BENHAM EQUITY FUNDS, 485BPOS, 1996-02-26

BENHAM EQUITY FUNDS
485BPOS, 1996-02-26

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _X__

File No. 33-19589:

Pre-Effective Amendment No.____ ____

Post-Effective Amendment No._17_ _X__

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 _X__

File No. 811-5447:

Amendment No._19_

BENHAM EQUITY FUNDS
(Exact Name of Registrant as Specified in Charter)

1665 Charleston Road, Mountain View, CA 94043
(Address of Principal Executive Offices)

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

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

Approximate Date of Initial Public Offering: 8/17/88

It is proposed that this filing will become effective:

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

Registrant continues its election to register an indefinite number of shares of
beneficial interest under the Securities Act of 1933 pursuant to Rule 24f-2
under the Investment Company Act of 1940. Registrant intends to file Rule 24f-2
Notice within 60 days after its fiscal year ending December 31, 1995.

<PAGE>
FORM N-1A
CROSS-REFERENCE SHEET

BENHAM EQUITY FUNDS
Benham Global Gold Fund

The Prospectus and Statement of Additional Information are incorporated herein
by reference to 1933 Act Post-Effective Amendment No. 17/1940 Act Amendment
No. 19.

PART A: PROSPECTUS

ITEM PROSPECTUS CAPTION

1 Cover Page

2 (a) Summary of Fund Expenses
(b), (c) Not Applicable

3 (a) Financial Highlights
(b) Not Applicable
(c), (d) Performance

4 (a)(i) About Benham Equity Funds, Cover Page
(a)(ii), (b) How the Fund Works, Risk Factors and Investment Techniques
(c) Risk Factors and Investment Techniques

5 (a) About Benham Equity Funds
(b) - (f) The Benham Group, Advisory and Service Fees
(g) Portfolio Transactions

5A Not Applicable

6 (a) About Benham Equity Funds, How to Redeem Your Investment
(b) - (d) Not Applicable
(e) How to Invest
(f), (g) Distributions and Taxes

7 (a) Distribution of Shares, Cover Page
(b) Share Price, Broker-Dealer Transactions
(c) Not Applicable
(d) How to Buy Shares, About Benham-Sponsored Retirement Plans
(e), (f) Not Applicable

8 (a) How to Redeem Your Investment, How to Redeem Shares
(b) Broker-Dealer Transactions
(c), (d) About Benham-Sponsored Retirement Plans, How to Redeem Your
Investment

9 Not Applicable

<PAGE>

CROSS-REFERENCE SHEET
(continued)

BENHAM EQUITY FUNDS
Benham Global Gold Fund

PART B: STATEMENT OF ADDITIONAL INFORMATION

ITEM STATEMENT OF ADDITIONAL INFORMATION CAPTION
10 Cover Page

11 Table of Contents

12 Not Applicable

13 (a) Investment Policies and Techniques
(b) Investment Restrictions
(c) Investment Policies and Techniques, Investment Restrictions
(d) Portfolio Transactions

14 (a), (b) Directors and Officers
(c) Not Applicable

15 (a) Not Applicable
(b) Additional Purchase and Redemption Information
(c) Directors and Officers

16 (a) Investment Advisory Services
(b) - (d) Investment Advisory Services, Administrative and Transfer
Agent Services, Expense Limitation Agreements
(e) - (g) Not Applicable
(h) About Benham Equity Funds
(i) Administrative and Transfer Agent Services

17 (a) Portfolio Transactions
(b) Not Applicable
(c) Portfolio Transactions
(d), (e) Not Applicable

18 (a) About Benham Equity Funds
(b) Not Applicable

19 (a) Additional Purchase and Redemption Information
(b) Valuation of Portfolio Securities
(c) Not Applicable

20 Taxes

21 (a) Additional Purchase and Redemption Information
(b), (c) Not Applicable

22 Performance

23 Cover Page

<PAGE>

BENHAM EQUITY FUNDS
Benham Income & Growth Fund
Benham Equity Growth

1933 Act Post-Effective Amendment No. 17
1940 Act Amendment No. 19

FORM N-1A
CROSS-REFERENCE SHEET

PART A: PROSPECTUS

ITEM PROSPECTUS CAPTION

1 Cover Page

2 (a) Summary of Fund Expenses
(b), (c) Not Applicable

3 (a) Financial Highlights
(b) Not Applicable
(c), (d) Performance

4 (a)(i) About Benham Equity Funds, Cover Page
(a)(ii), (b) How the Funds Work, Other Investment Policies and Techniques
(c) Suitability

5 (a) About Benham Equity Funds
(b) - (f) The Benham Group, Advisory and Service Fees
(g) Portfolio Transactions

5A Not Applicable

6 (a) About Benham Equity Funds, How to Redeem Your Investment
(b) - (d) Not Applicable
(e) How to Invest
(f), (g) Distributions and Taxes

7 (a) Distribution of Shares, Cover Page
(b) Share Price, Broker-Dealer Transactions
(c) Not Applicable
(d) How to Buy Shares, About Benham-Sponsored Retirement Plans
(e), (f) Not Applicable

8 (a) How to Redeem Your Investment, How to Redeem Shares, About
Benham-Sponsored Retirement Plans.
(b) Broker-Dealer Transactions
(c), (d) How to Redeem Your Investment, About Benham-Sponsored
Retirement Plans

9 Not Applicable

<PAGE>

BENHAM EQUITY FUNDS
Benham Income & Growth Fund
Benham Equity Growth Fund
CROSS-REFERENCE SHEET
(continued)

PART B: STATEMENT OF ADDITIONAL INFORMATION

ITEM STATEMENT OF ADDITIONAL INFORMATION CAPTION
10 Cover Page

11 Table of Contents

12 Not Applicable

13 (a) Investment Policies and Techniques
(b) Investment Restrictions
(c) Investment Policies and Techniques, Investment Restrictions
(d) Portfolio Transactions

14 (a), (b) Directors and Officers
(c) Not Applicable

15 (a) Not Applicable
(b) Additional Purchase and Redemption Information
(c) Directors and Officers

17 (a) Portfolio Transactions
(b) Not Applicable
(c) Portfolio Transactions
(d), (e) Not Applicable

18 (a) About Benham Equity Funds
(b) Not Applicable

19 (a) Additional Purchase and Redemption Information
(b) Valuation of Portfolio Securities
(c) Not Applicable

20 Taxes

21 (a) Additional Purchase and Redemption Information
(b), (c) Not Applicable

22 Performance

23 Cover Page

<PAGE>
FORM N-1A
CROSS-REFERENCE SHEET

BENHAM EQUITY FUNDS
Benham Utilities Income Fund

1933 Act Post-Effective Amendment No. 17
1940 Act Amendment No. 19

PART A: PROSPECTUS

ITEM PROSPECTUS CAPTION

1 Cover Page

2 (a) Summary of Fund Expenses
(b), (c) Not Applicable

3 (a) Financial Highlights
(b) Not Applicable
(c), (d) Performance

4 (a)(i) About Benham Equity Funds, Cover Page
(a)(ii), (b) How the Fund Works, Other Investment Policies and Techniques
(c) Investment Considerations

5 (a) About Benham Equity Funds
(b) - (f) The Benham Group, Advisory and Service Fees
(g) Portfolio Transactions

5A Not Applicable

6 (a) About Benham Equity Funds, How to Redeem Your Investment
(b) - (d) Not Applicable
(e) How to Invest
(f), (g) Distributions and Taxes

7 (a) Distribution of Shares, Cover Page
(b) Share Price, Broker-Dealer Transactions
(c) Not Applicable
(d) How to Buy Shares, About Benham-Sponsored Retirement Plans
(e), (f) Not Applicable

8 (a) How to Redeem Your Investment, How to Redeem Shares, About
Benham-Sponsored Retirement Plans
(b) Broker-Dealer Transactions
(c), (d) How to Redeem Your Investment, About Benham-Sponsored
Retirement Plans

9 Not Applicable

<PAGE>

CROSS-REFERENCE SHEET
(continued)

BENHAM EQUITY FUNDS
Benham Utilities Income Fund

PART B: STATEMENT OF ADDITIONAL INFORMATION

ITEM STATEMENT OF ADDITIONAL INFORMATION CAPTION
10 Cover Page

11 Table of Contents

12 Not Applicable

13 (a) Investment Policies and Techniques
(b) Investment Restrictions
(c) Investment Policies and Techniques, Investment Restrictions
(d) Portfolio Transactions

14 (a), (b) Directors and Officers
(c) Not Applicable

15 (a) Not Applicable
(b) Additional Purchase and Redemption Information
(c) Directors and Officers

16 (a) Investment Advisory Services
(b) - (d) Investment Advisory Services, Administrative and Transfer
Agent Services, Expense Limitation Agreement
(e) - (g) Not Applicable
(h) About Benham Equity Funds
(i) Administrative and Transfer Agent Services

17 (a) Portfolio Transactions
(b) Not Applicable
(c) Portfolio Transactions
(d), (e) Not Applicable

18 (a) About Benham Equity Funds
(b) Not Applicable

19 (a) Additional Purchase and Redemption Information
(b) Valuation of Portfolio Securities
(c) Not Applicable

20 Taxes

21 (a) Additional Purchase and Redemption Information
(b), (c) Not Applicable

22 Performance

23 Cover Page

<PAGE>
FORM N-1A
CROSS-REFERENCE SHEET

BENHAM EQUITY FUNDS
Benham Global Natural Resources Index Fund

The Prospectus and Statement of Additional Information are incorporated herein
by reference to 1933 Act Post-Effective Amendment No. 17/1940 Act Amendment
No. 19.

PART A: PROSPECTUS

ITEM PROSPECTUS CAPTION

1 Cover Page

2 (a) Summary of Fund Expenses
(b), (c) Not Applicable

3 (a) Financial Highlights
(b) Not Applicable
(c), (d) Performance

4 (a)(i) About Benham Equity Funds, Cover Page
(a)(ii), (b) How the Fund Works, Other Investment Policies and Techniques
(c) Risk Factors

5 (a) About Benham Equity Funds
(b) - (f) The Benham Group, Advisory and Service Fees
(g) Portfolio Transactions

5A Not Applicable

6 (a) About Benham Equity Funds, How to Redeem Your Investment
(b) - (d) Not Applicable
(e) How to Invest
(f), (g) Distributions and Taxes

7 (a) Distribution of Shares, Cover Page
(b) Share Price, Broker-Dealer Transactions
(c) Not Applicable
(d) How to Buy Shares, About Benham-Sponsored Retirement Plans
(e), (f) Not Applicable

8 (a) How to Redeem Your Investment, How to Redeem Shares
(b) Broker-Dealer Transactions
(c), (d) About Benham-Sponsored Retirement Plans, How to Redeem Your
Investment,

9 Not Applicable

<PAGE>

CROSS-REFERENCE SHEET
(continued)

BENHAM EQUITY FUNDS
Benham Global Natural Resources Index Fund

PART B: STATEMENT OF ADDITIONAL INFORMATION

ITEM STATEMENT OF ADDITIONAL INFORMATION CAPTION
10 Cover Page

11 Table of Contents

12 Not Applicable

13 (a) Investment Policies and Techniques
(b) Investment Restrictions
(c) Investment Policies and Techniques, Investment Restrictions
(d) Portfolio Transactions

14 (a), (b) Directors and Officers
(c) Not Applicable

15 (a) Not Applicable
(b) Additional Purchase and Redemption Information
(c) Directors and Officers

17 (a) Portfolio Transactions
(b) Not Applicable
(c) Portfolio Transactions
(d), (e) Not Applicable

18 (a) About Benham Equity Funds
(b) Not Applicable

19 (a) Additional Purchase and Redemption Information
(b) Valuation of Portfolio Securities
(c) Not Applicable

20 Taxes

21 (a) Additional Purchase and Redemption Information
(b), (c) Not Applicable

22 Performance

23 Cover Page

<PAGE>

BENHAM
GLOBAL GOLD
FUND

Prospectus * February 26, 1996

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

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

<PAGE>

- -------------------
[information in left margin of page]
THE BENHAM GROUP
1665 Charleston Rd.
Mountain View
California 94043

Fund
Information
1-800-331-8331
1-415-965-4274

Investor Services
1-800-321-8321
1-415-965-4222

TDD Service
1-800-624-6338
1-415-965-4764

Benham Group
Representatives
are available
by telephone weekdays from
5 a.m. to 5 p.m. Pacific Time.
- -------------------

BENHAM GLOBAL GOLD FUND

Formerly known as the Benham Gold Equities Index Fund

A Series of Benham Equity Funds

Prospectus o February 26, 1996

BENHAM GLOBAL GOLD FUND seeks to realize a total return (capital growth and
dividends) consistent with investment in securities of companies that are
engaged in mining, processing, fabricating, or distributing gold or other
precious metals throughout the world. The Fund is a non-diversified series of
Benham Equity Funds (BEF), a no-load, open-end mutual fund.

Please read this Prospectus carefully and retain it for future reference. It is
designed to help you decide whether the Fund's goals match your own. A Statement
of Additional Information (also dated February 26, 1996) has been filed with the
Securities and Exchange Commission (SEC) and is incorporated herein by
reference. For a free copy, call or write The Benham Group.

Mutual fund shares are not insured by the FDIC, the Federal Reserve Board, or
any other agency. The value of the investment and its returns will fluctuate and
is not guaranteed.

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

2
<PAGE>

SUMMARY OF FUND EXPENSES

The tables below illustrate the fees and expenses an investor in the Fund would
incur directly or indirectly. The figures shown are based on historical
expenses, adjusted to reflect the expense limitation agreement in effect as of
February 26, 1996.

================================================================================
A. SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------

Sales load imposed on purchases ........................... None
Sales load imposed on reinvested dividends ................ None
Deferred sales load ....................................... None
Redemption fee ............................................ None
Exchange fee .............................................. None

================================================================================
B. ANNUAL FUND OPERATING EXPENSES
As a Percentage of Average Daily Net Assets
- --------------------------------------------------------------------------------

Investment advisory fee.................................... .31%
12b-1 fee.................................................. None
Other expenses............................................. .30%
Total Fund operating expenses
(net of expense limitation).......................... .61%*

* Benham Management Corporation (BMC) has agreed to continue to limit the Fund's
total operating expenses to a percentage of average daily net assets through May
31, 1995. The operation of this expense limitation effectively requires the
total expenses paid by the Fund not exceed .75%. Amounts which are paid by
unaffiliated third parties do not apply to this expense limit. The agreement
provides that BMC may recover amounts absorbed on behalf of the Fund during the
preceding 11 months if, and to the extent that, for any given month, the Fund's
expenses were less than the expense limit in effect at that time. The expense
limitation is subject to annual renewal in June.

The Fund pays BMC investment advisory fees equal to an annualized percentage of
Fund average daily net assets. Other expenses include administrative and
transfer agent fees paid to Benham Financial Services, Inc. (BFS).

- -------------------
[information in right margin of page]
Please read this Prospectus carefully and retain it for future reference. It
is designed to help you decide if the Fund's goals match your own.
- -------------------

3
<PAGE>

================================================================================
C. EXAMPLE OF EXPENSES
- --------------------------------------------------------------------------------

The following table illustrates the expenses a shareholder would pay on a $1,000
investment in the Fund over periods of one, three, five, and ten years. These
figures are based on the expenses shown in Table B and assume (i) a 5% annual
return and (ii) full redemption at the end of each time period.

ONE YEAR THREE YEARS FIVE YEARS TEN YEARS

$6 $20 $34 $76

We include this table to help you understand the various costs and expenses that
you, as a shareholder, will bear either directly or indirectly. THIS EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
PERFORMANCE; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN, AND THE
FUND MAY NOT REALIZE THE 5% HYPOTHETICAL RATE OF RETURN REQUIRED BY THE SEC FOR
THIS EXAMPLE.

FINANCIAL HIGHLIGHTS

The information presented on the following page has been audited by KPMG Peat
Marwick LLP, independent auditors. Their report on the financial statements and
financial highlights is included in the Fund's Annual Report, which is
incorporated by reference in the Statement of Additional Information.

4
<PAGE>
<TABLE>
<CAPTION>

=====================================================================================================================
BENHAM GLOBAL GOLD FUND
Years ended December 31 (except as noted)
- ---------------------------------------------------------------------------------------------------------------------

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
Per Share $.035 N/A N/A N/A N/A N/A N/A N/A

- -------------
+ Commencement of operations for Benham Global Gold 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).

</TABLE>

5
<PAGE>

HOW THE FUND WORKS

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek to achieve a total return (capital
appreciation and current income) that is consistent with investing in securities
of companies that are engaged in mining, processing, fabricating, or
distributing gold or other related precious metals throughout the world. The
Fund will seek to attain the objective of capital appreciation by purchasing
securities with the potential to increase in value, so that its own shares will
in turn increase in value. Because the Fund's investment objective also includes
the pursuit of current income, the payment of dividends and interest may be a
consideration when the Fund purchases securities.

The Fund's investment objective and industry concentration policy, described on
the following pages, are fundamental and may not be changed without shareholder
approval. The other policies described in this Prospectus are not fundamental
and may be changed by the Fund's board of directors.

CORE INVESTMENT STRATEGIES

BMC will construct the Fund's portfolio to match the risk characteristics of the
market for gold and gold-related equity securities and, in turn, attempt to
produce performance indicative of performance in the worldwide gold equities
market. As part of evaluating and determining the appropriate investments for
the Fund, BMC intends to utilize various benchmarks, including worldwide gold
market indices, such as the FT-SE(R) Gold Mines Index.

The FT-SE(R) Gold Mines Index (the "Index") is compiled and calculated by FT-SE
International Limited ("FT-SE") under the joint license of the Financial Times
Ltd. ("FT") and the London Stock Exchange Limited (the "Stock Exchange"). FT-SE
calculates the Index in conjunction with the Institute of Actuaries and the
Faculty of Actuaries. However, neither FT-SE nor the Stock Exchange nor FT shall
be liable to any person for any error in the Index and neither FT-SE or Exchange
or FT shall be under any obligation to advise any person of any error therein.
The Fund is not in any way sponsored, endorsed, sold or promoted by FT-SE, the
Stock Exchange or FT. Neither FT-SE, the Stock Exchange nor FT makes any
warranty or representation whatsoever as to the results

6
<PAGE>

to be obtained from the use of the Index and/or the figure at which the said
Index stands at any particular time on any particular day or otherwise. FT-SE(R)
is a trademark of the Stock Exchange and FT and is used by FT-SE under license.

BMC intends to use quantitative management techniques in pursuit of the Fund's
investment objective. Quantitative investment management is designed to combine
a disciplined management approach with the flexibility to respond to events that
may affect the value of the Fund's investments.

The Fund will concentrate its investments in securities of companies throughout
the world which are engaged in mining, processing or dealing with gold or other
precious metals ("Gold Companies"). This means that at least 25% of the Fund's
total assets must be invested in Gold Companies. Under normal circumstances, at
least 65% of the value of the Fund's total assets will be invested in securities
of issuers engaged in gold operations, including securities of gold mining
finance companies, as well as operating companies with long-, medium- or
short-life gold mines.

The Fund may invest in common stocks, securities convertible into common stocks
and sponsored or unsponsored American Depositary Receipts ("ADRs") for the
securities of Gold Companies, all of which may be traded on a securities
exchange or over-the-counter. In seeking income or in times when a conservative
policy is warranted, the Fund may also purchase preferred stocks and debt
securities, such as notes, bonds, debentures or commercial paper, any of which
may or may not be rated by nationally recognized securities rating agencies.

As part of its global investment strategy, the Fund will normally invest in
securities of issuers located in at least three different countries, one of
which may be the United States. For temporary defensive purposes, however, the
Fund may invest in less than three countries. BMC anticipates that a substantial
portion of the Fund's assets will be invested in securities of companies
domiciled in or operating in one or more foreign countries. There are certain
risks which are posed to the Fund when it invests in foreign securities. (See
"Risk Factors and Investment Techniques--Foreign Securities," on page 9.) While
these

- -------------------
[information in right margin of page]
The Fund will concentrate its investments in securities of companies throughout
the world which are engaged in mining, processing or dealing with gold or other
precious metals ("Gold Companies").
- -------------------

7
<PAGE>

risks exist under the Current Objective, their significance to the Fund
and its shareholders may be greater as the Fund increases its investments in
regions outside North America.

BMC works to balance three goals:

* To construct the Fund's portfolio composition so that its risk and
investment performance characteristics will match the selected benchmarks as
closely as possible while meeting IRS diversification requirements;

* To keep enough cash on hand to meet shareholder redemption requests and pay
operational expenses; and

* To keep portfolio transaction costs low.

The Fund is a "non-diversified company" as defined in the Investment Company Act
of 1940 (the "1940 Act"), which means that the proportion of the Fund's assets
that may be invested in the securities of a single issuer is not limited by the
1940 Act. However, Subchapter M of the Internal Revenue Code of 1986 (the
"Code"), as amended, limits the proportion of assets a fund may invest in the
securities of any single issuer. The Fund intends to adhere to these limits in
order to qualify as a regulated investment company.

RISK FACTORS AND INVESTMENT TECHNIQUES

GENERAL

By itself, the Fund does not constitute a balanced investment plan. The Fund may
be appropriate for investors seeking to diversify their stock portfolios through
broad-based exposure to the global gold industry. The Fund works best for
long-term investors prepared to ride out the markets' ups and downs. Since the
Fund concentrates its investments in stocks of companies engaged in the gold
industry (gold company shares), its share price is likely to be more volatile
than the share price of a fund that diversifies across multiple industries.

Many investors perceive that gold investments hedge against inflation, currency
devaluations, and general stock market declines; however, there is no assurance
that these historical inverse relationships will persist. Changing market
conditions (i.e., fluctuating operating costs, political events, and changes in
interest rates and

8
<PAGE>

currency rates) may affect gold prices and tend to have a more exaggerated
effect on gold stocks. Because of their high share price volatility, gold stocks
are considered speculative and may affect the Fund's share price. Investment in
the Fund's shares may involve special considerations, including: fluctuations in
the price of gold; the potential effect of the concentration of the sources of
supply of gold and over control of the sale of gold; changes in U.S. or foreign
tax, currency or mining laws; increased environmental costs; and unpredictable
monetary policies and economic and political conditions.

CONVERTIBLE SECURITIES

In addition to common stock shares of gold companies, the Fund may buy
securities convertible into common stock, such as convertible bonds, convertible
preferred stocks, and warrants. BMC may purchase these securities if it believes
that a company's convertible securities are undervalued in the market.

Convertible securities provide a fixed-income stream and the opportunity,
through their conversion feature, to participate in the capital appreciation
resulting from a market price advance in the convertible security's underlying
common stock. A convertible security tends to increase in market value when
interest rates rise. The price of a convertible security is also influenced by
the market value of the security's underlying common stock and tends to increase
as the market value of the underlying stock rises, whereas it tends to decrease
as the market value of the underlying stock declines.

FOREIGN SECURITIES

Because of the Fund's policy of investing primarily in securities of companies
engaged in gold mining, a substantial part of the Fund's assets is generally
invested in securities of companies domiciled or operating in one or more
foreign countries.

Securities of foreign issuers may be affected by the strength of foreign
currencies relative to the U.S. dollar or by political or economic developments
in foreign countries. Foreign companies may not be subject to accounting
standards or governmental regulations comparable to those that affect U.S.
companies, and there may be less public information about their operations.

9
<PAGE>

In particular, liquidity of the Fund's portfolio may be affected by the Fund's
global exposure. While the Fund intends to acquire securities of foreign issuers
only where there are public trading markets for such securities, such
investments may tend to reduce the liquidity of the Fund's portfolio in the
event of internal problems in such foreign countries or deteriorating relations
between the United States and such countries. Restrictions and controls on
investment in the securities markets of some countries may have an adverse
effect on the availability and costs to the Fund of investments in those
countries. In addition, there may be the possibility of expropriations, foreign
withholding taxes, confiscatory taxation, political, economic or social
instability or diplomatic developments which could affect assets of the Fund
invested in issuers in foreign countries. In particular, investments in Gold
Companies located in South Africa, which comprise a significant component of the
global gold industry, may present greater risks to the Fund than investments in
other countries because of its realtively unstable internal political
conditions.

