

INVESTMENT FUNDAMENTALS
Indexing and Quantitative Management..................14
Benchmark Indexes.....................................15

<PAGE>

GLOBAL ECONOMIC REVIEW
JAMES M. BENHAM [picture of James
Chairman, Benham Funds M. Benham]

In 1995, global economic growth slowed dramatically from its strong pace in
1994. In the U.S., the Federal Reserve engineered a "soft landing"--slower,
steady economic growth coupled with low inflation--through a series of
short-term interest rate increases that culminated in early 1995. Japan remained
mired in recession, and a crisis in its banking system added to its economic
woes. Restrictive monetary policy and a strong currency led to sluggish growth
in Germany, and this extended to the rest of Europe.

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

Surprisingly, global inflation remained low throughout 1995. As the global
economic engine heated up at the end of 1994, many observers expected rising
prices in 1995. However, restrictive interest rate policy and low wage increases
kept inflation under control in the U.S. and Europe, and Japan's continuing
recession was accompanied by deflation (declining prices). Although prices have
increased at the wholesale level, retail businesses appear to be absorbing these
additional costs.

Slower economic growth and low levels of inflation convinced the central banks
in many countries to cut short-term interest rates in 1995 (see the graph
above). Germany's rate cuts in March, September and December paved the way for
similar cuts in Austria, Belgium, France and other western European nations.
Even Japanese short-term rates, which remain at historic lows, were reduced by
the Bank of Japan in an effort to bring the country's economy out of its
prolonged recession.

Despite slowing economic growth, we believe that a global recession is unlikely
in 1996. Many central banks are expected to continue lowering short-term
interest rates as they move toward a more stimulative monetary policy, and this
should encourage economic growth worldwide. Efforts to cut government budget
deficits in the U.S. and Europe should also have a positive effect on economic
growth. The Japanese economy still faces some obstacles, but conditions are
improving--the country's banking system is going through a restructuring process
that should make it stronger in the long run, and the recent decline in the
Japanese currency should help make Japan's exports more attractive.

[graph data]
Short-Term Interest Rate Cuts in 1995

U.S. Germany Japan
1/6/95 %5.5 %4.5 %1.75
1/13/95 5.5 4.5 1.75
1/20/95 5.5 4.5 1.75
1/27/95 5.5 4.5 1.75
2/3/95 6 4.5 1.75
2/10/95 6 4.5 1.75
2/17/95 6 4.5 1.75
2/24/95 6 4.5 1.75
3/3/95 6 4.5 1.75
3/10/95 6 4.5 1.75
3/17/95 6 4.5 1.75
3/24/95 6 4.5 1.75
3/31/95 6 4 1.75
4/7/95 6 4 1.75
4/14/95 6 4 1
4/21/95 6 4 1
4/28/95 6 4 1
5/5/95 6 4 1
5/12/95 6 4 1
5/19/95 6 4 1
5/26/95 6 4 1
6/2/95 6 4 1
6/9/95 6 4 1
6/16/95 6 4 1
6/23/95 6 4 1
6/30/95 6 4 1
7/7/95 5.75 4 1
7/14/95 5.75 4 1
7/21/95 5.75 4 1
7/28/95 5.75 4 1
8/4/95 5.75 4 1
8/11/95 5.75 4 1
8/18/95 5.75 4 1
8/25/95 5.75 3.5 1
9/1/95 5.75 3.5 1
9/8/95 5.75 3.5 0.5
9/15/95 5.75 3.5 0.5
9/22/95 5.75 3.5 0.5
9/29/95 5.75 3.5 0.5
10/6/95 5.75 3.5 0.5
10/13/95 5.75 3.5 0.5
10/20/95 5.75 3.5 0.5
10/27/95 5.75 3.5 0.5
11/3/95 5.75 3.5 0.5
11/10/95 5.75 3.5 0.5
11/17/95 5.75 3.5 0.5
11/24/95 5.75 3.5 0.5
12/1/95 5.75 3.5 0.5
12/8/95 5.75 3.5 0.5
12/15/95 5.75 3 0.5
12/22/95 5.5 3 0.5
12/29/95 5.5 3 0.5

Source: Bloomberg Financial Markets

1
<PAGE>

GOLD EQUITIES INDEX FUND
NAV AND AVERAGE ANNUAL TOTAL RETURNS
For Periods Ended December 31, 1995

NET ASSET VALUE RANGE AVERAGE ANNUAL TOTAL RETURNS
(1/1/95-12/31/95) ----------------------------------------------
1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
----------------------------------------------
$9.98-$13.53 9.25% 18.13% 5.97% 3.30%

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

TOTAL RETURN figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Fund and assume that all of the Fund's
distributions are reinvested. AVERAGE ANNUAL TOTAL RETURNS illustrate the
annually compounded returns that would have produced the Fund's cumulative total
returns if the Fund's performance had been constant over the entire period.
Average annual total returns smooth out variations in a fund's return; they are
not the same as year-by-year results. For year-by-year total returns, please
refer to the Fund's "Financial Highlights" on page 18.

The Fund commenced operations on August 17, 1988.

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

SEC PERFORMANCE COMPARISON

Comparative Performance of $10,000 Invested on 8/31/88 in the Fund, in the
Benham North American Gold Equities Index and in the Toronto Stock Exchange 300
Index

[line graph]
TSE 300 BNAGEI Fund
Aug-88 $10,000 $10,000 $10,000
Sep-88 10,031.4 9,348 9,406.44
Oct-88 10,390.1 9,435.87 9,416.5
Nov-88 10,113.5 9,656.67 9,607.65
Dec-88 10,452.4 9,187.36 9,136.32
Jan-89 11,168.7 9,304.95 9,206.99
Feb-89 11,056.3 10,102.3 9,984.33
Mar-89 11,128.2 9,680.11 9,540.14
Apr-89 11,297.8 9,085.75 8,954.6
May-89 11,595.2 8,660.54 8,540.7
Jun-89 11,812.4 9,343.85 9,166.61
Jul-89 12,493.9 9,497.09 9,277.66
Aug-89 12,650.6 9,973.85 9,721.86
Sep-89 12,488.5 10,392.8 10,085.3
Oct-89 12,437.1 10,774.2 10,438.6
Nov-89 12,548.5 12,430.1 11,963
Dec-89 12,686.4 12,322.5 11,870.5
Jan-90 11,857.9 13,112.9 12,580.1
Feb-90 11,827.5 12,400.7 11,890.8
Mar-90 11,726.4 11,610.2 11,130.5
Apr-90 10,781 10,196.1 9,762
May-90 11,598.2 11,188.8 10,714.9
Jun-90 11,527.6 10,530.3 10,066.1
Jul-90 11,605.8 11,513.4 10,998.7
Aug-90 10,942.5 11,249 10,755.4
Sep-90 10,373.1 11,318.5 10,816.3
Oct-90 10,138.8 9,287.44 8,859.8
Nov-90 10,404 8,910.03 8,515.14
Dec-90 10,809 10,001.3 9,563.97
Jan-91 10,881.3 8,259.34 7,896.66
Feb-91 11,545.8 8,997.74 8,592.22
Mar-91 11,706.7 8,840.45 8,428.56
Apr-91 11,643.8 8,528.95 8,121.69
May-91 11,956.4 8,867.27 8,428.55
Jun-91 11,743 9,584.8 9,093.42
Jul-91 12,012 9,392.15 8,909.31
Aug-91 11,970.2 8,402.1 7,978.48
Sep-91 11,573.8 8,502.66 8,029.62
Oct-91 12,026.5 9,030.55 8,541.06
Nov-91 11,827.5 9,192.17 8,684.26
Dec-91 12,107.8 8,987.1 8,489.64
Jan-92 12,416.8 9,146.17 8,653.69
Feb-92 12,397.7 8,825.14 8,315.33
Mar-92 11,859.3 8,015.87 7,566.85
Apr-92 11,678.9 7,672.79 7,238.75
May-92 11,821.7 8,298.89 7,812.93
Jun-92 11,873.3 8,854.92 8,315.33
Jul-92 12,083.6 9,409.24 8,807.49
Aug-92 11,971.8 9,236.11 8,592.17
Sep-92 11,651.1 9,344.17 8,510.14
Oct-92 11,800 8,863.88 8,151.28
Nov-92 11,647.9 7,752.35 7,320.77
Dec-92 11,934.2 8,253.93 7,754.9
Jan-93 11,786.3 8,012.91 7,518.66
Feb-93 12,329.2 8,872.7 8,330.09
Mar-93 12,921.7 10,002.2 9,439.4
Apr-93 13,607.2 11,509.5 10,702.8
May-93 13,993.2 12,803.2 11,914.8
Jun-93 14,335.3 13,640.5 12,674.9
Jul-93 14,363.1 14,909.1 13,650.7
Aug-93 15,006.4 13,702.9 12,592.7
Sep-93 14,518.5 11,944.9 11,010.9
Oct-93 15,496.3 13,970.7 12,890.6
Nov-93 15,252.6 13,754.2 12,900.9
Dec-93 15,818.5 15,016.8 14,053.6
Jan-94 16,684.7 15,001.8 14,084.5
Feb-94 16,233.9 14,263.7 13,375.1
Mar-94 15,939.5 14,752.9 13,642.4
Apr-94 15,722.7 12,941.3 12,059.2
May-94 15,974.6 13,728.7 12,799.4
Jun-94 14,910.4 13,049.2 12,100.3
Jul-94 15,493 12,886.1 11,977
Aug-94 16,152.6 13,665.7 12,696.6
Sep-94 16,216.1 15,259.1 14,197.6
Oct-94 15,996.7 13,676.7 12,809.7
Nov-94 15,289.4 11,942.5 11,123.7
Dec-94 15,790.6 12,494.3 11,700
Jan-95 15,068.4 10,965 10,305.9
Feb-95 15,497.1 11,647 10,966.8
Mar-95 16,262.9 13,535 12,629.4
Apr-95 16,147.2 13,271 12,453.8
May-95 16,822.4 13,728.9 12,835.9
Jun-95 17,172.2 13,744 12,846.2
Jul-95 17,519.3 13,836.1 12,928.8
Aug-95 17,178.3 13,911.2 13,063.1
Sep-95 17,276.2 14,043.4 13,197.3
Oct-95 17,022.3 12,138.8 11,410.8
Nov-95 17,830.3 13,627.6 12,681
Dec-95 18,084.9 13,640.8 12,782.6

Past performance does not guarantee future results.

This graph compares the Fund`s performance with two market indexes over the life
of the Fund. We have selected the Toronto Stock Exchange 300 Index (TSE 300) to
serve as the broad-based comparative index for the Fund. The TSE 300 has a
higher percentage of precious metals stocks than any other broad-based North
American stock index. We have also included the Benham North American Gold
Equities Index (BNAGEI), which is composed entirely of North American
gold-producing company stocks. Although the investment characteristics of the
indexes are similar to those of the Fund, the securities owned by the Fund and
those composing the indexes are likely to be different, and securities that the
Fund and the indexes have in common are likely to have different weightings in
the respective portfolios. Investors cannot invest directly in the indexes.

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

2
<PAGE>

GOLD EQUITIES INDEX FUND
TOP TEN STOCKS

AS OF 12/31/95 AS OF 6/30/95
COMPANY WEIGHT COMPANY WEIGHT
Barrick Gold Corporation 24.0% Barrick Gold Corporation 23.5%
Placer Dome, Inc. 14.2% Placer Dome, Inc. 16.0%
Newmont Mining Corp. 10.6% Newmont Mining Corp. 9.2%
Santa Fe Gold Corporation 4.6% Teck Corporation, B Shares 4.9%
TVX Gold, Inc. 4.6% Homestake Mining Co. 4.8%
Homestake Mining Co. 4.3% Santa Fe Gold Corporation 4.6%
Teck Corporation, B Shares 3.3% TVX Gold, Inc. 4.3%
Euro-Nevada Mining Co. Ltd. 3.3% Hemlo Gold Mines, Inc. 3.1%
Hemlo Gold Mines, Inc. 3.0% Battle Mountain Gold Co. 2.9%
Franco-Nevada Mining, Ltd. 2.8% Cambior, Inc. 2.8%
TOTAL WEIGHTING TOTAL WEIGHTING
OF TOP TEN 74.7% OF TOP TEN 76.1%

The Fund's top ten holdings may change over time. For the top ten holdings of
the Fund's benchmark index, see page 15.

PORTFOLIO COMPOSITION

[pie chart] [pie chart]
AS OF 12/31/95 AS OF 6/30/95
Canadian Index Companies: 66.0% Canadian Index Companies: 66.7%
U.S. Index Companies: 27.8% U.S. Index Companies: 27.1%
U.S. Non-Index Companies: 3.0% U.S. Non-Index Companies: 0.8%
Other Non-Index Companies: 2.9% Other Non-Index Companies: 3.3%
Other: 0.3% Other: 2.1%

The composition of the Fund`s holdings may change over time. For the composition
of the Fund's benchmark index, see page 15.

LIPPER PERFORMANCE COMPARISON

Lipper Analytical Services (Lipper) is an independent mutual fund ranking
service located in Summit, NJ. Rankings are based on average annual total
returns for the periods ended 12/31/95 for the funds in Lipper's "Gold-Oriented
Funds" category.

1 YEAR 3 YEARS 5 YEARS LIFE OF FUND+
The Fund: 9.25% 18.13% 5.97% 3.27%
Category Average : 1.76% 16.67% 5.44% 2.37%
The Fund's Ranking: 10 out of 39 14 out of 31 17 out of 28 11 out of 23

+ from August 18, 1988, through December 31, 1995

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

3
<PAGE>

GOLD EQUITIES INDEX FUND
MARKET SUMMARY
by Bill Martin, Portfolio Manager

GOLD BULLION

In 1995, gold traded within its tightest range since it began trading freely in
1971. The spot price of gold was $384 an ounce at the beginning of 1995 and
finished the year at $388 without straying far from the narrow range ($370-$395)
established at the beginning of 1994. The tight trading range masked the fact
that gold demand, mostly for jewelry, has exceeded gold mine production since
1988 (see the graph below). Demand has been driven by the rising wealth and
inflation rates of developing countries--the currencies in newly industrialized
countries are devalued frequently. In 1995, jewelry demand totaled nearly 3,200
tons, while world gold mine production was just 2,300 tons.

[line graph in left margin of page. graph data described belwo]

But the price of gold remained stable because sellers of existing gold supplies
helped fill the gap between jewelry demand and mining production. Many of the
world`s central banks, bloated with gold reserves that had scarcely appreciated
since 1980, sold and loaned gold to dealers to earn a return on the assets. Much
of that gold was subsequently leased to gold producers (mining companies)
looking to hedge (protect) their returns against falling prices. The gold
producers sold their borrowed gold to lock in current prices, then repaid the
dealers out of their own future gold production--a hedging technique known as
"selling forward." The combination of low global inflation, central bank sales
and selling forward by producers kept gold prices flat in 1995.

However, developments in late 1995 and early 1996 may have altered the gold
price structure. Central banks began to reach selling and lending limits for
their gold reserves, producing a shortage that caused dealers to raise their
gold lease rates. Selling forward became too expensive for producers, and gold
available to meet demand declined further. Demand from jewelry makers and
investors pushed gold prices above $400 an ounce for the first time since 1993.
Now that gold has broken the $400 barrier and there are signs that jewelry
demand may continue at that price level, we believe gold has moved into a new
trading range of $390-$430.

[graph data]
Global Gold Supply & Demand, in tons

Mining Production Jewelry Demand
'83 1452.2 1261
'84 1494.5 1517
'85 1565.5 1556
'86 1636.1 1771
'87 1732.4 1673
'88 1908.9 1937
'89 2067.6 2324
'90 2140 2454
'91 2167.7 2571
'92 2250.9 3143
'93 2309.2 2999
'94 2291.2 3039
'95 2268 3216

4
<PAGE>

GOLD EQUITIES INDEX FUND
MARKET SUMMARY
(Continued from the previous page)

GOLD STOCKS

Given low global inflation and the price stability of gold bullion in 1995, it's
not surprising that it wasn't a banner year for gold stocks or gold stock funds.
The chart below tells much of the story. It's surprising that North American
gold stocks performed as well as they did, but the explanation is fairly simple.
North American gold stocks, especially those of the larger mining companies such
as Barrick Gold, Placer Dome and Newmont Mining, benefited from declining
production costs, increased reserves and selling forward. Gold fund managers
bought these stocks because they had the potential to perform well even if gold
prices languished. However, these stocks did have risks. Larger capitalizations
and greater liquidity made them more likely to be bought by non-gold fund
managers and therefore more likely to be sold during sudden changes in the gold
market.

Investors in South African gold stocks definitely needed steely nerves in 1995.
Much of the poor performance of South African gold stocks was due to concern
over labor negotiations and the exchange rate system. Investors were worried
that wage increases in new mining union agreements would reduce profit margins.
Investors were also concerned that South Africa's new single currency system
would no longer allow gold investors to arbitrage between the two South African
currencies and earn currency returns in addition to their gold stock returns.

- --------------------------------------------------------------------------------
1995 GOLD RETURNS AT A GLANCE
Total Returns for the Year Ended December 31, 1995

MEASURES THAT REFLECTED GOLD STOCK PERFORMANCE
FT-SE(R) Gold Mines (Global) Index....................... -3.1%
FT-SE(R) Gold Mines (South African) Index................ -21.6%
Benham North American Gold Equities Index................ 9.2%
Average for Lipper's "Gold-Oriented Funds" Category...... 1.8%

GOLD BULLION PERFORMANCE
Spot Price of Gold....................................... 1.0%

U.S. INFLATION
Consumer Price Index (CPI)............................... 2.5%

Sources: Financial Times, Benham Management Corp., Lipper, Dow Jones
- --------------------------------------------------------------------------------

5
<PAGE>

GOLD EQUITIES INDEX FUND
MANAGEMENT DISCUSSION
A question and answer session with Bill Martin, Portfolio Manager

Q: How did the Fund perform?

A: The Fund's 9.25% total return in 1995 was higher than comparable 1995
total returns for gold stock market indexes such as the FT-SE(R) Gold
Mines (Global) Index, the FT-SE(R) Gold Mines (South African) Index and
the Benham North American Gold Equities Index (BNAGEI). The Fund also
outperformed the Lipper average for 39 gold-oriented funds and gold
bullion (see the chart on page 5).

Q: Why did the Fund outperform those gold performance measures?

A: The Fund outperformed the measures primarily because of the Fund's high
percentage of North American gold stock holdings, which outperformed
South African gold stocks and gold bullion in 1995 (see page 5). The
Fund outperformed its Lipper category average because most of those
funds had South African holdings, which underperformed in 1995. The
Fund outperformed BNAGEI by using non-index holdings and by
overweighting and underweighting index stocks. (See our discussion of
active quantitative management at the bottom of page 14.)

Q: Did you manage the Fund differently in the second half of 1995 than you
did in the first half?

A: Yes, but not much differently. Strategically, we tried to align the
Fund's holdings even more closely to BNAGEI, to the extent permitted by
IRS diversification requirements. We continued to focus on the three
largest BNAGEI holdings (Barrick Gold Corporation, Placer Dome, Inc.
and Newmont Mining Company). We like these companies because the large
size of their mines helps them achieve efficiencies that permit
cash-flow increases even when gold prices stagnate. We also like the
fact that they are managed more like finance companies than mining
companies, which we believe reduces their susceptibility to gold price
fluctuations.

Operationally, Twentieth Century's stock trading desk in Kansas City
began executing the Fund's trades in July. The efficiency and trading
volume of Twentieth Century's trading department should help keep the
Fund's transaction costs low.

6
<PAGE>

GOLD EQUITIES INDEX FUND
MANAGEMENT DISCUSSION
(Continued from the previous page)

Q: On February 12, 1996, the Fund's shareholders approved proposals to
change the Fund's investment objective, benchmark index and name. The
Fund's new name is Benham Global Gold Fund, and its new benchmark is
the FT-SE(R) Gold Mines Index* (FT-SE Index). How has the new benchmark
changed your investment strategy and the Fund's holdings?

A: The four biggest changes are:

1. We are reducing the Fund`s three largest holdings. Barrick Gold
Corporation, Placer Dome, Inc. and Newmont Mining Company, which
represented 26.0%, 16.5% and 12.1% of BNAGEI respectively as of
12/31/95, are just 15%, 10% and 10% of the FT-SE Index. No other
gold stock should be more than 5% of the Fund's portfolio.

2. We are reducing total North American holdings from approximately 98%
of the Fund to approximately 60%.**

3. We are increasing South African holdings from 0% as of 12/31/95 to
approximately 25%.**

4. We are increasing Australian holdings from less than 1% of the Fund
as of 12/31/95 to approximately 15%.**

Q: When will the Fund's holdings begin to resemble those of the FT-SE
Index?

A: We began shifting the Fund's holdings in February, but there hasn't
been any sense of urgency. We want to make prudent investment decisions
as we shift the Fund's investment focus. It'll be a gradual process,
but we expect the Fund's holdings to look quite different by June 30,
1996, the end of the reporting period for the Fund's semiannual report.

Q: Do you believe this is a good time to be selling North American gold
stocks and buying South African and Australian gold shares?

A: Yes, we believe the Fund could benefit from favorable timing. As we
discussed on page 5, North American gold shares significantly
outperformed other regional shares in 1995. That means the South
African and Australian gold shares we're buying to match the new
benchmark could be relatively undervalued. Also, if gold prices have
indeed moved into a higher trading range, the higher operating leverage
of the South African and Australian stocks gives them improved
performance potential.

* The FT-SE(R) Gold Mines Index is calculated by FT-SE International Limited in
conjunction with the Institute of Actuaries and the Faculty of Actuaries.
FT-SE International Limited does not sponsor, endorse or promote the Fund.

** Based on gold share prices as of 2/15/96.

7
<PAGE>

GOLD EQUITIES INDEX FUND
MANAGEMENT DISCUSSION
(Continued from the previous page)

Q: South African and Australian gold shares may be good values, but
doesn't that also reflect the perception that there's greater risk in
those markets?