In addition, issuers of unsponsored ADRs are not obligated to disclose material
information in the United States and, therefore, there may be less information
available to the investing public than with sponsored ADRs. BMC will attempt to
independently accumulate and evaluate information with respect to the issuers of
the underlying securities of sponsored and unsponsored ADRs to attempt to limit
the Fund's exposure to the market risk associated with such investments.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

To offset the currency risks associated with investing in securities of foreign
issuers, the Fund may hold foreign currency deposits and may convert dollars and
foreign currencies in the foreign exchange markets. Currency conversion involves
dealer spreads and other costs, although commissions usually are not charged.

Currencies may be exhanged on a spot (i.e., cash) basis or by entering into
forward contracts to purchase or sell foreign currencies at a future date and
price. By entering into a forward contract to buy or sell the amount of foreign
currency involved in a security transaction for a fixed amount of U.S. dollars,
BMC can protect the Fund against losses resulting from adverse changes in the

10
<PAGE>

relationship between the U.S. dollar and the foreign currency during the period
between the date the security is purchased or sold and the date on which payment
is made or received. However, using forward contracts in this manner does not
eliminate fluctuations in the prices of the underlying securities themselves.
Forward contracts simply establish a rate of exchange that can be achieved at
some future point in time. Additionally, although forward contracts tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they also limit any gain that might result if the hedged currency's value were
to increase.

BMC uses forward contracts for currency hedging purposes only and not for
speculative purposes. The Fund is not required to enter into forward contracts
with regard to its foreign holdings and will not do so unless doing so is deemed
appropriate by the advisor.

WHEN-ISSUED SECURITIES AND FORWARD-COMMITMENT AGREEMENTS

When-issued securities and forward-commitment agreements fix a security's price
and yield for future payment and delivery. The market value of the security may
change during this period, or a party to the agreement may fail to deliver or
pay for the security. Either of these situations could affect the market value
of the Fund's assets. As an operating policy, the Fund will not commit more than
35% of its total assets to when-issued or forward-commitment agreements.

GOLD INVESTMENTS

The Fund may purchase gold, gold certificates, or gold futures (referred to
collectively as "Gold Investments"), although it will not purchase gold in any
form that is not readily marketable and that cannot be stored in accordance with
custody regulations applicable to mutual funds.

BMC may use a Gold Investment when it judges the price of gold to be
artificially low. BMC may also use a Gold Investment as a hedge if it expects a
rise in the price of gold to correlate with rising prices of the Fund's other
gold-related investments. If gold prices rise as BMC predicted, proceeds from
the sale of the Gold Investment may be used to cover the increased price of the
hedged security. However, if the price of the Gold Investment declines, the Fund
may suffer a loss.

11
<PAGE>

Direct purchases of gold bullion or coins may generate higher custody and
transaction costs than other types of investments and do not generate interest
or dividend income for the Fund. The sole source of return on such investments
is from gain (or losses) realized at the time of sale. Gold coins may be
purchased for their intrinsic value only and not for their numismatic value.

The Fund purchases Gold Investments only to the extent necessary to meet
Internal Revenue Service ("IRS") income requirements and state restrictions on
the purchase of gold and other commodities.

IRS income tests and certain state laws effectively limit the amount of Gold
Investments the Fund may make. The Fund intends to make such investments only to
the extent permitted by these limits.

SHORT-TERM INSTRUMENTS

For liquidity purposes, the Fund may invest in high-quality money market
instruments with remaining maturities of one year or less.

The Fund may also enter into repurchase agreements, collateralized by U.S.
government securities, with banks or broker-dealers that are deemed to present
minimal credit risk. Credit risk determinations are made by BMC pursuant to
guidelines established by the board of directors. A repurchase agreement
involves the purchase of a security and a simultaneous agreement to sell the
security back to the seller at a higher price. Delays or losses could result if
the party to the agreement defaults or becomes bankrupt.

The Fund may invest up to 5% of its total assets in any money market fund
advised by BMC, provided that the investment is consistent with the Fund's
investment policies and restrictions.

OPTIONS

As more fully discussed in the Statement of Additional Information, the Fund may
enter into options (including writing covered call options), futures and options
on financial futures transactions. For state law purposes, the

12
<PAGE>

Fund will commit no more than 5% of its assets to premiums when purchasing put
options. The premium paid by the Fund when purchasing a put option will be
recorded as an asset in the Fund's statement of assets and liabilities. This
asset will be adjusted daily to the option's current market value, which will be
the latest sale price at the time at which the net asset value per share of the
Fund is computed or, in the absence of such sale, the latest bid price.

INTEREST RATE SWAPS

The Fund may enter into interest rate swap agreements with banks or
broker-dealers. These transactions may be used to help the Fund meet IRS
diversification requirements or to improve the correlation between the Fund's
total return and that of the the market for gold equities.

Swap transactions used by BMC typically involve entering into a contract with a
broker-dealer to receive the total returns of a specific security or basket of
securities (minus a fee) in exchange for periodic payments based on a money
market interest rate index such as the London Interbank Offered Rate (LIBOR).

SECURITIES LENDING

The Fund may lend its portfolio securities to banks and broker-dealers to earn
additional income. Securities loans are subject to guidelines prescribed by the
board of directors, which are set forth in the Statement of Additional
Information.

This practice could result in a loss or a delay in recovering the Fund's
securities. Loans are limited to 33-1/3% of the Fund's total assets.

OTHER INVESTMENT MANAGEMENT TECHNIQUES

BMC may buy other types of securities or employ other portfolio management
techniques on behalf of the Fund. When required by SEC guidelines, the Fund will
set aside cash or appropriate liquid assets in a segregated account to cover its
portfolio obligations. See the Statement of Additional Information for a more
detailed discussion of these investments and some of the risks associated with
them.

13
<PAGE>

- -------------------
[information in left margin of page]
Performance data and a discussion of factors that affected performance during
the Fund's most recent reporting period are included in its annual and
semiannual reports to shareholders.
- -------------------

PORTFOLIO TRANSACTIONS

BMC selects brokerage firms solely on the basis of best net price and execution
and engages in regular trading on behalf of the Fund. The Fund's annual
portfolio turnover rate is not expected to exceed 100% and may vary from year to
year.

PERFORMANCE

Mutual fund performance is commonly expressed in terms of historical yield or
total return and may be quoted in advertising and sales literature. Past
performance is no guarantee of future results.

YIELD calculations show the rate of income the Fund earns on its investments as
an annual percentage rate. The Fund's yield is calculated according to methods
that are standardized for all stock and bond funds.

TOTAL RETURN represents the Fund's changes over a specified time period assuming
reinvestment of dividends and capital gains, if any. CUMULATIVE TOTAL RETURN
illustrates the Fund's actual performance over a stated period of time. AVERAGE
ANNUAL TOTAL RETURN is a hypothetical rate of return that illustrates the
annually compounded return that would have produced the same cumulative total
return if the Fund's performance had been constant over a entire period. Average
annual total returns smooth out variations in the Fund's performance; they are
not the same as year-by-year results.

Performance data and a discussion of factors that affected performance during
the Fund's most recent reporting period are included in the Fund's annual and
semiannual reports to shareholders. These reports are routinely delivered to the
Fund's shareholders. To receive a free copy, call one of the Fund Information
numbers listed on page 16.

The Fund's life-of-fund cumulative and average annual total returns for the
period August 17, 1988, through December 31, 1995, were 26.99% and 3.30%,
respectively. Prior to February 12, 1996, the Fund was known as the Benham Gold
Equities Index Fund and had a strict North American gold equities investment
objective.

14
<PAGE>

SHARE PRICE

The price of your shares is the net asset value ("NAV") of the Fund next
determined after receipt of your instruction to purchase, convert or redeem. NAV
is determined by calculating the total value of a Fund's assets, deducting total
liabilities and dividing the result by the number of shares outstanding. NAV is
determined on each day that the New York Stock Exchange (the "Exchange") is
open.

Investments and requests to redeem shares will receive the share price next
determined after receipt by Benham of the investment or redemption request. For
example, investments and requests to redeem shares received by Benham before the
close of business of the Exchange are effective on, and will receive the price
determined on that day as of the close of the Exchange. Investment and
redemption requests received thereafter are effective on, and receive the price
determined as of the close of the Exchange on the next day the Exchange is open.

Investments are considered received only when your check or wired funds are
received by Benham. Wired funds are considered received on the day they are
deposited in Benham's bank account if they are deposited before the close of
business on the Exchange, usually 1:00 p.m. Pacific Time.

Investment and transaction instructions received by Benham on any business day
by mail at its office prior to the close of business of the Exchange, usually
1:00 p.m. Pacific Time, will receive that day's price. Investments and
instructions received after that time will receive the price determined on the
next business day.

- -------------------
[information in right margin of page]
Shares may be purchased and redeemed without any sales charge, commission,
redemption fee, 12b-1 fee, or contingent deferred sales load.
- -------------------

15
<PAGE>
- -------------------
[information in left margin of page]
Overnight and special delivery mail (e.g., Federal Express, Express Mail,
Priority Mail) should be sent to our street address: 1665 Charleston Rd.
Mountain View California 94043. Failure to do so may result in transaction
delays.
- -------------------

HOW TO INVEST

To open an account, you must complete and sign an application. If an application
is not enclosed with this Prospectus, you may request one by calling one of the
Fund Information numbers listed below. If you prefer, we will fill out your
application over the telephone and mail it to you for your signature. Separate
forms are required to establish Benham-Sponsored Retirement Plan accounts as
discussed on pages 26 and 27.

Benham Group Representatives are available at the telephone numbers listed below
weekdays from 5:00 a.m. to 5:00 p.m. Pacific Time. For your protection, Benham
records all telephone conversations with its telephone representatives.

FUND INFORMATION: for information about any Benham fund or other investment
product, call 1-800-331-8331 or 1-415-965-4274.

INVESTOR SERVICES: to open an account, receive a Prospectus or Statement of
Additional Information for a Benham fund or make transactions in an existing
account, call 1-800-321-8321 or 1-415-965-4222.

Benham shareholders may make transactions and obtain prices, yields, and total
return information for all Benham funds with TeleServ, our 24-hour automated
telephone information service. Dial 1-800-321-8321 and press 1.

16
<PAGE>

HOW TO BUY SHARES (Retirement investors, see pages 26 and 27).

MAKE YOUR INVESTMENT CHECK PAYABLE TO THE BENHAM GROUP. Mail
the check with your completed application to

The Benham Group
P.O. Box 7730
San Francisco, CA 94120-9853

FOR ADDITIONAL INVESTMENTS, enclose an investment slip
preprinted with the account number to which your investment
should be credited. If the payee information provided on the
check does not agree with information preprinted on the
investment slip, we will follow the instructions preprinted on
the investment slip.

If you do not have a preprinted investment slip, send your
check with separate written instructions indicating the fund
name and the account number. If the payee information provided
on the check does not agree with your written instructions, we
will follow the written instructions.

You may also invest your check in person at a Benham Investor
Center. One is located at 1665 Charleston Road in Mountain
View, California; the other is located at 2000 South Colorado
Boulevard, Suite 1000, in Denver, Colorado.

WE WILL NOT ACCEPT CASH INVESTMENTS OR THIRD-PARTY CHECKS. We
will, however, accept properly endorsed second-party checks
made payable to the investor(s) to whose account the investment
should be credited.

We will also accept checks drawn on foreign banks or foreign
branches of domestic banks and checks that are not drawn in
U.S. dollars (U.S. $100 minimum). The cost of collecting
payment on such checks will be passed on to the investor. These
costs may be substantial, and settlement may involve
considerable delays.

Investors will be charged $5 for every investment check
returned unpaid.

17
<PAGE>

If you wish to open an account by bank wire, please call our
Investor Services Department for more information and an
account number. Bank wire investments should be addressed as
follows:

State Street Bank and Trust Company
Boston, Massachusetts
ABA Routing Number 011000028
Beneficiary = Benham Equity Funds: Benham Global Gold Fund
AC - 0505 917 5
FBO [Your Name, Your Benham Fund Account Number]

- --------------------------------------------------------------------------------
BY EXCHANGE Minimum initial investment: $1,000
Minimum additional investment: $100

You may exchange your shares for shares of any other Benham
fund registered for sale in your state if you have received the
fund's prospectus. Exchanges may be made by telephone (for
identically registered accounts only), by written request, or
in person. Certain restrictions apply; please see page 20 for
details. You may open a new account by telephone exchange,
provided that you meet the minimum initial investment
requirement.

- --------------------------------------------------------------------------------
AUTOMATIC Minimum: $25
INVESTMENT
SERVICES These services are offered with respect to additional
investments only. See details on page 21.

18
<PAGE>

PROCESSING YOUR PURCHASE

Shares will be purchased at the next NAV calculated after your investment is
received and accepted by The Benham Group or an authorized subtransfer agent. An
investment received and accepted before the close of business of the Exchange,
normally 1:00 p.m. Pacific Time, will be included in your account balance the
same day. If the investment is received after the close of business of the
Exchange, usually 1:00 p.m. Pacific Time, it will be credited to your account
the following business day. The Fund reserves the right to refuse any
investment.

TELEPHONE TRANSACTIONS

Shareholders may order certain transactions (e.g., exchanges, wires, some types
of redemptions) by telephone. This privilege is granted to Benham fund
shareholders automatically; you need not specifically request this service, and
you may not specifically decline it. ONCE YOUR TELEPHONE ORDER HAS BEEN PLACED,
IT MAY NOT BE MODIFIED OR CANCELLED.

The Benham Group will not be liable for losses resulting from unauthorized or
fraudulent instructions if it follows procedures designed to verify the caller's
identity. BMC will request personal identification, record telephone calls, and
send confirmation statements for every telephone transaction to the
shareholder's record address. The Fund reserves the right to refuse or terminate
telephone transactions at any time.

CONFIRMATION AND QUARTERLY STATEMENTS

All transactions are summarized on quarterly account statements. In addition,
for every transaction that you request, a confirmation statement will be mailed
to your record address. Please review these statements carefully. If you believe
we have processed the transaction you requested incorrectly, please notify us as
soon as possible. If you fail to notify us of an error with reasonable
promptness, i.e., within 30 days of the date of your confirmation statement, we
will deem you to have ratified the transaction.

19
<PAGE>
- -------------------
[information in left margin of page]
The free exchange privilege is a convenient way to buy shares in other Benham
funds if your investment goals change.

Benham Open Orders allow investors to utilize a "buy low, sell high" investment
strategy.
- -------------------

ACCOUNT SERVICES

EXCHANGE PRIVILEGE

You may exchange your shares for shares of equivalent value in any other Benham
fund registered for sale in your state. An exchange request will be processed
the same day if it is received before the funds' NAVs are calculated which is
one hour prior to the close of the Exchange, usually 12:00 p.m. Pacific Time for
Benham Target Maturities Trust; and at the close of the Exchange, usually 1:00
p.m. Pacific Time for all other Benham funds.

The Benham Group discourages trading in response to short-term market
fluctuations. Such activity may interfere with BMC's ability to invest the
funds' assets in accordance with their respective investment objectives and
policies and may be disadvantageous to other shareholders. More than six
exchanges per calendar year out of a variable-price fund may be deemed an abuse
of the exchange privilege. For purposes of determining the number of exchanges
made, accounts under common ownership or control will be aggregated.

Each Benham fund reserves the right to modify or revoke the exchange privilege
of any shareholder or to limit or reject any exchange. Although each fund will
attempt to give shareholders prior notice whenever it is reasonably able to do
so, it may impose these restrictions at any time.

OPEN ORDER SERVICE

The Benham Group's Open Order Service allows you to designate a price at which
to buy or sell shares of a variable-price fund by exchange from a money market
fund. To place a "buy" order, you designate a purchase price that is equal to or
lower than the current NAV. To place a "sell" order, designate a sales price
that is equal to or higher than the current NAV. If the designated price is met
within 90 calendar days, we will automatically execute your order. If you are
buying shares of a variable-price fund, we will exchange money from your money
market account to purchase them. If you are selling shares of a variable-price
fund, we will transfer the proceeds of that sale to your money market account.
If you do not have a money market account, we will open one for you when we
execute your Open Order.

20
<PAGE>

If the fund you have selected deducts a distribution from its share price, your
order price will be adjusted accordingly so that the distribution does not
inadvertently trigger an Open Order transaction on your behalf. If you close or
reregister the account from which shares are to be redeemed, your Open Order
will be cancelled. All orders and cancellation of orders received by one hour
prior to the close of the Exchange, usually 12:00 p.m. Pacific Time, will be
considered to be effective the same day. All orders and cancellation of orders
not received one hour prior to the close of the Exchange, usually 12:00 p.m.
Pacific Time, will be considered effective the following business day.

AUTOMATIC INVESTMENT SERVICES (AIS)

TREASURY DIRECT allows you to deposit interest and principal payments from
Treasury securities directly into a Benham fund account.

PAYROLL DIRECT allows you to deposit any amount of your paycheck directly into a
Benham fund account.

GOVERNMENT DIRECT allows you to deposit your entire U.S. government payment
directly into a Benham fund account.

BANK DIRECT allows you to deposit a fixed amount from your bank account directly
into a Benham fund account on the 1st and/or 15th of each month (or the next
business day).

DIRECTED DIVIDENDS allow you to invest all or part of your dividend earnings
from one Benham fund account in one or more other Benham fund accounts. You may
choose to receive a portion of your dividends in cash and to invest the
remainder in other Benham fund accounts.

SYSTEMATIC EXCHANGES allow you to exchange from one Benham fund account to
another Benham fund account on the 1st and/or the 15th of each month (or the
next business day).

For more information about any of these services, please call our Investor
Services Department at 1-800-321-8321 or 1-415-965-4222.

- -------------------
[information in right margin of page]
Automatic Investment Services enable you to benefit from a dollar-cost averaging
investment strategy.
- -------------------

21
<PAGE>

- -------------------
[information in left margin of page]
You may redeem shares without charge.
- -------------------

BROKER-DEALER TRANSACTIONS

The Benham Group charges no sales commissions, or "loads," of any kind. However,
investors may purchase and sell shares through registered broker-dealers and
other qualified institutions, who may charge fees for their services.

The Benham Group will accept orders for the purchase of shares from such
institutions who agree in writing to pay in full for such shares in immediately
available funds no later than 1:00 p.m. Pacific Time the following business day.

TDD SERVICE FOR THE HEARING IMPAIRED

TDD users may contact The Benham Group at 1-800-624-6338 or 1-415-965-4764.
California residents may wish to contact us through the California Relay Service
(CRS) at 1-800-735-2929.

Your transaction requests via CRS will be handled on a recorded line. The Benham
Group cannot accept responsibility for instructions miscommunicated by CRS.

EMERGENCY SERVICES

The Benham Group has established an alternate operations site from which we can
access customer accounts and the mainframe computers used by the Benham funds in
the event of an emergency. Telephone lines and terminals are currently in place.
If our regular service is interrupted, the following numbers will automatically
connect you to this site.

From within the U.S., including Alaska and Hawaii, call 1-800-321-8321.

From all foreign countries, call collect, 1-303-759-9337 or 1-510-820-1409. The
operator will request your Benham fund account number before accepting the call.

HOW TO REDEEM YOUR INVESTMENT

When you place an order to redeem shares, your shares will be redeemed at the
next NAV calculated after The Benham Group or an authorized subtransfer agent
has received and accepted your redemption request in good order. The Fund's NAV
is usually calculated at the close of business of the Exchange, usually 1:00
p.m. Pacific Time. See page 15 for details.

22
<PAGE>

Barring extraordinary circumstances prescribed by law, redemption proceeds are
mailed within seven calendar days. However, The Benham Group reserves the right
to withhold the proceeds until the investment has matured (i.e., your payment
has cleared); see maturity periods below.

- --------------------------------------------------------------------------------
DRAWN FROM A MATURITY PERIOD
TYPE OF INVESTMENT CALIFORNIA BANK? (IN BUSINESS DAYS)
- --------------------------------------------------------------------------------
Checks, cashiers checks,
and bank money orders Yes 5 days
- --------------------------------------------------------------------------------
Same as above No 8 days
- --------------------------------------------------------------------------------
U.S. Treasury checks,
Traveler's checks,
U.S. Postal money orders,
Benham checks, bank wires,
and AIS Deposits* N/A 1 day

*Does not include bank direct deposits, which take 8 business days to mature.
- --------------------------------------------------------------------------------

If you hold shares in certificate form, redemption requests must be accompanied
by properly endorsed certificates.

If you want to keep your account open, please maintain a balance of shares worth
at least $1,000. If your account balance falls to less than $1,000 due to
redemption, your account may be closed, but not without at least 30 days' notice
and an opportunity to increase your account balance to the $1,000 minimum. Your
shares will be redeemed at the NAV calculated on the day your account is closed.
Proceeds will be mailed to the record address.

This policy also applies to Benham's Individual Retirement Accounts (IRAs),
excluding SEP-IRAs, except that shareholders will receive at least 120 days'
written notice and an opportunity to increase their account balance before their
accounts are closed. Investors wishing to open a Benham-Sponsored Retirement
Plan account, see pages 26 and 27 for details.

UNCASHED CHECKS. We may reinvest at the Fund's then-current NAV any distribution
or redemption checks that remain uncashed for six months. Until we receive
instructions to the contrary, subsequent distributions will be reinvested in the
original account. Uncashed redemption checks may be reinvested in an identically
registered account if the original account is closed.

23
<PAGE>

HOW TO REDEEM SHARES (Retirement investors, see pages 26 and 27).

================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------

BY TELEPHONE The Benham Group will accept telephone redemption
requests for any amount if the proceeds are to be sent to your
predesignated bank account. Redemptions of $25,000 or less
payable to the registered account owner(s) may also be ordered
by telephone. All other redemption requests must be made in
writing. ONCE YOUR TELEPHONE ORDER HAS BEEN PLACED, IT MAY NOT
BE MODIFIED OR CANCELLED.

- --------------------------------------------------------------------------------
IN WRITING Send a letter of instruction to

The Benham Group
Investor Services Department
1665 Charleston Road
Mountain View, California 94043

Your letter of instruction should specify
* Your name
* Your account number
* The name of the Fund from which you wish to redeem shares
* The dollar amount or number of shares you wish to redeem

For your protection, written redemption requests must be
accompanied by SIGNATURE GUARANTEES under the following
circumstances
* Redemption proceeds go to a party other than the registered
account owner(s)
* Redemption proceeds go to an account other than your
predesignated bank account
* Redemption proceeds go to the registered account owner(s),
but the amount exceeds $25,000

24
<PAGE>

================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------
IN WRITING Signature guarantees may be provided by banks, savings
(continued) and loan associations, savings banks, credit unions, stock
brokerage firms, or a Benham Investor Center. Shareholders
must appear in person with identification to obtain a
signature guarantee. Notary public certifications are not
accepted in lieu of signature guarantees.

BFS may require written consent of all account owners prior to
acting on the written instructions of any account owner.

- --------------------------------------------------------------------------------
BY BANK WIRE If you included bank wire information on your account
application or made subsequent arrangements to accommodate
bank wire redemptions, you may wire funds to your bank by
calling 1-800-321-8321 or 1-415-965-4222. The minimum amount
for a bank wire redemption is $1,000. Allow at least two
business days for redemption proceeds to be credited to your
bank account.

- --------------------------------------------------------------------------------
BY EXCHANGE See details on page 20.

- --------------------------------------------------------------------------------
AUTOMATIC DIRECTED PAYMENTS. You may arrange for periodic redemptions
REDEMPTION from your Benham fund account to your bank account or to
SERVICES another designated payee.

SYSTEMATIC EXCHANGES. You may arrange for periodic exchange
redemptions from one Benham fund account to another Benham
fund account.

25
<PAGE>

ABOUT BENHAM-SPONSORED RETIREMENT PLANS

Retirement plans offer investors a number of benefits, including the chance to
reduce current taxable income and to take advantage of tax-deferred compounding.
Retirement plan accounts require a special application; please let our Investor
Services Department know if you want to establish this type of account. We
suggest that you consult your tax advisor before establishing a retirement plan
account. The minimum account balance for all Benham Individual Retirement
Accounts (IRAs), excluding SEP-IRAs, is $1,000. If your balance falls below the
$1,000 per fund account

Contributory An employed indi- $2,000 or 100% of compensation
IRA vidual under age 70 1/2. (whichever is less).

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

Spousal IRA A nonworking spouse $2,250 (can be split between
(under age 70 1/2) of a Spousal and Contributory IRAs,
wage earner. provided that no IRA receives
more than a total of $2,000).
- --------------------------------------------------------------------------------

Rollover IRA An individual with a None, as long as total amount is
distribution from an eligible.
employer's retirement
plan or a rollover IRA.
- --------------------------------------------------------------------------------

SEP-IRA A self-employed indi- $22,500 or 15% of compensation
vidual or a business. (whichever is less).*

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

Money Same as for SEP-IRA. $30,000 or 25% of compensation
Purchase Plan (whichever is less). Annual
(Keogh) contribution is mandatory.*
- --------------------------------------------------------------------------------

Profit Same as for SEP-IRA. $22,500 or 15% of compensation
Sharing Plan (whichever is less). Annual
(Keogh) contribution is optional.*
- --------------------------------------------------------------------------------

* Self-employed individuals should consult IRS Publication 560 for their annual
contribution limits.

26
<PAGE>

minimum, your account may be closed (see page 23 for details). This distribution
may result in a taxable event and a possible penalty for early withdrawal. The
minimum fund account balance for all other Benham-Sponsored Retirement Plan
accounts is $100. Benham charges no fees for its IRAs but does charge low
maintenance fees for its Keoghs.

YOU MUST COMPLETE SPECIFIC FORMS TO TAKE DISTRIBUTIONS (I.E., REDEEM SHARES)
FROM A BENHAM-SPONSORED RETIREMENT PLAN ACCOUNT. PLEASE CALL OUR INVESTOR
SERVICES DEPARTMENT AT 1-800-321-8321 FOR ASSISTANCE.

================================================================================
DEADLINE FOR
OPENING ACCOUNT CONTRIBUTION DEADLINES
- --------------------------------------------------------------------------------

You may open an account anytime, Annual contributions can be made
but the deadline for establishing from January 1 through April 15 of
and funding an IRA for the prior the following tax year up to the
tax year is April 15. year you turn age 70 1/2.
- --------------------------------------------------------------------------------

Same as for Contributory IRA. Same as for Contributory IRA.

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

You may open a Rollover IRA Eligible rollover contributions must
anytime. be made within 60 days of receiv-
ing your distribution. There is no
age limit on rollover contributions.

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

You may open an account anytime, Must be made by employer's tax
but the deadline for establishing and filing deadline (including
funding an account for the prior tax extensions).
year is the employer's tax deadline
(including extensions).
- --------------------------------------------------------------------------------

The end of the employer's plan Same as for SEP-IRA.
year, usually December 31.

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

The end of the employer's plan Same as for SEP-IRA.
year, usually December 31.

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

For all Benham-Sponsored Retirement Plans, you may begin taking distributions at
age 59 1/2. You must begin to take required distributions by April 1 of the year
after you turn age 70 1/2. You may take distributions from your IRA or SEP-IRA
before you reach age 59 1/2; however, a penalty may apply.

27
<PAGE>

- -------------------
[information in left margin of page]
Each January, you will be informed of the tax status of dividends and capital
gain distributions for the previous year.
- -------------------

DISTRIBUTIONS AND TAXES

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

Dividends, if any, will be declared semiannually in June and December. Long-term
capital gain distributions, if any, will be declared once a year, typically in
December.

DISTRIBUTION OPTIONS. You may choose to receive dividends and capital gain
distributions in cash or to reinvest them in additional shares. (See Directed
Dividends on page 21 for further information.) Please indicate your choice on
your account application or contact our Investor Services Department. See page
23 for a description of our policy regarding uncashed distribution checks.

TAXES

The Fund intends to qualify annually and elect to be treated as a regulated
investment company under the Code, by distributing all or substantially all of
its net investment income and net realized capital gains to shareholders each
year.

The Fund's dividends and capital gain distributions are subject to federal
income tax and applicable state or local taxes whether they are received in cash
or reinvested in additional shares. Distributions are generally taxable in the
year they are declared.

Dividends from net investment income (including net short-term capital gains, if
any) are taxable as ordinary income. Distributions from net long-term capital
gains (minus net short-term capital losses) designated by the Fund as capital
gain dividends are taxable as long-term capital gains, regardless of how long
you have held your shares.

A portion of the Fund's dividends may qualify for the dividends-received
deduction available to corporations. The Fund will send you a tax statement
(Form 1099) by January 31 showing the tax status of distributions you received
in the previous year and will file a copy with the IRS.

You may realize a taxable gain or loss when you redeem (sell) or exchange shares
of the Fund. For most types of accounts, the proceeds from your redemption
transactions will be reported to you and the IRS annually.

28
<PAGE>

However, because the tax treatment depends on your purchase price and personal
tax position, you should keep your regular account statements to use in
determining your taxes.

RETURN OF CAPITAL. If, during a given year, the Fund pays dividends that exceed
the income earned on investments, a portion of your dividends may be
reclassified as a "return of capital." This reclassification of dividends paid
has at least two tax implications for shareholders:

(1) The amount of taxable dividends (as reported on your 1099-DIV from the Fund)
will be less than the amount of dividends you actually received during the tax
year.

(2) The return of capital reduces your cost basis in the shares you own, so that
when you redeem shares (and calculate your gain or loss), you must reduce your
investment cost by the amount of dividends that were reclassified as a return of
capital. For example, if you invest $10,000 in the Fund, and $100 worth of
dividends are reclassified as a return of capital, you must adjust your cost
from $10,000 to $9,900 to determine the amount of gain or loss on your
investment.

BUYING A DIVIDEND. The timing of your investment could have undesirable tax
consequences. If you open a new account or buy more shares for your current
account just before the day a dividend or distribution is reflected in your
Fund`s share price, you will receive a portion of your investment back as a
taxable dividend or distribution.

FOREIGN TAX WITHHOLDING. The income the Fund receives from foreign stocks may be
subject to withholding taxes. If more than 50% of the Fund's total assets at the
end of any tax year consist of certain foreign securities, the Fund will treat
any foreign taxes it pays as taxes paid directly by shareholders. Under such
circumstances, a shareholder would be required to include as "income" his or her
proportionate share of foreign taxes paid by the Fund and might be able to claim
either a credit or a deduction for this amount. You will receive notice from the
Fund each year indicating (i) whether it made the election and (ii) the amount
of foreign taxes, if any, that will be treated as though they were paid by you.
You

29
<PAGE>

may wish to consult the Statement of Additional Information and your tax advisor
for more information regarding the tax consequences of an investment in the
Fund.

BACKUP WITHHOLDING. The Fund is required by law to withhold 31% of reportable
dividends and capital gain distributions or redemptions payable to shareholders
who have not complied with IRS regulations. These regulations require you to
certify on your account application or on IRS Form W-9 that your social security
or taxpayer identification number ("TIN") is correct and that you are not
subject to backup withholding from previous underreporting to the IRS, or that
you are exempt from backup withholding.

The Benham Group may refuse to sell shares to investors who have not complied
with the certification requirement, either before or at the time of purchase.
Until we receive your certified TIN, we may redeem your Fund shares at any time.

MANAGEMENT INFORMATION

ABOUT BENHAM EQUITY FUNDS

Benham Equity Funds (BEF) is a registered open-end management investment company
that was organized as a California corporation on December 31, 1987. BEF
currently consists of five series.

A board of directors oversees the Fund's activities and is responsible for
protecting shareholders' interests. The majority of the directors are not
otherwise affiliated with BMC. BEF is neither required nor expected to hold
annual meetings, although special meetings may be called for purposes such as
electing or removing directors or amending a series' advisory agreement or
investment policies. The number of votes you are entitled to is based upon the
dollar value of your investment. Each series votes separately on matters that
pertain to it exclusively. Under California corporate law, BEF shareholders have
the right to cumulate votes in the election (or removal) of directors.

30
<PAGE>

THE BENHAM GROUP

BMC is investment advisor to the funds in The Benham Group, which currently
constitute more than $12 billion in assets. BMC, incorporated in California in
1971, became a wholly owned subsidiary of Twentieth Century Companies, Inc.
(TCC), a Delaware corporation, on June 1, 1995, upon the merger of Benham
Management International, Inc., BMC's former parent, into TCC. TCC is a holding
company that owns the operating companies that provide the investment
management, transfer agency, shareholder service, and other services for the
Twentieth Century family of funds, which now includes the Benham Group. The
combined company offers 62 mutual funds and as of February 8, 1996, has combined
assets under management in excess of $48 billion.

BMC supervises and manages the investment portfolios of The Benham Group and
directs the purchase and sale of its investment securities. BMC utilizes teams
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the portfolios. The teams meet regularly to review
portfolio holdings and to discuss purchase and sale activity. The teams adjust
holdings in the funds' portfolios deemed appropriate in pursuit of the funds'
investment objectives. Individual portfolio manager members of the team may also
adjust portfolio holdings of the funds as necessary between team meetings.

The portfolio manager member of the team managing the funds described in the
prospectus and his work experience for the last five years is as follows:

WILLIAM MARTIN, Portfolio Manager, has been primarily responsible for the
day-to-day operation of the Fund since May, 1992. Mr. Martin joined BMC in 1987
and has also managed the Benham Global Natural Resources Index Fund since its
inception in September, 1994. Mr. Martin received his Charter Financial Analyst
designation in 1991.

- -------------------
[information in right margin of page]
The Benham Group serves more than 475,000 investors.
- -------------------

31
<PAGE>

- -------------------
[information in left margin of page]
Benham Management Corporation provides investment advice and portfolio
management services to the Fund.
- -------------------

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

ADVISORY AND SERVICE FEES

The investment advisory fee cannot exceed .50% of average daily net assets, and
it drops to a marginal rate of .19% of average daily net assets as BEF's assets
increase.

Investment advisory fees paid by the Fund to BMC for the fiscal year ended
December 31, 1995, were equal to .31% of the Fund's average daily net assets, or
$3.10 per $1,000 of average daily net assets.

To avoid duplicative investment advisory fees, the Fund does not pay BMC
investment advisory fees with respect to assets invested in shares of any Benham
money market fund.

32
<PAGE>

in The Benham Group to an administrative fee schedule. The administrative fee
rate ranges from .11% to .08% of average daily net assets, dropping as Benham
Group assets increase. For transfer agent services, the Fund pays BFS a monthly
fee for each shareholder account maintained and for each shareholder transaction
executed during that month.

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

EXPENSE LIMITATION AGREEMENT

A contractual expense limitation agreement between BMC and the Fund is described
on page 3.

The Fund's total operating expenses for the fiscal year ended December 31, 1995,
were equal to .61% of the Fund's average daily net assets, or $6.10 per $1,000
of average daily net assets.

DISTRIBUTION OF SHARES

Benham Distributors, Inc. (BDI) and BMC distribute and market Benham products
and services. BMC pays all expenses for promoting sales of and distributing the
Fund's shares. The Fund does not pay commissions to, or receive compensation
from, broker-dealers.

BDI is a wholly owned subsidiary of TCC.

- -------------------
[information in right margin of page]
Benham Financial Services, Inc. provides administrative and transfer agent
services to the Fund.
- -------------------

33
<PAGE>

INVESTMENT ADVISOR

BENHAM MANAGEMENT CORPORATION
1665 Charleston Road
Mountain View, California 94043

DISTRIBUTOR

BENHAM DISTRIBUTORS, INC.
1665 Charleston Road
Mountain View, California 94043

CUSTODIAN

STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, Massachusetts 02101

TRANSFER AGENT

BENHAM FINANCIAL SERVICES, INC.
1665 Charleston Road
Mountain View, California 94043

INDEPENDENT AUDITORS

KPMG PEAT MARWICK LLP
3 Embarcadero Center
San Francisco, California 94111

DIRECTORS

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

34
<PAGE>

The Benham Group of Investment Companies

Capital Preservation Fund
Capital Preservation Fund II
Benham Government Agency Fund
Benham Prime Money Market Fund
Benham Short-Term Treasury and Agency Fund
Benham Treasury Note Fund
Benham Long-Term Treasury and Agency Fund
Benham Adjustable Rate Government Securities Fund
Benham GNMA Income Fund
Benham Target Maturities Trust
Benham California Tax-Free and Municipal Funds*
Benham National Tax-Free Money Market Fund
Benham National Tax-Free Intermediate-Term Fund
Benham National Tax-Free Long-Term Fund
Benham Florida Municipal Money Market Fund**
Benham Florida Municipal Intermediate-Term Fund**
Benham Arizona Municipal Intermediate-Term Fund***
Benham Global Gold Fund
Benham Income & Growth Fund
Benham Equity Growth Fund
Benham Utilities Income Fund
Benham Global Natural Resources Index Fund
Benham European Government Bond Fund
Benham Capital Manager Fund

* Available only to residents of California, Arizona, Colorado, Hawaii,
Nevada, New Mexico, Oregon, Texas, Utah, and Washington.

** Available only to residents of Florida, California, Georgia, Illinois,
Michigan, New Jersey, New York, and Pennsylvania.

*** Available only to residents of Arizona, California, Colorado, Nevada,
Oregon, Washington, and Texas.

35
<PAGE>

CONTENTS

Summary of Fund Expenses .............. 3
Financial Highlights .................. 4
How The Fund Works .................... 6
Investment Objective ............... 6
Core Investment Strategies ......... 6
Risk Factors and Investment Techniques 8
Portfolio Transactions ................ 14
Performance ........................... 14
Share Price ........................... 15
How to Invest ......................... 16
Account Services ...................... 20
Exchange Privilege ................. 20
Open Order Service ................. 20
Automatic Investment Services ...... 21
Broker-Dealer Transactions ......... 22
TDD Service ........................ 22
Emergency Services ................. 22
How to Redeem Your Investment ......... 22
About Benham-Sponsored Retirement Plans 26
Distributions and Taxes ............... 28
Management Information ................ 30
About Benham Equity Funds .......... 30
The Benham Group ................... 31
Advisory and Service Fees .......... 32
Expense Limitation Agreement ....... 33
Distribution of Shares ............. 33

<PAGE>
BENHAM GLOBAL GOLD FUND

A SERIES OF BENHAM EQUITY FUNDS

THE BENHAM GROUP(R)
1665 Charleston Road
Mountain View, CA 94043

Investor Services: 1-800-321-8321 or 1-415-965-4222

Fund Information: 1-800-331-8331 or 1-415-965-4274

STATEMENT OF ADDITIONAL INFORMATION

FEBRUARY 26, 1996

This Statement is not a prospectus but should be read in conjunction with the
Fund's current Prospectus dated February 26, 1996. The Fund's Annual Report for
the fiscal year ended December 31, 1995, is incorporated herein by reference. To
obtain a copy of the Prospectus or Annual Report, call or write The Benham
Group.

TABLE OF CONTENTS

Page
----

Investment Policies and Techniques ........... 2
Special Considerations as a Result of
the Fund`s Investment Policies ............... 9
Investment Restrictions ...................... 10
Portfolio Transactions ....................... 12
Valuation of Portfolio Securities ............ 13
Performance .................................. 13
Taxes ........................................ 15
About Benham Equity Funds .................... 16
Directors and Officers ....................... 17
Investment Advisory Services ................. 19
Administrative and Transfer Agent Services ... 20
Direct Fund Expenses ......................... 21
Expense Limitation Agreement ................. 22
Additional Purchase and Redemption Information 22
Other Information ............................ 23

1
<PAGE>

INVESTMENT POLICIES AND TECHNIQUES

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

U.S. GOVERNMENT SECURITIES

The Fund may invest in U.S. government securities, including bills, notes, and
bonds issued by the U.S. Treasury and securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. Some U.S. government
securities are backed by the direct full faith and credit pledge of the U.S.
government; others are supported by the right of the issuer to borrow from the
U.S. Treasury; others, such as securities issued by the Federal National
Mortgage Association, are supported by the discretionary authority of the U.S.
government to purchase the agencies' obligations; and others are supported only
by the credit of the issuing or guaranteeing instrumentality. There is no
assurance that the U.S. government will provide financial support to an
instrumentality it sponsors when it is not obligated by law to do so.

WHEN-ISSUED AND FORWARD-COMMITMENT AGREEMENTS

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

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

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

As an operating policy, the Fund will not commit more than 35% of its assets to
when-issued or forward-commitment agreements. If fluctuations in the value of
securities held cause more than 35% of the Fund's assets to be committed under
when-issued or forward-commitment agreements, Benham Management Corporation
("BMC") need not sell such commitments, but it will be restricted from entering
into further agreements on behalf of the Fund until the percentage of assets
committed to such agreements is reduced to 35%. In addition, as an operating
policy, the Fund will not enter into when-issued or forward-commitment
transactions with settlement dates exceeding 120 days.

2
<PAGE>

CONVERTIBLE SECURITIES

The Fund may buy securities that are convertible into common stock. The
following is a brief description of the various types of convertible securities
the Fund may buy.

Convertible bonds are issued with lower coupons than nonconvertible bonds of the
same quality and maturity, but they give holders the option to exchange their
bonds for a specific number of shares of the company's common stock at a
predetermined price. This structure allows the convertible bond holder to
participate in share price movements in the company's common stock. The actual
return on a convertible bond may exceed its stated yield if the company's common
stock appreciates in value and the option to convert to common shares becomes
more valuable.

Convertible preferred stocks are nonvoting equity securities that pay a fixed
dividend. These securities have a convertible feature similar to convertible
bonds; however, they do not have a maturity date. Due to their fixed-income
features, convertible issues typically are more sensitive to interest rate
changes than the underlying common stock. In the event of liquidation,
bondholders would have claims on company assets senior to those of stockholders;
preferred stockholders would have claims senior to those of common stockholders.

Warrants entitle the holder to buy the issuer's stock at a specific price for a
specific period of time. The price of a warrant tends to be more volatile than,
and does not always track, the price of the underlying stock. Warrants are
issued with expiration dates. Once a warrant expires, it has no value in the
market.

REPURCHASE AGREEMENTS

In a repurchase agreement (a "repo"), the Fund buys a security at one price and
simultaneously agrees to sell it back to the seller at an agreed upon price on a
specified date (usually within seven days from the date of purchase) or on
demand. The repurchase price exceeds the purchase price by an amount that
reflects an agreed-upon rate of return and that is unrelated to the interest
rate on the underlying security.

The advisor attempts to minimize the risks associated with repurchase agreements
by adhering to the following criteria:

(1) Limiting the securities acquired and held by the Fund under repurchase
agreements to U.S. government securities;

(2) Entering into repurchase agreements only with primary dealers in U.S.
government securities (including bank affiliates) who are deemed to be
creditworthy under guidelines established by a nationally recognized
statistical rating organization and approved by the Fund's board of
directors;

(3) Monitoring the creditworthiness of all firms involved in repurchase
agreement transactions;

(4) Requiring the seller to establish and maintain collateral equal to 102% of
the agreed-upon resale price, provided, however, that the board of
directors may determine that a broker-dealer's credit standing is
sufficient to allow collateral to fall to as low as 101% of the
agreed-upon resale price before the broker-dealer deposits additional
securities with the Fund's custodian or sub-custodian;

3
<PAGE>

(5) Investing no more than 5% of the Fund's total assets in repurchase
agreements that mature in more than seven days; and

(6) Taking delivery of securities subject to repurchase agreement and holding
them in a segregated account at the Fund's custodian bank.

The Fund has received permission from the Securities and Exchange Commission
(SEC) to participate in pooled repurchase agreements collateralized by U.S.
government securities with other mutual funds advised by BMC, the Fund's
investment advisor. Pooled repos are expected to increase the income the Fund
can earn from repo transactions without increasing the risks associated with
these transactions.

FOREIGN SECURITIES

Although the Fund may buy securities of foreign issuers in foreign markets, most
of its foreign securities investments are made by purchasing American Depositary
Receipts ("ADR"s), "ordinary shares," or "New York shares" in the U.S. For
example, several companies represented in the Benham North American Gold
Equities Index are based in Canada, although their shares trade in U.S. dollars
on U.S. exchanges.

ADRs are dollar-denominated receipts representing interests in the securities of
a foreign issuer. They are issued by U.S. banks and traded on exchanges or over
the counter in the U.S. Ordinary shares are shares of foreign issuers that are
traded abroad and on a U.S. exchange. New York shares are shares that a foreign
issuer has allocated for trading in the U.S. ADRs, ordinary shares, and New York
shares all may be purchased with and sold for U.S. dollars, which protects the
Fund from the foreign settlement risks described below.

Investing in foreign companies may involve risks not typically associated with
investing in U.S. companies. The value of securities denominated in foreign
currencies and of dividends from such securities can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity than
U.S. markets, and prices in some foreign markets can be very volatile.

Many foreign countries lack uniform accounting and disclosure standards
comparable to those that apply to U.S. companies, and it may be more difficult
to obtain reliable information regarding a foreign issuer's financial condition
and operations. In addition, the costs of foreign investing, including
withholding taxes, brokerage commissions, and custodial fees, are generally
higher than for U.S. investments.

Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
governmental supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer and
may involve substantial delays. It may also be difficult to enforce legal rights
in foreign countries.

Investing abroad carries political and economic risks distinct from those
associated with investing in the U.S. Foreign investments may be affected by
actions of foreign governments that are adverse to the interests of U.S.
investors, including the possibility of expropriation or nationalization of
assets, confiscatory taxation, restrictions on U.S. investment, or restrictions
on the ability to repatriate assets or to convert currency into U.S. dollars.
There may be a greater possibility of default by foreign

4
<PAGE>

governments or foreign-government-sponsored enterprises. Investments in foreign
countries also involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments.

The Fund may purchase or sell forward foreign currency exchange contracts. While
these contracts are not presently regulated by the Commodity Futures Trading
Commission (CFTC), the CFTC may in the future assert authority to regulate
forward contracts. In such event, the Fund's ability to utilize forward
contracts in the manner set forth in the Prospectus may be restricted. Forward
contracts will reduce the potential gain from a positive change in the
relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for the Fund
than if it had not entered into such contracts. The use of foreign currency
contracts will not eliminate fluctuations in the underlying U.S. dollar
equivalent value of, or rates of return on, the Fund's foreign currency
denominated portfolio securities and the use of such techniques will subject the
Fund to certain risks.

The matching of the increase in value of a forward contract and the decline in
the U.S. dollar equivalent value of the foreign currency denominated asset that
is the subject of the hedge generally will not be precise. In addition, the Fund
may not always be able to enter into foreign currency forward contracts at
attractive prices and this will limit the Fund's ability to use such contracts
to hedge or cross-hedge its assets. Also, with regard to the Fund's use of
cross-hedges, there can be no assurance that historical correlations between the
movement of certain foreign currencies relative to the U.S. dollar will
continue. Thus, at any time, poor correlation may exist between movements in the
exchange rates of the foreign currencies in which the Fund's assets that are the
subject of such cross-hedges are denominated.

The Fund's assets are valued daily in U.S. dollars, although foreign currency
holdings are not physically converted into U.S. dollars on a daily basis.

INTEREST RATE SWAPS

Swap transactions contemplated by BMC typically would involve entering into a
contract with a broker-dealer to receive the total returns of a specific Index
security or basket of Index securities (minus a fee) in exchange for periodic
payments based on a money market interest rate index such as the London
Interbank Offered Rate (LIBOR).

The net amount of the excess, if any, of one party's obligations over its
entitlements with respect to the interest rate swap agreement would be accrued
on a daily basis, and an equal amount of cash, cash equivalents, or high-grade
liquid debt securities would be maintained in a segregated account by the Fund's
custodian.

The Fund would not enter into an interest rate swap transaction unless: (1) the
unsecured senior debt or claims-paying ability of the other party was rated in
the top two rating categories by at least two rating agencies at the time the
transaction was entered into, (2) unless it was so rated by one such rating
agency if unrated by the other two, or (3) if unrated by all three, it was
considered by the advisor to be of comparable quality.

5
<PAGE>

If the other party to a swap transaction defaulted, the Fund would have certain
contractual remedies under the agreement but would nonetheless bear a risk of
loss of unrealized income (not principal) in the event of default or bankruptcy
of the broker-dealer.

Certain restrictions imposed on the Fund by the Internal Revenue Code may limit
the Fund's ability to use swap agreements. The swap market is relatively new and
largely unregulated. It is possible that developments in the swap market,
including government regulation, could adversely affect the Fund's ability to
terminate existing agreements or to realize amounts to be received under such
agreements. BMC believes that the swap market is relatively liquid. However, as
long as the SEC staff considers swap agreements to be illiquid, the Fund intends
to treat them as such for purposes of its investment restrictions.