A: That's very true. With regard to South Africa, investors remain
concerned in general about political instability that could affect
mining operations. In Australia, the risk relates more to the financial
structures of the mining companies. Australian mining companies tend to
be more heavily leveraged and have higher production costs than their
North American counterparts.

Q: How can you help reduce the risks of investing in South Africa and
Australia?

A: First and foremost, we are limiting the Fund's exposure to those
markets. The largest percentage of the Fund's holdings should continue
to be concentrated in the North America-based companies that we know
best. Secondly, to the extent possible, we are investing in companies
that exhibit characteristics similar to those we find attractive in
North America, such as lower production costs and hedging programs for
protection in declining markets.

Also, the diversification provided by South African and Australian
holdings can help reduce the Fund's vulnerability to a North American
political or environmental crisis. The Fund won't be so concentrated in
North American countries and currencies. Furthermore, as we've
mentioned already, the leveraged South African and Australian companies
offer significant return potential if gold bullion enjoys a sustained
bull market.

Q: Some analysts say gold is behaving more like a "normal" commodity--
reacting to supply and demand rather than factors such as inflation and
political instability. Do you agree with this assessment?

A: Yes, to a certain degree. In recent years, gold has failed to react to
political or economic turmoil as analysts expected. For example, the
price of gold barely flickered following the assassination of Israeli
Prime Minister Yitzhak Rabin in early November. The assassination could
have triggered a crisis that would have had a significant impact on oil
prices and inflation.

However, we still think that gold would have some kick left in it if
"real" (adjusted for inflation) interest rates fall, making other
investments look less attractive. Real rates appear unlikely to fall in
the near future, so in the meantime we should appreciate gold's
favorable supply and demand fundamentals. Those fundamentals should
help support its price even during these noninflationary times.

8
<PAGE>

GLOBAL NATURAL RESOURCES FUND
NAV AND AVERAGE ANNUAL TOTAL RETURNS
For Periods Ended December 31, 1995

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

The Fund commenced operations on September 15, 1994.

SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 9/30/94 in the Fund, in the Dow
Jones World Stock Index and in the Energy and Basic Materials Sectors of the Dow
Jones World Stock Index
[line graph]

[graph data] DJWSI EBMS FUND
9/30/94 $10,000 $10,000 $10,000
10/31/94 10,267 10,398 10,355
11/30/94 9,762 9,743 9,736
12/30/94 9,815 9,711 9,789
1/31/95 9,597 9,524 9,616
2/28/95 9,699 9,700 9,789
3/31/95 10,139 10,157 10,227
4/28/95 10,480 10,535 10,645
5/31/95 10,557 10,584 10,675
6/30/95 10,526 10,409 10,471
7/31/95 11,009 10,892 10,975
8/31/95 10,803 10,575 10,625
9/29/95 11,022 10,673 10,728
10/31/95 10,857 10,441 10,533
11/30/95 11,185 10,834 10,913
12/29/95 11,496 11,173 11,199

Past performance does not guarantee future results.

This graph compares the Fund`s performance with two market indexes over the life
of the Fund. We have selected the Dow Jones World Stock Index (DJWSI) to serve
as the broad-based comparative index for the Fund. We have also included the
Fund`s benchmark, the Energy and Basic Materials Sectors (EBMS) of the DJWSI.
Although the investment characteristics of the indexes are similar to those of
the Fund, the securities owned by the Fund and those composing the indexes are
likely to be different, and securities that the Fund and the indexes have in
common are likely to have different weightings in the respective portfolios.
Investors cannot invest directly in the indexes.

9
<PAGE>

GLOBAL NATURAL RESOURCES FUND
TOP TEN STOCKS

AS OF 12/31/95 AS OF 6/30/95
COMPANY WEIGHT COMPANY WEIGHT
Exxon Corporation 8.6% Royal Dutch Petroleum 7.4%
Royal Dutch Petroleum 7.0% Exxon Corporation 6.6%
Mobil Corporation 4.0% Mobil Corporation 4.1%
Texaco, Inc. 3.5% British Petroleum 3.8%
Amoco Corporation 3.1% Amoco Corporation 3.7%
Chevron Corporation 3.1% Chevron Corporation 3.4%
British Petroleum 2.8% Nippon Steel Corporation 2.5%
Diamond Fields Resources, Inc. 2.5% Texaco, Inc. 2.4%
Atlantic Richfield Company 2.3% Atlantic Richfield Company 2.1%
Nippon Steel Corporation 2.3% Societe Elf Aquitaine 2.0%
TOTAL WEIGHTING TOTAL WEIGHTING
OF TOP TEN 39.2% OF TOP TEN 38.0%

The Fund's top ten holdings may change over time. For the top ten holdings of
the Fund's benchmark index, see page 16.

PORTFOLIO COMPOSITION BY INDUSTRY SECTOR

[pie chart] [pie chart]
As of 12/31/95 As of 6/30/95
Energy: 60.7% Energy: 56.2%
Basic Materials: 37.5% Basic Materials: 41.0%
Other: 1.8% Other: 2.8%

PORTFOLIO COMPOSITION BY GEOGRAPHIC REGION

[pie chart] [pie chart]
As of 12/31/95 As of 6/30/95
United States: 45.3% United States: 44.3%
Europe: 27.5% Europe: 29.3%
Asia/Pacific: 19.6% Asia/Pacific: 19.4%
Americas (excluding U.S.): 7.6% Americas (excluding U.S.): 7.0%

The composition of the Fund`s holdings may change over time. For the geographic
composition of the Fund's benchmark index, see page 16.

10
<PAGE>

GLOBAL NATURAL RESOURCES FUND
MARKET SUMMARY
by Bill Martin, Portfolio Manager, and Joe Sterling, Associate Portfolio Manager

OVERVIEW

Global Commodity Prices: While the 1995 changes in the Commodity Research Bureau
(CRB) commodities price index (+2.8%) and the Journal of Commerce (JOC)
industrial commodities index (-1.7%) reflected slower global economic growth and
low global inflation, the Goldman Sachs Commodity Index (GSCI) increased 20.3%.
The main difference between the indexes was the energy sector, which performed
well (see below) and represented a much higher percentage of the GSCI (54%) than
of the other indexes. The GSCI's high energy percentage, which almost matches
the Fund's energy weighting, makes it a more appropriate index for us to watch
than the CRB or JOC indexes.

Global Natural Resource Stock Prices: The Fund's benchmark index (defined on
page 16) increased 15.1% in 1995, a mediocre increase by 1995 stock standards
but somewhat better than the slow economic growth and low inflation might have
suggested. The benchmark's return was boosted somewhat by the U.S. stock market.
Supply and demand factors within individual commodity sectors also played a role
in boosting natural resource stock prices.

ENERGY (PRIMARILY OIL)--60.7% of the Fund as of 12/31/95

Commodity Prices: The energy sector of the GSCI rose 28.2% during 1995, boosted
by increases in unleaded gasoline and crude oil futures prices, which rose 44.3%
and 33.6% respectively. Relatively low inventories and severe winter weather at
the end of 1995 caused strong price gains in this sector.

Stock Prices: The energy stocks in the Fund`s benchmark outperformed the
benchmark as a whole in 1995. Approximately 87% of the index`s 1995 return was
attributable to energy stocks, even though they represented just about 60% of
the index.

BASIC MATERIALS (METALS, STEEL, PAPER)--37.5% of the Fund as of 12/31/95

Commodity Prices: The industrial metals sector of the GSCI declined 6.6% in
1995. Aluminum, the heaviest weighting, fell 14.6%, and copper, the second
heaviest weighting, increased just 5.8%. Both rolled and galvanized steel
suffered price cuts. Paper was one of the few relatively bright spots, with
prices rebounding from cyclical lows in 1993 and early 1994.

Stock Prices: The basic materials stocks in the Fund`s benchmark underperformed
the benchmark as a whole in 1995. Just 12.6% of the index`s 1995 return was
attributable to basic materials stocks, even though they represented over 35% of
the index. The best-performing companies were the non-ferrous metal producers,
which benefited from strong demand and falling supply. The worst-performing were
steel producers, especially Japanese steel companies.

11
<PAGE>

GLOBAL NATURAL RESOURCES FUND
MANAGEMENT DISCUSSION
with Bill Martin, Portfolio Manager, and Joe Sterling,
Associate Portfolio Manager

Q: How did the Fund perform?

A: The Fund rebounded from its -3.48% total return for the three-plus
months following its inception in September 1994 to post a 14.41% total
return in 1995. That nearly matched the 15.06% total return of the
Fund's benchmark (defined on page 16) for the same period. The Fund
underperformed the benchmark because the Fund's total return includes
operating expenses (such as transaction costs and management fees) that
reduce its total return, while the total return of the benchmark does
not. Without operating expenses, the Fund's total return was 15.26%.

The Fund outperformed the benchmark before expenses because of our
decisions to overweight or underweight sectors or holdings compared to
the benchmark. For example, we slightly overweighted Canadian stocks
(we believe Canada is an excellent natural resources market) and
significantly underweighted stocks from the United Kingdom (we believe
the transaction costs for U.K. stocks are too high).

Q: How did the Fund perform compared to its peers?

A: The Lipper Performance Comparison below shows that the Fund
underperformed the average return of its peers in 1995 but outperformed
the average from its inception date of September 15, 1994, to December
31, 1995.

LIPPER PERFORMANCE COMPARISON

1 YEAR LIFE OF FUND+

The Fund: 14.41% 8.00%
Category Average: 18.80% 7.83%
The Fund`s Ranking: 21 out of 32 17 out of 30

+ from September 15, 1994, to December 31, 1995

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

12
<PAGE>

GLOBAL NATURAL RESOURCES FUND
MANAGEMENT DISCUSSION
(Continued from the previous page)

Q: What factors influenced the Fund's performance against its peers?

A: The Fund underperformed during 1995 because it had a larger percentage
of international holdings and a lower percentage of U.S. holdings and
chemical stocks than many of its peers.

The Fund's Japanese holdings (16.6% of the Fund as of 12/31/95) put it
at a particular disadvantage. Not only was the Japanese stock market
relatively weak in 1995, its returns were eroded further by the U.S.
dollar's appreciation against the Japanese yen during the second half
of the year. We did not use "currency hedging" to protect the Fund
against this erosion because the Fund's benchmark is an unhedged "pure
play" on global natural resource stocks. For the Fund's performance to
track the performance of the benchmark, we cannot "hedge" any of the
Fund's holdings. "Currency hedging" involves investing a portion of the
Fund's assets in U.S. securities to offset currency losses on foreign
investments when the dollar strengthens.

The Fund outperformed its peers since inception because of our decision
to avoid Latin American natural resources stocks during 1994. That
decision proved favorable when Latin American stock prices fell after
the Mexican currency crisis caused many investors to flee from
"emerging markets" stocks.

Q: What is your outlook for the Fund for 1996?

A: Low inflation and slow economic growth remain the prevailing
macroeconomic themes governing the commodity markets. Overcapacity in
areas such as oil and paper could also put downward pressures on
prices. However, there's a glimmer of hope that economic growth in the
second half of the year could be stronger than expected, fueled in part
by declining interest rates. Japan's recovery should also help.

One interesting side note--Dow Jones added an approximately 6% South
African position to the benchmark at the end of 1995, reducing the U.S.
and European positions by approximately 3% each. This increases the
geographic diversification of the benchmark and the Fund and gives us
the challenge of building a new position in a natural resource-rich
country.

13
<PAGE>

INVESTMENT FUNDAMENTALS
INDEXING AND QUANTITATIVE MANAGEMENT

DISCRETIONARY (ACTIVE) VS. QUANTITATIVE (PASSIVE) MANAGEMENT

Discretionary equity managers use their own experience, knowledge, research and
judgement to decide whether to buy, sell or hold stocks. Quantitative equity
managers generally rely on a stock market index or a computer model to make most
decisions. Discretionary managers are generally described as "active" because of
their active role in management decisions, while quantitative managers are
usually described as "passive."

Quantitative equity management was first used in the early 1970s when
institutional equity investors (primarily pension funds and insurance companies)
became dissatisfied with the performance of certain "guru" portfolio managers.
Seeming to rely heavily on inspiration and hunches, these managers often ran hot
and cold in their results. Seeking a more stable management technique,
institutional investors turned to indexing.

INDEXING

Indexing is nothing more than an equity manager's effort to duplicate the
holdings and performance of a stock market index. The manager attempts to
closely parallel the target index by holding all or at least a representative
sample of the stocks in the index.

Indexing was introduced by academics who argued that securities markets were so
random and "efficient" that it would be hard for professional managers to
consistently outperform the broad market through individual stock selection.
Over time, market indexes have tended to outperform the majority of active
equity managers--studies and surveys have shown that active portfolio managers
frequently underperform market indexes such as the S&P 500. An index fund is
still subject to "market risk" (the ups and downs of the broad stock market over
time), but indexing reduces the impact of "specific risk" (the ups and downs of
individual stocks or industry sectors) and incorrect market timing (index funds
are fully invested at all times, so they don't miss market movements by holding
cash). Indexing also provides the benefit of broad diversification (provided
that the index itself is broadly diversified), and it tends to reduce fund
expenses--index funds typically have lower transaction costs than discretionary
funds.

ACTIVE QUANTITATIVE MANAGEMENT--BENHAM'S APPROACH

Based on years of research and stock fund management, we have developed an
active quantitative equity management approach that combines active management
with indexing. We select stocks within a benchmark index's broad, diversified
framework. Our goal is to overweight or underweight stocks that are either in
the index or are similar to those in the index to provide a higher long-term
investment return than the benchmark itself.

14
<PAGE>

INVESTMENT FUNDAMENTALS
BENCHMARK INDEXES

GOLD EQUITIES INDEX FUND

Until February 12, 1996, the Fund's benchmark index was the Benham North
American Gold Equities Index. The Index was a proprietary index created by The
Benham Group in 1987, and it originally consisted of 44 North American companies
whose revenues were derived primarily from gold production. Since then,
consolidation in the gold industry has reduced the number of companies in the
Index. As of December 31, 1995, the Index consisted of 30 companies.

The Fund was managed to track the performance of the Index. However, we were
unable to duplicate the exact composition of the Index because the Fund would
have been unable to comply with IRS mutual fund diversification requirements. To
meet these diversification requirements, we had some flexibility to overweight
or underweight some Index stocks. We also diversified the Fund with non-Index
companies whose earnings were influenced by gold price fluctuations and whose
securities caused the Fund's performance to closely track Index performance. The
Fund's non-Index holdings could not exceed 20% of the Fund's portfolio.

On February 12, 1996, the Fund`s shareholders approved proposals to change the
Fund`s investment objective, benchmark index and name. We discuss these changes
on pages 7 and 8. We also plan to describe the benchmark index in greater detail
in future mailings and in the Fund`s June 30, 1996 semiannual report.

Benham North American Gold Equities Index

TOP TEN HOLDINGS* GEOGRAPHIC COMPOSITION*
As of December 31, 1995 As of December 31, 1995
[pie chart]
COMPANY WEIGHT
Barrick Gold Corporation 26.0% Canada: 64.8%
Placer Dome, Inc. 16.5% U.S.: 33.2%
Newmont Mining Company 12.1% Other: 2.0%
Homestake Mining Company 6.1%
Santa Fe Gold Corporation 4.7%
Echo Bay Mines, Ltd. 3.3%
Teck Corporation, B Shares 3.3%
TVX Gold, Inc. 3.3%
Hemlo Gold Mines, Inc. 2.7%
Franco-Nevada Mining, Ltd. 2.7%
TOTAL WEIGHTING OF TOP TEN 80.7%

* The Index's top ten holdings and geographic composition may change over time.

15
<PAGE>

INVESTMENT FUNDAMENTALS
BENCHMARK INDEXES
(Continued from the previous page)

GLOBAL NATURAL RESOURCES INDEX FUND

The Fund's benchmark index (the Index) is derived from the Energy and Basic
Materials sectors of the Dow Jones World Stock Index* (DJWSI). The DJWSI was
created by the editors of The Wall Street Journal on January 5, 1993. The DJWSI
consists of 2,600 stocks in 25 countries and is divided into nine broad market
sectors. We created the Index using the companies represented in two of these
sectors--Basic Materials and Energy. In creating the Index, however, we altered
the Basic Materials sector to exclude chemical companies because these companies
do not stockpile natural resources. As of December 31, 1995, the Index consisted
of 320 companies in 26 countries.

The Fund is managed to track the performance of the Index. However, constructing
a portfolio that matches the exact composition of the Index would involve fairly
substantial transaction costs. Instead, we employ a quantitative management
technique called portfolio optimization. Portfolio optimization involves using a
computer model to construct a portfolio that matches the risk characteristics of
the Index. This technique limits the Fund's deviation from the performance of
the Index while keeping Fund transaction costs minimal.

BASIC MATERIALS AND ENERGY SECTORS OF THE DJWSI*

TOP TEN HOLDINGS+ GEOGRAPHIC COMPOSITION+
As of December 31, 1995 As of December 31, 1995
[pie chart]
COMPANY WEIGHT
Exxon Corporation 8.3% U.S.: 40.7%
Royal Dutch Petroleum 6.2% Europe: 27.8%
British Petroleum 3.8% Asia/Pacific: 19.1%
Mobil Corporation 3.7% Americas (excluding U.S.): 6.5%
Shell Transportation and Trading 3.7% South Africa: 5.9%
Amoco Corporation 3.0%
Chevron Corporation 2.8%
Nippon Steel Corporation 2.0%
Societe Elf Aquitaine 1.6%
Atlantic Richfield Company 1.5%
TOTAL WEIGHTING OF TOP TEN 36.6%

* The Dow Jones World Stock Index is the property of Dow Jones & Company, Inc.
and is not affiliated with The Benham Group.

+ The Index's top ten holdings and geographic composition may change over time.

16
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Benham Equity Funds:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investment securities, of Benham Gold Equities Index Fund and
Benham Global Natural Resources Index Fund (two of the series comprising Benham
Equity Funds) (the Funds) as of December 31, 1995, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, except for the Benham Global
Natural Resources Index Fund which is for the year then ended and for the period
from September 15, 1994 (commencement of operations) to December 31, 1994, and
the financial highlights for each of the periods presented herein. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Benham
Gold Equities Index Fund and Benham Global Natural Resources Index Fund as of
December 31, 1995, the results of their operations, the changes in their net
assets and their financial highlights for the periods indicated above, in
conformity with generally accepted accounting principles.

/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP

San Francisco, California
February 5, 1996

17
<PAGE>
<TABLE>
<CAPTION>
BENHAM EQUITY FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)

Benham Gold Equities Index Fund
----------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988+
----- ----- ----- ----- ----- ----- ----- -----
PER-SHARE DATA
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD........ $11.33 13.67 7.55 8.28 9.35 11.71 9.05 10.00
Income From Investment Operations
Net Investment Income...................... .0226 .0299 .0124 .0181 .0247 .0006 .0372 .0895
Net Realized and Unrealized Gains
(Losses) on Investments................. 1.0259 (2.3213) 6.1197 (.7324) (1.0753) (2.2691) 2.7547 (.9688)
-------- -------- -------- -------- -------- -------- -------- -------
Total Income (Losses) From
Investment Operations.............. 1.0485 (2.2914) 6.1321 (.7143) (1.0506) (2.2685) 2.7919 (.8793)
-------- -------- -------- -------- -------- -------- -------- -------
Less Distributions
Dividends from Net Investment Income....... (.0085) (.0214) (.0114) (.0157) (.0194) (.0006) (.0372) (.0666)
Distributions from Net Realized Capital Gains 0 0 (.0007) 0 0 (.0909) (.0947) (.0041)
Distributions in Excess of Net Realized
Capital Gains........................... 0 (.0272) 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------
Total Distributions................... (.0085) (.0486) (.0121) (.0157) (.0194) (.0915) (.1319) (.0707)
-------- -------- -------- -------- -------- -------- -------- -------
NET ASSET VALUE AT END OF PERIOD.............. $12.37 11.33 13.67 7.55 8.28 9.35 11.71 9.05
====== ===== ===== ==== ==== ==== ===== ====
TOTAL RETURN*................................. 9.25% (16.75)% 81.22% (8.65)% (11.23)% (19.43)% 29.93% (9.19)%
- ------------
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Period (in thousands
of dollars).............................. $537,693 568,030 616,347 163,777 124,436 104,163 61,786 7,683
Ratio of Expenses to Average Daily Net Assets++ .61% .61% .72% .75% .75% .96% 1.00% 0%
Ratio of Net Investment Income to Average
Daily Net Assets........................... .17% .20% .23% .23% .30% .01% .36% 2.04%**
Portfolio Turnover Rate....................... 28.40% 41.67% 28.38% 52.57% 56.33% 20.96% 34.39% .92%
Average Commission Paid Per Share Traded...... $.035 N/A N/A N/A N/A N/A N/A N/A

- -------------------
+ COMMENCEMENT OF OPERATIONS FOR BENHAM GOLD EQUITIES INDEX FUND WAS AUGUST 17, 1988.
++ The ratio for the year ended December 31, 1995, includes expenses paid through expense offset arrangements.
* Total return figures assume reinvestment of dividend and capital gain distributions and are not annualized.
** Annualized (The period ended December 31, 1988, includes .76% from nonrecurring income).

See the accompanying notes to financial statements.
</TABLE>

18
<PAGE>
<TABLE>
<CAPTION>
BENHAM EQUITY FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)

Benham Global
Natural Resources
Index Fund
------------
1995 1994+
----- -----
PER-SHARE DATA
- --------------
<S> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD...................................... $9.61 10.00
Income from Investment Operations
Net Investment Income.................................................... .16 .07
Net Realized and Unrealized Gains (Losses) on Investments................ 1.22 (.42)
------- -------
Total Income (Losses) From Investment Operations...................... 1.38 (.35)
------- -------
Less Distributions
Dividends from Net Investment Income..................................... (.16) (.04)
Distributions from Net Realized Capital Gains............................ (.17) 0
------- -------
Total Distributions................................................... (.33) (.04)
------- -------
NET ASSET VALUE AT END OF PERIOD............................................ $10.66 9.61
====== ====
TOTAL RETURN*............................................................... 14.41% (3.48%)
- ------------

SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Period (in thousands of dollars)....................... $30,157 $18,972
Ratio of Expenses to Average Daily Net Assets++............................. .76% 0%
Ratio of Net Investment Income to Average Daily Net Assets.................. 2.02% 2.74%**
Portfolio Turnover Rate..................................................... 39% 0%
Average Commission Paid Per Share Traded.................................... $.028 N/A

- -------------------
+ COMMENCEMENT OF OPERATIONS FOR BENHAM GLOBAL NATURAL RESOURCES INDEX FUND WAS SEPTEMBER 15, 1994.
++ The ratio for the year ended December 31, 1995, includes expenses paid through expense offset arrangements.
* Total return figures assume reinvestment of dividend and capital gain distributions and are not annualized.
** Annualized.

See the accompanying notes to financial statements.
</TABLE>

19
<PAGE>
<TABLE>
<CAPTION>
BENHAM EQUITY FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
Benham Benham
Gold Global Natural
Equities Resources
Index Fund Index Fund
--------- ---------
ASSETS
<S> <C> <C>
Investment securities (identified cost $439,952,138 and $33,777,787,
respectively) (Note 4).................................................. $536,269,490 35,418,046
Cash denominated in foreign currencies (cost $38,735)...................... 0 38,803
Cash....................................................................... 0 66,805
Investment in affiliated money market fund (Note 2)........................ 305,534 0
Interest and dividends receivable.......................................... 112,279 50,486
Receivable for fund shares sold............................................ 619,282 16,299
Prepaid expenses and other assets.......................................... 2,265 31,990
Receivable for securities sold............................................. 5,249,617 0
----------- ----------
Total assets............................................................ 542,558,467 35,622,429
----------- ----------
LIABILITIES
Payable for securities purchased........................................... 0 5,417,614
Payable for fund shares redeemed........................................... 102,944 0
Payable to affiliates (Note 2)............................................. 278,712 11,247
Bank overdraft............................................................. 4,478,332 0
Accrued expenses and other liabilities..................................... 5,339 36,110
----------- ----------
TOTAL LIABILITIES....................................................... 4,865,327 5,464,971
----------- ----------
NET ASSETS.................................................................... $537,693,140 30,157,458
=========== ==========
Net assets consist of:
Capital (par value and paid in surplus).................................... $479,991,492 28,474,274
Net undistributed realized gain (loss) on investments...................... (38,616,155) 39,046
Undistributed net investment income........................................ 0 5,798
Net unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies (Note 4).................. 96,317,803 1,638,340
----------- ----------
Net assets.................................................................... $537,693,140 30,157,458
=========== ==========
Shares of beneficial interest outstanding..................................... 43,484,012 2,829,544
=========== ==========
Net asset value, offering price and redemption price per share................ $12.37 10.66
====== =====
- -------------------
* See the accompanying notes to financial statements.
</TABLE>

20
<PAGE>
<TABLE>
<CAPTION>
BENHAM EQUITY FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995

Benham Benham
Gold Global Natural
Equities Resources
Index Fund Index Fund
--------- ---------
INVESTMENT INCOME
<S> <C> <C>
Dividends (net of foreign taxes withheld of $427,531 and
$49,161, respectively).................................................. $ 3,822,932 632,316
Interest................................................................... 565,734 24,229
---------- ----------
Total Income............................................................ 4,388,666 656,545
---------- ----------
EXPENSES (NOTE 2)
Investment advisory fees................................................... 1,776,728 79,020
Administrative fees........................................................ 549,463 21,079
Transfer agency fees....................................................... 702,149 62,844
Printing and postage....................................................... 179,568 8,474
Custodian fees............................................................. 73,498 32,904
Auditing and legal fees.................................................... 54,852 13,148
Registration and filing fees............................................... 47,646 19,236
Directors' fees and expenses............................................... 12,709 6,323
Other operating expenses................................................... 72,044 29,500
---------- ----------
Total expenses.......................................................... 3,468,657 272,528
Amount waived (Note 2)........................................................ 0 (93,050)
Custodian earnings credits.................................................... (70,108) (2,174)
---------- ----------
Net expenses............................................................... 3,398,549 177,304
---------- ----------
Net investment income................................................... 990,117 479,241
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (NOTE 4)
Net realized gain (loss)...................................................... (18,376,439) 407,901
Net unrealized appreciation for the year...................................... 62,195,695 2,144,025
---------- ----------
Net realized and unrealized gain on investments and foreign currency transactions 43,819,256 2,551,926
---------- ----------
Net increase in assets resulting from operations.............................. $44,809,373 3,031,167
========== ==========
- -------------------
See the accompanying notes to financial statements.
</TABLE>

21
<PAGE>
<TABLE>
<CAPTION>
BENHAM EQUITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 (EXCEPT AS NOTED)

Benham Gold Benham Global Natural
Equities Index Fund Resources Index Fund
------------------ ------------------
1995 1994 1995 1994+
-------- -------- -------- --------
FROM INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C>
Net investment income..................................................... $ 990,117 1,201,047 479,241 97,226
Net realized gain (loss) on investments and foreign currency transactions (18,376,439) (1,980,901) 407,901 (12,380)
Net change in unrealized appreciation (depreciation) of investments and...
foreign currency transactions.......................................... 62,195,695 (112,291,405) 2,144,025 (505,685)
----------- ------------ ---------- ----------
Change in net assets derived from investment activities................. 44,809,373 (113,071,259) 3,031,167 (420,839)
----------- ----------- ---------- ----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income..................................................... (374,822) (767,719) (380,010) (81,083)
Net realized gain on investments.......................................... 0 0 (375,581) 0
In excess of realized gains on investments................................ 0 (1,643,456) 0 0
----------- ----------- ----------- ----------
Total distributions to shareholders..................................... (374,822) (2,411,175) (755,591) (81,083)
----------- ----------- ----------- ----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from sales of shares............................................. 634,985,010 898,872,787 37,771,225 32,515,471
Net asset value of dividends reinvested................................... 339,282 2,121,335 721,605 71,483
Cost of shares redeemed................................................... (710,095,220) (833,829,036) (29,582,694) (13,113,286)
----------- ----------- ----------- ----------
Change in net assets derived from capital share transactions........... (74,770,928) 67,165,086 8,910,136 19,473,668
----------- ----------- ----------- ----------
Net increase (decrease) in net assets................................... (30,336,377) (48,317,348) 11,185,712 18,971,746
NET ASSETS:
Beginning of period....................................................... 568,029,517 616,346,865 18,971,746 0
----------- ----------- ----------- ----------
End of period............................................................. $537,693,140 568,029,517 30,157,458 18,971,746
=========== =========== =========== ==========

- -------------------
+ For the period from September 15, 1994 (commencement of operations), through December 31, 1994.

See the accompanying notes to financial statements.
</TABLE>

22
<PAGE>

BENHAM EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1995

(1) SIGNIFICANT ACCOUNTING POLICIES

Benham Equity Funds (BEF) is registered under the Investment Company Act of 1940
as an open-end management investment company. Benham Gold Equities Index Fund
(BGEIF) and Benham Global Natural Resources Index Fund (BGNRIF) are two of the
five Funds composing BEF. BGEIF seeks to realize a total return that corresponds
to the total return of the Benham North American Gold Equities Index, an index
composed of stocks of North American gold-producing companies. BGNRIF seeks to
realize a total return consistent with investment in companies that are engaged
in the natural resources industries. BEF is authorized to issue a total of 20
billion shares of capital stock. Each Fund is authorized to issue two billion
shares. Significant accounting policies followed by BEF are summarized below.

VALUATION OF INVESTMENT SECURITIES--Investment securities, both foreign and
domestic, are valued at market as provided by an independent pricing service.
The pricing service values equity securities at the closing price on their
primary exchange. Securities traded over-the-counter are valued at the mean
between the latest bid and asked prices. Prices of non-U.S. dollar denominated
securities are converted into U.S. dollars on a daily basis. When valuations are
not readily available, securities are valued at fair value as determined in good
faith by the board of directors. Security transactions are recorded on the date
the order to buy or sell is executed. Realized gains and losses from security
transactions are determined on the basis of identified cost.

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

As of December 31, 1995, BGEIF had a tax capital loss carryover of $36,626,815.
Loss carryovers not offset by realized gains will expire eight years after the
fiscal year in which they were realized. BGEIF's capital loss carryover will
expire December 31, 2003. No capital gain distributions will be made by BGEIF
until all of its loss carryover has been offset or expired.

The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate

23
<PAGE>

characterization for federal income tax purposes. These differences are
primarily due to differing treatments for foreign currency transactions and wash
sales. On the Statements of Assets and Liabilities, as a result of permanent
book-to-tax differences, a reclassification adjustment has been made for
equalization to decrease undistributed net investment income and increase
capital.

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

INVESTMENT INCOME AND SHAREHOLDER DISTRIBUTIONS--Dividend income from investment
securities is recorded on the ex-dividend date. Interest income and expenses are
accrued daily. Both BGEIF and BGNRIF distribute dividends, if any, semiannually.
Each Fund distributes net short-term and long-term capital gains, if any, once
per year. Distributions may be paid in cash or reinvested as additional shares.

FOREIGN CURRENCY TRANSLATIONS--The Funds' functional currency is the U.S.
dollar. Foreign currency denominated assets and liabilities are translated into
U.S. dollars at current exchange rates each day the Funds are open for business.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at prevailing exchange rates on the dates these transactions occur.

ORGANIZATION COSTS--Costs incurred by BGNRIF in connection with the
organization, initial registration, and public offering of shares are being
amortized on a straight-line basis over a five-year period ending September
1999.

(2) INVESTMENT ADVISORY FEE AND OTHER
TRANSACTIONS WITH AFFILIATES

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

0.50% of the first $100 million
0.45% of the next $100 million
0.40% of the next $100 million
0.35% of the next $100 million
0.30% of the next $100 million

24
<PAGE>

0.25% of the next $1 billion
0.24% of the next $1 billion
0.23% of the next $1 billion
0.22% of the next $1 billion
0.21% of the next $1 billion
0.20% of the next $1 billion
0.19% of average daily net assets over $6.5 billion

Additionally, BGNRIF pays the following annual investment advisory fee to BMC
based on its average daily net assets.

.05% of the first $500 million
.04% of the next $500 million
.03% of average daily net assets over $1 billion

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

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

BEF has an additional agreement with BMC pursuant to which BMC established a
contractual expense guarantee that limits each Fund's expenses (excluding
extraordinary expenses such as brokerage commissions and taxes) to .75% of the
Fund's average daily net assets. The agreement provides further that BMC may
recover amounts (representing expenses in excess of the Fund's expense guarantee
rate) absorbed during the preceding 11 months, if, and to the extent that, for
any given month, the Fund's expenses are less than the expense guarantee rate in
effect at that time. The expense guarantee rate is effective through May 31,
1996, and is subject to annual renewal.

The payables to affiliates as of December 31, 1995, based on the above
agreements were as follows:

BENHAM
BENHAM GLOBAL NATURAL
GOLD EQUITIES RESOURCES
INDEX FUND INDEX FUND
---------- ----------
Investment Advisor.............................. $143,853 1,262
Administrative Services......................... 44,860 2,047
Transfer Agent.................................. 89,999 7,938
--------- ---------
$278,712 11,247
========= =========

25
<PAGE>

As of December 31, 1995, BGEIF had invested in shares of Capital Preservation
Fund, Inc. (CPF), a money market fund advised by BMC. The terms of such
transactions were identical to those with nonrelated entities except that, to
avoid duplicative investment advisory fees and administrative fees, BGEIF did
not pay BMC investment advisory fees or BFS administrative fees with respect to
assets invested in shares of CPF.

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

(3) SHARE TRANSACTIONS

Transactions for the years ended December 31, 1995, and 1994, were as follows:

BENHAM BENHAM GLOBAL
GOLD EQUITIES NATURAL RESOURCES
INDEX FUND INDEX FUND
----------------- -----------------
1995 1994 1995 1994*
-------- -------- -------- --------

Shares sold................ 52,760,173 71,673,938 3,649,431 3,292,834
Reinvestment of dividends.. 27,188 194,741 68,911 7,468
---------- ---------- --------- ---------
52,787,361 71,868,679 3,718,342 3,300,302
Less shares redeemed....... (59,426,047)(66,828,432) (2,862,561)(1,326,539)
---------- ---------- --------- ---------
Net increase (decrease)
in shares.................. (6,638,686) 5,040,247 855,781 1,973,763
========== ========== ========= =========

- -------------------
* For the period September 15, 1994 (commencement of operations), through
December 31, 1994.

(4) INVESTMENT SECURITIES--PURCHASES AND SALES

Purchases and sales of investment securities, excluding short-term securities,
for the year ended December 31, 1995, were as follows:

BENHAM
BENHAM GLOBAL NATURAL
GOLD EQUITIES RESOURCES
INDEX FUND INDEX FUND
--------- ---------

Purchases................................... $155,687,668 17,636,016
============ ==========
Sales Proceeds.............................. $212,152,965 9,240,278
============ ==========

26
<PAGE>

As of December 31, 1995, unrealized appreciation (depreciation) was as follows:

BENHAM
BENHAM GLOBAL NATURAL
GOLD EQUITIES RESOURCES
INDEX FUND INDEX FUND
--------- ---------

Appreciated securities....................... $118,300,550 2,461,489
Depreciated securities....................... (21,983,198) (821,230)
------------ ---------
Net unrealized appreciation.................. $ 96,317,352 1,640,259
============ =========

As of December 31, 1995, the cost of investment securities for federal income
tax purposes was $456,281,646 (BGEIF) and $33,830,410 (BGNRIF). Gross unrealized
appreciation and depreciation of investments, based on this cost, were:

BENHAM
BENHAM GLOBAL NATURAL
GOLD EQUITIES RESOURCES
INDEX FUND INDEX FUND
--------- ---------

Appreciated securities....................... $104,121,384 2,422,583
Depreciated securities....................... (24,133,540) (834,947)
------------ ---------
Net unrealized appreciation.................. $ 79,987,844 1,587,636
============ =========

(5) EXPENSE OFFSET ARRANGEMENTS

Each Fund's Statement of Operations reflects custodial earnings credits. These
amounts are used to offset the custody fees payable by the Funds to the
custodian bank. The credits are earned when the Fund maintains a balance of
uninvested cash at the custodian bank. Beginning with the year ending December
31, 1995, the ratios of expenses to average daily net assets shown in the
Financial Highlights are calculated as if these credits had not been earned.

27
<PAGE>

BENHAM EQUITY FUNDS
Benham Gold Equities Index Fund
Schedule of Investment Securities
December 31, 1995

SHARES VALUE
------- -----------

AUSTRALIA -- 0.7%
5,800,000 Golden Shamrock Mining.1 $ 3,574,636
----------
CANADA -- 66.8%
233,000 AUR Resources, Inc.1 1,152,620
556,420 Agnico Eagle Mines, Ltd. 7,024,802
4,889,066 Barrick Gold Corp. 128,949,116
592,400 Cambior, Inc. 6,457,860
964,800 Echo Bay Mines, Ltd. 10,009,800
483,200 Euro-Nevada Mining Co., Ltd. 17,617,472
256,400 Franco-Nevada Mining, Ltd. 14,985,554
526,800 Glamis Gold, Ltd. 3,292,500
98,800 Golden Knight Resources, Inc.1 570,175
515,000 Golden Star Resource 2,639,375
1,715,000 Hemlo Gold Mines, Inc. 16,338,805
1,548,800 Kinross Gold Corp.1 12,060,506
366,300 Miramar Mining.1 1,812,073
3,165,200 Placer Dome, Inc. 76,360,450
996,100 Prime Resources.1 6,844,203
1,819,500 Royal Oak Mines.1 6,481,969
3,482,200 TVX Gold, Inc.1 24,563,439
919,000 Teck Corp., Cl "B" 17,932,477
838,100 Viceroy Resources Corp.1 3,685,126
85,500 Wharf Resources, Ltd. 563,958
----------
359,342,280
----------
GHANA -- 1.4%
386,000 Ashanti Goldfields 7,816,500
----------
UNITED STATES -- 30.8%
800 Alta Gold Co. 1 1,238
1,061,000 Amax Gold, Inc.1 7,692,250
1,549,000 Battle Mountain Gold Co. 13,166,500
29,530 Coeur D'Alene International, Ltd. 505,701
268,100 Crown Resources, Inc.1 1,348,878
477,000 FMC Gold Co. 1,967,625
447,100 First Mississippi Gold, Inc.1 9,836,200
230,500 Freeport McMoran Corp. 6,454,000
843,800 Hecla Mining Co.1 5,801,125
1,481,276 Homestake Mining Co. 23,144,937
1,261,088 Newmont Mining Corp. 57,064,232
296,800 Pegasus Gold, Inc.1 4,118,100
2,035,900 Santa Fe Gold Corp.1 24,685,288
500,000 Stillwater Mining Co.1 9,750,000
----------
165,536,074
----------

TOTAL COMMON STOCKS-- 99.7% 536,269,490
(Cost $439,952,138)

OTHER ASSETS LESS LIABILITIES-- 0.3% 1,423,650
----------

NET ASSETS -- 100% -- equivalent to $12.37 per share
on 43,484,012 shares outstanding $537,693,140
==========

- -------------------
1 Non-income producing.

See the accompanying notes to financial statements.

28
<PAGE>

BENHAM EQUITY FUNDS
Benham Global Natural Resources Index Fund
Schedule of Investment Securities
December 31, 1995

SHARES VALUE
- --------- ------------

COMMON STOCKS

AUSTRALIA -- 0.7%
BASIC MATERIALS
13,330 CRA Ltd. $ 195,390
----------
TOTAL -- AUSTRALIA 195,390
----------

BELGIUM -- 1.5%
ENERGY
1,500 Petrofina SA 457,717
----------
TOTAL -- BELGIUM 457,717
----------

CANADA -- 7.6%
BASIC MATERIALS
15,200 Alcan Aluminum Ltd. 473,100
14,100 Cominco Ltd. 290,813
40,000 Diamond Fields Resources, Inc. 754,855
9,100 Placer Dome, Inc. 219,538
12,800 Rio Algom Ltd. 233,600
ENERGY
13,000 Norcen Energy Resources, Inc. 195,311
18,600 Ranger Oil Ltd. 116,250
----------
TOTAL -- CANADA 2,283,467
----------

FINLAND -- 1.0%
BASIC MATERIALS
10,750 Outokumpu Oy 170,222
7,500 Repola Oy 141,134
----------
TOTAL -- FINLAND 311,356
----------
FRANCE -- 4.4%
BASIC MATERIALS
1,200 IMetal 143,076
ENERGY
7,400 Societe Elf Aquitaine 544,160
9,550 Total 643,284
----------
TOTAL -- FRANCE 1,330,520
----------

GERMANY -- 4.0%
BASIC MATERIALs
700 DeGussa AG 232,927
850 Preussag AG 237,278
1,050 Thyssen AG.1 190,484
900 Viag AG 360,251
ENERGY
500 RWE AG 180,995
----------
TOTAL -- GERMANY 1,201,935
----------

JAPAN -- 16.6%
BASIC MATERIALS
13,000 Hokuetsu Paper Mills 114,355
145,000 Kawasaki Steel Corporation 504,592
17,000 Mitsubishi Paper 102,049
26,000 Mitsui Mining Company.1 113,098
68,000 NKK Corporation1 182,736
40,000 New Oji Paper Company 361,141
37,000 Nippon Paper Industries 256,443
199,000 Nippon Steel Corporation 680,967
34,000 Nisshin Steel Company 137,052
10,000 Nittetsu Mining Company 99,565

29
<PAGE>

Schedule of Investment Securities - Benham Global Natural Resources Index Fund
(Continued)
- --------------------------------------------------------------------------------

SHARES VALUE
- --------- ------------

JAPAN (CONTINUED)
27,000 Settsu Corporation.1 $ 84,824
112,000 Sumitomo Metal Industries.1 338,869
28,000 Sumitomo Metal Mining 251,174
ENERGY
47,000 Cosmo Oil Company 256,240
15,000 General Sekiyu KK 136,733
50,000 Japan Energy Corporation 167,231
16,000 Mitsubishi Oil Company 141,827
92,000 Nippon Oil Company 576,278
13,000 Showa Shell Sekiyu 108,700
27,000 Tonen Corporation 394,101
----------
TOTAL -- JAPAN 5,007,975
----------

MALAYSIA -- 0.4%
BASIC MATERIALS
85,000 Malaysian Mining CP 122,529
----------
TOTAL -- MALAYSIA 122,529
----------

NETHERLANDS -- 7.0%
ENERGY
15,200 Royal Dutch Petroleum 2,119,303
----------
TOTAL -- NETHERLANDS 2,119,303
----------

NEW ZEALAND -- 1.4%
BASIC MATERIALS
111,600 Carter, Holt, Harvey 240,597
10,627 Fletcher Challenge Forests 15,135
74,900 Fletcher Challenge Ltd. 172,731
----------
TOTAL -- NEW ZEALAND 428,463
----------

NORWAY -- 0.9%
ENERGY
20,300 Saga Petroleum, A 270,536
----------
TOTAL -- NORWAY 270,536
----------

SINGAPORE -- 0.5%
BASIC MATERIALS
67,000 Natsteel 137,382
----------
TOTAL -- SINGAPORE 137,382
----------

SPAIN -- 2.1%
ENERGY
4,600 Petroleos (CIA Espania) 125,484
15,800 Respol SA 516,043
----------
TOTAL -- SPAIN 641,527
----------

SWEDEN -- 0.4%
BASIC MATERIALS
10,000 Stora Kopparbergs, A 117,492
----------
TOTAL -- SWEDEN 117,492
----------

SWITZERLAND -- 0.8%
BASIC MATERIALS
300 Alusuisse Lonza 237,608
----------
TOTAL -- SWITZERLAND 237,608
----------

30
<PAGE>

Schedule of Investment Securities - Benham Global Natural Resources Index Fund
(Continued)
- --------------------------------------------------------------------------------

SHARES VALUE
- --------- ------------

UNITED KINGDOM -- 5.4%
BASIC MATERIALS
139,700 British Steel $ 353,047
75,000 Bunzl 231,755
10,100 Johnson Mathey 82,024
9,000 RTZ Corporation 130,808
ENERGY
99,800 British Petroleum 835,286
----------
TOTAL -- UNITED KINGDOM 1,632,920
----------

UNITED STATES -- 43.5%
BASIC MATERIALS
4,900 Allegheny Ludlum Corporation 90,650
4,400 Asarco, Inc. 140,800
1,900 Bowater, Inc. 67,450
4,100 Brush Wellman, Inc. 70,725
93 Freeport McMoran Copper & Gold, A 2,604
7,999 Freeport McMoran Copper & Gold, B 224,972
1,900 Freeport McMoran, Inc. 70,300
3,000 Georgia Pacific Corporation 205,875
8,700 Handy & Harman 143,550
12,600 International Paper Company 477,225
2,800 Mead Corporation 146,300
3,900 Newmont Mining Corporation 176,475
3,700 Nucor Corporation 211,363
5,000 Phelps Dodge Corporation 311,250
5,800 Weyerhaeuser Company 250,850
ENERGY
4,400 Amerada Hess Corporation 233,200
13,000 Amoco Corporation 934,375
6,200 Atlantic Richfield Company 686,650
5,900 Baker Hughes, Inc. 143,813
6,200 Burlington Resources, Inc. 243,350
17,500 Chevron Corporation 918,750
8,300 Dresser Industries, Inc. 202,313
8,900 Enron Corporation 339,313
32,200 Exxon Corporation 2,580,025
10,800 Mobil Corporation 1,209,600
11,100 Occidental Petroleum Corporation 237,263
12,000 Oryx Energy Company1 160,500
11,200 Phillips Petroleum Corporation 382,200
9,200 Schlumberger, Inc. 637,100
13,600 Texaco, Inc. 1,067,600
11,100 Unocal Corporation 323,285
11,600 USX Marathon Group 226,200
----------
TOTAL -- UNITED STATES 13,115,926
----------

TOTAL COMMON STOCKS -- 98.2% 29,612,046
(cost $27,971,787) ----------

SHORT-TERM INVESTMENTS -- 19.3%
Repurchase Agreement with State Street Bank and
Trust Company, 5.00%, due 1/2/96, in the amount of
$5,809,226; collateralized by $5,305,000 par value
U.S. Treasury Notes, 7.50%, due 5/15/02
(cost $5,806,000) 5,806,000
----------

TOTAL INVESTMENT SECURITIES -- 117.5% 35,418,046
(cost $33,777,787)

LIABILITIES LESS OTHER ASSETS-- (17.5%) (5,260,588)
----------

NET ASSETS -- 100% -- equivalent to $10.66 per share
on 2,829,544 shares outstanding $30,157,458
==========

- -------------------
1 Non-income producing.