In the event that the unsecured senior debt or claims-paying ability of the
other party to an interest rate swap transaction ceased to be rated or was
downgraded by a rating agency, BMC would, although it would not be required to,
sell or exchange such instrument within a reasonable time thereafter, taking
into consideration such factors as price, credit risk, market conditions,
interest rates, and other hedging strategies available to the Fund.

GOLD FUTURES CONTRACTS

The Fund may enter into contracts for the future delivery of gold. A gold
futures contract is an agreement between two parties to buy and sell gold
bullion on a future date at a specified price. The purchaser of a gold futures
contract is bound by the terms of the contract to pay a fixed price for gold to
be delivered on a fixed date in the future. The seller of a gold futures
contract is obligated to deliver gold on a fixed date in the future in exchange
for a fixed price. Contracts of this type involve daily settlement, in cash, of
the gain or loss on the underlying gold. Although futures contracts, by their
terms, require actual delivery and acceptance of the underlying metal, in most
cases the contracts are closed out before the settlement date.

Gold futures contracts are standardized obligations traded on major commodities
exchanges. In the United States, gold futures contracts trade on the Commodity
Exchange, Inc. in New York, the Chicago Board of Trade, and the Mid-America
Commodity Exchange in Chicago. Gold futures contracts traded on U.S.commodity
exchanges are subject to regulation by the applicable exchange and by the CFTC
The CFTC's mandate is to prevent price manipulation and excessive speculation
and to promote orderly and effective commodity futures markets. CFTC regulations
may include trading, price, and position limits as well as margin requirements.

When the Fund purchases or sells a futures contract, it deposits an initial
margin with its custodian equal to a percentage of the contract's value. If the
value of either party's position changes, that party is required to make
maintenance margin payments to settle the change in value on a daily basis. The
Fund makes a payment if its futures position becomes less valuable, and it
receives a payment if its futures position becomes more valuable.

Positions in gold futures contracts may be closed out only on an exchange or
board of trade that provides a secondary market for such contracts. Although the
Fund intends to purchase contracts only on national exchanges or boards of trade
where there appears to be an active secondary market, there is no assurance that
a liquid secondary market will exist for any particular contract at any
particular time.

6
<PAGE>

Because it is possible to enter into a gold futures contract by making an
initial payment of as little as 5% of the value of the underlying gold, these
contracts can involve a high degree of risk. A small decline in the price of the
underlying gold could result in the loss of most or all of the cash invested.

Pursuant to a 1988 undertaking with the State of California, the Fund's combined
margin deposits on gold futures contracts may not exceed 5% of the Fund's net
assets. The extent to which the Fund enters into gold futures contracts (and
forward foreign currency transactions) may also be limited by the fact that the
Fund intends to meet Internal Revenue Service requirements for qualification as
a regulated investment company, including requirements regarding diversification
of assets and qualifying income. To assure that the Fund's investments in gold
futures contracts do not involve leveraging, cash or cash equivalents equal to
the underlying commodity value (at the time a contract is executed) of any gold
futures contract purchased by the Fund (less related margin deposits) will be
deposited in a segregated account with the Fund's custodian.

SECURITIES LENDING

The Fund may lend its portfolio securities to earn additional income. If a
borrower defaulted on a securities loan, the Fund could experience delays in
recovering the securities it loaned; if the value of the loaned securities
increased in the meantime, the Fund could suffer a loss.

To minimize the risk of default on securities loans, BMC adheres to the
following guidelines prescribed by the board of directors:

(1) TYPE AND AMOUNT OF COLLATERAL. At the time a loan is made, the Fund must
receive, from or on behalf of the borrower, collateral consisting of any
combination of cash and full faith and credit U.S. government securities
equal to not less than 102% of the market value of the securities loaned.
Cash collateral received by the Fund in connection with loans of portfolio
securities may be commingled by the Fund's custodian with other cash and
marketable securities, provided that the loan agreement expressly allows
such commingling. The loan must not reduce the risk of loss or opportunity
for gain in the securities loaned.

(2) ADDITIONS TO COLLATERAL. Collateral must be marked to market daily, and
the borrower must agree to add collateral to the extent necessary to
maintain the 102% level specified in guideline (1). The borrower must
deposit additional collateral no later than the business day following the
business day on which a collateral deficiency occurs or collateral appears
to be inadequate.

(3) TERMINATION OF LOAN. The Fund must have the ability to terminate any loan
of portfolio securities at any time. The borrower must be obligated to
redeliver the borrowed securities within the normal settlement period
following receipt of the termination notice.

(4) REASONABLE RETURN ON LOAN. The borrower must agree that the Fund (a) will
receive all dividends, interest, or other distributions on loaned
securities and (b) will be paid a reasonable return on such loans either
in the form of a loan fee or premium or from the retention by the Fund of
part or all of the earnings and profits realized from the investment of
cash collateral in full faith and credit U.S government securities.

(5) LIMITATIONS ON PERCENTAGE OF PORTFOLIO SECURITIES ON LOAN. The Fund's
loans may not exceed 33-1/3% of its total assets.

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<PAGE>

(6) CREDIT ANALYSIS. As part of the regular monitoring procedures set forth by
the board of trustees that BMC follows to evaluate banks and
broker-dealers in connection with, for example, repurchase agreements and
municipal securities credit issues, BMC will analyze and monitor the
creditworthiness of all borrowers with which portfolio lending
arrangements are contemplated or entered into.

If a borrower fails financially, there may be delays in recovering loaned
securities and a loss in the value of collateral. However, loans will only be
made to parties that meet the guidelines prescribed by the board of directors.

RESTRICTED SECURITIES

Restricted securities held by the Fund generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where registration
is required, the Fund may be required to pay all or part of the registration
expense, and a considerable period may elapse between the time it decides to
seek registration of the securities and the time it is permitted to sell them
under an effective registration statement. If, during this period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to try to register the securities initially.

GOLD INVESTMENTS

GOLD BULLION. As a means of seeking its principal objective of capital
appreciation and when it is felt to be appropriate as a possible hedge against
inflation, the Fund may invest a portion of its assets in gold bullion and may
hold a portion of its cash in foreign currency in the form of gold coins. There
is, of course, no assurance that such investments will provide capital
appreciation as a hedge against inflation. The Fund's ability to invest in gold
bullion is restricted by the diversification requirements which the Fund must
meet in order to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), as well as the
diversification requirements of the Investment Company Act of 1940, as amended
(the "1940 Act"). In addition, the ability of the Fund to make such investments
may be further restricted by the securities laws and regulations in effect from
time to time in the states where the Fund's shares are qualified for sale. The
Fund has not previously invested in gold bullion because of these regulations.
However, at the date of this Statement of Additional Information there do not
appear to be any regulations currently in effect in the states in which the Fund
is qualified for sale prohibiting such purchases. Accordingly, if otherwise
consistent with the Fund's objectives, it may purchase gold bullion.

Fund assets will be invested in gold bullion at such times as the prospects of
such investments are, in the opinion of management, attractive in relation to
other possible investments. The basic trading unit for gold bullion is a gold
bar weighing approximately 100 troy ounces with a purity of at least 995/1000,
although gold bullion is also sold in much smaller units. Gold bars and wafers
are usually numbered and bear an indication of purity and the stamp of the assay
office which certifies the bar's purity. Bars of gold bullion historically have
traded primarily in New York, London, and Zurich gold markets and in terms of
volume, such gold markets have been the major markets for trading in gold
bullion. Prices in the Zurich gold market generally correspond to the prices in
the London gold market. Since the ownership of gold bullion became legal in the
United States on December 31, 1974, U.S. markets for trading gold bullion have
developed. It is anticipated that transactions in gold will

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<PAGE>

generally be made in such U.S. markets, although such transactions may be made
in foreign markets when it is deemed to be in the best interest of the Fund.
Transactions in gold bullion by the Fund are negotiated with principal bullion
dealers, unless, in the investment's manager's opinion, more favorable prices
(including the costs and expenses described below) are otherwise obtainable.
Prices at which gold bullion is purchased or sold include dealer mark-ups or
mark-downs, insurance expenses, may be a greater or lesser percentage of the
price from time to time, depending on whether the price of gold bullion
decreases or increases. Since gold bullion does not generate any investment
income, the only source of return to the Fund on such an investment will be from
any gains realized upon its sale, and negative return will be realized, of
course, to the extent the Fund sells its gold bullion at a loss.

SPECIAL CONSIDERATIONS AS A RESULT OF THE FUND'S INVESTMENT POLICIES

As is the case with respect to virtually all investments, there are risks
inherent in the Fund's policies of investing in securities of companies engaged
in mining, processing or dealing in gold or other precious metals and in gold
bullion. In addition to the general considerations described above, such
investments may involve the following special considerations:

FLUCTUATIONS IN THE PRICE OF GOLD. The price of gold has recently been subject
to substantial upward and downward movements over short periods of time and may
be affected by unpredictable international monetary and political policies, such
as currency devaluations or revaluations, economic conditions within an
individual country, trade imbalances or trade or currency restrictions between
countries and world inflation rates and interest rates. The price of gold, in
turn, is likely to affect the market prices of securities of companies mining,
processing, or dealing in gold and, accordingly, the value of the Fund's
investments in such securities also may be affected.

POTENTIAL EFFECT OF CONCENTRATION OF SOURCE OF SUPPLY AND CONTROL OF SALES. At
the current time there are only four major sources of supply of primary gold
production, and the market share of each source cannot be readily ascertained.
One of the largest national producers of gold bullion and platinum is the
Republic of South Africa. Changes in political and economic conditions affecting
South Africa may have a direct impact on its sales of gold. Under South African
law, the only authorized sales agent for gold produced in South Africa is the
Reserve Bank of South Africa which, through its retention policies, controls the
time and place of its retention policies, and controls the time and place of any
sale of South African bullion. The South African Ministry of Mines determines
gold mining policy. South Africa depends predominantly on gold sales for the
foreign exchange necessary to finance its imports, and its sales policy is
necessarily subject to national and international economic and political
developments.

TAX AND CURRENCY LAWS. Changes in the tax or currency laws of the U.S., and of
foreign countries, may inhibit the Fund's ability to pursue or may increase the
cost of pursuing its investment programs. For example, in September 1985, the
government of South Africa reimposed a two-tier currency system. While this
system may be removed within the next couple of years, it continues to
differentiate between currency which may be used in transactions involving
transfers of South African investments by foreign investors (the "financial
rand") and currency used for importing goods and remitting profits and dividends
from an operating enterprise ( the "commercial rand"). Since the reimposition of
the two-tier currency system, the volatility of the financial rand has
contributed to fluctuations in the net asset value of the Fund. These effects
may increase if the permissible uses of the financial rand are expanded.

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<PAGE>

UNPREDICTABLE MONETARY POLICIES, ECONOMIC AND POLITICAL CONDITIONS. The Fund's
assets might be less liquid or the change in the value of its assets might be
more volatile (and less related to general price movements in the U.S. markets)
than would be the case with investments in the securities of larger U.S.
companies, particularly because the price of gold and other precious metals may
be affected by unpredictable international monetary policies and economic and
political considerations, governmental controls, conditions of scarcity, surplus
or speculation. In addition, the use of gold or Special Drawing Rights (which
are also used by members of the International Monetary Fund for international
settlements) to settle net deficits and surpluses in trade and capital movements
between nations subject the supply and demand, and therefore the price, of gold
to a variety of economic factors which normally would not affect other types of
commodities.

NEW AND DEVELOPING MARKETS FOR PRIVATE GOLD OWNERSHIP. Between 1933 and December
31, 1974, a market did not exist in the United States in which gold bullion
could be purchased by individuals for investment purposes. Since it became legal
to invest in gold, markets have developed in the U.S. Any large purchases or
sales of gold bullion could have an effect on the price of gold bullion.
Recently, several Central Banks have been sellers of gold bullion from their
reserves. Sales by central banks and/or rumors of such sales have had a negative
effect on gold prices.

EXPERTISE OF THE INVESTMENT MANAGER. The successful management of the Fund's
portfolio may be more dependent upon the skills and expertise of its investment
manager than is the case for most mutual funds because of the need to evaluate
the factors identified above. Moreover, in some countries, disclosures
concerning an issuer's financial condition and results and other matters may be
subject to less stringent regulatory provisions, or may be presented on a less
uniform basis than is the case for issuers subject to U.S. securities laws.
Issuers and securities exchanges in some countries may be subject to less
stringent governmental regulations than is the case for U.S. companies.

INVESTMENT RESTRICTIONS

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

THE FUND MAY NOT:

(1) Issue senior securities, except as permitted under the 1940 Act.

(2) Borrow money, except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33-1/3% of the Fund's total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33-1/3% limitation.

(3) Lend any security or make any other loan if, as a result, more than
33-1/3% of the Fund's total assets would be lent to other parties, except,
(i) through the purchase of a portion of an issue of debt securities in
accordance with its investment objective, policies and limitations, or
(ii) by engaging in repurchase agreements with respect to portfolio
securities.

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<PAGE>

(4) Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the fund from
investment in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business).

(5) Deviate from its policy of concentrating its investments in securities of
issuers engaged in mining, fabricating, processing or dealing in gold or
other precious metals, such as silver, platinum and palladium.

(6) Act as underwriter of securities issued by others, except to the extent
that the Fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities.

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

THE FUND MAY NOT:

(a) Purchase the securities of any one issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result thereof, the Fund would own more than
10% of its outstanding voting securities of such issuer.

(b) Purchase any security or enter into a repurchase agreement if, as a
result, more than 15% of its net assets would be invested in repurchase
agreements not entitling the holder to payment of principal and interest
within seven days and in securities that are illiquid by virtue of legal
or contractual restrictions on resale or the absence of a readily
available market.

(c) Except in connection with a merger, consolidation, acquisition, or
reorganization, invest in the securities of other investment companies,
including investment companies advised by BMC, if, immediately after such
purchase or acquisition, more than 10% of the value of the Fund's total
assets would be invested in such securities.

(d) Purchase gold bullion, gold coins, or gold represented by certificates of
ownership interest or gold futures contracts whose underlying commodity
value would cause the Fund's aggregate investment in such commodities to
exceed 10% of the Fund's net assets.

(e) Invest in securities of an issuer that, together with any predecessor, has
been in operation for less than three years if, as a result, more than 5%
of the total assets of the Fund would then be invested in such securities.

(f) Purchase warrants, valued at the lower of cost or market, in excess of 10%
of the Fund's net assets. Included in that amount but not to exceed 2% of
net assets, are warrants whose underlying securities are not traded on
principal domestic or foreign exchanges. Warrants acquired by the Fund in
units or attached to securities are not subject to these restrictions.

(g) Invest in oil, gas or other mineral exploration or development programs or
leases.

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

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<PAGE>

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

(j) Lend assets other than securities to other parties, except by (a) lending
money (up to 5% of the Fund's net assets) to a registered investment
company or portfolio for which its investment adviser or an affiliate
serves as investment adviser or (b) acquiring loans, loan participation,
or other forms of direct debt instruments and in connection therewith,
assuming any associated unfunded commitments of the sellers. (This
limitation does not apply to purchases of debt securities or to repurchase
agreements.)

(k) Purchase the securities of any issuer if, to the knowledge of the Fund's
management, those officers and directors of the Fund and of its investment
advisor, who each own beneficially more than 0.5% of the outstanding
securities of such issuer, together own more than 5% of such issuer's
securities.

(l) Purchase or sell options of any kind.

PORTFOLIO TRANSACTIONS

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

Under normal conditions, the Fund's annual portfolio turnover rate is not
expected to exceed 100%. The table below illustrates the Fund's portfolio
turnover rates for the fiscal years ended December 31, 1995, 1994, and 1993.

PORTFOLIO TURNOVER RATES

Fiscal Fiscal Fiscal
1995 1994 1993

28.40% 41.67% 28.38%

Brokerage commissions paid by the Fund during the fiscal years ended December
31, 1995, 1994, and 1993, are indicated in the following table.

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<PAGE>

BROKERAGE COMMISSIONS

Fiscal Fiscal Fiscal
1995 1994 1993

$1,122,431 $1,533,658 $1,465,792

VALUATION OF PORTFOLIO SECURITIES

The Fund's net asset value per share ("NAV") is normally calculated by Benham
Financial Services, Inc. (BFS) at the close of business of the New York Stock
Exchange (the "Exchange"), usually 1:00 p.m. Pacific Time. The Exchange has
designated the following holiday closings for 1996: New Year's Day (observed),
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. Although BFS expects the same holiday
schedule to be observed in the future, the Exchange may modify its holiday
schedule at any time.

BMC typically completes its trading on behalf of the Fund in various markets
before the Exchange closes for the day. Securities are valued at market,
depending upon the market or exchange on which they trade. Price quotations for
exchange-listed securities are taken from the primary exchanges on which these
securities trade. Stocks traded on exchanges or over-the-counter are valued
according to last sale prices, if such prices are available, or at the current
bid price. Fixed-income securities are priced at market value on the basis of
market quotations supplied by independent pricing services. Foreign currency
exchange rates are also determined prior to the close of the Exchange. Trading
of securities in foreign markets may not take place on every day the Exchange is
open, and trading takes place in various foreign markets on days on which the
Exchange and the Fund's offices are not open and the Fund's net asset value is
not calculated. The Fund's net asset value may be significantly affected on days
when shareholders have no access to the Fund. Securities for which market
quotations are not readily available, or which may change in value due to events
occurring after their primary exchange has closed for the day, are valued at
fair market value as determined in good faith under the direction of the board
of directors.

PERFORMANCE

The Fund's total returns may be quoted in advertising and sales literature.
These figures, as well as the Fund"s share price will vary. Past performance
should not be considered as indicative of future results.

Total returns reflect all aspects of the Fund's return, including the effect of
reinvesting dividends and capital gain distributions and any change in the
Fund's net asset value per share during the period. The Fund's share price and
total returns will vary. Past performance should not be considered an indication
of future results.

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<PAGE>

average annual total returns are a convenient means of comparing investment
alternatives, investors should realize that the Fund's performance is not
constant over time but changes from year to year and that average annual returns
represent averaged figures as opposed to actual year-to-year performance.

The Fund's average annual total returns for the one-year, five-year, and
life-of-fund periods ended December 31, 1995, are indicated in the table below.

AVERAGE ANNUAL TOTAL RETURNS

One Year Five Years Life of Fund*

9.25% 5.97% 3.30%

* The Fund commenced operations on August 17, 1988.

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

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

Indexes may assume reinvestment of dividends, but generally they do not reflect
administrative and management costs such as those incurred by a mutual fund.

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<PAGE>

The Fund's sales literature may illustrate the market for gold within the
context of historical and current economic conditions. Specific illustrations
may include the relationship of the price of gold (per London pm fixing) to
30-year U.S. Treasury bond yields, 30-year U.S. Treasury bond prices, inflation
as measured by the Consumer Price Index, or equity securities as measured by the
Standard & Poor's 500 Composite Stock Price Index (S&P 500) or the Dow Jones
Industrial Average.

Occasionally, statistics may be used to illustrate Fund volatility or risk.
Measures of volatility or risk are generally used to compare the Fund's net
asset value or performance to a market index. One measure of volatility is
"beta." Beta expresses Fund volatility relative to the total market as
represented by the S&P 500. A beta of more than 1.00 indicates volatility
greater than that of the market, and a beta of less than 1.00 indicates
volatility less than that of the market. Another measure of volatility or risk
is "standard deviation." Standard deviation is used to measure the variability
of net asset value or total return relative to an average over a specified
period of time. The premise is that greater volatility connotes greater risk
undertaken to achieve desired performance.

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

The Benham Group has distinguished itself as an innovative provider of low-cost,
true no-load mutual funds. Among other innovations, The Benham Group established
the first no-load fund that invests primarily in zero-coupon U.S. Treasury
securities; the first no-load double tax-free California short-term bond fund;
the first no-load adjustable rate government securities fund; and the first
no-load utilities fund designed to pay monthly dividends.

TAXES

The Fund intends to qualify annually as a "regulated investment company" under
the Code. By so qualifying, the Fund will not be subject to federal income or
state taxes on its net investment income and net realized capital gains
distributed to shareholders.

Distributions from the Fund are taxable to shareholders regardless of whether
they are taken in cash or reinvested in additional shares. For federal income
tax purposes, shareholders receiving distributions in the form of additional
shares will have a basis in each such share equal to the Fund's net asset value
per share on the reinvestment date.

Distributions of net investment income and net short-term capital gains are
taxable to shareholders as ordinary income. The board of directors does not
expect to declare dividends on a regular basis. However, to the extent that
dividends are declared and to the extent that they consist of dividend income
from domestic corporations, such dividends may be eligible for the
dividends-received deduction available to corporations. Shareholders will be
notified annually of the federal tax status of distributions.

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<PAGE>

Upon redeeming, selling, or exchanging shares of the Fund, a shareholder will
realize a taxable gain or loss depending upon his or her basis in the shares
liquidated. The gain or loss generally will be long-term or short-term,
depending on the length of time shares were held. However, a loss recognized by
a shareholder in the disposition of shares on which capital gain dividends were
paid (or deemed paid) before the shareholder had held his or her shares for more
than six months would be treated as a long-term capital loss for tax purposes. A
gain realized on the redemption, sale, or exchange of shares would not be
affected by the reacquisition of shares. A loss realized on the redemption,
sale, or exchange of shares would be disallowed to the extent that the shares
disposed of were replaced (whether through reinvestment of distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the date shares were disposed of. Under such circumstances, the basis
of the shares acquired would be adjusted to reflect the disallowed loss.

Earnings derived by the Fund from sources outside the U.S. may be subject to
non-U.S. withholding and possibly other taxes. Such taxes might be reduced or
eliminated under the terms of a U.S. income tax treaty, and the Fund would
undertake any procedural steps required to claim the benefits of such a treaty.
With respect to any non-U.S. taxes actually paid by a Fund, if more than 50% of
the value of the Fund's total assets at the close of any taxable year consists
of securities of foreign corporations, the Fund will elect to treat any non-U.S.
income and similar taxes it pays as though the taxes were paid by its
shareholders.

Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the shareholder's U.S. tax attributable to his or her taxable income
from foreign sources. Gains realized by the Fund from the sale of securities
will be treated as derived from U.S. sources, and certain currency gains,
including gains from foreign-currency-denominated debt securities, receivables,
and payables, will be treated as income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income, which may include certain dividends received from the Fund and
certain other types of income. Accordingly, shareholders may be unable to claim
a credit for the full amount of their proportionate share of the foreign taxes
paid by the Fund.

Gains attributable to the disposition of the Fund`s direct investments in gold
bullion or coins do not qualify as income for purposes of satisfying
diversification tests under the Code. If the Fund realizes greater than 10% of
its income from such non-qualifying sources, the Fund would incur federal income
and state taxes on the net investment income and capital gains it distributes to
shareholders.

The information above is only a summary of some of the tax considerations
affecting the Fund and its shareholders; no attempt has been made to discuss
individual tax consequences. Shareholders who are neither citizens nor residents
of the U.S. may be subject to a nonresident alien withholding tax of 30% or a
lower treaty rate, depending on the country in which they reside. The Fund's
distributions also may be subject to state, local, or foreign taxes. To
determine whether the Fund is a suitable investment based on his or her tax
situation, a prospective investor may wish to consult a tax advisor .

ABOUT BENHAM EQUITY FUNDS

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<PAGE>

Growth Fund, Benham Equity Growth Fund, and Benham Utilities Income Fund. With
respect to each series, shares issued are fully paid and nonassessable and have
no preemptive, conversion, or similar rights. All consideration received by BEF
for shares of any series, and all assets, income, and gains (or losses) earned
thereon, belong to that series exclusively and are subject to the liabilities
related thereto.

Shares of each series have equal voting rights, provided that each series votes
separately on matters that pertain to it exclusively. BEF has instituted dollar
based voting, meaning that the number of votes you are entitled to is based upon
the dollar amount of their investment. The election of directors is determined
by the votes received from all BEF shareholders without regard to whether a
majority of shareholders voted in favor of a particular nominee or all nominees
of a group. Under California Corporations Code Section 708, shareholders have
the right to cumulate votes in the election (or removal) of directors. For
example, if six directors are up for election, a shareholder may cast six votes
for a single candidate, three votes for each of two candidates, etc.