See the accompanying notes to financial statements.

31
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

TRUSTEES

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

OFFICERS

James M. Benham
Chairman of the Board

John T. Kataoka
President and Chief Executive Officer

Bruce R. Fitzpatrick
Vice President

Maryanne Roepke
Treasurer

Douglas A. Paul
Vice President, Secretary
and General Counsel

Ann N. McCoid
Controller

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

1665 Charleston Road
Mountain View, CA 94043

1-800-321-8321

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

Benham Distributors, Inc. 2/96 Q071

<PAGE>
BENHAM
EQUITY FUNDS

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

Annual Report
December 31, 1995

[picture of the front of
the New York Stock Exchange
building]

Equity Growth Fund
Income & Growth Fund
Utilities Income Fund

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

<PAGE>

CONTENTS

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

U.S. STOCK MARKET SUMMARY............................ 2

EQUITY GROWTH FUND
Performance Information.............................. 4
Portfolio Composition................................ 5
Portfolio Statistics and
Additional Performance Information................ 6
Management Discussion................................ 7
Financial Highlights..................................26
Financial Statements and Notes........................29
Schedule of Investments...............................37

INCOME & GROWTH FUND
Performance Information.............................. 9
Portfolio Composition.................................10
Portfolio Statistics and
Additional Performance Information.................11
Management Discussion.................................12
Financial Highlights..................................27
Financial Statements and Notes........................29
Schedule of Investments...............................42

UTILITIES INCOME FUND
Market Summary........................................14
Performance Information...............................15
Portfolio Composition & Total Return Breakdown........16
Portfolio Statistics and
Lipper Performance Comparison......................17
Management Discussion.................................18
Financial Highlights..................................28
Financial Statements and Notes........................29
Schedule of Investments...............................48

INVESTMENT FUNDAMENTALS
Definitions...........................................20
Equity Fund Management Approach.......................22
Benchmark Indexes.....................................23

<PAGE>

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

Slowing economic growth, lower-than-expected inflation and robust financial
market performance characterized the U.S. economy in 1995. The Federal Reserve
(the Fed) surprised analysts and encouraged investors by achieving its goal of
slow economic growth and low inflation, the so-called "soft landing." The Fed
raised short-term interest rates seven times from February 1994 to February 1995
(see the graph below) to slow the economy and inhibit inflation.

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

The Fed's success in slowing the economy forced it to change its interest rate
strategy in mid-1995. Evidence of economic weakness was so pronounced in the
second quarter that the Fed reduced one of its short-term interest rate
benchmarks, the federal funds rate target, from 6.00% to 5.75% in July. It was
the Fed's first interest rate cut since September 1992.

By the end of the year, political turmoil in Washington took center stage.
Unsuccessful federal budget negotiations between President Clinton and Congress
led to two government shutdowns during the fourth quarter. The shutdowns and
political bickering over the budget were a source of consternation for the U.S.
bond market--the budget situation caused concerns about federal debt repayment,
while the government shutdowns delayed the release of key economic reports.

Although the federal budget battle and government shutdowns captured most of the
headlines, economists and the Fed focused on the decelerating economy and low
inflation. Slowing corporate and government spending, declining auto sales and
housing activity, and poorer-than-expected holiday season retail sales helped
persuade the Fed to reduce the federal funds rate target to 5.50% in December.
The lack of inflation was also a factor in the Fed's decision to lower interest
rates--in 1995, U.S. inflation (as measured by the consumer price index) was
just 2.5%, the lowest annual rate since 1986.

Going forward, we believe that 1996 will bring more of the same for the U.S.
economy. Inflation, which has been below 3% in each of the past four years, is
expected to remain tame in 1996, while economic growth is projected to continue
its sluggish pace. The Fed lowered interest rates again in January (see the
graph) and may continue tthis trend to avoid triggering a recession.

[graph data]

Short-Term U.S. Interest Rates
1/92-1/96
Discount Rate Fed Funds Rate
Jan-92 3.5 4.03
Feb-92 3.5 4.06
Mar-92 3.5 3.98
Apr-92 3.5 3.73
May-92 3.5 3.82
Jun-92 3.5 3.76
Jul-92 3 3.25
Aug-92 3 3.3
Sep-92 3 3.22
Oct-92 3 3.1
Nov-92 3 3.09
Dec-92 3 2.92
Jan-93 3 3.02
Feb-93 3 3.03
Mar-93 3 3.07
Apr-93 3 2.96
May-93 3 3
Jun-93 3 3.04
Jul-93 3 3.06
Aug-93 3 3.03
Sep-93 3 3.09
Oct-93 3 2.99
Nov-93 3 3.02
Dec-93 3 2.96
Jan-94 3 3.05
Feb-94 3 3.25
Mar-94 3 3.34
Apr-94 3 3.56
May-94 3.5 4.01
Jun-94 3.5 4.25
Jul-94 3.5 4.26
Aug-94 4 4.47
Sep-94 4 4.73
Oct-94 4 4.76
Nov-94 4.75 5.29
Dec-94 4.75 5.45
Jan-95 4.75 5.53
Feb-95 5.25 5.92
Mar-95 5.25 5.98
Apr-95 5.25 6.05
May-95 5.25 6.01
Jun-95 5.25 5.98
Jul-95 5.25 5.77
Aug-95 5.25 5.75
Sep-95 5.25 5.8
Oct-95 5.25 5.76
Nov-95 5.25 5.8
Dec-95 5.25 5.6
Jan-96 5 5.25

Source: Federal Reserve Bank of New York

1
<PAGE>

MARKET SUMMARY
U.S. STOCK MARKET
by Steve Colton, Vice President & Portfolio Manager

NOTE: TERMS MARKED WITH AN ASTERISK (*) ARE DEFINED ON PAGE 20.

In 1995, the U.S. stock market enjoyed a remarkable year. Most of the major
stock indexes posted returns in excess of 30% and set new record highs during
the year. For example, the Standard & Poor's 500 Stock Index (S&P 500) had a
total return of 37.58% in 1995, its best calendar-year performance since 1958.

The 1995 U.S. stock market rally was primarily driven by three factors:

(1) Strong corporate earnings growth--Robust U.S. economic growth in late 1994
translated into rising profits in early 1995. As a result, stock prices soared
in the first half of the year as corporate earnings growth exceeded
expectations. In particular, technology companies reported exceptional earnings
growth, fueled by heavy demand for computers and other technology-related
products.

(2) Heavy cash flows into the market--Increased cash flows into the market
sustained the stock rally in the second half of the year. Many investors who
left the market following 1994's tepid stock performance shifted back into
stocks. An increased focus on retirement planning for aging "baby boomers"
brought additional money into the stock market. The biggest beneficiaries were
stock mutual funds, which experienced record cash inflows in 1995.

[line graph] 1995 U.S. Stock Index Returns

[graph data]
Russell 2000 S&P 500
12/31/94 1 1
1/31/95 0.99 1.03
2/28/95 1.03 1.07
3/31/95 1.05 1.1
4/30/95 1.07 1.13
5/31/95 1.09 1.18
6/30/95 1.14 1.2
7/31/95 1.21 1.24
8/31/95 1.24 1.25
9/30/95 1.26 1.3
10/31/95 1.2 1.29
11/30/95 1.25 1.35
12/31/95 1.28 1.38

Standard & Poor's 500 Stock Index (S&P 500) 37.58%
Russell 2000 Stock Index 28.44%

Investors cannot invest directly in either of these indexes.

Source: Ibbotson Associates, Inc.

2
<PAGE>

MARKET SUMMARY
U.S. STOCK MARKET
(Continued from the previous page)

(3) Falling interest rates--A gradually weaker economy (see page 1) led to
declining interest rates throughout the year. Lower rates are favorable for
stocks because they typically reduce corporate borrowing costs, enhance
corporate profits and encourage consumer spending. In addition, falling rates on
bonds and money market instruments make stocks more attractive investments.

As a whole, large-capitalization stocks* outperformed small-capitalization
stocks* during the year. The S&P 500, a broad index of large-cap U.S. stocks,
posted a significantly higher total return than the Russell 2000, a broad index
of small-cap U.S. stocks (see the chart on page 2).

There were several reasons why larger companies in general produced better
investment returns than smaller companies in 1995. First, a number of large
corporations reorganized in an effort to cut costs and improve efficiency.
Corporate restructuring and downsizing enabled many large companies to increase
their profitability.

In addition, large companies reaped the greatest benefits from the weak U.S.
dollar. Many large U.S. corporations have substantial overseas operations. As
the dollar's value declined in the first half of 1995, revenues from foreign
sales translated into more dollars, enhancing the profits of large multinational
corporations based in the U.S.

Another reason for the superior performance of large-cap stocks was strong
demand from investors. Concerns about slower earnings growth in the second half
of the year caused many investors to seek refuge in large blue-chip stocks* with
steady earnings growth. This higher demand fled to higher prices for many
large-cap stocks.

The best industry returns in 1995 came from the financial sector, which includes
banking, insurance and financial services stocks. Declining interest rates and
several significant mergers, particularly among banks, were the main reasons for
their strong performance. High-yielding utilities stocks also benefited from
falling interest rates (see page 14 for further details). Technology stocks had
strong returns during the year despite a dramatic sell-off in the fourth
quarter. It was also a good year for "consumer non-cyclical" stocks--food,
beverage, tobacco and pharmaceutical companies--which tend to be immune to the
ups and downs of the economy. Increased demand for these stocks resulted from
expectations of slower corporate earnings growth in 1996.

Lagging industry sectors included retailers and basic materials producers.
Consumer spending was weak in 1995, especially during the latter half of the
year, and this hurt profits at retail stores. Basic materials companies--such as
metals, chemical and paper producers--suffered from slowing demand and low
prices for their products.

3
<PAGE>

EQUITY GROWTH FUND
NAV AND AVERAGE ANNUAL TOTAL RETURNS
For Periods Ended December 31, 1995

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

The Fund commenced operations on May 9, 1991.

SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 5/31/91
in the Fund and in the S&P 500
[line graph]

[graph data]
S&P 500 Fund
5/31/91 $10,000 $10,000
6/28/91 9,542 9,535
7/31/91 9,987 10,069
8/30/91 10,223 10,406
9/30/91 10,053 10,266
10/31/91 10,187 10,584
11/29/91 9,777 10,385
12/31/91 10,895 11,620
1/31/92 10,693 11,409
2/28/92 10,832 11,399
3/31/92 10,621 11,007
4/30/92 10,933 11,007
5/29/92 10,986 11,048
6/30/92 10,823 10,805
7/31/92 11,265 11,281
8/31/92 11,034 11,099
9/30/92 11,164 11,168
10/30/92 11,203 11,351
11/30/92 11,584 11,830
12/31/92 11,726 12,100
1/29/93 11,824 12,131
2/26/93 11,986 12,234
3/31/93 12,238 12,635
4/30/93 11,943 12,312
5/28/93 12,262 12,551
6/30/93 12,298 12,857
7/30/93 12,249 12,847
8/31/93 12,713 13,422
9/30/93 12,616 13,549
10/29/93 12,877 13,559
11/30/93 12,754 13,349
12/31/93 12,908 13,482
1/31/94 13,347 13,804
2/28/94 12,985 13,348
3/31/94 12,419 12,856
4/29/94 12,578 13,001
5/31/94 12,784 13,247
6/30/94 12,471 13,034
7/29/94 12,881 13,337
8/31/94 13,409 13,787
9/30/94 13,081 13,531
10/31/94 13,375 13,723
11/30/94 12,888 13,249
12/30/94 13,079 13,451
1/31/95 13,418 13,824
2/28/95 13,941 14,349
3/31/95 14,352 14,704
4/28/95 14,775 15,289
5/31/95 15,365 15,887
6/30/95 15,722 16,121
7/31/95 16,244 16,663
8/31/95 16,285 16,710
9/29/95 16,972 17,133
10/31/95 16,911 16,932
11/30/95 17,654 17,724
12/29/95 17,994 18,099

Past performance does not guarantee future results.

This graph compares the Fund`s performance with a broad-based market index, the
Standard & Poor`s 500 Stock Index (S&P 500), over the life of the Fund. Although
the investment characteristics of the S&P 500 are similar to those of the Fund,
the securities owned by the Fund and those composing the S&P 500 are likely to
be different, and any securities that the Fund and the S&P 500 have in common
are likely to have different weightings in the respective portfolios. Investors
cannot invest directly in the S&P 500.

4
<PAGE>

EQUITY GROWTH FUND
TOP TEN STOCKS

AS OF 12/31/95 AS OF 6/30/95
COMPANY WEIGHT COMPANY WEIGHT
Mobil Corporation 2.7% Du Pont E.I. de Nemours 3.0%
Philip Morris Companies, Inc. 2.7% Atlantic Richfield Co.mpany 3.0%
General Electric Company 2.5% Philip Morris Companies, Inc. 2.7%
Exxon Corporation 2.3% General Electric Company 2.7%
Johnson & Johnson 2.2% Ameritech Corporation 2.2%
BankAmerica Corp. 2.1% Bell Atlantic Corporation 2.1%
Ameritech Corporation 1.9% Signet Banking Corporation 1.9%
Travelers Group, Inc. 1.9% Johnson & Johnson 1.8%
Amoco Corporation 1.8% Amoco Corporation 1.8%
Sears, Roebuck & Co. 1.7% Navistar International Corp. 1.7%
TOTAL WEIGHTING TOTAL WEIGHTING
OF TOP TEN 21.8% OF TOP TEN 22.9%

The Fund's top ten holdings may change over time. For the top ten holdings of
the S&P 500, see page 23.

INDUSTRY WEIGHTINGS
As of December 31, 1995
[bar chart]

[graph data]
Utilities: 11.1%
Energy: 9.2%
Insurance: 7.3%
Electrical & Electronic Components: 7.2%
Pharmaceuticals: 6.9%
Telecommunications: 5.8%
Banking: 5.4%
Chemicals: 4.5%
Computer Systems: 4.4%
Retail: 4.3%
Aerospace & Defense: 3.3%
Financial Services: 3.0%
Food & Beverage: 2.8%
Tobacco: 2.7%
Paper & Forest Products: 2.3%
Building & Home Improvements: 1.9%
Leisure: 1.7%
Airlines: 1.5%
Railroads: 1.5%
Business Services & Supplies: 1.4%
Other: 11.8%

5
<PAGE>

EQUITY GROWTH FUND
PORTFOLIO STATISTICS

AS OF 12/31/95 AS OF 6/30/95
------------------- -------------------
S&P S&P
THE FUND 500 THE FUND 500
------------------- -------------------

Number of Companies: 156 500 144 500
Dividend Yield: 2.39% 2.30% 2.32% 2.47%
Beta (S&P 500 = 1.00): 0.99 1.00 0.99 1.00
Price/Earnings Ratio:* 15.4 19.5 19.8 17.1
Price/Book Ratio: 2.9 4.0 2.3 3.7

* based on earnings from the previous 12 months

The statistical terms listed above are defined on page 21.

LIPPER PERFORMANCE COMPARISON

1 YEAR 3 YEARS LIFE OF FUND*

The Fund: 34.56% 14.37% 13.90%
Category Average: 30.84% 12.47% 12.65%
The Fund's Ranking: 176 out of 569 108 out of 341 80 out of 244

* from May 9, 1991, through December 31, 1995

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

ONE-YEAR TOTAL RETURN BREAKDOWN
For the Period Ended December 31, 1995

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

1.60% + 7.21% + 25.75% = 34.56%

6
<PAGE>

EQUITY GROWTH FUND
MANAGEMENT DISCUSSION
with Steve Colton, Vice President & Portfolio Manager

Q: How did the Fund perform in 1995?

A: The Fund's total return for the year was 34.56%, compared to a 37.58%
gain for the S&P 500 over the same period. Although the Fund trailed
the S&P 500, it outperformed the 30.84% return for the average growth
fund (see the Lipper Performance Comparison on page 6). The Fund's 1995
performance ranked in the top third of all growth funds.

Q: That's impressive considering the Fund is relatively conservative. Why
did the Fund outperform its peer group average?

A: The Fund has a policy of remaining fully invested in U.S. stocks, and I
think this was its key advantage in 1995. When stocks have a big year,
it pays to be fully invested in the market at all times. Many growth
funds held cash in their portfolios at some point during the year--some
were bearish about the market going into 1995, while others took
profits later in the year in anticipation of a stock market correction.
As a result, they were unable to take full advantage of the market's
rise. This also explains why the S&P 500 outperformed 85% of all
domestic stock funds in 1995.

Q: The Fund was among the 85% that underperformed the S&P 500. Why?

A: The Fund's lag resulted from its small-cap stock holdings. Because the
Fund selects from a universe of 1,500 stocks, it tends to have a
smaller average market capitalization than the S&P 500, which consists
mostly of large-cap stocks. In 1995, large-cap stocks provided better
returns than small-cap stocks. Many of the small-cap stocks owned by
the Fund also had a high degree of earnings variability, which turned
out to be an undesirable characteristic during the last half of the
year--investors flocked to larger companies with steady, reliable
earnings.

Q: Technology stocks were very popular in 1995 because of their strong
earnings growth. Did the Fund jump on the technology bandwagon?

A: Not really. The Fund owned selected technology stocks during the year,
but it was underweighted in this sector compared to the S&P 500.
Although their earnings growth has been tremendous, technology stocks
tend to be very volatile. A high concentration of tech stocks may be
suitable for an aggressive stock fund, but the Fund is more
conservatively managed. We even trimmed the Fund's technology holdings
in August and September because we felt that this sector was
overvalued. This strategy paid off as technology stocks plunged in the
fourth quarter.

7
<PAGE>

EQUITY GROWTH FUND
MANAGEMENT DISCUSSION
(Continued from the previous page)

Q: By the end of 1995, the Fund had a higher dividend yield than the
S&P 500. Isn't this unusual for a growth fund?

A: Yes. The Fund's higher dividend yield was a byproduct of the Fund's
largest industry weightings, which included utilities, energy companies
and financial stocks (see the chart on page 5). We were heavily
weighted in these industries because they tend to perform best in a
declining interest rate environment. Many of these stocks, especially
the utilities, have relatively high dividend yields, and that boosted
the Fund's yield.

Q: Looking ahead, what is your outlook for U.S. stocks in 1996?

A: We certainly don't expect a repeat of last year's huge gains. There is
a lot of uncertainty in the market about the factors that drove the
1995 bull market--earnings growth, cash flows and interest rates. Many
stock market analysts expect the earnings growth rate of the S&P 500 to
be around 8% in 1996, which is only half of what it was in 1995. Record
cash flows into stock mutual funds buoyed the market at the end of
1995, but it remains to be seen whether this level of demand can be
sustained. Interest rates may have an impact on investor demand for
stocks--if rates continue to fall, investors in low-yielding money
market and bond funds may be inclined to seek higher potential returns
in the stock market.

Despite these uncertainties, we believe that economic conditions are
still favorable for stocks--economic growth is moderate and inflation
is low. As a result, we expect positive stock market returns in 1996.

Q: How will you position the Fund going forward?

A: Believe it or not, our recent purchases focused on several technology
stocks. After a sharp sell-off in the fourth quarter of 1995, many
technology issues are now trading at attractive prices, and we expect
their earnings to grow faster than the overall market. The Fund is also
overweighted in chemicals stocks, which we believe to be undervalued.
Although the slowing U.S. economy led many investors to sell these
stocks in late 1995, we believe that chemicals companies will maintain
their strong earnings growth.

We are underweighting telephone and media stocks, which appear to be
trading at overvalued prices. Telephone stock prices already reflect
the benefits of the recent federal telecommunications legislation,
while merger activity among media companies has boosted their stock
prices to historically high levels.

8
<PAGE>

INCOME & GROWTH FUND
NAV AND AVERAGE ANNUAL TOTAL RETURNS
For Periods Ended December 31, 1995

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

The Fund commenced operations on December 17, 1990.

SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 12/31/90
in the Fund and in the S&P 500
[line graph]

[graph data]
S&P 500 Fund
12/31/90 $10,000 $10,000
1/31/91 10,436 10,514
2/28/91 11,182 11,314
3/29/91 11,453 11,670
4/30/91 11,480 11,727
5/31/91 11,976 12,181
6/28/91 11,428 11,634
7/31/91 11,960 12,231
8/30/91 12,244 12,588
9/30/91 12,039 12,531
10/31/91 12,200 12,809
11/29/91 11,709 12,447
12/31/91 13,048 13,908
1/31/92 12,806 13,686
2/28/92 12,972 13,753
3/31/92 12,720 13,428
4/30/92 13,093 13,568
5/29/92 13,157 13,583
6/30/92 12,962 13,432
7/31/92 13,491 14,012
8/31/92 13,215 13,755
9/30/92 13,370 13,824
10/30/92 13,417 14,071
11/30/92 13,873 14,583
12/31/92 14,044 15,002
1/29/93 14,161 15,060
2/26/93 14,354 15,258
3/31/93 14,657 15,733
4/30/93 14,303 15,449
5/28/93 14,685 15,744
6/30/93 14,728 16,094
7/30/93 14,669 16,024
8/31/93 15,226 16,700
9/30/93 15,109 16,770
10/29/93 15,422 16,863
11/30/93 15,275 16,552
12/31/93 15,459 16,699
1/31/94 15,985 17,137
2/28/94 15,551 16,587
3/31/94 14,873 15,948
4/29/94 15,064 16,087
5/31/94 15,311 16,260
6/30/94 14,936 16,030
7/29/94 15,426 16,441
8/31/94 16,059 17,020
9/30/94 15,666 16,642
10/31/94 16,018 16,942
11/30/94 15,435 16,415
12/30/94 15,663 16,608
1/31/95 16,070 17,055
2/28/95 16,696 17,656
3/31/95 17,189 18,060
4/28/95 17,695 18,715
5/31/95 18,402 19,468
6/30/95 18,830 19,764
7/31/95 19,454 20,423
8/31/95 19,503 20,550
9/29/95 20,326 21,406
10/31/95 20,253 21,352
11/30/95 21,142 22,333
12/29/95 21,549 22,732

Past performance does not guarantee future results.

This graph compares the Fund`s performance with a broad-based market index, the
Standard & Poor's 500 Stock Index (S&P 500), over the life of the Fund. Although
the investment characteristics of the S&P 500 are similar to those of the Fund,
the securities owned by the Fund and those composing the S&P 500 are likely to
be different, and any securities that the Fund and the S&P 500 have in common
are likely to have different weightings in the respective portfolios. Investors
cannot invest directly in the S&P 500.

9
<PAGE>

INCOME & GROWTH FUND
TOP TEN STOCKS

AS OF 12/31/95 AS OF 6/30/95
COMPANY WEIGHT COMPANY WEIGHT
General Electric Company 2.6% General Electric Company 3.6%
Exxon Corporation 2.4% Du Pont E.I. de Nemours 3.1%
Philip Morris Companies, Inc. 2.3% Emerson Electric Company 2.7%
Royal Dutch Petroleum Co. 2.2% Exxon Corporation 2.6%
Consolidated Edison Co. 2.1% Philip Morris Companies, Inc. 2.6%
Bristol Myers Squibb 2.1% Bristol Myers Squibb 2.3%
Johnson & Johnson 2.0% Johnson & Johnson 2.3%
Mobil Corporation 1.9% Atlantic Richfield Company 2.2%
Dow Chemical Company 1.9% Amoco Corporation 2.0%
Atlantic Richfield Company 1.8% Monsanto Company 1.9%
TOTAL WEIGHTING TOTAL WEIGHTING
OF TOP TEN 21.3% OF TOP TEN 25.3%

The Fund's top ten holdings may change over time. For the top ten holdings of
the S&P 500, see page 23.

INDUSTRY WEIGHTINGS
As of December 31, 1995
[bar chart]

[graph data]

Energy: 12.2%
Utilities: 9.5%
Electrical & Electronic Components: 8.6%
Pharmaceuticals: 7.3%
Banking: 7.1%
Chemicals: 6.8%
Telecommunications: 6.0%
Insurance: 5.5%
Retail: 4.1%
Computer Systems: 3.6%
Aerospace & Defense: 3.1%
Tobacco: 2.8%
Food & Beverage: 2.3%
Financial Services: 2.3%
Paper & Forest Products: 2.2%
Computer Software & Services: 1.6%
Leisure: 1.6%
Automobiles & Auto Parts: 1.4%
Printing & Publishing: 1.2%
Railroads: 1.0%
Other: 9.8%

10
<PAGE>

INCOME & GROWTH FUND
PORTFOLIO STATISTICS

AS OF 12/31/95 AS OF 6/30/95
------------------- -------------------
S&P S&P
THE FUND 500 THE FUND 500
------------------- -------------------

Number of Companies: 239 500 186 500
Dividend Yield: 2.95% 2.30% 3.26% 2.47%
Beta (S&P 500 = 1.00): 0.97 1.00 0.97 1.00
Price/Earnings Ratio:* 15.4 19.5 15.3 17.1
Price/Book Ratio: 3.1 4.0 2.3 3.7

* based on earnings from the previous 12 months

The statistical terms listed above are defined on page 21.

LIPPER PERFORMANCE COMPARISON

1 YEAR 3 YEARS 5 YEARS LIFE OF FUND*

The Fund: 36.88% 14.86% 17.85% 17.75%
Category Average: 30.82% 13.21% 15.32% 15.23%
The Fund's Ranking: 45 out of 445 78 out of 262 27 out of 193 25 out of 189

* from December 20, 1990, through December 31, 1995

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

ONE-YEAR TOTAL RETURN BREAKDOWN
For the Period Ended December 31, 1995

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

2.36% + 4.26% + 30.26% = 36.88%

11
<PAGE>

INCOME & GROWTH FUND
MANAGEMENT DISCUSSION
with Steve Colton, Vice President & Portfolio Manager

Q: How did the Fund perform in 1995?

A: The Fund's total return for the year was 36.88%, compared to a 37.58%
gain for the S&P 500 over the same period. Although the Fund narrowly
trailed the S&P 500, it outperformed the 30.82% return for the average
growth and income fund (see the Lipper Performance Comparison on page
11). The Fund's 1995 performance ranked in the top 10% of all growth
and income funds.

Q: That's an impressive ranking. Why did the Fund perform so well compared
to its peers?

A: The Fund has a policy of remaining fully invested in U.S. stocks, and I
think this was its key advantage in 1995. When stocks have a big year,
it pays to be fully invested in the market at all times. Many growth
and income funds held cash in their portfolios at some point during the
year--some were bearish about the market going into 1995, while others
took profits later in the year in anticipation of a stock market
correction. As a result, they were unable to take full advantage of the
market's rise. This also explains why the S&P 500 outperformed 85% of
all domestic stock funds in 1995.

Q: The Fund was among the 85% that underperformed the S&P 500. Why?

A: The Fund's return trailed the S&P 500 by just 70 basis points (a basis
point equals 0.01%), and this narrow underperformance was due primarily
to the Fund's small-cap stock holdings. Because the Fund selects from a
universe of 1,500 stocks, it tends to have a smaller average market
capitalization than the S&P 500, which consists mostly of large-cap
stocks. In 1995, large-cap stocks provided better returns than
small-cap stocks. The Fund was also overweighted in utilities stocks,
which underperformed the S&P 500 (see the graph on page 14).

Q: Why did the Fund have such a high weighting in utilities stocks?

A: The Fund's income component was the main reason. The Fund is managed to
have a dividend yield that is 30% higher than the S&P 500. As a result,
the Fund tends to be overweighted in stocks with high dividend yields,
such as utilities, energy and financial stocks. In fact, these
overweightings are crucial because many of the Fund's growth-oriented
stocks, such as technology companies, tend to pay little or no
dividends.

12
<PAGE>

INCOME & GROWTH FUND
MANAGEMENT DISCUSSION
(Continued from the previous page)

Q: Is that why the Fund was underweighted in technology stocks?

A: Partly. The Fund's bias toward income has led the Fund to be
underweighted in this sector compared to the S&P 500. But another
factor is volatility--the wild price swings in the technology sector
may be appropriate for an aggressive stock fund, but the Fund leans
toward a more conservative approach. We even trimmed the Fund's
technology holdings in August and September because we felt that this
sector was overvalued. This strategy paid off as technology stocks
plunged in the fourth quarter.

Q: Looking ahead, what is your outlook for U.S. stocks in 1996?

Q: How will you position the Fund going forward?

A: Believe it or not, our recent purchases focused on several technology
stocks. After a sharp sell-off in the fourth quarter of 1995, many
technology issues are now trading at attractive prices, and we expect
their earnings to grow faster than the overall market. We also like
natural gas stocks, which typically have high dividend yields and
should benefit from favorable supply and demand conditions.

We are underweighting food and beverage stocks, which appear to be
trading at overvalued prices. As economic growth has slowed, investors
have shown strong demand for the steady earnings of food and beverage
companies, and this has pushed their stock prices to extremely high
levels.

13
<PAGE>

UTILITIES INCOME FUND
MARKET SUMMARY
by Steve Colton, Vice President & Portfolio Manager

Like the broader stock market, utilities stocks posted strong returns in 1995
(see the chart below). The New York Stock Exchange Utilities Index returned more
than 30% for the year--its best year since 1989.

The rally in utilities stocks was driven primarily by declining interest rates.
Slowing economic growth and two interest rate cuts by the Federal Reserve (see
page 1) caused rates to decline throughout the year. Utilities stocks are
sensitive to changes in interest rates, and their prices surged as rates fell.
Strong earnings and merger activity also pushed utilities stock prices higher.

Although utilities stocks trailed the broader market over the full year, they
outperformed the overall market during the last six months. The two Fed rate
cuts, which occurred in July and December, provided a boost to the utilities
sector during this period. In addition, slowing economic growth led many
investors to seek refuge in "defensive" stocks--large companies with steady
earnings and strong dividends. Utilities stocks in general are considered
defensive, and their prices climbed in response to the increased demand.

Telecommunications stocks were the top performers within the utilities industry
in 1995. Congressional legislation eliminated several obsolete regulations that
restricted growth in the telecommunications industry. In particular, regional
telephone companies will soon be able to compete for long distance and cable
services within their regions. Natural gas stocks also had a strong year as
demand soared, leading to higher prices and rising earnings. Electric stocks
lagged the other utilities sectors, but they still managed to post solid
returns. Merger activity was a positive factor, but uncertainty about regulatory
changes in California and New York hampered the performance of electric
utilities.

[line graph]

[graph data] S&P 500 NYSE Utilities
12/31/94 $1 $1
1/31/95 1.02593 1.0536
2/28/95 1.06591 1.05195
3/31/95 1.09737 1.04718
4/28/95 1.12968 1.07909
5/31/95 1.17484 1.11212
6/30/95 1.20213 1.12237
7/31/95 1.24199 1.14754
8/31/95 1.24511 1.17206
9/29/95 1.29765 1.22915
10/31/95 1.29302 1.24808
11/30/95 1.34978 1.27087
12/29/95 1.37578 1.33894

Standard & Poor's 500 Stock Index (S&P 500) 37.58%
New York Stock Exchange Utilities Index 33.89%

Investors cannot invest directly in either of these indexes.

Source: Ibbotson Associates, Inc.

14
<PAGE>

UTILITIES INCOME FUND
NAV AND AVERAGE ANNUAL TOTAL RETURNS
For Periods Ended December 31, 1995

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

The Fund commenced operations on March 1, 1993.

SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 3/1/93 in the Fund,
in the S&P 500 and in the New York Stock Exchange Utilities Index
[line graph]

[graph data]
S&P 500 NYSE Utilities Index Fund
2/26/93 $10,000 $10,000 $10,000
3/31/93 10,211 10,258 10,223
4/30/93 9,964 10,060 10,126
5/28/93 10,231 10,069 10,161
6/30/93 10,261 10,455 10,590
7/30/93 10,219 10,645 10,787
8/31/93 10,607 11,112 11,249
9/30/93 10,526 11,078 11,264
10/29/93 10,744 11,073 11,187
11/30/93 10,641 10,493 10,596
12/31/93 10,770 10,614 10,660
1/31/94 11,136 10,680 10,706
2/28/94 10,834 10,107 10,168
3/31/94 10,361 9,699 9,732
4/29/94 10,494 9,984 9,979
5/31/94 10,667 9,710 9,804
6/30/94 10,405 9,562 9,639
7/29/94 10,747 9,946 9,995
8/31/94 11,187 10,038 10,064
9/30/94 10,914 9,812 9,801
10/31/94 11,159 9,818 9,838
11/30/94 10,753 9,640 9,681
12/30/94 10,912 9,618 9,590
1/31/95 11,195 10,133 10,152
2/28/95 11,631 10,117 10,212
3/31/95 11,975 10,071 10,162
4/28/95 12,327 10,378 10,420
5/31/95 12,820 10,696 10,791
6/30/95 13,118 10,795 10,862
7/31/95 13,553 11,037 11,068
8/31/95 13,587 11,272 11,275
9/29/95 14,160 11,822 11,897
10/31/95 14,110 12,004 12,128
11/30/95 14,729 12,223 12,359
12/29/95 15,013 12,877 13,014

Past performance does not guarantee future results.

This graph compares the Fund`s performance with a broad-based index, the
Standard & Poor's 500 Stock Index (S&P 500), over the life of the Fund. Because
utility company stocks make up less than 15% of the S&P 500, we have also
included the Fund's benchmark index, the New York Stock Exchange Utilities
Index. Although the investment characteristics of the indexes are similar to
those of the Fund, the securities owned by the Fund and those composing the
indexes are likely to be different, and any securities that the Fund and the
indexes have in common are likely to have different weightings in the respective
portfolios. Investors cannot invest directly in the indexes.

15
<PAGE>

UTILITIES INCOME FUND
TOP TEN STOCKS

AS OF 12/31/95 AS OF 6/30/95
COMPANY WEIGHT COMPANY WEIGHT COMPANY
Bell South Corporation 4.8% SBC Communications, Inc. 4.7%
GTE Corporation 4.6% Bell South Corporation 4.5%
Ameritech Corporation 4.4% Bell Atlantic Corporation 4.5%
SBC Communications, Inc. 4.2% GTE Corporation 4.4%
Sprint Corporation 4.0% Ameritech Corporation 4.3%
NYNEX Corporation 3.7% Consolidated Edison Co. 3.9%
Bell Atlantic Corporation 3.6% U.S. West Communications, Inc. 3.5%
Consolidated Edison Co. 3.6% Duke Power Company 3.1%
U.S. West Communications, Inc. 3.3% Ohio Edison Company 3.1%
Pacific Telesis Group 3.1% Sprint Corporation 2.9%
TOTAL WEIGHTING TOTAL WEIGHTING
OF TOP TEN 39.3% OF TOP TEN 38.9%

The Fund's top ten holdings may change over time. For the top ten holdings of
the New York Stock Exchange Utilities Index, see page 23.

INDUSTRY WEIGHTINGS
As of December 31, 1995
[bar chart]

[graph data]
Fund NYSE Utilities
Telecommunications: 46.2% 45.9%
Electric: 36.7% 37.4%
Natural Gas: 8.6% 8.9%
Other: 8.5% 7.8%

The industry weightings of the Fund and the New York Stock Exchange Utilities
Index may change over time.

ONE-YEAR TOTAL RETURN BREAKDOWN
For the Period Ended December 31, 1995

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

3.65% + 32.05% = 35.70%

16
<PAGE>

UTILITIES INCOME FUND
STOCK PORTFOLIO STATISTICS

AS OF 12/31/95 AS OF 6/30/95
------------------- -------------------
NYSE NYSE
UTILITIES UTILITIES
THE FUND INDEX THE FUND INDEX
------------------- -------------------

Number of Companies: 90 248 91 233
Dividend Yield: 4.56% 4.28% 5.10% 4.85%
Beta (S&P 500 = 1.00): 0.66 0.67 0.70 0.70
Price/Earnings Ratio:* 15.5 16.4 13.5 15.0
Price/Book Ratio: 2.3 2.3 1.7 2.0

* based on earnings from the previous 12 months

The statistical terms listed above are defined on page 21.

BOND PORTFOLIO STATISTICS

As of 12/31/95 As of 6/30/95

Number of Issues: 1* 0
Average Rating: AAA N/A
Average Coupon: 5.75% N/A
Average Maturity: 1.75 years N/A
Average Duration: 1.60 years N/A

* U.S. Treasury note

The Fund may invest up to 25% of its assets in fixed-income securities to
enhance dividend income or increase share price stability.

LIPPER PERFORMANCE COMPARISON

1 YEAR LIFE OF FUND*

The Fund: 35.70% 9.33%
Category Average: 27.35% 7.90%
The Fund's Ranking: 3 out of 78 10 out of 38

* from March 4, 1993, through December 31, 1995

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

17
<PAGE>

UTILITIES INCOME FUND
MANAGEMENT DISCUSSION
with Steve Colton, Vice President & Portfolio Manager

Q: How did the Fund perform in 1995?

A: The Fund's total return for the year was 35.70%, compared to a 33.89%
gain for the New York Stock Exchange (NYSE) Utilities Index over the
same period. In addition to beating the Index, the Fund also
outperformed the 27.35% return for the average utilities fund (see the
Lipper Performance Comparison on page 17). The Fund's 1995 performance
ranked it number three out of the 78 utilities funds.

Q: That's an impressive ranking. Why did the Fund perform so well compared
to its peers?

A: The Fund remained almost fully invested in utilities stocks for the
entire year, holding very little in bonds or cash. I think this was the
Fund's key advantage over its peers in 1995. According to Morningstar,
the average utilities fund invested just 75% of its portfolio in
domestic utilities stocks in 1995, with 14% in foreign stocks and 11%
in cash and bonds. The Fund, on the other hand, averaged more than 96%
in domestic utilities stocks during the year. As a result, the Fund was
able to take full advantage of the rise in U.S. utilities stocks, while
lagging cash and foreign stock returns caused its peers to fall behind.

Q: Why did the Fund maintain such a high percentage of utilities stocks?

A: We constantly monitor the relative values of utilities stocks and
bonds, adding bonds to the Fund's portfolio only when they provide
better value. In 1995, utilities stocks consistently offered more
attractive values than U.S. Treasury and corporate utility bonds. This
was mostly due to the narrowing difference between the yields of
utilities stocks and bonds--a narrow yield spread indicates that bond
prices are expensive compared to utilities stocks. The Fund held a
small position in two-year Treasury notes during the last half of the
year, but the bulk of the Fund's portfolio remained invested in
utilities stocks.

Q: The Fund was also among the few utilities funds to beat the NYSE
Utilities Index. How was this achieved?

A: Most of the Fund's outperformance of the NYSE Utilities Index occurred
in the first quarter of the year. The Fund was overweighted in natural
gas stocks, which posted double-digit returns during the quarter.
Although other slight industry overweightings--electric utilities in
the second quarter, telecommunications stocks in the third and fourth
quarters--also enhanced the Fund's return relative to the Index, the
Fund`s return essentially tracked the Index`s return for much of the
year.

18
<PAGE>

UTILITIES INCOME FUND
MANAGEMENT DISCUSSION
(Continued from the previous page)

Q: Have there been any recent regulatory changes in the utilities
industry?

A: In December, after several delays, the California Public Utilities
Commission approved a plan for deregulating the state's electricity
market. The proposal, which represents a compromise of two different
plans, would allow industrial customers to begin choosing their power
supplier starting in 1998. Other customers would be phased in by 2003.
The plan now heads to the California state legislature for approval.

At the federal level, Congress approved a sweeping federal
telecommunications bill in early 1996. The legislation removed several
barriers to competition and will enable local and regional phone
companies to expand into long distance and cable operations.

Q: Looking ahead, what is your outlook for utilities stocks in 1996?

A: Although we don't expect a repeat of last year`s strong returns, the
environment remains favorable for utilities stocks. Economic conditions
in the U.S. continue to be ideal--economic growth is moderate and
inflation is low . If the Fed is able to maintain these conditions in
1996, interest rates are likely to remain steady. The Fed may even
lower interest rates further to prevent a recession. Either of these
scenarios would be advantageous for utilities stocks.

As "defensive" stocks, utilities may also benefit from recent concerns
about earnings growth in the broader stock market. Increased demand for
defensive stocks that provide steady, reliable earnings could boost
returns in the utilities sector.

Q: How will you position the Fund going forward?

A: We intend to underweight the regional telephone stocks, which we
believe to be overvalued. Although these companies should reap the most
benefits from the recent telecommunications legislation, these benefits
are already more than priced into the market. Instead, we're increasing
the Fund's stake in several foreign telephone stocks that trade on the
New York Stock Exchange. Our favorites include Tele Danmark and
Telefonica de Espana, the national phone companies in Denmark and
Spain, respectively.