CUSTODIAN BANK: State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02101, is custodian of the Fund's assets. Services
provided by the custodian bank include (i) settling portfolio purchases and
sales, (ii) reporting failed trades, (iii) identifying and collecting portfolio
income, and (iv) providing safekeeping of securities. The custodian takes no
part in determining the Fund's investment policies or in determining which
securities are sold or purchased by the Fund.

INDEPENDENT AUDITORS: KPMG Peat Marwick LLP, 3 Embarcadero Center, San
Francisco, California 94111, serves as BEF's independent auditors. KPMG audits
the annual report and provides tax and other services as auditors.

DIRECTORS AND OFFICERS

BEF's activities are overseen by a board of directors, including seven
independent directors. The individuals listed below whose names are marked with
an asterisk (*) are "interested persons" of BEF (as defined in the Investment
Company Act of 1940) by virtue of, among other things, their affiliation with
either BEF; BEF's investment advisor, BMC; BEF's agent for transfer and
administrative services, BFS; BEF's distribution agent, Benham Distributors,
Inc. (BDI); the parent corporation, Twentieth Century Companies, Inc. (TCC) or
TCC's subsidiaries; or other funds advised by BMC. Each director listed below
serves as a trustee or director of other funds in The Benham Group. Unless
otherwise noted, dates in parentheses indicate the dates the director or officer
began his or her service in a particular capacity. The directors' and officers'
address is 1665 Charleston Road, Mountain View, California 94043 and 4500 Main
Street, Kansas City, Missouri 64111.

DIRECTORS

*JAMES M. BENHAM, chairman of the board of directors (1988). Mr. Benham is also
chairman of the boards of BFS (1985), BMC (1971),and BDI (1988); president of
BMC (1971), BMI (1982), and BDI (1988); and a member of the board of governors
of the Investment Company Institute (1989). Mr. Benham has been in the
securities business since 1963, and he frequently comments through the media on
economic conditions, investment strategies, and the securities markets.

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

17
<PAGE>

RONALD J. GILSON, independent director (1995). Mr. Gilson is the Charles J.
Meyers Professor of Law and Business at Stanford Law School (1979) and the Mark
and Eva Stern Professor of Law and Business at Columbia University Schoool of
Law (1992). He is counsel to Marron, Ried & Sheehy (a San Francisco law firm,
1984).

MYRON S. SCHOLES, independent director (1988). Mr. Scholes is a principal of
Long-Term Capital Management (1993). He is also Frank E. Buck Professor of
Finance at the Stanford Graduate School of Business (1983), a director of
Dimensional Fund Advisors (1982) and the Smith Breeden Family of Funds (1992).
From August 1991 to June 1993, Mr. Scholes was a managing director of Salomon
Brothers Inc. (securities brokerage).

KENNETH E. SCOTT, independent director (1988). Mr. Scott is Ralph M. Parsons
Professor of Law and Business at Stanford Law School (1972) and a director of
RCM Capital Management (June 1994).

EZRA SOLOMON, independent director (1988). Mr. Solomon is Dean Witter Professor
of Finance Emeritus at the Stanford Graduate School of Business, where he served
as Dean Witter Professor of Finance from 1965 to 1990, and a director of
Encyclopedia Britannica.

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

*JAMES E. STOWERS III, director (1995), president and chief executive officer
(1996). Mr. Stowers is the president and director of Twentieth Century
Investors, Inc., TCI Portfolios, Inc., Twentieth Century World Investors, Inc.,
Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios,
Inc., Twentieth Century Institutional Portfolios, Inc., Twentieth Century
Companies, Inc., Investors Research Corporation and Twentieth Century Services,
Inc.

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

OFFICERS

*JAMES E. STOWERS III, president, and chief executive officer (1996).

*ANN N. MCCOID, controller (1988).

*DOUGLAS A. PAUL, secretary (1988), vice president (1990), and general counsel
(1990).

*MARYANNE ROEPKE, chief financial officer and treasurer (1995).

As of January 31, 1996, BEF's directors and officers, as a group, owned less
than 1% of the Fund's outstanding shares.

18
<PAGE>

The following table summarizes the compensation that the directors of the Fund
received for the Fund's fiscal year ended December 31, 1995, as well as the
compensation received for serving as a director or trustee of all other Benham
funds.
<TABLE>
<CAPTION>
DIRECTOR COMPENSATION FOR THE FISCAL YEAR ENDED
December 31, 1995
- -----------------------------------------------------------------------------------------------------------------
NAME OF AGGREGATE PENSION OR ESTIMATED TOTAL
DIRECTOR COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS COMPENSATION
FROM FUND ACCRUED AS PART OF UPON RETIREMENT FROM FUND AND
FUND EXPENSES FUND COMPLEX**
PAID TO DIRECTORS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert A. Eisenstat $ 0 Not Applicable Not Applicable $ 0
- -----------------------------------------------------------------------------------------------------------------
Ronald J. Gilson $1054 Not Applicable Not Applicable $48,833
- -----------------------------------------------------------------------------------------------------------------
Myron S. Scholes $2008 Not Applicable Not Applicable $65,625
- -----------------------------------------------------------------------------------------------------------------
Kenneth E. Scott $1798 Not Applicable Not Applicable $65,125
- -----------------------------------------------------------------------------------------------------------------
Ezra Solomon $2152 Not Applicable Not Applicable $58,792
- -----------------------------------------------------------------------------------------------------------------
Isaac Stein $1818 Not Applicable Not Applicable $63,625
- -----------------------------------------------------------------------------------------------------------------
Jeanne D. Wohlers $2119 Not Applicable Not Applicable $67,375
- -----------------------------------------------------------------------------------------------------------------
* Interested directors receive no compensation for their services as such.

** The Benham Group Fund Complex currently consists of 10 registered investment companies.
</TABLE>

INVESTMENT ADVISORY SERVICES

The Fund has an investment advisory agreement with BMC, dated June 1, 1995, that
was approved by the Fund`s shareholders on May 31, 1995.

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

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

19
<PAGE>

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

The investment advisory agreement stipulates that BMC will provide the Fund with
investment advice and portfolio management services in accordance with the
Fund's investment objective, policies, and restrictions. The agreement also
provides that BMC will determine what securities will be purchased and sold by
the Fund and assist the Fund's officers in carrying out decisions made by the
board of directors. Under the investment advisory agreement, the Fund pays BMC a
monthly investment advisory fee equal to its pro rata share of the dollar amount
derived from applying BEF's average daily net assets to the following investment
advisory fee rate schedule:

INVESTMENT ADVISORY FEE SCHEDULE FOR BEF

.50% of the first $100 million
.45% of the next $100 million
.40% of the next $100 million
.35% of the next $100 million
.30% of the next $100 million
.25% of the next $1 billion
.24% of the next $1 billion
.23% of the next $1 billion
.22% of the next $1 billion
.21% of the next $1 billion
.20% of the next $1 billion
.19% of net assets over $6.5 billion.

Investment advisory fees paid by the Fund to BMC for the fiscal years ended
December 31, 1995, 1994, and 1993, are indicated in the following table. Fee
amounts are net of expense limitations and recoupments as described on the
following page.

INVESTMENT ADVISORY FEES*

Fiscal Fiscal Fiscal
1995 1994 1993

$1,776,728 $1,884,679 $1,325,964

* Net of reimbursements

ADMINISTRATIVE AND TRANSFER AGENT SERVICES

BFS, a wholly owned subsidiary of TCC, is BEF's agent for transfer and
administrative services. For administrative services, the Fund pays BFS a
monthly fee based on its pro rata share of the dollar amount derived from
applying the average daily net assets of all of the funds in The Benham Group to
the following administrative fee schedule:

20
<PAGE>

GROUP ASSETS ADMINISTRATIVE FEE RATE

up to $4.5 billion .11%
up to $6 billion .10
up to $9 billion .09
over $9 billion .08

Prior to May 1, 1993, the administrative fee rate schedule ranged from .10% for
assets up to $4.5 billion to .07% for assets over $7.5 billion. This fee rate
schedule was adopted by BFS on a voluntary basis effective January 1, 1991, and
then formalized under a revised Administrative Services and Transfer Agency
Agreement that became effective on June 1, 1992.

For transfer agent services, the Fund pays BFS monthly fees of $1.1875 for each
shareholder account maintained and $1.35 for each shareholder transaction
executed during the month.

Administrative service and transfer agent fees paid by the Fund to BFS for the
fiscal years ended December 31, 1995, 1994, and 1993, are indicated in the
following table. Fee amounts are net of expense limitations as described below.

ADMINISTRATIVE FEES

Fiscal Fiscal Fiscal
1995 1994 1993

$549,463 $583,896 $356,629

TRANSFER AGENT FEES

Fiscal Fiscal Fiscal
1995 1994 1993

$702,149 $645,099 $428,747

DIRECT FUND EXPENSES

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

21
<PAGE>

EXPENSE LIMITATION AGREEMENT

BMC may recover amounts absorbed on behalf of the Fund during the preceding 11
months if, and to the extent that, for any given month, the Funds expense limit
in effect at that time. BMC has agreed to limit the Funds' expenses to .75% of
the Funds' average daily net assets during the year ending May 31, 1996.

The Funds' contractual expense limit is subject to annual renewal. The expense
limit for the year ended December 31, 1995, was .75% of average daily net
assets.

Net amounts absorbed and recouped for the fiscal years ended December 31, 1995,
1994, and 1993, are indicated in the table below.

NET REIMBURSEMENTS(RECOUPMENTS) BY BMC AND BFS

Fiscal Fiscal Fiscal
1995 1994 1993

$0 $0 $47,247

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Fund's shares are continuously offered at net asset value. The Benham Group
may reject or limit the amount of an investment to prevent any one shareholder
or affiliated group from controlling BEF or one of its series; to avoid
jeopardizing a series' tax status; or whenever, in management's opinion, such
rejection is in BEF's or a series' best interest.

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

- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Benham Charles Schwab & Co. 7,606,501.270 17.7428
Global Gold 101 Montgomery Street
Fund San Francisco, CA 94104-4122

- -------------------------------------------------------------------------------------------------
</TABLE>

As of January 31, 1996, to BEF`s knowledge, no other shareholder was the record
holder or beneficial owner of 5% or more of the Fund`s total shares outstanding.

The Benham Group charges neither fees nor commissions on the purchase and sale
of Benham fund shares. However, BFS may charge fees for special services
requested by a shareholder or necessitated by acts or omissions of a
shareholder. For example, BFS may charge a fee for processing dishonored
investment checks or stop-payment requests. BFS charges $10 per hour for account
research requested by investors. This charge will be assessed, for example, when
a shareholder request requires more than one hour of research on historical
account records. The fees charged are based on the estimated costs of performing
shareholder-requested services and are not intended to increase income.

Share purchases and redemptions are governed by California law.

22
<PAGE>

OTHER INFORMATION

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

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

<PAGE>
BENHAM INCOME &
GROWTH FUND

BENHAM EQUITY
GROWTH FUND

Prospectus * February 26, 1996

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

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

<PAGE>

- -------------------
[information in left margin of page]
THE BENHAM GROUP
1665 Charleston Rd.
Mountain View
California 94043

Fund
Information
1-800-331-8331
1-415-965-4274

Investor Services
1-800-321-8321
1-415-965-4222

TDD Service
1-800-624-6338
1-415-965-4764

Benham Group
Representatives
are available
by telephone weekdays from
5 a.m. to 5 p.m. Pacific Time.
- -------------------

BENHAM INCOME
& GROWTH FUND

BENHAM EQUITY
GROWTH FUND

Series of Benham Equity Funds

Prospectus o February 26, 1996

BENHAM INCOME & GROWTH FUND (BIGF) seeks dividend growth, current income, and
capital appreciation by investing in common stocks.

BENHAM EQUITY GROWTH FUND (BEGF) seeks capital appreciation by investing in
common stocks.

Each Fund is a diversified series of Benham Equity Funds (BEF), a no-load,
open-end mutual fund. Please read this Prospectus carefully and retain it for
future reference. It is designed to help you decide whether the Funds' goals
match your own. A Statement of Additional Information (also dated February 26,
1996) has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference. For a free copy, call or write The Benham
Group.

Mutual fund shares are not insured by the FDIC, the Federal Reserve Board, or
any other agency. The value of the investment and its returns will fluctuate and
is not guaranteed.

2
<PAGE>

SUMMARY OF FUND EXPENSES

The tables below illustrate the fees and expenses an investor in the Funds would
incur directly or indirectly. The figures shown for each Fund are based on
historical expenses, adjusted to reflect the expense limitation agreement in
effect as of February 26, 1996.

================================================================================
A. SHAREHOLDER TRANSACTION EXPENSES
For Each Fund Described in This Prospectus
- --------------------------------------------------------------------------------

BIGF BEGF

Investment advisory fee ............................ .31%* .31%
12b-1 fee .......................................... None None
Other expenses ..................................... .36% .40%
Total Fund operating expenses
(net of expense limitation) .................. .67%* .71%*

* Benham Management Corporation (BMC) has agreed to continue to limit the Fund's
total operating expenses as a percentage of its average daily net assets through
May 31, 1996. The operation of this expense limitation effectively requires that
total expenses paid by the Funds not exceed .75%. Amounts which are actually
paid by unaffiliated third parties do not apply to this expense limit. The
agreement provides that BMC may recover amounts absorbed on behalf of the Fund
during the preceding 11 months if, and to the extent that, for any given month,
Fund expenses were less than the expense limit in effect at that time. The
expense limitation is subject to annual renewal in June.

Each Fund pays BMC investment advisory fees equal to an annualized percentage of
Fund average daily net assets. Other expenses include administrative and
transfer agent fees paid to Benham Financial Services, Inc. (BFS).

- -------------------
[information in right margin of page]
Please read this Prospectus carefully and retain it for future reference. It is
designed to help you decide if the Fund's goals match your own.
- -------------------

3
<PAGE>

- --------------------------------------------------------------------------------
C. EXAMPLE OF EXPENSES
- --------------------------------------------------------------------------------

The following table illustrates the expenses a shareholder would pay on a $1,000
investment in each of the Funds over periods of one, three, five, and ten years.
The figures are based on the expenses shown in Table B and assume (i) a 5%
annual return and (ii) full redemption at the end of each time period.

ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS

Income & Growth Fund $7 $21 $37 $83
Equity Growth Fund 7 23 40 88

FINANCIAL HIGHLIGHTS

The information presented on the following page has been audited by KPMG Peat
Marwick LLP, independent auditors. Their report on the financial statements and
financial highlights is included in the Funds' Annual Report, which is
incorporated by reference in the Fund's Statement of Additional Information.

4
<PAGE>

================================================================================
BENHAM INCOME & GROWTH FUND
Years ended December 31 (except as noted)
- --------------------------------------------------------------------------------

1995 1994 1993 1992 1991 1990+
PER-SHARE DATA
- --------------
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
per Share $.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.

5
<PAGE>

================================================================================
BENHAM EQUITY GROWTH FUND
Years ended December 31 (except as noted)
- --------------------------------------------------------------------------------

1995 1994 1993 1992 1991+
PER-SHARE DATA
- --------------
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 1.97% 2.26% 2.04% 2.33% 3.29%**

Portfolio Turnover Rate 125.86% 94.09% 96.52% 114.32% 89.22%

Average Commission per Share $.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.

6
<PAGE>

HOW THE FUNDS WORK

INVESTMENT OBJECTIVES

BENHAM INCOME & GROWTH FUND (BIGF). BIGF's investment objective is to seek
dividend growth, current income, and capital appreciation by investing in common
stocks.

BIGF is designed for income-oriented investors seeking a total return that
exceeds the total return of the Standard & Poor's 500 Composite Stock Price
Index (S&P 500) and a dividend yield that exceeds the S&P 500's dividend yield.
Of course, the Fund's total return and dividend yield may be higher or lower
than the S&P 500's total return and dividend yield over any period of time.

BENHAM EQUITY GROWTH FUND (BEGF). BEGF's investment objective is to seek capital
appreciation by investing in common stocks. BEGF is designed for investors whose
financial goals include long-term capital growth. BMC seeks a total return for
the Fund that exceeds the total return of the S&P 500. Of course, the Fund's
total return may be higher or lower than the S&P 500's return over any period of
time.

There is no assurance that either Fund will achieve its investment objective.
Each Fund's investment objective and industry concentration and issuer
diversification policies are fundamental and may not be changed without
shareholder approval. The other policies described in this Prospectus are not
fundamental and may be changed by BEF's board of directors.

CORE INVESTMENT STRATEGIES

BMC uses quantitative management strategies in pursuit of each Fund's investment
objective. Quantitative investment management combines a disciplined management
approach with the flexibility to respond to events that may affect the value of
the Fund's investments. This approach is a middle ground between active
management, which allows the advisor to select a fund's investments without
reference to an index or investment model, and indexing, in which the advisor
tries to match a fund's portfolio composition to that of a particular index.

- -------------------
[information in right margin of page]
BIGF is designed for income-oriented investors desiring long-term participation
in the stock market. BEGF is designed for investors whose goals include
long-term capital growth.

BMC uses a quantitative method to manage each Fund, including a technique known
as "portfolio optimization."
- -------------------

7
<PAGE>

- -------------------
[information in left margin of page]
Neither Fund may invest more than 25% of its assets in a single industry.
- -------------------

The primary management technique BMC uses is portfolio optimization. BMC
constructs the Funds' portfolios to match the risk characteristics of the S&P
500 and then optimizes each portfolio to achieve the desired balance of risk and
return potential. With respect to BIGF, this includes targeting a dividend yield
that exceeds that of the S&P 500.

The Funds' portfolio holdings are drawn primarily from equity securities of the
1,500 largest companies traded in the United States (ranked by market
capitalization). BEGF may also invest in small capitalization stocks of
companies that, in BMC's opinion, have growth potential consistent with the
Fund's investment objective.

Portfolio optimization may cause a Fund to be more heavily invested in some
industries than in others. However, neither Fund may invest more than 25% of its
assets in companies whose principal business activities are in the same
industry. In addition, each Fund is a "diversified" investment company as
defined in the Investment Company Act of 1940 (the "1940 Act"). This means that
investments in any single issuer are limited to restrictions under the 1940 Act.

Each Fund may invest in securities or engage in transactions involving
instruments other than equity securities, as discussed in the section entitled
"Other Investment Policies and Techniques," which begins on page 12.

8
<PAGE>

INVESTMENT CONSIDERATIONS

The Funds may be an appropriate component of a stock portfolio for investors
seeking total return through diversified investments in stocks, bonds, and
short-term instruments. The Funds invest primarily in stocks, which may enhance
inflation-adjusted returns. The chart below illustrates how stocks have
historically outpaced inflation and produced higher returns than bonds.
Depending on your age and investment horizon, one Fund may be more appropriate
for you. If you seek a steady stream of monthly investment income, BIGF may be
best for you. If you primarily seek capital appreciation, BEGF may be most
appropriate for you. Of course, no single mutual fund can provide a balanced
investment plan.

CHART 1 - Growth of Stocks, Bonds, & Inflation
[line graph]

[graph data]
S&P 500 Index 20-Year U.S. Treasury Bond Inflation (CPI)
12/31/25 1 1 1
12/31/26 1.11624 1.07769 0.985103
12/31/27 1.5347 1.17391 0.96462
12/31/28 2.20396 1.17513 0.955309
12/31/29 2.01849 1.21533 0.957172
12/31/30 1.51595 1.27195 0.899445
12/31/31 0.858988 1.20442 0.813782
12/31/32 0.788613 1.40727 0.729983
12/31/33 1.21439 1.40623 0.733707
12/31/34 1.19687 1.54721 0.748606
12/31/35 1.7674 1.62433 0.770952
12/31/36 2.36692 1.7464 0.780264
12/31/37 1.53787 1.75045 0.804473
12/31/38 2.01648 1.84729 0.782127
12/31/39 2.0082 1.95702 0.778402
12/31/40 1.81171 2.07614 0.785852
12/31/41 1.60169 2.0955 0.862203
12/31/42 1.92748 2.16294 0.942275
12/31/43 2.42669 2.20802 0.972069
12/31/44 2.90603 2.27017 0.992553
12/31/45 3.96487 2.51386 1.0149
12/31/46 3.64486 2.5113 1.19926
12/31/47 3.8529 2.44543 1.30727
12/31/48 4.06486 2.52854 1.34265
12/31/49 4.82875 2.6916 1.31844
12/31/50 6.36008 2.6932 1.39479
12/31/51 7.88755 2.58732 1.47672
12/31/52 9.33629 2.61733 1.48976
12/31/53 9.24394 2.71253 1.49907
12/31/54 14.1084 2.90748 1.49162
12/31/55 18.5614 2.8699 1.49721
12/31/56 19.7783 2.70957 1.54004
12/31/57 17.6457 2.91166 1.58659
12/31/58 25.2976 2.73423 1.61453
12/31/59 28.3219 2.67251 1.63873
12/31/60 28.4549 3.04075 1.66294
12/31/61 36.106 3.07035 1.67412
12/31/62 32.9545 3.28179 1.6946
12/31/63 40.4685 3.32161 1.72254
12/31/64 47.1388 3.43807 1.74302
12/31/65 53.0081 3.46247 1.77654
12/31/66 47.6737 3.58891 1.83613
12/31/67 59.1038 3.25941 1.892
12/31/68 65.6415 3.25092 1.98139
12/31/69 60.059 3.08598 2.10243
12/31/70 62.4653 3.45957 2.21788
12/31/71 71.4058 3.91726 2.29238
12/31/72 84.9559 4.14 2.37059
12/31/73 72.5003 4.09417 2.57916
12/31/74 53.311 4.27246 2.89388
12/31/75 73.1443 4.66535 3.09686
12/31/76 90.5842 5.44702 3.24584
12/31/77 84.0767 5.40954 3.46558
12/31/78 89.5922 5.34584 3.77843
12/31/79 106.113 5.27987 4.28122
12/31/80 140.514 5.0715 4.81195
12/31/81 133.616 5.16571 5.24213
12/31/82 162.223 7.25066 5.44509
12/31/83 198.745 7.29792 5.6518
12/31/84 211.199 8.42741 5.87527
12/31/85 279.117 11.0371 6.0968
12/31/86 330.671 13.7446 6.16569
12/31/87 347.967 13.3716 6.43757
12/31/88 406.458 14.665 6.72207
12/31/89 534.455 17.3215 7.03446
12/31/90 517.499 18.3924 7.46401
12/31/91 675.592 21.9421 7.69273
12/31/92 727.412 23.7092 7.91586
12/31/93 800.078 28.0339 8.13342
12/31/94 810.538 25.8555 8.35099
12/31/95 1113.92 34.0436 8.57975

Source: Ibbotson Associates, Stocks, Bonds, Bills and Inflation.

- -------------------
[information in right margin of page]
The Funds may also provide a means to enhance the "real," or inflation-adjusted,
returns from your investment portfolio.
- -------------------

9
<PAGE>

- -------------------
[information in left margin of page]
Both Funds offer investors stock market exposure and portfolio diversification
that would be costly to duplicate on an individual basis.
- -------------------

In contrast to bond investors, common stock investors forego the certainty of
coupon interest payments. However, they enjoy the potential for increased
dividend income if the issuing company prospers. As indicated below, Chart 2
compares the growth of dividends from S&P 500 stocks with the rate of inflation
over a 50-year period.

CHART 2 - Growth of Dividends vs. Inflation
[line graph]

[graph data]
S&P 500 Dividends. Inflation (CPI)
1 1
1.08 1.18
1.27 1.29
1.41 1.32
1.73 1.3
2.23 1.37
2.14 1.46
2.14 1.47
2.2 1.48
2.33 1.47
2.48 1.48
2.64 1.52
2.71 1.57
2.65 1.59
2.77 1.62
2.95 1.64
3.06 1.65
3.23 1.67
3.45 1.7
3.79 1.72
4.12 1.75
4.35 1.81
4.42 1.87
4.65 1.96
4.79 2.07
4.76 2.19
4.65 2.26
4.77 2.34
5.12 2.55
5.45 2.86
5.58 3.06
6.14 3.21
7.08 3.43
7.68 3.74
8.56 4.23
9.33 4.75
10.05 5.18
10.41 5.37
10.74 5.58
11.41 5.8
11.97 6.02
12.55 6.1
13.35 6.36
14.74 6.65
16.74 6.95
18.33 7.39
18.48 7.61
18.76 7.83
19.06 8.05
19.97 8.26
20.89 8.46

Sources: Ibbotson Associates, Stocks, Bonds, Bills and Inflation and Standard
and Poor's Security Price Index Record.