We also like natural gas stocks, which are now overweighted in the
Fund's portfolio. The combination of increased demand due to the cold
winter weather and low levels of supply has enhanced the profit margins
of natural gas companies.

19
<PAGE>

INVESTMENT FUNDAMENTALS
DEFINITIONS

Types of Stocks

Blue-Chip Stocks--stocks of the most established companies in American industry.
They are generally large, fairly stable companies that have demonstrated
consistent earnings and usually have long-term growth potential. Examples
include General Electric and Merck & Company.

Cyclical Stocks--stocks whose price and earnings fluctuations tend to follow the
ups and downs of the business cycle. Examples include the stocks of automobile
manufacturers, steel producers and textile operators.

Growth Stocks--stocks of companies that have experienced above-average earnings
growth and appear likely to continue such growth. These stocks often sell at
high P/E ratios. Examples currently include the stocks of high-tech, computer
hardware and computer software companies.

Large-Capitalization ("Large-Cap") Stocks--stocks of companies with a market
capitalization (the total value of a company's outstanding stock) of more than
$500 million. These tend to be the stocks that make up the Dow Jones Industrial
Average, the S&P 500 and the Russell 1000 Index.

Small-Capitalization ("Small-Cap") Stocks--stocks of companies with a market
capitalization (the total value of a company's outstanding stock) of less than
$500 million. These tend to be the stocks that make up the Nasdaq Composite
Index and the Russell 2000 Index.

Value Stocks--stocks that are purchased because they are relatively inexpensive.
These stocks are typically characterized by low P/E ratios.

20
<PAGE>

INVESTMENT FUNDAMENTALS
DEFINITIONS
(Continued from the previous page)

Statistical Terminology

Beta--a number that compares the price movement of a stock or stock portfolio to
a market index, usually the S&P 500. The market index is assigned a beta of
1.00. The price of a stock with a beta higher than 1.00 is likely to rise or
fall more than the index (in the same direction as the index). The price of a
stock with a beta of less than 1.00 is likely to rise or fall less than the
index and may move in the opposite direction of index movements.

Dividend Yield--a percentage return calculated by dividing a company's annual
cash dividend by the current market value of the company's stock.

Payout Ratio--this dividend safety measurement expresses a company's stock
dividends as a percentage of the company's earnings. Analysts use this ratio to
look for insupportable dividends that are likely to be cut.

Price/Book Ratio--a stock value measurement calculated by dividing a company's
stock price by its book value per share, with the result expressed as a multiple
instead of as a percentage. (Book value per share is calculated by subtracting a
company's liabilities from its assets, then dividing that value by the number of
outstanding shares.)

Price/Earnings (P/E) Ratio--a stock value measurement calculated by dividing a
company's stock price by its earnings per share, with the result expressed as a
multiple instead of as a percentage. (Earnings per share are calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)

Return on Equity (ROE)--this number shows the percentage return a company
generates from the money invested by its shareholders. THIS IS THE COMPANY'S
RETURN, NOT THE SHAREHOLDERS'. ROE is calculated by dividing a company's net
profits by its shareholder equity.

21
<PAGE>

INVESTMENT FUNDAMENTALS
EQUITY FUND MANAGEMENT APPROACH

Our stock fund management approach is a combination of the two most common
equity investment strategies: discretionary management and quantitative
management.

Discretionary equity managers use their own experience, knowledge, research and
judgement to decide whether to buy, sell or hold stocks. Discretionary
management techniques may include "stock picking" (selecting individual stocks
without regard to the portfolio's industry concentration) and "market timing"
(shifting all or a portion of the portfolio into and out of the stock market
based on the manager's opinion of whether the market will rise or fall).
Discretionary managers are generally described as active because of their active
role in portfolio management decisions.

Quantitative equity managers generally rely on a stock market index or a
computer model to make most decisions. These managers tend to be "indexers" who
try to duplicate the holdings and performance of a stock market index (such as
the S&P 500). Quantitative managers are usually described as passive.

Based on these two management strategies, we have developed an active
quantitative equity management approach that combines active management with
indexing. Starting with a benchmark index (see page 23 for the funds' benchmark
indexes), we construct a stock portfolio that seeks to provide the highest
expected return with the least amount of deviation from the benchmark index.

We create a universe of stocks traded on U.S. exchanges--for the Equity Growth
Fund and the Income & Growth Fund, the universe consists of the 1,500 largest
companies in the U.S.; for the Utilities Income Fund, the universe consists of
the 248 companies represented in the New York Stock Exchange Utilities Index. We
review each stock and give it a "score" based on its expected performance. Our
evaluation assesses past and future earnings growth as well as relative value.

After we've given each stock a score, we employ a process called portfolio
optimization--a computer program identifies a portfolio of stocks (with
appropriate weightings) that will best track the benchmark index and reflect the
total return characteristics of our stock ranking model. Each stock in this
"optimal" portfolio then undergoes a rigorous quality check by our stock fund
management team.

For the Income & Growth Fund, the portfolio optimization process incorporates a
yield constraint that creates a portfolio with a dividend yield that is
approximately 30% higher than the yield of the S&P 500.

22
<PAGE>

INVESTMENT FUNDAMENTALS
BENCHMARK INDEXES

Standard & Poor's 500 Stock Index

The benchmark index of the Equity Growth Fund and the Income & Growth Fund is
the Standard & Poor's 500 Stock Index (S&P 500). The index is composed of the
stocks of the 500 largest companies traded on the New York Stock Exchange.
Although the S&P 500 represents less than 10% of all U.S. stocks, these 500
companies make up approximately 70% of the total market capitalization of the
U.S. stock market. The S&P 500 is considered a broad measure of overall stock
market performance and is commonly used as a benchmark for the performance of
individual stocks and stock mutual funds.

The stocks in the S&P 500 are weighted based on market capitalization (the total
market value of a company's outstanding stock). Accordingly, stocks with larger
market capitalizations (such as the top ten listed below) have a larger impact
on the overall performance of the S&P 500.

New York Stock Exchange Utilities Index

The benchmark index of the Utilities Income Fund is the New York Stock Exchange
Utilities Index. The index is composed of 248 utilities stocks traded on the New
York Stock Exchange. Like the S&P 500, the stocks in the NYSE Utilities Index
are weighted based on market capitalization (see the top ten stock listing
below).

TOP TEN HOLDINGS
AS OF DECEMBER 31, 1995

S&P 500 WEIGHT* NYSE UTILITIES INDEX WEIGHT*
General Electric Company 2.7% GTE Corporation 6.5%
AT&T Corporation 2.3% Bell South Corporation 6.3%
Exxon Corporation 2.2% SBC Communications, Inc. 5.1%
Coca-Cola Company 2.0% Ameritech Corporation 5.0%
Merck & Company, Inc. 1.8% Bell Atlantic Corporation 4.5%
Philip Morris Companies, Inc. 1.7% NYNEX Corporation 3.4%
Royal Dutch Petroleum Co. 1.6% Southern Company 2.5%
IBM Corporation 1.3% U.S. West Communications, Inc. 2.5%
Procter & Gamble 1.3% Sprint Corporation 2.2%
Johnson & Johnson 1.2% AirTouch Communications 2.0%
TOTAL WEIGHTING OF TOP TEN 18.1% TOTAL WEIGHTING OF TOP TEN 40.0%

* based on market capitalization

PLEASE NOTE: The top ten holdings of the indexes may change over time. For the
industry weightings of the NYSE Utilities Index, see page 16.

23
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

24
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Benham Equity Funds:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investment securities, of Benham Equity Growth Fund, Benham
Income & Growth Fund and Benham Utilities Income Fund (three of the series
comprising Benham Equity Funds) (the Funds) as of December 31, 1995, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented herein. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Benham
Equity Growth Fund, Benham Income & Growth Fund and Benham Utilities Income Fund
as of December 31, 1995, the results of their operations, the changes in their
net assets and their financial highlights for the periods indicated above, in
conformity with generally accepted accounting principles.

/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP

San Francisco, California
February 5, 1996

25
<PAGE>
<TABLE>
<CAPTION>
BENHAM EQUITY FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)

BENHAM EQUITY GROWTH FUND
----------------------------------
1995 1994 1993 1992 1991+
------ ----- ----- ----- -----
PER-SHARE DATA
- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD................................... $ 11.53 12.12 11.68 11.57 10.00
Income from Investment Operations
Net Investment Income................................................. .2564 .2993 .2309 .2573 .3355
Net Realized and Unrealized Gains (Losses) on Investments............. 3.7016 (.3315) 1.0955 .2345 1.6542
-------- -------- -------- -------- --------
Total Income (Losses) From Investment Operations.................. 3.9580 (.0322) 1.3264 .4918 1.9897
-------- -------- -------- -------- --------
Less Distributions
Dividends from Net Investment Income.................................. (.2243) (.2990) (.2307) (.2309) (.2891)
Distributions from Net Realized Capital Gains......................... (1.0137) (.2588) (.6557) (.1509) (.1306)
-------- -------- -------- -------- --------
Total Distributions............................................... (1.2380) (.5578) (.8864) (.3818) (.4197)
-------- -------- -------- -------- --------
NET ASSET VALUE AT END OF PERIOD......................................... $ 14.25 11.53 12.12 11.68 11.57
======= ===== ===== ===== =====
TOTAL RETURN*............................................................ 34.56% (.23)% 11.42% 4.13% 17.48%
- ------------

SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Period (in thousands of dollars).................... $ 159,450 97,437 96,284 73,592 38,951
Ratio of Expenses to Average Daily Net Assets++.......................... .71% .75% .75% .75% .35%**
Ratio of Net Investment Income to Average Daily Net Assets............... 1.96% 2.26% 2.04% 2.33% 3.29%**
Portfolio Turnover Rate.................................................. 125.86% 94.09% 96.52% 114.32% 89.22%
Average Commission Paid Per Share Traded................................. $.032 N/A N/A N/A N/A

- -------------------
+ Commencement of operations for Benham Equity Growth Fund was May 9, 1991.
++ The ratio for the year ended December 31, 1995, includes expenses paid through expense offset arrangements.
* Total return figures assume reinvestment of dividend and capital gain distributions and are not annualized.
** Annualized.

See the accompanying notes to financial statements.
</TABLE>

26
<PAGE>
<TABLE>
<CAPTION>
BENHAM EQUITY FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)

BENHAM INCOME & GROWTH FUND
---------------------------------------------------------
1995 1994 1993 1992 1991 1990+
------ ----- ----- ----- ----- -----
PER-SHARE DATA
- --------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD............................ $ 13.92 15.08 14.11 13.53 10.12 10.00
Income From Investment Operations
Net Investment Income.......................................... .4215 .4435 .4285 .4155 .4860 .0087
Net Realized and Unrealized Gains (Losses) on
Investments................................................... 4.6399 (.5302) 1.1502 .6220 3.5602 .1200
-------- -------- -------- -------- -------- --------
Total Income (Losses) From Investment Operations............ 5.0614 (.0867) 1.5787 1.0375 4.0462 .1287
-------- -------- -------- -------- -------- --------
Less Distributions
Dividends from Net Investment Income........................... (.4200) (.4350) (.4246) (.4137) (.4726) (.0087)
Distributions from Net Realized Capital Gains.................. (.7514) (.6383) (.1841) (.0438) (.1636) 0
-------- -------- -------- -------- -------- --------
Total Distributions......................................... (1.1714) (1.0733) (.6087) (.4575) (.6362) (.0087)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE AT END OF PERIOD.................................. $ 17.81 13.92 15.08 14.11 13.53 10.12
======= ===== ===== ===== ===== =====
TOTAL RETURN*..................................................... 36.88% (.55)% 11.31% 7.86% 39.08% 1.29%
- ------------

SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Period (in thousands of dollars)............. $ 373,701 224,939 230,191 141,221 59,318 991
Ratio of Expenses to Average Daily Net Assets++................... .67% .73% .75% .75% .50% 0%
Ratio of Net Investment Income to Average Daily Net Assets........ 2.61% 2.96% 2.90% 3.16% 4.03% 2.09%**
Portfolio Turnover Rate........................................... 69.88% 67.96% 30.75% 63.17% 140.21% 0%
Average Commission Paid Per Share Traded.......................... $.030 N/A N/A N/A N/A N/A

- -------------------
+ Commencement of operations for Benham Income & Growth Fund was December 17, 1990.
++ The ratio for the year ended December 31, 1995, includes expenses paid through expense offset arrangements.
* Total return figures assume reinvestment of dividend and capital gain distributions and are not annualized.
** Annualized.

See the accompanying notes to financial statements.
</TABLE>

27
<PAGE>
<TABLE>
<CAPTION>
BENHAM EQUITY FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)

BENHAM UTILITIES
INCOME FUND
---------------------------
1995 1994 1993+
------ ----- -----
PER-SHARE DATA
- --------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD............................................. $ 8.79 10.24 10.00
Income from Investment Operations
Net Investment Income........................................................... .4226 .4375 .3626
Net Realized and Unrealized Gains (Losses) on Investments....................... 2.6446 (1.4515) .2979
-------- -------- --------
Total Income (Losses) From Investment Operations............................. 3.0672 (1.0140) .6605
-------- -------- --------
Less Distributions
Dividends from Net Investment Income............................................ (.4172) (.4360) (.3577)
Distributions from Net Realized Capital Gains................................... 0 0 (.0628)
-------- -------- --------
Total Distributions.......................................................... (.4172) (.4360) (.4205)
-------- -------- --------
NET ASSET VALUE AT END OF PERIOD................................................... $ 11.44 8.79 10.24
======= ==== =====
TOTAL RETURN*...................................................................... 35.70% (10.03)% 6.60%
- ------------

SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Period (in thousands of dollars).............................. $ 218,794 152,570 194,314
Ratio of Expenses to Average Daily Net Assets++.................................... .75% .75% .50%**
Ratio of Net Investment Income to Average Daily Net Assets......................... 4.31% 4.67% 4.23%**
Portfolio Turnover Rate............................................................ 68.17% 61.42% 38.76%
Average Commission Paid Per Share Traded........................................... $.030 N/A N/A

- -------------------
+ Commencement of operations for Benham Utilities Income Fund was March 1, 1993.
++ The ratio for the year ended December 31, 1995, includes expenses paid through expense offset arrangements.
* Total return figures assume reinvestment of dividend and capital gain distributions and are not annualized.
** Annualized.

See the accompanying notes to financial statements.
</TABLE>

28
<PAGE>
<TABLE>
<CAPTION>
BENHAM EQUITY FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
BENHAM BENHAM BENHAM
EQUITY GROWTH INCOME & GROWTH UTILITIES INCOME
FUND FUND FUND
------------- --------------- ----------------
ASSETS
<S> <C> <C> <C>
Investment securities (identified cost of $131,125,926, $306,064,947,
and $181,762,336, respectively) (Note 4)......................... $152,758,267 363,870,234 211,657,482
Cash................................................................... 4,702,835 5,383,399 5,873,166
Investment in affiliated money market fund (Note 2).................... 7,095,297 5,201,090 0
Interest and dividends receivable...................................... 379,428 982,984 993,896
Receivable for fund shares sold........................................ 1,076,612 794,687 585,445
Margin deposits for futures contracts held (Note 1).................... 154,350 177,250 0
Net unrealized appreciation on futures contracts held (Note 1)......... 1,931 974 0
Prepaid expenses and other assets...................................... 7,715 1,631 15,035
Receivable for securities sold......................................... 809,155 0 0
----------- ----------- ----------
Total assets........................................................ 166,985,590 376,412,249 219,125,024
----------- ----------- ----------
LIABILITIES
Payable for securities purchased....................................... 2,010,825 213,100 0
Payable for fund shares redeemed....................................... 5,684 30,636 32,168
Dividends payable...................................................... 0 85,525 146,860
Payable to affiliates (Note 2)......................................... 79,812 183,787 121,566
Bank overdraft......................................................... 5,209,731 1,871,816 0
Accrued expenses and other liabilities................................. 229,244 326,242 29,969
------------ ----------- ----------
Total liabilities................................................... 7,535,296 2,711,106 330,563
------------ ----------- ----------
NET ASSETS................................................................ $159,450,294 373,701,143 218,794,461
============ =========== ==========
Net assets consist of:
Capital (par value and paid in surplus)................................ 133,059,730 305,574,352 200,289,046
Net undistributed realized gain (loss) on investments.................. 4,692,288 9,998,268 (11,614,849)
Undistributed net investment income.................................... 64,004 322,262 224,936
Net unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies (Note 4)................... 21,634,272 57,806,261 29,895,328
------------ ----------- ----------
Net assets................................................................ $159,450,294 373,701,143 218,794,461
============ =========== ==========
Shares of beneficial interest outstanding................................. 11,193,129 20,984,716 19,130,376
============ =========== ==========
Net asset value, offering price and redemption price per share............ $14.25 17.81 11.44
======= ===== ====

- -------------------
See the accompanying notes to financial statements.
</TABLE>

29
<PAGE>
<TABLE>
<CAPTION>

BENHAM EQUITY FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995

BENHAM BENHAM BENHAM
EQUITY GROWTH INCOME & GROWTH UTILITIES INCOME
FUND FUND FUND
------------- --------------- ----------------
INVESTMENT INCOME
<S> <C> <C> <C>
Dividend............................................................. $3,335,687 8,812,231 8,676,083
Interest............................................................. 202,550 293,602 334,927
----------- ---------- ----------
3,538,237 9,105,833 9,011,010
Less foreign taxes withheld.......................................... (24,933) (22,950) (35,011)
----------- ---------- ----------
Total income................................................... 3,513,304 9,082,883 8,975,999
----------- ---------- ----------
EXPENSES (NOTE 2)
Investment advisory fees............................................. 409,901 857,968 549,221
Administrative fees.................................................. 126,295 264,645 170,950
Transfer agency fees................................................. 240,686 472,699 414,319
Printing and postage................................................. 47,209 87,182 76,376
Custodian fees....................................................... 20,081 35,359 29,171
Auditing and legal fees.............................................. 17,266 28,496 22,063
Registration and filing fees......................................... 42,095 61,017 39,086
Directors' fees and expenses......................................... 7,956 9,381 8,549
Other operating expenses............................................. 23,145 42,185 37,725
----------- ---------- ----------
Total expenses.................................................... 934,634 1,858,932 1,347,460
Amount recouped (waived) (Note 2)....................................... 2,726 0 (8,882)
Custodian earnings credits (Note 5)..................................... (14,356) (29,015) (19,451)
----------- ---------- ----------
Net expenses......................................................... 923,004 1,829,917 1,319,127
----------- ---------- ----------
Net investment income................................................ 2,590,300 7,252,966 7,656,872
----------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY (NOTE 4)
Net realized gain (loss)................................................ 14,524,662 24,745,688 (1,057,980)
Net unrealized appreciation for the year................................ 20,284,838 53,273,200 48,067,735
----------- ---------- ----------
Net realized and unrealized gain on investments and foreign currency. 34,809,500 78,018,888 47,009,755
----------- ---------- ----------
Net increase in assets resulting from operations........................ $37,399,800 85,271,854 54,666,627
=========== ========== ==========

- -------------------
See the accompanying notes to financial statements.
</TABLE>

30
<PAGE>
<TABLE>
<CAPTION>
BENHAM EQUITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994

Benham Benham Benham
Equity Growth Fund Income & Growth Fund Utilities Income Fund
------------------ ------------------ ------------------
1995 1994 1995 1994 1995 1994
-------- -------- -------- -------- -------- --------
FROM INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net investment income.......................... $ 2,590,300 2,189,926 7,252,966 6,902,403 7,656,872 7,729,036
Net realized gain (loss) on investments........ 14,524,662 2,987,716 24,745,688 8,818,085 (1,057,980) (10,349,019)
Net change in unrealized appreciation (depreciation)
on investments and translation of assets and
liabilities in foreign currencies............ 20,284,838 (5,537,661) 53,273,200 (17,364,091) 48,067,735 (16,313,407)
----------- ---------- ----------- ---------- ---------- ----------
Change in net assets derived from investment
activities................................... 37,399,800 (360,019) 85,271,854 (1,643,603) 54,666,627 (18,933,390)
----------- ---------- ----------- ---------- ---------- ----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income.......................... (2,229,577) (2,075,261) (7,155,104) (6,759,560) (7,543,125) (7,710,943)
Net realized gain on investments............... (10,288,052) (2,489,288) (14,921,356) (10,063,900) 0 0
----------- ---------- ----------- ---------- ---------- ----------
Total distributions to shareholders.......... (12,517,629) (4,564,549) (22,076,460) (16,823,460) (7,543,125) (7,710,943)
----------- ---------- ----------- ---------- ---------- ----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from sales of shares.................. 99,236,956 49,385,381 136,860,249 88,320,733 129,707,694 117,011,703
Net asset value of dividends reinvested........ 12,120,317 4,432,861 20,831,551 15,784,525 6,339,489 6,169,242
Cost of shares redeemed........................ (74,226,375)(47,740,524) (72,124,849) (90,890,340)(116,945,889) (138,280,523)
----------- ---------- ----------- ---------- ---------- ----------
Change in net assets derived from capital share
transactions.............................. 37,130,898 6,077,718 85,566,951 13,214,918 19,101,294 (15,099,578)
----------- ---------- ----------- ---------- ---------- ----------
Net increase (decrease) in net assets..... 62,013,069 1,153,150 148,762,345 (5,252,145) 66,224,796 (41,743,911)

NET ASSETS:
Beginning of year.............................. 97,437,225 96,284,075 224,938,798 230,190,943 152,569,665 194,313,576
----------- ---------- ----------- ---------- ---------- ----------
End of year.................................... $159,450,294 97,437,225 373,701,143 224,938,798 218,794,461 152,569,665
=========== ========== =========== ========== ========== ==========

- -------------------
See the accompanying notes to financial statements.
</TABLE>

31
<PAGE>

BENHAM EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1995

(1) SIGNIFICANT ACCOUNTING POLICIES

Benham Equity Funds (BEF) is registered under the Investment Company Act of 1940
as a open-end management investment company. Benham Equity Growth Fund (BEGF),
Benham Income & Growth Fund (BIGF), and Benham Utilities Income Fund (BUIF)
(collectively the Funds) are three of the five funds composing BEF. BEGF seeks
capital appreciation by investing in common stocks. BIGF seeks dividend growth,
current income, and capital appreciation by investing in common stocks. BUIF
seeks current income and long-term growth of capital and income. BUIF invests
primarily in equity securities of companies engaged in the utilities industry.
BEF is authorized to issue a total of 20 billion shares of capital stock. Each
Fund is authorized to issue two billion shares. Significant accounting policies
followed by BEF are summarized below.

VALUATION OF INVESTMENT SECURITIES--Investment securities, both foreign and
domestic, are valued at market as provided by an independent pricing service.
The pricing service values equity securities at the closing price on their
primary exchange. Securities traded over-the-counter are valued at the mean
between the latest bid and asked prices. Prices of non-U.S. dollar denominated
securities are converted to U.S. dollars on a daily basis. When valuations are
not readily available, securities are valued at market value as determined in
good faith by or under the direction of the board of directors. Security
transactions are recorded on the date the order to buy or sell is executed.
Realized gains and losses from security transactions are determined on the basis
of identified cost.

The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. On the Statement of Assets and Liabilities for
BEGF, as a result of permanent book-to-tax differences, a reclassification
adjustment has been made for equalization to decrease undistributed net
investment income and increase capital.

32
<PAGE>

As of December 31, 1995, BUIF had a tax capital loss carryover of $11,392,226.
Loss carryovers not offset by realized gains will expire eight years after the
fiscal year in which they are realized. BUIF's capital loss carryovers of
$7,035,543 and $4,356,683 will expire by December 31, 2002 and 2003,
respectively. No capital gain distributions will be made by a Fund until all of
its loss carryover has been offset or expired.

INVESTMENT INCOME AND SHAREHOLDER DISTRIBUTIONS--Dividend income from investment
securities is recorded on the ex-dividend date. Interest income and expenses are
accrued daily. BEGF distributes dividends quarterly; BIGF and BUIF accrue
dividends daily and distribute them on the last business day of each month. Each
Fund distributes net short-term and long-term capital gains, if any, once per
year. Distributions may be paid in cash or reinvested as additional shares.

FUTURES CONTRACTS--The Funds may buy and sell stock index futures contracts in
order to manage each Fund's exposure to changes in market conditions. One of the
risks of entering into futures contracts may include the possibility that the
change in value of the contract may not correlate with the changes in value of
the underlying securities. Upon entering into a futures contract, the Fund is
required to deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent payments
(variation margin) are made or received by the Fund. The variation margin is
equal to the daily change in the contract value and is recorded as unrealized
gains and losses. The Fund recognizes a realized gain or loss when the contract
is closed or expires.

As of December 31, 1995, the following Funds had futures contracts outstanding:

Number of Net Unrealized
Fund Contracts Type Expiration Date Value Appreciation
- ----- ---------- ------------ --------------- ---------- ---------------
BEGF 15 S&P 500 Index March 1996 $4,639,125 $1,931
BIGF 17 S&P 500 Index March 1996 5,257,675 974

Cash of $4,490,950 (BEGF) and $5,092,961 (BIGF) has been segregated at the
custodian bank for these contracts.

33
<PAGE>

ORGANIZATION COSTS--Costs incurred by each of the Funds in connection with the
organization, initial registration, and public offering of shares are being
amortized on a straight-line basis over five-year periods ending May 1996 (BEGF)
and February 1998 (BUIF).

(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

0.50% of the first $100 million
0.45% of the next $100 million
0.40% of the next $100 million
0.35% of the next $100 million
0.30% of the next $100 million
0.25% of the next $1 billion
0.24% of the next $1 billion
0.23% of the next $1 billion
0.22% of the next $1 billion
0.21% of the next $1 billion
0.20% of the next $1 billion
0.19% of average daily net assets over $6.5 billion

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

34
<PAGE>

any given month, the Fund's expenses are less than the expense guarantee rate in
effect at that time. The expense guarantee rate is effective through May 31,
1996, and is subject to annual renewal in June 1996.

The payables to affiliates as of December 31, 1995, based on the above
agreements were as follows:

BENHAM BENHAM BENHAM
EQUITY INCOME & UTILITIES
GROWTH FUND GROWTH FUND INCOME FUND
---------- ---------- ----------
Investment Advisor $ 39,483 93,599 60,729
Administrative Services 12,313 29,189 16,979
Transfer Agent 28,016 60,999 43,858
------ ------ ------
$ 79,812 183,787 121,566
====== ====== ======

As of December 31, 1995, each Fund had invested in shares of Capital
Preservation Fund, Inc. (CPF), a money market fund advised by BMC. The terms of
such transactions were identical to those with nonrelated entities except that,
to avoid duplicative investment advisory fees and administrative fees, the Funds
did not pay BMC investment advisory fees or BFS administrative fees with respect
to assets invested in shares of CPF.

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

(3) SHARE TRANSACTIONS

Transactions for each of the Funds for the years ended December 31, 1995, and
1994, were as follows:

BENHAM EQUITY BENHAM INCOME &
GROWTH FUND GROWTH FUND
----------------- -----------------
1995 1994 1995 1994
-------- -------- -------- --------

Shares sold................. 7,293,964 4,157,828 8,043,488 5,982,201
Reinvestment of dividends... 865,208 382,374 1,210,017 1,112,099
--------- --------- --------- ---------
8,159,172 4,540,202 9,253,505 7,094,300
Less shares redeemed........ (5,415,539) (4,034,608) (4,427,311)(6,204,599)
--------- --------- --------- ---------
Net increase in shares...... 2,743,633 505,594 4,826,194 889,701
========= ========= ========= =========

BENHAM UTILITIES
INCOME FUND
------------------
1995 1994
-------- --------

Shares sold.................................... 13,052,071 12,484,726
Reinvestment of dividends...................... 634,034 664,545
---------- ----------
13,686,105 13,149,271
Less shares redeemed........................... (11,911,081)(14,769,805)
---------- ----------
Net increase (decrease) in shares.............. 1,775,024 (1,620,534)
========== ==========

35
<PAGE>

(4) INVESTMENT SECURITIES--PURCHASES AND SALES

Purchases and sales of investment securities, excluding short-term securities,
for the year ended December 31, 1995, were as follows:

BENHAM BENHAM BENHAM
EQUITY INCOME & UTILITIES
GROWTH FUND GROWTH FUND INCOME FUND
---------- ---------- ----------

Purchases...................... $181,454,582 252,965,943 117,775,156
=========== ========== ==========
Sales Proceeds................. $159,529,357 190,423,663 113,270,587
=========== ========== ==========

As of December 31, 1995, unrealized appreciation (depreciation) on investment
securities was as follows:

BENHAM BENHAM BENHAM
EQUITY INCOME & UTILITIES
GROWTH FUND GROWTH FUND INCOME FUND
---------- ---------- ----------

Appreciated securities......... $ 23,460,569 62,462,517 33,624,503
Depreciated securities......... (1,826,297) (4,656,256) (3,729,357)
----------- ---------- ----------
Net unrealized appreciation.... $ 21,634,272 57,806,261 29,895,146
=========== ========== ==========

As of December 31, 1995, the costs of investment securities for federal income
tax purposes were $131,169,312 (BEGF), $306,120,405 (BIGF), and $182,192,888
(BUIF). Gross unrealized appreciation and depreciation of investments, based on
these costs, were:

BENHAM BENHAM BENHAM
EQUITY INCOME & UTILITIES
GROWTH FUND GROWTH FUND INCOME FUND
---------- ---------- ----------

Appreciated securities......... $ 23,438,770 62,459,536 33,256,716
Depreciated securities......... (1,847,884) (4,708,733) (3,792,122)
----------- ---------- ----------
Net unrealized appreciation.... $ 21,590,886 57,750,803 29,464,594
=========== ========== ==========

(5) EXPENSE OFFSET ARRANGEMENTS

36
<PAGE>

BENHAM EQUITY FUNDS
Benham Equity Growth Fund
Schedule of Investment Securities
December 31, 1995

SHARES VALUE
------- -----------

COMMON STOCKS

AEROSPACE & DEFENSE -- 3.3%
37,000 Litton Industries, Inc.1 $ 1,646,500
9,000 Lockheed Martin Corp. 711,000
8,100 McDonnell-Douglas Corp. 745,200
23,200 Rockwell International Corp. 1,226,700
38,600 Teledyne Inc. 989,125
----------
5,318,525
----------
AIRLINES -- 1.5%
15,000 A M R Corp.1 1,113,750
18,300 Delta Air Lines, Inc. 1,351,913
----------
2,465,663
----------
AUTOMOBILES & AUTO PARTS --1.2%
13,600 Dana Corp. 397,800
74,300 Navistar International Corp.1 780,150
18,300 PACCAR Inc. 770,887
----------
1,948,837
----------
BANKING -- 5.4%
8,100 Banc One Corp. 305,775
50,900 BankAmerica Corp. 3,295,775
18,800 Chemical Banking Corp. 1,104,500
76,300 City National Corp. 1,068,200
3,620 First Chicago Corp. 142,990
33,200 NationsBank Corp. 2,311,550
1,500 Wells Fargo & Co. 324,000
----------
8,552,790
----------
BIOTECHNOLOGY -- 0.7%
10,800 Amgen Inc.1 640,575
9,400 Medtronic, Inc. 525,225
----------
1,165,800
----------
BROADCASTING -- 0.5%
6,500 Capital Cities/ABC, Inc. 801,938
1,400 Carlton Communications Plc 42,350
----------
844,288
----------
BUILDING & HOME IMPROVEMENTS -- 1.9%
26,600 Champion Enterprises, Inc.1 821,275
8,200 Fluor Corp. 541,200
24,600 Pulte Corp. 827,175
25,900 Toll Brothers, Inc.1 595,700
8,800 Webb (Del) Corp. 177,100
----------
2,962,450
----------
BUSINESS SERVICES & SUPPLIES --1.4%
28,600 CDI Corp.1 514,800
17,000 Equifax Inc. 363,375
35,800 ManPower, Inc. 1,006,875
6,800 PolyGram N.V. ADR 357,000
----------
2,242,050
----------

37
<PAGE>

Schedule of Investment Securities - Benham Equity Growth Fund (Continued)
- --------------------------------------------------------------------------------

SHARES VALUE
------- -----------

CHEMICALS -- 4.5%
17,700 Dow Chemical Co. $ 1,245,637
10,400 du Pont (E.I.) de Nemours & Co. 726,700
18,200 Eastman Chemical Co. 1,139,775
122,000 Hanson PLC ADR. 1,860,500
32,700 Imperial Chemical Industries PLC 1,528,725
2,200 Monsanto Co. 269,500
15,000 Terra Industries Inc. 211,875
9,100 Wellman, Inc. 207,025
----------
7,189,737
----------
COMMUNICATIONS SERVICES -- 5.8%
52,600 Ameritech Corp. 3,103,400
11,100 Bell Atlantic Corp. 742,313
20,000 Compania De Telefonia Espana SA ADR 837,500
10,000 Pacific Telesis Group 336,250
34,200 SBC Communications Inc. 1,966,500
36,100 Sprint Corp. 1,439,487
30,000 Tele Danmark A/S ADR 828,750
----------
9,254,200
----------
COMPUTER SOFTWARE & SERVICES -- 0.3%
6,000 Microsoft Corp.1 526,875
----------
COMPUTER SYSTEMS -- 4.4%
26,100 Amdahl Corp. 1 221,850
15,200 Compaq Computer Corp. 1 729,600
5,600 Dell Computer Corp.1 194,950
5,600 Digital Equipment Corp. 1 359,100
30,000 Hewlett-Packard Co. 2,512,500
22,700 International Business Machines Corp. 2,082,725
5,000 Komag, Inc. 1 229,375
15,600 Sun Microsystems, Inc.1 712,725
----------
7,042,825
----------
ELECTRICAL & ELECTRONIC COMPONENTS -- 7.2%
20,000 Arrow Electronics, Inc. 1 862,500
41,800 Avnet, Inc. 1,870,550
30,000 Cypress Semiconductor Corp. 1 382,500
74,300 Dynatech Corp.1 1,272,387
13,300 Fluke Corporation 502,075
55,300 General Electric Co. 3,981,600
3,000 Harris Corp. 163,875
9,000 Honeywell Inc. 437,625
19,600 SCI Systems, Inc. 1 605,150
25,900 Texas Instruments Inc. 1,340,325
----------
11,418,587
----------
ENERGY (PRODUCTION & MARKETING) -- 9.2%
40,600 Amoco Corp. 2,918,125
15,700 Atlantic Richfield Co. 1,738,775
45,800 Exxon Corp. 3,669,725
39,000 Mobil Corp. 4,368,000
14,400 Royal Dutch Petroleum Co. 2,032,200
----------
14,726,825
----------
FINANCIAL SERVICES -- 3.0%
25,000 American Express Co. 1,034,375
31,200 Dean Witter, Discover & Co. 1,466,400
10,000 Green Tree Financial Corp. 263,750
11,300 Household International, Inc. 668,112
6,500 Merrill Lynch & Co., Inc. 331,500
12,300 Morgan Stanley Group Inc. 991,688
----------
4,755,825
----------
FOOD & BEVERAGE -- 2.8%
80,000 Archer-Daniels Midland Co. 1,440,000
18,150 Heinz (H J) Co. 601,219
9,100 IBP Inc. 459,550
34,700 PepsiCo, Inc. 1,938,862
----------
4,439,631
----------

38
<PAGE>
Schedule of Investment Securities - Benham Equity Growth Fund (Continued)
- --------------------------------------------------------------------------------
SHARES VALUE
------- -----------
FURNITURE & FURNISHINGS -- 0.0%
2,700 Shelby Williams Industries, Inc. $ 31,725
----------
HEALTHCARE -- 0.6%
10,000 Foundation Health Corp. 1 430,000
6,300 RoTech Medical Corp.1 171,675
10,000 Sierra Health Services, Inc.1 317,500
----------
919,175
----------
INDUSTRIAL EQUIPMENT & MACHINERY -- 0.8%
34,000 Dover Corp. 1,253,750
----------
INSURANCE -- 7.3%
31,100 AFLAC Inc. 1,348,963
22,900 Allstate Corporation 941,762
11,800 American International Group, Inc. 1,091,500
10,000 CNA Financial Corp. 1 1,135,000
15,800 Chubb Corp. (The) 1,528,650
11,200 HealthCare COMPARE Corp.1 489,300
16,200 Old Republic Int'l Corp 575,100
20,000 SAFECO Corp. 691,250
11,600 Transatlantic Holdings, Inc. 851,150
47,300 Travelers Group, Inc. 2,973,988
----------
11,626,663
----------
LEISURE -- 1.7%
77,100 Callaway Golf Co. 1,744,387
23,000 Marriott International 879,750
----------
2,624,137
----------
MEDICAL EQUIPMENT & SUPPLIES -- 0.4%
13,000 Boston Scientific Corp.1 637,000
----------
NONFERROUS METAL -- 0.8%
23,100 Aluminum Co. of America 1,221,413
----------
OFFICE EQUIPMENT -- 0.2%
16,200 Bowne & Co., Inc. 324,000
----------
PAPER & FOREST PRODUCTS -- 2.3%
25,000 Boise Cascade Corp. 865,625
3,400 Champion International Corp. 142,800
15,700 Mead Corp. 820,325
5,500 Rayonier Inc. 183,562
2,400 Temple-Inland Inc. 105,900
30,000 Weyerhaeuser Co. 1,297,500
5,700 Willamette Industries, Inc. 320,625
----------
3,736,337
----------
PHARMACEUTICALS -- 6.9%
15,500 Bristol-Myers Squibb Co. 1,331,063
10,800 Cardinal Health, Inc. 591,300
40,900 Johnson & Johnson 3,502,062
52,700 McKesson Corp. 2,667,938
5,800 Merck & Co., Inc. 381,350
39,000 Pfizer Inc. 2,457,000
----------
10,930,713
----------
PRINTING & PUBLISHING -- 1.0%
8,000 American Business Products, Inc. 228,000
28,700 Jostens, Inc. 695,975
2,500 Washington Post Company 705,000
----------
1,628,975
----------
RAILROADS -- 1.5%
23,300 Burlington Northern Inc. 1,817,400
9,300 Conrail Inc. 651,000
----------
2,468,400
----------
RETAIL (APPAREL) -- 0.6%
2,100 Claire's Stores, Inc. 37,013
12,600 Oshkosh B'Gosh, Inc. 215,775
34,600 Ross Stores, Inc. 668,212
----------
921,000
----------
39
<PAGE>

Schedule of Investment Securities - Benham Equity Growth Fund (Continued)
- --------------------------------------------------------------------------------

SHARES VALUE
------- -----------

RETAIL (FOOD & DRUG) -- 0.7%
16,300 Longs Drug Stores Corp. $ 780,362
10,200 Walgreen Co. 304,725
----------
1,085,087
----------
RETAIL (GENERAL MERCHANDISE) -- 2.0%
3,300 Mac Frugals Bargains Close-Outs, Inc.1 46,200
70,100 Sears, Roebuck & Co. 2,733,900
25,000 Waban Inc.1 468,750
----------
3,248,850
----------
RETAIL (SPECIALTY) -- 1.0%
20,000 CompUSA Inc.1 622,500
13,500 Good Guys, Inc. (The)1 119,813
71,300 Pier 1 Imports, Inc. 811,037
----------
1,553,350
----------
RUBBER & PLASTICS -- 0.1%
2,800 Premark International, Inc. 141,750
----------
SERVICES (MISCELLANEOUS) -- 0.5%
5,000 CKS Group, Inc.1 194,375
8,100 CPI Corp. 129,600
20,000 Culligan Water Technologies, Inc.1 485,000
----------
808,975
----------
SHIPPING -- 0.2%
11,100 Stolt-Nielsen S.A. 319,125
----------
STEEL -- 0.3%
26,100 Quanex Corp. 505,688
----------
TOBACCO -- 2.7%
46,800 Philip Morris Companies, Inc. 4,235,400
----------
UTILITIES (ELECTRIC) -- 11.1%
43,200 Atlanta Gas Light Co. 853,200
19,200 Boston Edison Co. 566,400
29,500 Central & South West Corp. 822,313
5,200 CILCORP Inc. 220,350
40,700 Coastal Corp. (The) 1,516,075
73,200 Consolidated Edison Co. of New York, Inc. 2,342,400
27,600 DQE, Inc. 848,700
22,900 Empresa Nacional de Electricidad S.A. 1,311,025
27,100 FPL Group, Inc. 1,256,762
4,500 NIPSCO Industries, Inc. 172,125
17,400 Northern States Power Co. (Minn.) 854,775
16,900 Oneok, Inc. 386,588
42,000 Pacific Enterprises 1,186,500
21,000 PacifiCorp 446,250
59,400 Panhandle Eastern Corp. 1,655,775
14,100 Portland General Corp. 410,662
6,000 Public Service Co. of Colo. 212,250
11,400 SCEcorp 202,350
62,000 Unicom Corp. 2,030,500
18,400 Washington Gas Light Co. 377,200
----------
17,672,200
----------

TOTAL COMMON STOCKS-- 95.8% 152,748,621
(Cost $131,116,029) ----------

40
<PAGE>

Schedule of Investment Securities - Benham Equity Growth Fund (Continued)
- --------------------------------------------------------------------------------

SHARES VALUE
------- -----------

CONVERTIBLE PREFERRED STOCKS

ELECTRICAL & ELECTRONIC COMPONENTS -- 0.0%
671 Teledyne Inc. Preferred 9,646
(Cost $9,897) ----------

TOTAL INVESTMENT SECURITIES-- 95.8% 152,758,267
(Cost $131,125,926) ----------

OTHER ASSETS LESS LIABILITIES-- 4.2% 6,692,027
----------

NET ASSETS -- 100% -- equivalent to $14.25 per share
on 11,193,129 shares outstanding $159,450,294
==========

- -------------------
1 Non-income producing.

See the accompanying notes to financial statements.