Historical equity index returns suggest that stocks provide superior investment
returns over the long term. Over short periods of time, however, the prices of
individual stocks and the stock market as a whole can be very volatile. The
table below shows best and worst average annual total returns for the S&P 500
over time spans of one, five, ten, and twenty years between 1926 and 1995.

================================================================================
VARIABILITY OF S&P 500 RETURNS
- --------------------------------------------------------------------------------

1 YR 5 YRS 10 YRS 20 YRS

Best 53.99% 23.92% 20.06% 16.86%
Worst -43.34 -12.47 -0.89 3.11

Source: Ibbotson Associates, Stocks, Bonds, Bills and Inflation. This analysis
is based on historical annual total return figures for the S&P 500.

10
<PAGE>

Notice that the difference between the best and worst return decreases as the
measure of time increases. Stock market investing may not make sense for you
unless you are prepared to ride out the markets' ups and downs.

As indicated below, Chart 3 compares the historical risk vs. return
characteristics of stocks (represented by the S&P 500), bonds (represented by a
20-year U.S. Treasury bond), and Treasury bills. As you can see, historically,
stocks have provided higher returns at greater risk than Treasury bonds and
bills over the long term.

CHART 3 - Risk vs. Reward 1926-1995
[dot graph]

[graph data]
Reward - Standard Deviation Risk - Average Annual Total Return
S&P 500 20.42 10.54
T-Bonds 9.25 5.17
T-Bills 3.27 3.72

Source: Ibbotson Associates, Stocks, Bonds, Bills and Inflation.

The historical S&P 500 data presented here are not intended to suggest that an
investor would have achieved comparable results by investing in any one equity
security or in managed portfolios of equity securities, such as the Funds,
during the periods shown. The S&P 500 is an unmanaged index representing the
performance of 500 major companies, most of which are listed on the New York
Stock Exchange. Investors cannot invest directly in the S&P 500. The historical
conditions that gave rise to the patterns illustrated here may not be repeated.
Transaction costs and other expenses of managing a common stock portfolio are
not reflected in the figures shown. S&P 500 is a registered service mark of
Standard and Poor's Corporation.

11
<PAGE>

- -------------------
[information in left margin of page]
Keep in mind that seeking increased total return causes higher volatility.
- -------------------

OTHER INVESTMENT POLICIES AND TECHNIQUES

CONVERTIBLE SECURITIES. Although the Funds' equity investments consist primarily
of common stock, each Fund may buy securities convertible into common stock,
such as convertible bonds, convertible preferred stocks, or warrants. BMC may
purchase these securities if it believes that a company's convertible securities
are undervalued in the market.

SHORT-TERM INSTRUMENTS. For liquidity purposes, each Fund may invest in
high-quality money market instruments with remaining maturities of one year or
less. Such instruments may include U.S. government securities, certificates of
deposit, commercial paper, and bankers' acceptances.

Each Fund may also enter into repurchase agreements, collateralized by U.S.
government securities, with banks or broker-dealers that are deemed to present
minimal credit risk. Credit risk determinations are made by BMC pursuant to
guidelines established by the board of directors. A repurchase agreement
involves the purchase of a security and a simultaneous agreement to sell the
security back to the seller at a higher price. Delays or losses could result if
the other party to the agreement defaults or becomes bankrupt.

Each Fund may invest up to 5% of its total assets in any money market fund
advised by BMC, provided that the investment is consistent with the Fund's
policies and restrictions. For more information, see Investment Advisory Fees on
page 32.

FOREIGN SECURITIES. Each Fund may invest in securities of foreign issuers,
including instruments that trade on domestic or foreign securities exchanges in
U.S. dollars or foreign currencies. Securities of foreign issuers may be
affected by the strength of foreign currencies relative to the U.S. dollar or by
political or economic developments in foreign countries. Foreign companies may
not be subject to accounting standards or governmental regulations comparable to
those that affect U.S. companies, and there may be less public information about
their operations.

12
<PAGE>

SECURITIES LENDING. The Funds may lend their portfolio securities to banks and
broker-dealers to earn additional income. Securities loans are subject to
guidelines prescribed by the board of directors, which are set forth in the
Statement of Additional Information. This practice could result in a loss or
delay in recovering the Funds' securities. Loans are limited to 33-1/3% of each
Fund's total assets.

FUTURES AND OPTIONS TRANSACTIONS. In order to manage each Fund's exposure to
changes in market conditions, such as movements in securities prices, interest
rates, and domestic and foreign economies, each Fund may invest up to 20% of its
assets in futures and options. As with many investments, futures and options can
be highly volatile. If BMC incorrectly judges market conditions in an attempt to
reduce risk or enhance return or if certain markets pose liquidity difficulties,
losses may occur and a Fund's value may be affected. Neither Fund will utilize
futures and options for speculative purposes.

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

PORTFOLIO TRANSACTIONS

BMC selects brokerage firms solely on the basis of best net price and execution
and expects to engage in regular trading on behalf of the Funds. An annual
portfolio turnover rate of 150% or more is considered high, and Fund expenses
may increase as a Fund's portfolio turnover rate increases. However, as
described on page 3, each Fund's total operating expenses are limited to .75% of
average daily net assets.

- -------------------
[information in right margin of page]
Each Fund may invest in securities of foreign issuers that trade on domestic or
foreign securities exchanges in U.S. dollars or foreign currencies.

Each Fund may use futures and options transactions to a limited extent.
- -------------------

13
<PAGE>

- -------------------
[information in right margin of page]

Performance data and a discussion of factors that affected performance during
the Fund's most recent reporting period are included in BEF's semiannual
and annual reports to shareholders.

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

PERFORMANCE

Mutual fund performance is commonly measured as yield or total return. It is
based on historical fund performance and may be quoted in advertising and sales
literature. Past performance is no guarantee of future results.

YIELD calculations show the rate of income the Funds earn on their investments
as an annual percentage rate. The Funds' yields are calculated according to
methods that are standardized for all stock and bond funds.

TOTAL RETURN represents the Funds' changes over a specified time period,
assuming reinvestment of dividends and capital gains, if any. CUMULATIVE TOTAL
RETURN illustrates the Funds' actual performance over a stated period of time.
AVERAGE ANNUAL TOTAL return is a hypothetical rate of return that illustrates
the annually compounded return that would have produced the same cumulative
total return if the Funds' performance had been constant over the entire period.
Average annual total returns smooth out variations in the Funds' performance;
they are not the same as year-by-year results.

Performance data and a discussion of factors that affected performance during
the Funds' most recent reporting period are included in the Funds' annual and
semiannual reports to shareholders. These reports are routinely delivered to the
Funds' shareholders. For a free copy, call one of the Fund Information numbers
on page 16.

14
<PAGE>

SHARE PRICE

The price of your shares is the net asset value ("NAV") next determined for the
Fund after receipt of your instruction to purchase, convert or redeem. NAV is
determined by calculating the total value of a Fund's assets, deducting total
liabilities and dividing the result by the number of shares outstanding. NAV is
determined on each day that the New York Stock Exchange (the "Exchange") is
open.

Investment and transaction instructions recieved by Benham on any business day
by mail at its office prior to the close of business of the Exchange, usually
1:00 p.m. Pacific Time, will receive that day's price. Investments and
instructions received after that time will receive the price deteremined on the
next business day.

- -------------------
Shares may be purchased and redeemed without any sales charge, commission,
redemption fee, or 12b-1 fee, or contingent deferred sales load.
- -------------------

15
<PAGE>

- -------------------
[information in left margin of page]
Overnight and special delivery mail (e.g., Federal Express, Express Mail,
Priority Mail) should be sent to our street address: 1665 Charleston Rd.
Mountain View California 94043. Failure to do so may result in transaction
delays.
- -------------------

HOW TO INVEST

Your investment will be credited to your account and begin earning interest at
the next NAV calculated after The Benham Group or an authorized subtransfer
agent receives and accepts your order. Payment of redemption proceeds may be
delayed until we have your completed application on file and your investment
matures (i.e., clears). See page 23 for details.

FUND INFORMATION: for information about any Benham fund or other investment
product, call 1-800-331-8331 or 1-415-965-4274.

16
<PAGE>

HOW TO BUY SHARES (Retirement investors, see pages 26 and 27).

MAKE YOUR INVESTMENT CHECK PAYABLE TO THE BENHAM GROUP. Mail
the check with your completed application to

The Benham Group
P.O. Box 7730
San Francisco, California 94120-9853

FOR ADDITIONAL INVESTMENTS, enclose an investment slip
preprinted with the account number to which your investment
should be credited. If the payee information provided on the
check does not agree with the information preprinted on the
investment slip, we will follow the instructions preprinted on
the slip.

If you do not have a preprinted investment slip, send your
check with separate written instructions indicating the fund
name and the account number. If the payee information provided
on the check does not agree with the written instructions, we
will follow the written instructions.

Investors will be charged $5 for every investment check
returned unpaid.

17
<PAGE>

If you wish to OPEN AN ACCOUNT BY BANK WIRE, please call our
Investor Services Department for more information and an
account number. Bank wire investments should be addressed as
follows:

State Street Bank and Trust Company
Boston, Massachusetts
ABA Routing Number 011000028
Beneficiary = Benham Equity Funds: [Name of Fund]
AC [State Street Fund Account Number]
FBO [Your Name, Your Benham Fund Account Number]

Fund Names and State Street Fund Account Numbers:

Benham Income & Growth Fund..............0505 928 2
Benham Equity Growth Fund................0505 927 4

- --------------------------------------------------------------------------------
BY EXCHANGE Minimum initial investment: $1,000
Minimum additional investment: $100

You may exchange your shares for shares of any other Benham
fund registered for sale in your state if you have received the
fund's prospectus. Exchanges may be made by telephone (for
identically registered accounts only), by written request, or
in person. Certain restrictions apply; please see page 20 for
details. You may open a new account by exchange, provided that
you meet the minimum initial investment requirement.

18
<PAGE>

PROCESSING YOUR PURCHASE

TELEPHONE TRANSACTIONS

The Benham Group will not be liable for losses resulting from unauthorized or
fraudulent instructions if it follows procedures designed to verify the caller's
identity. BMC will request personal identification, record telephone calls, and
send confirmation statements for every telephone transaction to the
shareholder's record address. The Fund reserves the right to revise or terminate
telephone transaction privileges at any time.

CONFIRMATION AND QUARTERLY STATEMENTS

19
<PAGE>

- -------------------
[information in left margin of page]
The free exchange privilege is a convenient way to buy shares in other Benham
funds if your investment goals change.

Benham Open Orders allow investors to utilize a "buy low, sell high" investment
strategy.
- -------------------

ACCOUNT SERVICES

EXCHANGE PRIVILEGE

You may exchange your shares for shares of equivalent value in any other Benham
fund registered for sale in your state. Such an exchange may generate a taxable
gain or loss. An exchange request will be processed the same day if it is
received before the funds' NAVs are calculated, which is one hour prior to the
close of the Exchange, usually 12:00 p.m. Pacific Time for Benham Target
Maturities Trust; and at the close of the Exchange, usually 1:00 p.m. Pacific
Time for all other Benham funds.

The Benham Group discourages trading in response to short-term market
fluctuations. Such activity may encumber BMC's ability to invest the funds'
assets in accordance with their respective investment objectives and policies
and may be disadvantageous to other shareholders. More than six exchanges per
calendar year out of a variable-price fund may be deemed an abuse of the
exchange privilege. For purposes of determining the number of exchanges made,
accounts under common ownership or control will be aggregated.

OPEN ORDER SERVICE

The Benham Group's Open Order Service allows you to designate a price at which
to buy or sell shares of a variable-price fund by exchange from or to a money
market fund. To place a "buy" order, you designate a purchase price that is
equal to or lower than the current NAV. To place a "sell" order, designate a
sale price that is equal to or higher than the current NAV. If the designated
price is met within 90 calendar days, we will automatically execute your order
at the NAV calculated that day as of the close of the Exchange. If the
designated price is not met within 90 calendar days, your Open Order to buy or
sell shares automatically expires. If you are buying shares of a variable-price
fund, we will exchange money from your money market account to purchase them. If
you are

20
<PAGE>

selling shares of a variable-price fund, we will transfer the proceeds of that
sale to your money market account. If you do not have a money market account, we
will open one for you when we execute your Open Order.

If the fund you have selected deducts a distribution from its share price, your
order price will be adjusted accordingly so that the distribution does not
inadvertently trigger an Open Order transaction on your behalf. If you close or
reregister the account from which shares are to be redeemed, your Open Order
will be canceled. Because of their time-sensitive nature, Open Order
transactions may be made only by telephone or in person and are subject to the
exchange limitations described in each fund's prospectus. All orders and
cancellations received by one hour prior to the close of the Exchange, usually
12:00 p.m. Pacific Time, will be considered to be effective the same day. All
orders and cancellation of orders not received one hour prior to the close of
the Exchange, usually 12:00 p.m. Pacific Time, will be considered effective the
following business day.

AUTOMATIC INVESTMENT SERVICES (AIS)

TREASURY DIRECT allows you to deposit interest and principal payments from
Treasury securities directly into a Benham fund account.

PAYROLL DIRECT allows you to deposit any amount of your paycheck directly into a
Benham fund account.

GOVERNMENT DIRECT allows you to deposit your entire U.S. government payment into
a Benham fund account.

BANK DIRECT allows you to deposit a fixed amount from your bank account into a
Benham fund account on the 1st and/or the 15th of each month (or the next
business day).

DIRECTED DIVIDENDS allow you to invest all or part of your dividend earnings
from one Benham fund account into one or more other Benham fund accounts. You
may choose to receive a portion of your dividends in cash and to invest the
remainder in another Benham fund account.

SYSTEMATIC EXCHANGES allow you to exchange from one Benham fund account to
another Benham fund account on the 1st and/or the 15th of each month (or the
next business day).

- -------------------
[information in right margin of page]
Automatic Investment Services enable you to benefit from a dollar-cost averaging
strategy.
- -------------------

21
<PAGE>

- -------------------
[information in left margin of page]
You may redeem shares without charge.
- -------------------

For more information about any of these services, please call our Investor
Services Department at 1-800-321-8321 or 1-415-965-4222.

BROKER-DEALER TRANSACTIONS

TDD SERVICE FOR THE HEARING IMPAIRED

TDD users may contact The Benham Group at 1-800-624-6338 or 1-415-965-4764.
California residents may wish to contact us through the California Relay Service
(CRS) at 1-800-735-2929.

Your transaction requests via CRS will be handled on a recorded line. The Benham
Group cannot accept responsibility for instructions miscommunicated by CRS.

EMERGENCY SERVICES

From within the U.S., including Alaska and Hawaii, call 1-800-321-8321.

From all foreign countries, call collect, 1-303-759-9337 or 1-510-820-1409. The
operator will request your Benham fund account number before accepting the call.

HOW TO REDEEM YOUR INVESTMENT

22
<PAGE>

Funds' NAVs are normally calculated at the close of business of the Exchange,
usually 1:00 p.m. Pacific Time. See page 15 for details.

Barring extraordinary circumstances prescribed by law, redemption proceeds are
mailed within seven calendar days. However, if the shares to be redeemed were
purchased by check, The Benham Group reserves the right to withhold the proceeds
until the investment has matured (i.e., your payment has cleared); see maturity
periods below.

- --------------------------------------------------------------------------------
Drawn from a Maturity Period
Type of Investment California Bank? (in business days)
- --------------------------------------------------------------------------------
Checks, cashiers' checks,
and bank money orders Yes 5 days
- --------------------------------------------------------------------------------
Same as above No 8 days
- --------------------------------------------------------------------------------
U.S. Treasury checks,
Traveler's checks,
U.S. Postal money orders,
Benham checks, bank wires,
and AIS Deposits* N/A 1 day

*Does not include bank direct deposits, which take 8 business days to mature.
- --------------------------------------------------------------------------------

If you hold shares in certificate form, redemption requests must be accompanied
by properly endorsed certificates.

If you want to keep your account open, please maintain a balance of shares worth
at least $1,000. If your account balance falls below $1,000 due to redemption,
your account may be closed, but not without at least 30 days' notice and an
opportunity to increase your account balance to the $1,000 minimum. This policy
applies to Benham's Individual Retirement Accounts (IRAs), excluding SEP-IRAs,
except that shareholders will receive at least 60 days' written notice and an
opportunity to increase their account balance before their accounts are closed.
Investors wishing to open a Benham-Sponsored Retirement Plan account should see
pages 26 and 27 for details.

UNCASHED CHECKS. We may reinvest at the Fund's current NAV any distribution or
redemption checks that remain uncashed for six months. Until we receive
instructions to the contrary, subsequent distributions will be reinvested in the
original account. Uncashed redemption checks may be reinvested in an identically
registered account if the original account is closed.

23
<PAGE>

HOW TO REDEEM SHARES (Retirement investors, see pages 26 and 27).

================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------

BY TELEPHONE The Benham Group will accept telephone redemption requests for
any amount if the proceeds are to be sent to your
predesignated bank account. Redemptions of $25,000 or less
payable to the registered account owner(s) may also be ordered
by telephone. All other redemption requests must be made in
writing. ONCE YOUR TELEPHONE ORDER HAS BEEN PLACED, IT MAY NOT
BE MODIFIED OR CANCELLED.

- --------------------------------------------------------------------------------
IN WRITING Send a letter of instruction to

The Benham Group
Investor Services Department
1665 Charleston Road
Mountain View, California 94043

Your letter of instruction should specify
* Your name
* Your account number
* The name of the Fund from which you wish to redeem shares
* The dollar amount or number of shares you wish to redeem

If you have instructed The Benham Group to require more than
one signature on written redemption requests, each of the
required number of signers must have his or her signature
guaranteed on the redemption requests. Signature guarantees
may be provided by banks, savings and loan associations,
savings banks, credit unions, stock brokerage firms, or a
Benham Investor Center.

24
<PAGE>

================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------
IN WRITING Shareholders must appear in person with identification to
(continued) obtain a signature guarantee. Notary public certifications are
not accepted in lieu of signature guarantees.

BFS may require written consent of all account owners prior to
acting on the written instructions of any account owner.

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

BY EXCHANGE See details on page 20.

SYSTEMATIC EXCHANGES. You may arrange for periodic exchange
redemptions from one Benham fund account to another Benham
fund account.

25
<PAGE>

ABOUT BENHAM-SPONSORED RETIREMENT PLANS

================================================================================
PLAN TYPE AVAILABLE TO MAXIMUM ANNUAL CONTRIBUTION
PER PARTICIPANT
- --------------------------------------------------------------------------------
Contributory An employed indi- $2,000 or 100% of compensation
IRA vidual under age 70 1/2. (whichever is less).

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

SEP-IRA A self-employed indi- $22,500 or 15% of compensation
vidual or a business. (whichever is less).*

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

* Self-employed individuals should consult IRS Publication 560 for their annual
contribution limits.

26
<PAGE>

Same as for Contributory IRA. Same as for Contributory IRA.

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

You may open a Rollover IRA Eligible rollover contributions must
anytime. be made within 60 days of receiv-
ing your distribution. There is no
age limit on rollover contributions.

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

The end of the employer's plan Same as for SEP-IRA.
year, usually December 31.

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

The end of the employer's plan Same as for SEP-IRA.
year, usually December 31.

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

27
<PAGE>

DISTRIBUTIONS AND TAXES

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

BIGF's dividends are declared daily, accrued throughout the month, and expects
to pay dividends at the end of the month. BEGF's dividends are declared and paid
quarterly in March, June, September, and December. In December, each Fund may
distribute an additional ordinary income dividend, consisting of net short-term
capital gains and undistributed income, in order to preserve its status as a
regulated investment company (mutual fund) under the Internal Revenue Code.
Long-term capital gains, if any, will be declared once a year, typically in
December. The directors may modify the Funds' distribution policies at any time.

DISTRIBUTION OPTIONS. You may choose to receive dividends and capital gain
distributions in cash or to reinvest them in additional shares. (See Directed
Dividends on page 21 for further information.) Please indicate your choice on
your account application or contact our Investor Services Department. See page
23 for a discussion of our policy regarding uncashed distribution checks.

TAXES

Each Fund intends to qualify annually and elect to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986 (the
"Code"), as amended, by distributing all or substantially all of its net
investment income and net realized capital gains to shareholders each year.

The Funds' dividends and capital gain distributions are subject to federal
income tax and applicable state and local taxes whether they are received in
cash or reinvested in additional shares. Distributions are generally taxable in
the year they are declared.

Dividends from net investment income (including net short-term capital gains, if
any) are taxable as ordinary income. Distributions of any net capital gains (net
long-

28
<PAGE>

term capital gains minus net short-term capital losses) designated by the
Funds as capital gain dividends are taxable as long-term capital gains,
regardless of how long you have held your shares.

The Funds will send you a tax statement (Form 1099) by January 31 showing the
tax status of distributions you received in the previous year and will file a
copy with the IRS. You may realize a taxable gain or loss when you redeem (sell)
or exchange shares. For most types of accounts, the proceeds from your
redemption transactions will be reported to the IRS annually. However, because
the tax treatment depends on your purchase price and your personal tax position,
you should keep your regular statements to use in determining your taxes.

BUYING A DIVIDEND. The timing of your investment could have undesirable tax
consequences. If you open a new account or buy more shares for your current
account just before the day a dividend or distribution is reflected in your
Fund's share price, you will receive a portion of your investment back as a
taxable dividend or distribution.

BACKUP WITHHOLDING. The Funds are required by federal law to withhold 31% of
reportable dividends and capital gains distributions (as well as redemptions
from variable-price funds) payable to shareholders who have not complied with
IRS regulations. These regulations require you to certify on your account
application or on IRS Form W-9 that your social security or taxpayer
identification number (TIN) is correct and that you are not subject to backup
withholding from previous underreporting to the IRS, or that you are exempt from
backup withholding.

The Benham Group may refuse to sell shares to investors who have not complied
with this requirement, either before or at the time of purchase. Until we
receive your certified TIN, we may redeem your Fund shares at any time.

29
<PAGE>

- -------------------
[information in left margin of page]
The Benham Group serves more than 475,000 investors.
- -------------------

MANAGEMENT INFORMATION

ABOUT BENHAM EQUITY FUNDS

Benham Equity Funds (BEF) is a registered open-end management investment company
that was organized as a California corporation on December 31, 1987. BEF
currently consists of five series.

A board of directors oversees the Funds' activities and is responsible for
protecting shareholders' interests. The majority of directors are not otherwise
affiliated with BMC. BEF is neither required nor expected to hold annual
meetings, although special meetings may be called for purposes such as electing
or removing directors or amending a series' advisory agreement or investment
policies. The number of votes you are entitled to is based upon the dollar value
of your investment. Each Fund votes separately on matters that pertain to it
exclusively. Under California corporate law, BEF shareholders have the right to
cumulate votes in the election (or removal) of directors.

THE BENHAM GROUP

BMC is investment advisor to the funds in The Benham Group, which currently
constitute more than $12 billion in assets. BMC, incorporated in California in
1971, became a wholly owned subsidiary of Twentieth Century Companies, Inc.
(TCC), a Delaware corporation, on June 1, 1995, upon the merger of Benham
Management International, Inc., BMC's former parent, into TCC. TCC is a holding
company that owns the operating companies that provide the investment
management, transfer agency, shareholder service, and other services for the
Twentieth Century family of funds, which now includes the Benham Group. The
combined company offers 62 mutual funds and, as of February 8, 1996, has
combined assets under managment in excess of $48 billion.

30
<PAGE>

holdings and to discuss purchase and sale activity. The teams adjust
holdings in the funds' portfolios deemed appropriate in pursuit of the funds'
investment objectives. Individual portfolio manager members of the team may also
adjust portfolio holdings of the funds as necessary between team meetings.

The portfolio manager member of the team managing the funds described in this
prospectus and his work experience for the last five years is as follows:

MR. STEVEN COLTON, Portfolio Manager, has been primarily responsible for the
day-to-day operations of the Funds since December of 1990 for Benham Income &
Growth Fund and May of 1991 for Benham Equity Growth Fund. Mr. Colton joined BMC
in 1987 and has also managed the Benham Utilities Index Fund since its inception
in March, 1993.

Benham Management Corporation (BMC) has adopted a Code of Ethics (the "Code"),
which restricts personal investing practices. Among other provisions, the Code
requires that employees with access to information about the purchase and sale
of securities in the funds' portfolios obtain preclearance before executing
personal trades. With respect to portfolio managers and other investment
personnel, the Code prohibits acquisition of securities in an initial public
offering, as well as profits derived from the purchase and sale of the same
security within 60 calendar days. These provisions are designed to ensure that
the interests of fund shareholders come before the interests of the people who
manage the funds.

ADVISORY AND SERVICE FEES

For investment advice and portfolio management services, each Fund pays BMC a
monthly investment advisory fee based on its pro rata share of the dollar amount
derived from applying BEF's average daily net assets to an investment advisory
fee schedule. The investment advisory fee rate cannot exceed .50% of average
daily net assets, and it drops to a marginal rate of .19% of average daily net
assets as BEF assets increase.

- -------------------
[information in right margin of page]
Benham Management Corporation provides investment advice and portfolio
management services to the Funds.

Benham Financial Services, Inc. provides administrative and transfer agent
services to the Funds.
- -------------------

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<PAGE>

The following table illustrates investment advisory fees paid by the Funds for
the fiscal year ended December 31, 1995. For each Fund, the figures shown
represent investment advisory fees as a percentage of the Fund's average daily
net assets and as a dollar amount per $1,000 of the Fund's average daily net
assets.

INVESTMENT ADVISORY FEES

Income & Growth Fund .31% $3.10
Equity Growth Fund .31% $3.10

To avoid duplicative investment advisory fees, the Funds do not pay BMC
investment advisory fees with respect to assets invested in shares of Benham
money market funds.

BFS, a wholly owned subsidiary of TCC, is BEF's agent for transfer and
administrative services. For administrative services, each Fund pays BFS a
monthly fee equal to its pro rata share of the dollar amount derived from
applying the average daily net assets of all of the funds in The Benham Group.
The administrative fee rate ranges from .11% to .08% of average daily net
assets, dropping as Benham Group assets increase. For transfer agent services,
each Fund pays BFS a monthly fee for each shareholder transaction executed
during that month.

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

32
<PAGE>

EXPENSE LIMITATION AGREEMENT

An expense limitation agreement between BMC and the Funds is described on page
3.

In the following table, each Fund's total operating expenses for the fiscal year
ended December 31, 1995, are expressed as a percentage of the Fund's average
daily net assets and as a dollar amount per $1,000 of the Fund's average daily
net assets.

TOTAL OPERATING EXPENSES

Income & Growth Fund .67% $6.70
Equity Growth Fund .71% $7.10

In compliance with rules promulgated by the SEC, the total operating expenses
include amounts paid by third parties under expense offset arrangements with the
Fund.

DISTRIBUTION OF SHARES

Benham Distributors, Inc. (BDI) and BMC distribute and market Benham products
and services. BMC pays all expenses for promoting and distributing the Funds'
shares. Neither Fund pays commissions to or receives compensation from
broker-dealers.

BDI is a wholly owned subsidiary of TCC.

33
<PAGE>

INVESTMENT ADVISOR

BENHAM MANAGEMENT CORPORATION
1665 Charleston Road
Mountain View, California 94043

DISTRIBUTOR

BENHAM DISTRIBUTORS, INC.
1665 Charleston Road
Mountain View, California 94043

CUSTODIAN

STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, Massachusetts 02101

TRANSFER AGENT

BENHAM FINANCIAL SERVICES, INC.
1665 Charleston Road
Mountain View, California 94043

INDEPENDENT AUDITORS

KPMG PEAT MARWICK LLP
3 Embarcadero Center
San Francisco, California 94111

DIRECTORS

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

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<PAGE>
The Benham Group of Investment Companies

Capital Preservation Fund
Capital Preservation Fund II
Benham Government Agency Fund
Benham Prime Money Market Fund
Benham Short-Term Treasury and Agency Fund
Benham Treasury Note Fund
Benham Long-Term Treasury and Agency Fund
Benham Adjustable Rate Government Securities Fund
Benham GNMA Income Fund
Benham Target Maturities Trust
Benham California Tax-Free and Municipal Funds*
Benham National Tax-Free Money Market Fund
Benham National Tax-Free Intermediate-Term Fund
Benham National Tax-Free Long-Term Fund
Benham Florida Municipal Money Market Fund**
Benham Florida Municipal Intermediate-Term Fund**
Benham Arizona Municipal Intermediate-Term Fund***
Benham Gold Equities Index Fund
Benham Income & Growth Fund
Benham Equity Growth Fund
Benham Utilities Income Fund
Benham Global Natural Resources Index Fund
Benham European Government Bond Fund
Benham Capital Manager Fund

* Available only to residents of California, Arizona, Colorado, Hawaii,
Nevada, New Mexico, Oregon, Texas, Utah, and Washington.

** Available only to residents of Florida, California, Georgia, Illinois,
Michigan, New Jersey, New York, and Pennsylvania.

*** Available only to residents of Arizona, California, Colorado, Nevada,
Oregon, Washington, and Texas.

35
<PAGE>

CONTENTS

Summary of Fund Expenses .................. 3
Financial Highlights ...................... 4
How the Funds Work ........................ 7
Investment Objectives .................. 7
Core Investment Strategies ............. 7
Investment Considerations ................. 9
Other Investment Policies and Techniques .. 12
Portfolio Transactions .................... 13
Performance ............................... 14
Share Price ............................... 15
How to Invest ............................. 16
Account Services .......................... 20
Exchange Privilege ..................... 20
Open Order Service ..................... 20
Automatic Investment Services .......... 21
Broker-Dealer Transactions ............. 22
TDD Service ............................ 22
Emergency Services ..................... 22
How to Redeem Your Investment ............. 22
About Benham-Sponsored Retirement Plans ... 26
Distributions and Taxes ................... 28
Dividends and Capital Gain Distributions 28
Taxes .................................. 28
Management Information .................... 30
About Benham Equity Funds .............. 30
The Benham Group ....................... 30
Advisory and Service Fees .............. 31
Expense Limitation Agreement ........... 33
Distribution of Shares ................. 33

<PAGE>
BENHAM INCOME & GROWTH FUND
BENHAM EQUITY GROWTH FUND

SERIES OF BENHAM EQUITY FUNDS

THE BENHAM GROUP(R)
1665 Charleston Road
Mountain View, CA 94043

Investor Services: 1-800-321-8321 or 1-415-965-4222
Fund Information: 1-800-331-8331 or 1-415-965-4274

STATEMENT OF ADDITIONAL INFORMATION

February 26, 1996

This Statement is not a prospectus but should be read in conjunction with the
Funds' current Prospectus dated February 26, 1996. The Funds' Annual Report for
the fiscal year ended December 31, 1995, is incorporated herein by reference. To
obtain a copy of the Prospectus or the Annual Report, call or write The Benham
Group.

TABLE OF CONTENTS

Page
----
Investment Policies and Techniques ........... 2
Investment Restrictions ...................... 11
Portfolio Transactions ....................... 13
Valuation of Portfolio Securities ............ 13
Performance .................................. 14
Taxes ........................................ 16
About Benham Equity Funds .................... 17
Directors and Officers ....................... 17
Investment Advisory Services ................. 19
Administrative and Transfer Agent Services ... 21
Direct Fund Expenses ......................... 22
Expense Limitation Agreements ................ 22
Additional Purchase and Redemption Information 23
Other Information ............................ 23

1
<PAGE>

INVESTMENT POLICIES AND TECHNIQUES

U.S. GOVERNMENT SECURITIES

The Funds may invest in U.S. government securities, including bills, notes, and
bonds issued by the U.S. Treasury and securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. Some U.S. government
securities are supported by the direct full faith and credit pledge of the U.S.
government; others are supported by the right of the issuer to borrow from the
U.S. Treasury; others, such as securities issued by the Federal National
Mortgage Association, are supported by the discretionary authority of the U.S.
government to purchase the agencies' obligations; and others are supported only
by the credit of the issuing or guaranteeing instrumentality. There is no
assurance that the U.S. government will provide financial support to an
instrumentality it sponsors when it is not obligated by law to do so.

REPURCHASE AGREEMENTS

In a repurchase agreement (a "Repo"), a Fund buys a security at one price and
simultaneously agrees to sell it back to the seller at an agreed upon price on a
specified date (usually within seven days from the date of purchase) or on
demand. The repurchase price exceeds the purchase price by an amount that
reflects an agreed-upon rate of return and that is unrelated to the interest
rate on the underlying security. Delays or losses could result if the other
party to the agreement defaults or becomes bankrupt.

Benham Management Corporation (BMC), the Funds' investment advisor, attempts to
minimize the risks associated with repurchase agreements by adhering to the
following criteria:

(1) Limiting the securities acquired and held by a Fund under repurchase
agreement to U.S. government securities;

(3) Monitoring the creditworthiness of all firms involved in repurchase
agreement transactions;

(4) Requiring the seller to establish and maintain collateral equal to 102% of
the agreed-upon resale price, provided, however, that the board of
directors may determine that a broker-dealer's credit standing is
sufficient to allow collateral to fall to as low as 101% of the agreed-upon
resale price before the broker-dealer deposits additional securities with
the Fund's custodian or sub-custodian;

(5) Investing no more than 5% of a Fund's total assets in repurchase agreements
that mature in more than seven days (together with any other illiquid
security the Fund holds); and

2
<PAGE>

(6) Taking delivery of all securities subject to repurchase agreement and
holding them in an account at the Funds' custodian bank.

The Funds have received permission from the Securities and Exchange Commission
(SEC) to participate in pooled repurchase agreements collateralized by U.S.
government securities with other mutual funds advised by its investment advisor,
Benham Management Corporation (BMC). Pooled repos are expected to increase the
income the Funds can earn from repo transactions without increasing the risks
associated with these transactions.

WHEN-ISSUED AND FORWARD-COMMITMENT AGREEMENTS

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

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

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

As an operating policy, each Fund will not commit more than 35% of its assets to
when-issued or forward-commitment agreements. If fluctuations in the value of
securities held cause more than 35% of a Fund's assets to be committed under
when-issued or forward-commitment agreements, BMC need not sell such
commitments, but it will be restricted from entering into further agreements on
behalf of the Fund until the percentage of assets committed to such agreements
is reduced to at least 35%. In addition, as an operating policy, each Fund will
not enter into when-issued or forward-commitment transactions with settlement
dates exceeding 120 days.

CONVERTIBLE SECURITIES

Each Fund may buy securities that are convertible into common stock. Listed
below is a brief description of the various types of convertible securities the
Funds may buy.

CONVERTIBLE BONDS are issued with lower coupons than nonconvertible bonds of the
same quality and maturity, but they give holders the option to exchange their
bonds for a specific number of shares of the company's common stock at a
predetermined price. This structure allows the convertible bond holder to
participate in share price movements in the company's common stock. The actual
return on a convertible bond may exceed its stated yield if the company's common
stock appreciates in value and the option to convert to common shares becomes
more valuable.

3
<PAGE>

CONVERTIBLE PREFERRED STOCKS are nonvoting equity securities that pay a fixed
dividend. These securities have a convertible feature similar to convertible
bonds; however, they do not have a maturity date. Due to their fixed-income
features, convertible issues typically are more sensitive to interest rate
changes than the underlying common stock. In the event of liquidation,
bondholders would have claims on company assets senior to those of stockholders;
preferred stockholders would have claims senior to those of common stockholders.

WARRANTS entitle the holder to buy the issuer's stock at a specific price for a
specific period of time. The price of a warrant tends to be more volatile than,
and does not always track, the price of its underlying stock. Warrants are
issued with expiration dates. Once a warrant expires, it has no value in the
market.

FOREIGN SECURITIES

Although the Funds may buy securities of foreign issuers in foreign markets,
most of their foreign securities investments are made by purchasing American
Depositary Receipts (ADRs), "ordinary shares," or "New York Shares" in the U.S.
The Funds may invest in foreign-currency-denominated securities that trade in
foreign markets if BMC believes that such investments will be advantageous to
the Funds.

4
<PAGE>

confiscatory taxation, restrictions on U.S. investment, or restrictions on the
ability to repatriate assets or to convert currency into U.S. dollars. There may
be a greater possibility of default by foreign governments or
foreign-government-sponsored enterprises. Investments in foreign countries also
involve a risk of local political, economic, or social instability, military
action or unrest, or adverse diplomatic developments.

To offset the currency risks associated with investing in securities of foreign
issuers, a Fund may hold foreign currency deposits and may convert dollars and
foreign currencies in the foreign exchange markets. Currency conversion involves
dealer spreads and other costs, although commissions usually are not charged.

Currencies may be exchanged on a spot (i.e., cash) basis or by entering into
forward contracts to purchase or sell foreign currencies at a future date and
price. By entering into a forward contract to buy or sell the amount of foreign
currency involved in a security transaction for a fixed amount of U.S. dollars,
BMC can protect a Fund against losses resulting from adverse changes in the
relationship between the U.S. dollar and the foreign currency during the period
between the date the security is purchased or sold and the date on which payment
is made or received. However, it should be noted that using forward contracts to
protect a Fund's foreign investments from currency fluctuations does not
eliminate fluctuations in the prices of the underlying securities themselves.
Forward contracts simply establish a rate of exchange that can be achieved at
some future point in time. Additionally, although forward contracts tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they also limit any gain that might result if the hedged currency's value
increases.

Foreign exchange dealers do not charge fees for currency conversions. Instead,
they realize a profit based on the difference (the spread) between the prices at
which they are buying and selling various currencies. A dealer may offer to sell
a foreign currency at one rate while simultaneously offering a lesser rate of
exchange on the purchase of that currency.

BMC uses forward contracts for currency hedging purposes only and not for
speculative purposes. The Funds are not required to enter into forward contracts
with regard to their foreign holdings and will not do so unless it is deemed
appropriate by the advisor.

Each Fund's assets are valued daily in U.S. dollars, although foreign currency
holdings are not physically converted into U.S. dollars on a daily basis.

DEPOSITARY RECEIPTS

American Depositary Receipts and European Depositary Receipts ("ADR"s and
"EDR"s) are receipts representing ownership of shares of a foreign-based issuer
held in trust by a bank or similar financial institution. These are designed for
U.S. and European securities markets as alternatives to purchasing underlying
securities in their corresponding national markets and currencies. ADRs and EDRs
can be sponsored or unsponsored.

Sponsored ADRs and EDRs are certificates in which a bank or financial
institution participates with a custodian. Issuers of unsponsored ADRs and EDRS
are not contractually obligated to disclose material information in the United
States. Therefore, there may not be a correlation between such information and
the market value of the unsponsored ADR or EDR.

5
<PAGE>

RESTRICTED SECURITIES

Restricted securities held by the Funds generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where registration
is required, a Fund may be required to pay all or a part of the registration
expense, and a considerable period may elapse between the time it decides to
seek registration of the securities and the time it is permitted to sell them
under an effective registration statement. If, during this period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to try to register the securities.

SECURITIES LENDING

To minimize the risk of default on securities loans, BMC adheres to the
following guidelines prescribed by the board of directors:

(5) LIMITATIONS ON PERCENTAGE OF PORTFOLIO SECURITIES ON LOAN. The Fund's
loans may not exceed 33-1/3% of its total assets.

(6) CREDIT ANALYSIS. As part of the regular monitoring procedures set forth by
the board of directors that BMC follows to evaluate banks and
broker-dealers in connection with, for example, repurchase agreements and
municipal securities credit issues, BMC will analyze and monitor the
creditworthiness of all borrowers with which portfolio lending
arrangements are contemplated or entered into.

6
<PAGE>

PUT OPTIONS ON INDIVIDUAL SECURITIES

Each Fund may buy puts with respect to stocks underlying its convertible
security holdings. For example, if BMC anticipates a decline in the price of the
stock underlying a convertible security a Fund holds, it may purchase a put
option on the stock. If the stock price subsequently declines, an increase in
the value of the put option could be expected to offset all or a portion of the
effect of the stock's decline on the value of the convertible security.

FUTURES AND OPTIONS TRANSACTIONS

FUTURES CONTRACTS provide for the sale by one party and purchase by another
party of a specific security at a specified future time and price. Futures
contracts are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission (CFTC), a U.S. government agency.

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

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

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

Those who trade futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities they hold or expect to acquire
for investment purposes. Speculators are less likely to own the securities
underlying the futures contracts they trade and are more likely to use futures
contracts with the expectation of realizing profits from fluctuations in the
prices of the underlying securities.

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

7
<PAGE>

PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a Fund obtains the
right (but not the obligation) to sell the option's underlying instrument at a
fixed strike price. In return for this right, the Fund pays the current market
price for the option (known as the option premium). Options have various types
of underlying instruments, including specific securities, indexes of securities
prices, and futures contracts. A Fund may terminate its position in a put option
it has purchased by allowing it to expire or by exercising the option. If the
option is allowed to expire, the Fund will lose the entire premium it paid. If
the Fund exercises the option, it completes the sale of the underlying
instrument at the strike price. The Fund may also terminate a put option
position by closing it out in the secondary market at its current price if a
liquid secondary market exists.

The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).

The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase, rather
than sell, the underlying instrument at the option's strike price. A call buyer
typically attempts to participate in potential price increases of the underlying
instrument with risk limited to the cost of the option if security prices fall.
At the same time, the buyer can expect to suffer a loss if security prices do
not rise sufficiently to offset the cost of the option.

WRITING PUT AND CALL OPTIONs. If a Fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party chooses to exercise
the option. When writing an option on a futures contract, the Fund will be
required to make margin payments to a broker or custodian as described above for
futures contracts. The Fund may seek to terminate its position in a put option
before it is exercised by closing out the option in the secondary market at its
current price. If the secondary market is not liquid for a put option the Fund
has written, however, the Fund must continue to be prepared to pay the strike
price while the option is outstanding, regardless of price changes, and must
continue to set aside assets to cover its position.

If security prices rise, a put writer would generally expect to profit, although
the gain would be limited to the amount of the premium received. If security
prices remain the same over time, it is likely that the writer will also profit
by being able to close out the option at a lower price. If security prices fall,
the put writer would expect to suffer a loss. This loss should be less than the
loss from purchasing the underlying instrument directly, however, because the
premium received for writing the option should mitigate the effects of the
decline.

Writing a call option obligates a Fund to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price even if its current value is greater,
a call writer gives up some ability to participate in security price increases.

8
<PAGE>

COMBINED POSITIONS. A Fund may purchase and write options in combination with
one another, or in combination with futures or forward contracts, in order to
adjust the risk and return characteristics of the overall position. For example,
a Fund may purchase a put option and write a call option on the same underlying
instrument in order to construct a combined position whose risk and return
characteristics are similar to a futures contract. Another possible combined
position would involve writing a call option at one strike price and buying a
call option at a lower price in order to reduce the risk of the written call
option in the event of a substantial price increase. Because combined options
positions involve multiple trades, they result in higher transaction costs and
may be more difficult to open and close out.

OTC OPTIONS. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of over-the-counter options (options not traded on exchanges)
generally are established through negotiation with the other party to the option
contract. While this type of arrangement allows a Fund greater flexibility in
tailoring an option to its needs, OTC options generally involve greater credit
risk than exchange-traded options, which are guaranteed by the clearing
organizations of the exchanges where they are traded. The risk of illiquidity is
also greater with OTC options because these options generally can be closed out
only by negotiation with the other party to the option.

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

CORRELATION OF PRICE CHANGES. Price changes of a Fund's futures and options
positions may not be well correlated with price changes of its other
investments. This may be because of differences between the underlying indexes
and the types of securities the Fund invests in. For example, if a Fund sold a
broad-based index futures contract to hedge against a stock market decline while
completing sales of specific securities in its investment portfolio, the prices
of the securities could move in a different direction than the broad market
index represented by the index futures contract. In the case of an S&P 500
futures contract purchased by a Fund, either in anticipation of stock purchases
or in an effort to be fully invested, failure of the contract to track the Index
accurately could hinder the Fund from achieving its investment objective.

Options and futures prices can also diverge from the prices of their underlying
instruments even if the underlying instruments match the Fund's investments.
Options and futures prices are affected by factors such as current and
anticipated short-term interest rates, changes in volatility of the underlying
instrument, and the time remaining until expiration of the contract; these
factors may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from the imposition of daily price
fluctuation limits or trading halts. A Fund may purchase or sell options and
futures contracts with a greater or lesser value than the securities it wishes
to hedge or intends to purchase in an effort to compensate for differences in
volatility between the contract and the securities, although this strategy may
not be successful in all cases. If price changes in a Fund's options or futures
positions are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.

9
<PAGE>

LIQUIDITY OF FUTURES CONTRACTS AND OPTIONS. There is no assurance a liquid
secondary market will exist for any particular futures contract or option at any
particular time. Options may have relatively low trading volume and liquidity if
their strike prices are not close to the underlying instrument's current price.
In addition, exchanges may establish daily price fluctuation limits for futures
contracts and options and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached or a trading halt is imposed, it may be
impossible for a Fund to enter into new positions or close out existing
positions. If the secondary market for a contract were not liquid because of
price fluctuation limits or otherwise, prompt liquidation of unfavorable
positions could be difficult or impossible, and the Fund could be required to
continue holding a position until delivery or expiration regardless of changes
in value. Under these circumstances, the Fund's access to assets held to cover
its futures and options positions also could be impaired.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS.

The Funds have filed a notice of eligibility for exclusion as a "commodity pool
operator" with the CFTC and the National Futures Association, which regulates
trading in the futures markets. The Funds intend to comply with Section 4.5 of
the regulations under the Commodity Exchange Act, which limits the extent to
which the Funds can commit assets to initial margin deposits and options
premiums.

Each Fund may enter into futures contracts, options, or options on futures
contracts, provided that such obligations represent no more than 20% of the
Fund's net assets. Under the Commodity Exchange Act, a Fund may enter into
futures and options transactions for hedging purposes without regard to the
percentage of assets committed to initial margin and option premiums and for
other than hedging purposes provided that assets committed to initial margin and
option premiums do not exceed 5% of the Fund's net assets. To the extent
required by law, each Fund will set aside cash and appropriate liquid assets in
a segregated account to cover its obligations related to futures contracts and
options.

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

FUTURES AND OPTIONS RELATING TO FOREIGN CURRENCIES. Each Fund may purchase and
sell currency futures and purchase and write currency options to increase or
decrease its exposure to different foreign currencies. Each Fund may also
purchase and write currency options in conjunction with each other or with
currency futures or forward contracts.

Currency futures contracts are similar to forward currency exchange contracts,
except that they are traded on exchanges (and have margin requirements) and have
standard contract sizes and delivery dates. Most currency futures contracts call
for payment or delivery in U.S. dollars. The underlying instrument of a currency
option may be a foreign currency, which generally is purchased or delivered in
exchange for U.S. dollars, although it may be a futures contract. The purchaser
of a currency call obtains the right to purchase the underlying currency, and
the purchaser of a currency put obtains the right to sell the underlying
currency.

10
<PAGE>

The uses and risks of currency futures and options are similar to those of
futures and options relating to securities or indexes, as described above.
Currency futures and option values can be expected to correlate with exchange
rates, but may not reflect other factors that affect the value of a Fund's
investments. A currency hedge, for example, should protect a
deutsche-mark-denominated security from a decline in the deutsche mark, but it
will not protect the Fund against a price decline resulting from a deterioration
in the issuer's creditworthiness. Because the value of a Fund's
foreign-currency-denominated investments will change in response to many factors
other than exchange rates, it may not be possible to match the amount of
currency options and futures to the value of the Fund's foreign investments over
time.

INVESTMENT RESTRICTIONS

The Funds' investment restrictions are set forth below. These restrictions are
fundamental and may not be changed without approval of a majority of the votes
of shareholders of the Fund as determined in accordance with the Investment
Company Act of 1940. Unless otherwise indicated, percentage limitations included
in the restrictions apply at the time transactions are entered into.
Accordingly, any later increase or decrease beyond the specified limitation
resulting from a change in the Fund's net assets will not be considered in
determining whether it has complied with its investment restrictions.

EACH FUND MAY NOT

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

(2) Purchase the securities of any one issuer if immediately after such
purchase the Fund would hold more than 10% of the outstanding voting
securities of that issuer.