41
<PAGE>

BENHAM EQUITY FUNDS
Benham Income & Growth Fund
Schedule of Investment Securities
December 31, 1995

SHARES VALUE
------- -----------

COMMON STOCKS

AEROSPACE & DEFENSE -- 3.1%
11,600 Boeing Co. $ 909,150
6,800 General Dynamics Corp. 402,050
46,200 Litton Industries, Inc.1 2,055,900
23,200 Lockheed Martin Corp. 1,832,800
5,200 McDonnell-Douglas Corp. 478,400
6,400 Raytheon Co. 302,400
8,900 Rockwell International Corp. 470,587
56,600 Teledyne, Inc. 1,450,375
10,200 Textron Inc. 688,500
32,000 United Technologies Corp. 3,036,000
----------
11,626,162
----------
AIRLINES -- 0.7%
35,100 Delta Air Lines, Inc. 2,593,013
----------
AUTOMOBILES & AUTO PARTS -- 1.4%
78,800 Dana Corp. 2,304,900
9,500 Eaton Corp. 509,437
19,000 Echlin Inc. 693,500
3,800 Goodyear Tire & Rubber Co. 172,425
100,300 Navistar International Corp.1 1,053,150
5,000 TRW Inc. 387,500
----------
5,120,912
----------
BANKING -- 7.1%
46,200 Banc One Corp. 1,744,050
31,100 Bank of New York Co., Inc. 1,516,125
67,600 BankAmerica Corp. 4,377,100
1,500 BayBanks, Inc. 147,000
80,600 Chase Manhattan Corp. 4,886,375
24,000 Chemical Banking Corp. 1,410,000
27,000 Citicorp 1,815,750
98,600 City National Corp. 1,380,400
26,800 CoreStates Financial Corp. 1,015,050
13,756 First Chicago Corp. 543,362
4,700 First Interstate Bancorp 641,550
15,400 First Union Corp. 856,625
3,600 Morgan (J.P.) & Co. Inc. 288,900
45,700 NationsBank Corp. 3,181,862
42,600 P N C Bank Corp. 1,373,850
25,200 Signet Banking Corp. 598,500
4,400 Wells Fargo & Co. 950,400
----------
26,726,899
----------
BIOTECHNOLOGY -- 0.7%
13,800 Amgen Inc.1 818,513
35,600 Medtronic, Inc. 1,989,150
----------
2,807,663
----------

42
<PAGE>

Schedule of Investment Securities - Benham Income & Growth Fund (Continued)
- --------------------------------------------------------------------------------

SHARES VALUE
------- -----------

BUILDING & HOME IMPROVEMENTS -- 0.3%
9,700 Champion Enterprises, Inc.1 $ 299,487
2,000 Southdown, Inc.1 39,000
30,200 Toll Brothers, Inc.1 694,600
----------
1,033,087
----------
BUSINESS SERVICES & SUPPLIES -- 0.6%
30,800 CDI Corp.1 554,400
17,000 Equifax Inc. 363,375
34,700 Kelly Services, Inc. 975,938
5,200 PolyGram N.V. 273,000
----------
2,166,713
----------
CHEMICALS & RESINS -- 6.8%
4,000 Chemed Corp. 155,500
98,800 Dow Chemical Co. 6,953,050
58,500 du Pont (E.I.) de Nemours & Co. 4,087,687
25,200 Eastman Chemical Co. 1,578,150
27,400 Goodrich (B.F.) Company 1,866,625
201,800 Hanson PLC ADR 3,077,450
42,100 Imperial Chemical Industries PLC 1,968,175
25,000 Monsanto Co. 3,062,500
53,100 Morton International, Inc. 1,904,963
40,000 Terra Industries Inc. 565,000
4,100 Union Carbide Corp. 153,750
----------
25,372,850
----------
COMMUNICATIONS SERVICES -- 6.0%
91,900 Ameritech Corp. $ 5,422,100
91,900 Bell Atlantic Corp. 6,145,813
18,600 GTE Corp. 818,400
26,100 NYNEX Corp. 1,409,400
172,800 Pacific Telesis Group 5,810,400
20,000 SBC Communications Inc. 1,150,000
31,100 Sprint Corp. 1,240,112
20,000 Tele Danmark A/S ADR 552,500
----------
22,548,725
----------
COMPUTER PERIPHERALS -- 0.2%
7,700 Cisco Systems Inc.1 575,094
4,300 Seagate Technology, Inc.1 204,250
----------
779,344
----------
COMPUTER SOFTWARE & SERVICES -- 1.6%
28,700 Computer Associates
International, Inc. 1,632,313
49,600 Microsoft Corp.1 4,355,500
----------
5,987,813
----------
COMPUTER SYSTEMS -- 3.6%
5,300 Compaq Computer Corp.1 254,400
15,400 Dell Computer Corp.1 536,112
25,700 Digital Equipment Corp.1 1,648,013
9,300 Gateway 2000, Inc.1 227,269
71,400 Hewlett-Packard Co. 5,979,750
49,300 International Business Machines Corp. 4,523,275
10,000 Komag, Inc.1 458,750
----------
13,627,569
----------
CONSUMER PRODUCTS -- 0.7%
32,300 Procter & Gamble Co. 2,680,900

43
<PAGE>

Schedule of Investment Securities - Benham Income & Growth Fund (Continued)
- --------------------------------------------------------------------------------

SHARES VALUE
------- -----------

ELECTRICAL & ELECTRONIC COMPONENTS -- 8.6%
25,800 Arrow Electronics, Inc.1 $ 1,112,625
57,500 Avnet, Inc. 2,573,125
36,500 Cypress Semiconductor Corp.1 465,375
44,100 Dynatech Corp.1 755,212
37,000 Emerson Electric Co. 3,024,750
39,200 Fluke Corporation 1,479,800
133,300 General Electric Co. U.S. 9,597,600
2,200 General Instrument Corp.1 51,425
25,200 Harris Corp. 1,376,550
44,300 Honeywell Inc. 2,154,088
9,900 Integrated Device Technology, Inc.1 128,081
40,300 Intel Corp. 2,289,544
33,000 Johnson Controls, Inc. 2,268,750
11,700 Micron Technology, Inc. 463,612
8,300 National Semiconductor Corp.1 184,675
38,600 Parker-Hannifin Corp. 1,322,050
1,600 SCI Systems, Inc.1 49,400
52,900 Texas Instruments Inc. 2,737,575
6,000 Wyle Electronics 210,750
----------
32,244,987
----------
ENERGY (PRODUCTION & MARKETING) -- 12.1%
79,800 Amoco Corp. 5,735,625
15,400 Atlanta Gas Light Co. 304,150
62,600 Atlantic Richfield Co. 6,932,950
33,900 Eastern Enterprises 1,194,975
114,100 Exxon Corp. 9,142,262
63,300 Mobil Corp. 7,089,600
33,700 Oneok, Inc. 770,888
89,400 Pacific Enterprises 2,525,550
110,400 Panhandle Eastern Corp. 3,077,400
57,600 Royal Dutch Petroleum Co. 8,128,800
22,600 Washington Gas Light Co. 463,300
----------
45,365,500
----------
ENERGY (SERVICES) -- 0.1%
17,600 Nabors Industries, Inc.1 195,800
----------
ENVIRONMENTAL SERVICES -- 0.5%
68,000 Browning-Ferris Industries, Inc. 2,006,000
----------
FABRICATED METAL PRODUCTS -- 0.1%
6,300 Amcast Industrial Corp. 114,975
5,300 Valmont Industries, Inc. 129,850
----------
244,825
----------
FINANCIAL SERVICES -- 2.3%
63,500 American Express Credit Corp. 2,627,313
34,000 Dean Witter, Discover & Co. 1,598,000
3,600 Federal National Mortgage Association 446,850
800 Green Tree Financial Corp. 21,100
7,300 Household International, Inc. 431,612
20,800 MBNA Corp. 767,000
20,800 Merrill Lynch & Co., Inc. 1,060,800
17,900 Morgan Stanley Group Inc. 1,443,188
----------
8,395,863
----------
FOOD & BEVERAGE -- 2.3%
52,500 Archer-Daniels Midland 945,000
28,100 Coca-Cola Company (The) 2,086,425
5,000 Coors (Adolph) Co. 110,937
17,800 IBP, Inc. 898,900
58,600 PepsiCo, Inc. 3,274,275
5,100 Ralston Purina Co. 318,113
33,400 Sara Lee Corp. 1,064,625
----------
8,698,275
----------
FURNITURE -- 0.4%
12,800 Bassett Furniture Industries, Inc. 294,400
46,800 Leggett & Platt, Inc. 1,134,900
10,800 Shelby Williams Industries, Inc. 126,900
----------
1,556,200
----------
44
<PAGE>

Schedule of Investment Securities - Benham Income & Growth Fund (Continued)
- --------------------------------------------------------------------------------

SHARES VALUE
------- -----------

HEALTHCARE -- 0.8%
14,100 Baxter International Inc. $ 590,437
22,500 Foundation Health Corp.1 967,500
14,000 Sierra Health Services, Inc.1 444,500
19,700 U.S. Healthcare, Inc. 914,819
----------
2,917,256
----------
INDUSTRIAL EQUIPMENT & MACHINERY -- 0.5%
4,700 Applied Materials, Inc.1 184,769
24,200 Dover Corp. 892,375
6,500 Harsco Corp. 377,812
6,500 Kaydon Corp. 197,438
1,600 Novellus Systems, Inc.1 86,600
----------
1,738,994
----------
INSURANCE -- 5.5%
17,900 Aetna Life & Casualty Co. 1,239,575
61,600 Allstate Corporation 2,533,300
3,600 American Bankers Insurance Group, Inc. 141,075
40,000 American General Corp. 1,395,000
34,400 American International Group, Inc. 3,182,000
2,500 Aon Corp. 124,687
10,000 Chubb Corp. (The) 967,500
3,300 General Re Corp. 511,500
6,700 Loews Corp. 525,113
76,400 SAFECO Corp. 2,640,575
14,800 St. Paul Companies, Inc. (The) 823,250
12,700 Transamerica Corp. 925,512
13,800 Transatlantic Holdings, Inc. 1,012,575
65,200 Travelers Group, Inc. 4,099,450
9,200 Washington National Corp. 254,150
----------
20,375,262
----------
LEISURE -- 1.6%
32,800 Brunswick Corp. 787,200
131,800 Callaway Golf Co. 2,981,975
18,400 Eastman Kodak Co. 1,232,800
18,000 Marriott International 688,500
5,300 Outboard Marine Corp. 107,987
----------
5,798,462
----------
MEDICAL EQUIPMENT & SUPPLIES -- 0.1%
4,000 Boston Scientific Corp.1 196,000
2,100 RoTech Medical Corp.1 57,225
----------
253,225
----------
METALS & MINING -- 0.2%
2,800 Cleveland Cliffs Inc. 114,800
9,400 Cyprus Amax Mineral Co. 245,575
7,000 Phelps Dodge Corp. 435,750
----------
796,125
----------
NONFERROUS METALS -- 0.7%
42,600 Aluminum Co. of America 2,252,475
6,500 Reynolds Metals Co. 368,063
----------
2,620,538
----------
OFFICE EQUIPMENT -- 0.3%
5,900 Pitney Bowes Inc. 277,300
7,000 Xerox Corp. 959,000
----------
1,236,300
----------

45
<PAGE>
Schedule of Investment Securities - Benham Income & Growth Fund (Continued)
- --------------------------------------------------------------------------------

SHARES VALUE
------- -----------

PAPER & FOREST PRODUCTS -- 2.2%
7,800 Boise Cascade Corp. $ 270,075
8,400 Consolidated Papers, Inc. 471,450
29,000 Federal Paper Board Co., Inc. 1,504,375
10,700 Georgia-Pacific Corp. 734,287
63,300 Longview Fibre Co. 1,028,625
46,100 Rayonier Inc. 1,538,588
18,400 Stone Container Corp. 264,500
6,900 Temple-Inland Inc. 304,462
36,000 Weyerhaeuser Co. 1,557,000
12,500 Willamette Industries, Inc. 703,125
----------
8,376,487
----------
PHARMACEUTICALS -- 7.3%
44,600 Abbott Laboratories 1,862,050
17,600 American Home Products Corp. 1,707,200
2,400 Bergen Brunswig 59,700
89,700 Bristol-Myers Squibb Co. 7,702,988
3,600 Lilly (Eli) & Co. 202,500
89,300 Johnson & Johnson 7,646,312
13,700 McKesson Corp. 693,563
66,000 Merck & Co., Inc. 4,339,500
50,000 Pfizer Inc. 3,150,000
----------
27,363,813
----------
PRINTING & PUBLISHING -- 1.2%
15,500 American Business Products, Inc. 441,750
99,852 Jostens, Inc. 2,421,411
23,700 Tribune Co. 1,448,662
----------
4,311,823
----------
RAILROADS -- 1.0%
21,900 Burlington Northern Inc. 1,708,200
22,800 CSX Corporation 1,040,250
12,800 Conrail Inc. 896,000
----------
3,644,450
----------
RETAIL (APPAREL) -- 1.0%
11,700 Claire's Stores, Inc. 206,213
6,000 Gap, Inc. 252,000
2,400 NIKE, Inc. 167,100
24,200 Oshkosh B'Gosh, Inc. 414,425
86,600 Ross Stores, Inc. 1,672,462
22,400 TJX Companies, Inc. 422,800
10,400 VF Corp. 548,600
----------
3,683,600
----------
RETAIL (FOOD & DRUG) -- 0.3%
4,000 Safeway Inc.1 206,000
17,100 Vons Cos., Inc.1 483,075
20,000 Walgreen Co. 597,500
----------
1,286,575
----------
RETAIL (GENERAL MERCHANDISE) -- 2.3%
2,300 Consolidated Stores, Inc.1 50,025
2,700 May Department Stores Co. (The) 114,075
23,100 Penney (J.C.) Company, Inc. 1,100,138
176,000 Sears, Roebuck & Co. 6,864,000
19,100 Waban Inc.1 358,125
----------
8,486,363
----------
RETAIL (SPECIALTY) -- 0.5%
30,000 CompUSA Inc.1 933,750
6,800 Good Guys, Inc. (The)1 60,350
71,500 Pier 1 Imports, Inc. 813,313
----------
1,807,413
----------
SERVICES (MISCELLANEOUS) -- 0.1%
14,800 CPI Corp. 236,800
----------
STEEL -- 0.3%
27,500 Carpenter Technology Corp. 1,130,937
----------
46
<PAGE>

Schedule of Investment Securities - Benham Income & Growth Fund (Continued)
- --------------------------------------------------------------------------------

SHARES VALUE
------- -----------

TOBACCO -- 2.8%
46,400 American Brands, Inc. $ 2,070,600
93,300 Philip Morris Companies, Inc. 8,443,650
----------
10,514,250
----------
UTILITIES (ELECTRIC) -- 9.5%
20,900 Baltimore Gas & Electric Co. 595,650
43,900 Boston Edison Co. 1,295,050
92,500 Central & South West Corp. 2,578,438
14,300 CILCORP Inc. 605,962
5,400 Commonwealth Energy System 241,650
244,300 Consolidated Edison Co. of New York, Inc. 7,817,600
36,900 DQE, Inc. 1,134,675
82,200 Detroit Edison Company 2,835,900
5,000 Duke Power Co. 236,875
17,500 Enova Corporation 415,625
70,000 Entergy Corp. 2,047,500
11,600 FPL Group, Inc. 537,950
20,000 General Public Utilities Corp. 680,000
22,000 Hawaiian Electric Industries, Inc. 852,500
75,000 Niagara Mohawk Power Corp. 721,875
15,000 NIPSCO Industries, Inc. 573,750
47,900 Ohio Edison Co. 1,125,650
137,000 Pacific Gas & Electric Co. 3,887,375
33,700 Public Service Co. of Colo. 1,192,137
88,900 Rochester Gas & Electric Corp. 2,011,363
61,800 SCEcorp 1,096,950
30,000 Sierra Pacific Resources 701,250
13,400 Southwestern Public Service Co. 438,850
39,100 Texas Utilities Electric Co. 1,607,987
7,800 Unicom Corp. 255,450
----------
35,488,012
----------
UTILITIES (WATER) -- 0.0%
900 Consumers Water Co. 16,313
----------

TOTAL COMMON STOCKS-- 97.4% 363,862,098
(Cost $306,056,599) ----------

CONVERTIBLE PREFERRED STOCKS

ELECTRICAL & ELECTRONIC COMPONENTS -- 0.0%
566 Teledyne, Inc. Preferred 8,136
(Cost $8,348) ----------

TOTAL INVESTMENT SECURITIES-- 97.4% 363,870,234
(Cost $306,064,947) ----------

OTHER ASSETS LESS LIABILITIES-- 2.6% 9,830,909
----------

NET ASSETS -- 100% -- equivalent to $17.81 per share
on 20,984,716 shares outstanding $373,701,143
==========

47
<PAGE>

BENHAM EQUITY FUNDS
Benham Utilities Income Fund
Schedule of Investment Securities
December 31, 1995

SHARES VALUE
(Note 1)
------- -----------

COMMON STOCKS

COMMUNICATIONS EQUIPMENT -- 1.1%
20,759 Alcatel Alsthom Compagnie
Generale d'Electicite $ 363,283
109,900 US West Mediavision Group.1 2,088,100
----------
2,451,383
----------
COMMUNICATIONS SERVICES -- 45.1%
68,200 AirTouch Communications, Inc.1 1,926,650
130,200 ALLTEL Corp. 3,840,900
164,800 Ameritech Corp. 9,723,200
54,600 BCE Inc. 1,883,700
118,900 Bell Atlantic Corp. 7,951,438
239,900 BellSouth Corp. 10,435,650
25,000 British Telecommunications plc 1,412,500
78,900 Century Telephone Enterprises, Inc. 2,505,075
40,800 Cincinnati Bell Inc. 1,417,800
60,800 Frontier Corp. 1,824,000
226,900 GTE Corp. 9,983,600
151,100 NYNEX Corp. 8,159,400
201,400 Pacific Telesis Group 6,772,075
158,000 SBC Communications Inc. 9,085,000
221,900 Sprint Corp. 8,848,263
56,500 Tele Danmark A/S 1,560,812
1,100 Telecom Corp. of New Zealand Ltd. 76,313
14,900 Telefonica de Espana 623,937
94,000 Telefonos de Mexico, S. A. 2,996,250
35,000 U.S. Long Distance Corp.1 483,438
201,800 U S WEST Communications, Inc. 7,214,350
----------
98,724,351
----------
ENERGY (EXPLORATION & PRODUCTION) -- 1.2%
65,900 Enron Corp. 2,512,437
----------
NATURAL GAS -- 8.6%
70,600 Atlanta Gas Light Co. 1,394,350
11,800 Bay State Gas Co. 327,450
20,800 British Gas plc 813,800
21,700 Brooklyn Union Gas Co.(The) 634,725
14,100 Connecticut Energy Corp. 313,725
2,000 Connecticut Natural Gas Corp. 46,750
47,800 Consolidated Natural Gas Co. 2,168,925
29,800 Eastern Enterprises 1,050,450
14,700 Energen Corp. 354,638
13,200 Indiana Energy Inc. 315,150
11,700 National Fuel Gas Co. 393,412
17,800 New Jersey Resources Corp. 536,225
51,100 NICOR Inc. 1,405,250
15,200 Oneok, Inc. 347,700
122,300 Pacific Enterprises 3,454,975
109,300 Panhandle Eastern Corp. 3,046,738
11,300 Providence Energy Corp. 192,100
29,400 Washington Gas Light Co. 602,700
16,100 WICOR, Inc. 519,225
21,100 Williams Companies, Inc.(The) 925,762
----------
18,844,050
----------
UTILITIES (ELECTRIC) -- 36.7%
29,900 Atlantic Energy, Inc. 575,575
18,700 Baltimore Gas & Electric Co. 532,950
97,000 Boston Edison Co. 2,861,500
168,700 Central & South West Corp. 4,702,513
13,200 CILCORP Inc. 559,350

48
<PAGE>

Schedule of Investment Securities - Benham Utilities Income Fund (Continued)
- --------------------------------------------------------------------------------

SHARES VALUE
------- -----------

91,920 Citizens Utilities Co. $ 1,171,980
8,400 Commonwealth Energy System 375,900
248,400 Consolidated Edison Co. of New York, Inc. 7,948,800
37,800 DQE, Inc. 1,162,350
34,900 Delmarva Power & Light Co. 793,975
136,900 Detroit Edison Company 4,723,050
95,000 Duke Power Co. 4,500,625
35,700 Eastern Utilities Associates 843,412
15,000 Empresa Nacional de Electricidad S.A. 858,750
22,100 Entergy Corp. 646,425
114,500 Enova Corporation 2,719,375
42,500 FPL Group, Inc. 1,970,938
12,900 General Public Utilities Corp. 438,600
3,000 Green Mountain Power Corp 83,250
71,000 Houston Industries Inc. 1,721,750
4,200 IPALCO Enterprises, Inc. 160,125
22,900 Illinova Corp. 687,000
33,900 LG&E Energy Corp. 1,432,275
42,900 MidAmerican Energy Co. 718,575
98,400 NIPSCO Industries, Inc. 3,763,800
200,000 Niagara Mohawk Power Corp. 1,925,000
64,200 Northeast Utilities 1,564,875
81,900 Northern States Power Co. 4,023,337
16,700 Northwestern Public Service Co. 467,600
166,200 Ohio Edison Co. 3,905,700
9,900 Oklahoma Gas & Electric Co. 425,700
130,200 Pacific Gas & Electric Co. 3,694,425
95,000 PECO Energy Co. 2,861,875
3,700 Portland General Corp. 107,763
4,500 Public Service Enterprise Group Inc. 137,812
86,200 Rochester Gas & Electric Corp. 1,950,275
199,700 SCEcorp 3,544,675
219,100 Southern Co. 5,395,337
3,000 St. Joesph Light & Power Co. 106,500
54,700 TECO Energy, Inc. 1,401,688
31,600 Texas Utilities Co. 1,299,550
48,100 Unicom Corp. 1,575,275
----------
80,340,230
----------
UTILITIES (WATER) -- 0.3%
8,700 Aquirion Co. 221,850
8,100 Consumers Water Co. 146,812
11,800 Philadephia Suburban Corp. 244,850
8,100 United Water Resources Inc. 97,200
----------
710,712
----------

TOTAL COMMON STOCKS-- 93.0% 203,583,163
(Cost $173,759,758) ----------

FIXED INCOME SECURITIES

U.S. TREASURY SECURITIES -- 3.7%
$8,000,000 U.S. Treasury Notes, 5.75%, 9-30-97 8,074,319
(Cost $8,002,578) ----------

TOTAL INVESTMENT SECURITIES-- 96.7% 211,657,482
(Cost $181,762,336) ----------

OTHER ASSETS LESS LIABILITIES-- 3.3% 7,136,979
----------

NET ASSETS -- 100% -- equivalent to $11.44 per share
on 19,130,376 shares outstanding $218,794,461
==========

1 Non-income producing.

See the accompanying notes to financial statements.

49
<PAGE>

TRUSTEES

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

OFFICERS

James M. Benham
Chairman of the Board

John T. Kataoka
President and Chief Executive Officer

Bruce R. Fitzpatrick
Vice President

Maryanne Roepke
Treasurer

Douglas A. Paul
Vice President, Secretary
and General Counsel

Ann N. McCoid
Controller

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

1665 Charleston Road
Mountain View, CA 94043

1-800-321-8321

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

Benham Distributors, Inc. 2/96 Q070