(3) Borrow money except from a bank as a temporary measure to satisfy
redemption requests or for extraordinary or emergency purposes and then
only in an amount not exceeding 33-1/3% of the market value of the Fund's
total assets so that immediately after any such borrowing asset coverage
of at least 300% for all such borrowings exists. To secure any such
borrowing, the Fund may not mortgage, pledge, or hypothecate in excess of
33-1/3% of the value of its total assets. The Fund will not purchase any
security while borrowings representing more than 5% of its total assets
are outstanding. The Fund may also borrow money for temporary or emergency
purposes from other funds or portfolios for which Benham Management
Corporation is the investment advisor, or from a joint account of such
funds or portfolios, as permitted by federal regulatory agencies.

(4) Act as an underwriter of securities issued by others.

(5) Purchase real estate, real estate mortgage loans, interests in real estate
limited partnerships, or interests in oil, gas or mineral exploration or
development programs or leases, provided that this limitation shall not
prohibit (i) the purchase of U.S. Government securities and other debt
securities secured by real estate or interests therein; (ii) the purchase
of marketable securities issued by companies or investment trusts that
deal in real estate or interests therein; or (iii)

11
<PAGE>

purchase of marketable securities issued by companies or other entities or
investment vehicles that engage in businesses relating to the development,
exploration, mining, processing or distributing of oil, gas, or minerals.

(6) Engage in any short-selling operations (except by selling futures
contracts).

(7) Make loans to others, except for the lending of portfolio securities
pursuant to guidelines established by the board of directors or in
connection with purchase of debt securities in accordance with the Fund's
investment objective and policies. The Fund may also lend money to other
funds or portfolios for which BMC is the investment advisor, as permitted
under investment restriction (3) above.

(8) Purchase warrants, valued at the lower of cost or market, in excess of 5%
of the value of the Fund's net assets. Included within that amount, but
not to exceed 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock Exchanges. Warrants
acquired by the Fund at any time in units or attached to securities are
not subject to this restriction.

(9) Purchase securities on margin, except for such short-term credits as may
be necessary for the clearance of transactions, provided that the Fund may
make initial and variation margin payments in connection with purchases or
sales of futures contracts or options on futures contracts.

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

(11) Issue or sell any class of senior security as defined in the Investment
Company Act of 1940 except for notes or other evidences of indebtedness
permitted under investment restriction (3) above and except to the extent
that notes evidencing temporary borrowings or the purchase of securities
on a when-issued or delayed delivery basis might be deemed such.

(12) Except in connection with a merger, consolidation, acquisition, or
reorganization, invest in the securities of other investment companies,
including investment companies advised by BMC, if, immediately after such
purchase or acquisition, more than 10% of the value of the Fund's total
assets would be invested in such securities in the aggregate or more than
5% in any one such security.

(13) Purchase or retain securities of any issuer if, to the knowledge of the
Fund's management, those officers and directors of the Fund and of its
investment advisor who each own beneficially more than 0.5% of the
outstanding securities of such issuer, together own beneficially more than
5% of such securities.

(14) Invest in securities of an issuer that, together with any predecessor, has
been in operation for less than three years if, as a result, more than 5%
of the total assets of the Fund would then be invested in such securities.

(15) Invest in the securities of any one issuer if, immediately after such
purchase, more than 25% of the Fund's total assets would be invested in
the securities of issuers having their principal business activities in
the same industry.

12
<PAGE>

PORTFOLIO TRANSACTIONS

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

The Funds' annual portfolio turnover rates are not expected to exceed 150%.
Because a higher turnover rate increases transaction costs and may increase
taxable capital gains, the advisor carefully weighs the potential benefits of
short-term investing against these considerations.

The following table illustrates the Funds' portfolio turnover rates for the
fiscal years ended December 31, 1995 and 1994.

PORTFOLIO TURNOVER RATES

FISCAL FISCAL
FUND 1995 1994

Income & Growth Fund 69.88% 67.96%
Equity Growth Fund 125.86 94.09

Brokerage commissions paid by each Fund during the fiscal years ended December
31, 1995, 1994, and 1993, are indicated in the following table.

BROKERAGE COMMISSIONS

FISCAL FISCAL FISCAL
FUND 1995 1994 1993

Income & Growth Fund $367,093 $236,642 $214,496
Equity Growth Fund 320,306 178,344 134,712

VALUATION OF PORTFOLIO SECURITIES

Each Fund's net asset value per share ("NAV") is determined by Benham Financial
Services, Inc. (BFS) usually at 1:00 p.m. Pacific Time on each day the New York
Stock Exchange (the "Exchange") is open for business. The Exchange has
designated the following holiday closings for 1996: New Year's Day (observed),
Presidents` Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. Although BFS expects the same holiday
schedule to be observed in the future, the Exchange may modify its holiday
schedule at any time.

BMC typically completes its trading on behalf of the Funds in various markets
before the Exchange closes for the day. Securities are valued at market,
depending upon the market or exchange on which they trade. Price quotations for
exchange-listed securities are taken from the primary exchanges on which these
securities trade. Securities traded on exchanges will be valued at their last

13
<PAGE>

sale prices. If no sale is reported, the mean between the latest bid and asked
prices is used. Securities traded over-the-counter will be valued at the mean
between the latest bid and asked prices. Fixed-income securities are priced at
market value on the basis of market quotations supplied by independent pricing
services. Trading of securities in foreign markets may not take place on every
day the Exchange is open, and trading takes place in various foreign markets on
days on which the Exchange and the Funds' offices are not open and the Funds'
net asset values are not calculated. The Funds' net asset values may be
significantly affected on days when shareholders have no access to the Funds.
Securities for which market quotations are not readily available, or which may
change in value due to events occuring after their primary exchange has closed
for the day, are valued at fair market value as determined in good faith under
the direction of the board of directors.

PERFORMANCE

The Funds may quote performance in various ways. Historical performance
information will be used in advertising and sales literature.

Yield quotations for each Fund are based on the investment income per share
earned during a particular 30-day period, less expenses accrued during the
period (net investment income), and are computed by dividing the Fund's net
investment income by its share price on the last day of the period, according to
the following formula:

YIELD = 2 [(a - b + 1)6 - 1]
cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends, and d =
the maximum offering price per share on the last day of the period.

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

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

The Funds' average annual total returns for the one-year and life-of-fund
periods ended December 31, 1995, are indicated in the following table.

14
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS

FUND ONE YEAR 5 YEAR LIFE OF FUND*

Income & Growth Fund 36.88% 17.85% 18.01%
Equity Growth Fund 34.56 N/A 13.90

* Income & Growth Fund commenced operations on December 17, 1990. Equity Growth
Fund commenced operations on May 9, 1991.

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

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

Indexes may assume reinvestment of dividends, but generally they do not reflect
administrative and management costs such as those incurred by a mutual fund.

Occasionally statistics may be used to illustrate Fund volatility or risk.
Measures of volatility or risk generally are used to compare a Fund's net asset
value or performance to a market index. One measure of volatility is "beta."
Beta expresses Fund volatility relative to the total market as represented by
the S&P 500. A beta of more than 1.00 indicates volatility greater than the
market, and a beta of less than 1.00 indicates volatility less than the market.
Another measure of volatility or risk is "standard deviation." Standard
deviation is used to measure variability of net asset value or total return
relative to an average over a specified period of time. The premise is that
greater volatility connotes greater risk undertaken to achieve desired
performance.

15
<PAGE>

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

TAXES

Each Fund intends to qualify annually as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"), as amended. By
so qualifying, a Fund will not be subject to federal and California income taxes
to the extent that it distributes substantially all of its net investment income
and net realized capital gains distributed to shareholders.

Distributions from the Funds are taxable to shareholders regardless of whether
they are taken in cash or reinvested in additional shares. For federal income
tax purposes, shareholders receiving distributions in the form of additional
shares will have a basis in each such share equal to the Fund's net asset value
per share on the reinvestment date.

Distributions of net investment income and net short-term capital gains are
taxable to shareholders as ordinary income. To the extent that a Fund's
dividends consist of dividend income from domestic corporations, such dividends
may be eligible for the dividends-received deduction available to corporations.
Shareholders will be notified annually of the federal tax status of
distributions. Upon redeeming, selling, or exchanging shares, a shareholder will
realize a taxable gain or loss depending upon his or her basis in the shares
liquidated. The gain or loss generally will be long-term or short-term depending
on the length of time the shares were held. However, a loss recognized by a
shareholder in the disposition of shares on which capital gain dividends were
paid (or deemed paid) before the shareholder had held his or her shares more
than six months would be treated as a long-term capital loss for tax purposes. A
gain realized on the redemption, sale, or exchange of shares would not be
affected by the reacquisition of shares. A loss realized on the redemption,
sale, or exchange of shares would be disallowed to the extent that the shares
disposed of were replaced (whether through reinvestment of distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the date shares were disposed of. Under such circumstances, the basis
of the shares acquired would be adjusted to reflect the disallowed loss.

The information above is only a summary of some of the tax considerations
affecting the Funds and their shareholders; no attempt has been made to discuss
individual tax consequences. Shareholders who are neither citizens nor residents
of the U.S. may be subject to a nonresident alien withholding tax of 30% or a
lower treaty rate, depending on the country in which they reside. The Funds'
distributions also may be subject to state, local, or foreign taxes. A
prospective investor may wish to consult a tax advisor to determine whether
either Fund is a suitable investment based on his or her tax situation.

16
<PAGE>

ABOUT BENHAM EQUITY FUNDS

Benham Equity Funds (BEF) was organized as a California corporation on December
31, 1987, under the name "Benham Equities, Inc." The corporation was renamed
Benham Equity Funds on September 2, 1988. BEF is authorized to issue ten series
and to issue two billion (2,000,000,000) shares of each such series. Within each
series, the directors may issue an unlimited number of shares. Currently, there
are four classes of shares: Benham Gold Equities Index Fund, Benham Income &
Growth Fund, Benham Equity Growth Fund, and Benham Utilities Income Fund. With
respect to each series, shares issued are fully paid and nonassessable and have
no preemptive, conversion, or similar rights. All consideration received by BEF
for shares of any series, and all assets, income, and gains (or losses) earned
thereon, belong to that series exclusively and are subject to the liabilities
related thereto.

Shares of each series have equal voting rights, provided that each series votes
separately on matters that pertain to it exclusively. BEF has instituted
dollar-based voting, meaning the number of votes you are entitled to is based
upon the dollar value of their investment. Under California Corporations Code
Section 708, shareholders have the right to cumulate votes in the election (or
removal) of directors. For example, if six directors are proposed for election,
a shareholder may cast six votes for a single candidate, or three votes for each
of two candidates, etc.

CUSTODIAN BANK: State Street Bank and Trust Company, 225 Franklin Street,
Boston, MA 02101, is custodian of each Fund's assets. Services provided by the
custodian bank include (i) settling portfolio purchases and sales, (ii)
reporting failed trades, (iii) identifying and collecting portfolio income, and
(iv) providing safekeeping of securities. The custodian takes no part in
determining the Funds' investment policies or in determining which securities
are sold or purchased by the Funds.

INDEPENDENT AUDITORS: KPMG Peat Marwick LLP, 3 Embarcadero Center, San
Francisco, California 94111, serves as the Fund's independent auditors. KPMG
audits the annual report and provides tax and other services as auditors.

DIRECTORS AND OFFICERS

BEF's activities are overseen by a board of directors, including seven
independent directors. The individuals listed below whose names are marked with
an asterisk (*) are "interested persons" of BEF (as defined in the Investment
Company Act of 1940) by virtue of, among other considerations, their affiliation
with either BEF; BEF's investment advisor, Benham Management Corporation (BMC);
BEF's agent for transfer and administrative services, Benham Financial Services,
Inc. (BFS); BEF's distribution agent, Benham Distributors, Inc. (BDI); the
parent corporation, Twentieth Century Companies, Inc. (TCC) or TCC's
subsidiaries; or other funds advised by BMC. Each director listed below also
serves as a trustee or director of other funds in The Benham Group. Unless
otherwise noted, dates in parentheses indicate the dates the director or officer
began his or her service in a particular capacity. The directors' and officers'
address is 1665 Charleston Road, Mountain View, California 94043 and 4500 Main
Street, Kansas City, Missouri 64111.

17
<PAGE>

DIRECTORS

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

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

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

MYRON S. SCHOLES, independent director (1988). Mr. Scholes is a principal of
Long-Term Capital Management (1993). He is also Frank E. Buck Professor of
Finance at the Stanford Graduate School of Business (1983) and a director of
Dimensional Fund Advisors (1982) and the Smith Breeden Family of Funds (1992).
From August 1991 to June 1993, Mr. Scholes was a managing director of Salomon
Brothers Inc. (securities brokerage).

KENNETH E. SCOTT, independent director (1988). Mr. Scott is Ralph M. Parsons
Professor of Law and Business at Stanford Law School (1972) and a director of
RCM Capital Funds, Inc. (June 1994).

*JAMES E. STOWERS III, director (1995), president and chief executive officer
(1996); Mr. Stowers is president and director, Twentieth Century Investors,
Inc., TCI Portfolios, Inc., Twentieth Century World Investors, Inc., Twentieth
Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc.,
Twentieth Century Companies, Inc., Investors Research Corporation and Twentieth
Century Services, Inc.

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

18
<PAGE>

OFFICERS

*JAMES E. STOWERS III, president, and chief executive officer (1996).

*ANN N. MCCOID, controller (1988).

*DOUGLAS A. PAUL, secretary (1988), vice president (1990), and general counsel
(1990).

*MARYANNE ROEPKE, chief financial officer and treasurer (1995).

- ---------------------------------------------------------------------------------------------------------------------------
NAME OF AGGREGATE PENSION OR ESTIMATED TOTAL
DIRECTOR COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS COMPENSATION
FROM ACCRUED AS PART OF UPON RETIREMENT FROM FUND AND
EACH FUND FUND EXPENSES FUND COMPLEX
PAID TO DIRECTORS**
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert A. Eisenstat $ 0 (BIGF) Not Applicable Not Applicable $0
0 (BEGF)
- ---------------------------------------------------------------------------------------------------------------------------
Ronald J. Gilson $ 861 (BIGF) Not Applicable Not Applicable $48,833
781 (BEGF)
- ---------------------------------------------------------------------------------------------------------------------------
Myron S. Scholes $ 1578 (BIGF) Not Applicable Not Applicable $65,625
1376 (BEGF)
- ---------------------------------------------------------------------------------------------------------------------------
Kenneth E. Scott $ 1578 (BIGF) Not Applicable Not Applicable $65,125
1375 (BEGF)
- ---------------------------------------------------------------------------------------------------------------------------
Ezra Solomon $ 1597 (BIGF) Not Applicable Not Applicable $58,792
1382 (BEGF)
- ---------------------------------------------------------------------------------------------------------------------------
Isaac Stein $ 1587 (BIGF) Not Applicable Not Applicable $63,625
1376 (BEGF)
- ---------------------------------------------------------------------------------------------------------------------------
Jeanne D. Wohlers $ 1601 (BIGF) Not Applicable Not Applicable $67,375
1384 (BEGF)
- ---------------------------------------------------------------------------------------------------------------------------

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

** The Benham Group Fund Complex currently consists of 10 registered investment companies.

As of January 31, 1996, the officers and directors, as a group, owned less than 1% of the outstanding shares of each Fund.

</TABLE>

INVESTMENT ADVISORY SERVICES

Each Fund has an investment advisory agreement with BMC dated May 31, 1995, that
was approved by shareholders on that date.

19
<PAGE>

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

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

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

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

For these services, each Fund pays BMC a monthly investment advisory fee equal
to its pro rata share of the dollar amount derived from offering a percentage of
BEF's average daily net assets to the following investment advisory fee rate
schedule:

Investment advisory fees paid by each Fund to BMC for the fiscal years ended
December 31, 1995, 1994, and 1993, are indicated in the following table. Fee
amounts are net of reimbursements as described below.

20
<PAGE>

INVESTMENT ADVISORY FEES

FISCAL FISCAL FISCAL
FUND 1995 1994 1993

Income & Growth Fund $857,968 $778,787 $538,545
Equity Growth Fund 412,627 303,587 222,347

ADMINISTRATIVE AND TRANSFER AGENT SERVICES

BFS, a wholly owned subsidiary of TCC, is BEF's agent for transfer and
administrative services. For administrative services, each Fund pays BFS a
monthly fee based on its pro rata share of the dollar amount derived from
applying the average daily net assets of all of the funds in The Benham Group to
the following administrative fee schedule:

GROUP ASSETS ADMINISTRATIVE FEE RATE

up to $4.5 billion .11%
up to $6 billion .10
up to $9 billion .09
over $9 billion .08

For transfer agent services, each Fund pays BFS a monthly fee of $1.3958 (Income
& Growth Fund) or $1.1875 (Equity Growth Fund) for each shareholder account
maintained and $1.35 (both Funds) for each shareholder transaction executed
during that month.

Administrative service and transfer agent fees paid by each Fund to BFS for the
fiscal years ended December 31, 1995, 1994, and 1993, are indicated in the
following tables. Fee amounts are net of expense limitations as described on the
next page.

ADMINISTRATIVE FEES

FISCAL FISCAL FISCAL
FUND 1995 1994 1993

Income & Growth Fund $264,645 $229,311 $174,067
Equity Growth Fund 126,295 86,954 76,262

TRANSFER AGENT FEES
FISCAL FISCAL FISCAL
FUND 1995 1994 1993

Income & Growth Fund $472,699 $476,007 $408,480
Equity Growth Fund 240,686 207,987 167,147

21
<PAGE>

DIRECT FUND EXPENSES

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

EXPENSE LIMITATION AGREEMENTS

As part of the investment advisory agreement between BEF and BMC in effect
through May 31, 1992, the directors set an expense limitation, pursuant to which
BMC limited each Fund's expenses to .75% of the Fund's average daily net assets.
The agreement provided that BMC could recoup amounts absorbed on behalf of each
Fund during the preceding 11 months if, and to the extent that, for any given
month, the Fund's expense ratio (net reimbursements) was lower than the expense
guarantee rate in effect at the time, but not during any period, during which
BMC has agreed, pursuant to the expense limitation, to limit the Fund's expenses
to an amount less than the expense guarantee rate.

VOLUNTARY BMC EXPENSE LIMITATION. BMC voluntarily absorbed all expenses for
Benham Income & Growth Fund and Benham Equity Growth Fund through September 30,
1991, and October 31, 1991, respectively.

Net amounts absorbed and recouped for the fiscal years ended December 31, 1995,
1994, and 1993, are indicated in the table below.

NET AMOUNTS ABSORBED (RECOUPED) BY BMC AND BFS

FISCAL FISCAL FISCAL
FUND 1995 1994 1993

Income & Growth Fund 0 ($38,345) $114,063
Equity Growth Fund (2,726) 2,871 66,494

22
<PAGE>

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Funds' shares are continuously offered at NAV. Share certificates are issued
(without charge) only when requested in writing. Certificates are not issued for
fractional shares. Dividend and voting rights are not affected by the issuance
of certificates.
<TABLE>
<CAPTION>

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

- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Benham Charles Schwab & Co. 2,968,025.307 13.3260
Income & Growth 101 Montgomery Street
Fund San Francisco, CA 94104-4122

- -----------------------------------------------------------------------------------------------------------------
Benham Charles Schwab & Co. 1,229,241.569 10.7283
Equity Growth 101 Montgomery Street
Fund San Francisco, CA 94104-4122

- -----------------------------------------------------------------------------------------------------------------
</TABLE>

As of January 31, 1996, to BEF`s knowledge, no other shareholder was the record
holder or beneficial owner of 5% or more of the Fund`s total shares outstanding.

OTHER INFORMATION

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

<PAGE>
BENHAM UTILITIES
INCOME FUND

Prospectus * February 26, 1996

[picture of Hoover Dam]

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

<PAGE>

- -------------------
[information in left margin of page]
THE BENHAM GROUP
1665 Charleston Rd.
Mountain View
California 94043

FUND
INFORMATION
1-800-331-8331
1-415-965-4274

INVESTOR SERVICES
1-800-321-8321
1-415-965-4222

TDD SERVICE
1-800-624-6338
1-415-965-4764

Benham Group
Representatives
are available
by telephone
weekdays from
5 a.m. to 5 p.m. Pacific Time.
- -------------------

BENHAM UTILITIES
INCOME FUND

A Series of Benham Equity Funds

Prospectus o February 26, 1996

BENHAM UTILITIES INCOME FUND seeks current income and long-term growth of
capital and income. The Fund invests primarily in equity securities of companies
engaged in the utilities industry.

One feature that distinguishes the Fund from other utility funds is that it
attempts to provide investors with a consistent level of monthly dividend
income, although there is no guarantee that it will be able to do so. The Fund
is a diversified series of Benham Equity Funds (BEF), a no-load, open-end mutual
fund.

Mutual fund shares are not insured by the FDIC, the Federal Reserve Board, or
any other agency. The value of the investment and its returns will fluctuate and
is not guaranteed.

2
<PAGE>

SUMMARY OF FUND EXPENSES

================================================================================
A. SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------

Sales load imposed on purchases ............................. None
Sales load imposed on reinvested dividends .................. None
Deferred sales load ......................................... None
Redemption fee .............................................. None
Exchange fee ................................................ None

Investment advisory fee
(net of expense limitation)............................ .30%*
12b-1 fee.................................................... None
Other expenses............................................... .45%
Total Fund operating expenses
(net of expense limitation)............................ .75%*

* Benham Management Corporation (BMC) has agreed to continue to limit the Fund`s
total operating expenses to a percentage of average daily net assets through May
31, 1996. The operation of this expense limitation effectively requires that
total expenses paid by the Fund not exceed .75% of average daily net assets. The
agreement provides that BMC may recover amounts absorbed on behalf of the Fund
during the preceding 11 months if, and to the extent that, for any given month,
the Fund`s expenses were less than the expense limit in effect at the time. The
expense limitation is subject to annual renewal in June. If this expense
limitation were not in effect, the Fund`s investment advisory fee and total
operating expenses would be .31% and .76% of average daily net assets,
respectively.

- -------------------
[[information in right margin of page]
Please read this Prospectus carefully and retain it for future reference. It is
designed to help you decide if the Fund's goals match your own.
- -------------------

3
<PAGE>

================================================================================
C. EXAMPLE OF EXPENSES
- --------------------------------------------------------------------------------

One Year Three Years Five Years Ten Years
$8 $24 $42 $93

FINANCIAL HIGHLIGHTS

4
<PAGE>

================================================================================
BENHAM UTILITIES INCOME FUND
Years ended December 31 (except as noted)
- --------------------------------------------------------------------------------

1995 1994 1993+
------ ------ ------
PER-SHARE DATA
- --------------
NET ASSET VALUE AT BEGINNING OF PERIOD $8.79 10.24 10.00

Income From Investment Operations

Net Investment Income .42 .44 .36
Net Realized and Unrealized Gains (Losses)
on Investments 2.65 (1.45) .30
----- ----- -----

Total Income (Losses) From Investment Operations 3.07 (1.01) .66
----- ----- -----
Less Distributions
Dividends from Net Investment Income (.42) (.44) (.36)
Distributions from Net Realized Capital Gains 0 0 (.06)
----- ----- -----
Total Distributions (.42) (.44) (.42)
----- ----- -----
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) $218,795 152,570 194,314
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 per Share $.03 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.

5
<PAGE>

- -------------------
[information in left margin of page]
Under normal market conditions, the Fund invests at least 75% of its total
assets in equity securities of companies engaged in the utilities industry.
- -------------------

HOW THE FUND WORKS

The following pages contain a discussion of the Fund's investment objective and
policies. See "Other Investment Policies and Techniques"beginning on page 11 for
a more detailed discussion of the types of securities the Fund may buy and the
risks associated with them.

INVESTMENT OBJECTIVE

The Fund seeks to provide investors with current income and long-term growth of
capital and income. There is no assurance that the Fund will achieve its
investment objective.

The Fund's investment objective, industry concentration policy, and issuer
diversification policy, described on the following pages, are fundamental and
may not be changed without shareholder approval. The other policies described in
this Prospectus are not fundamental and may be changed by BEF's board of
directors.

CORE INVESTMENT STRATEGIES

The Fund normally invests at least 75% of its total assets in equity securities
of companies engaged in the utilities industry. Such companies may include:
public utility companies, whose user rates are set by a government entity such
as a state utilities commission; companies with non-regulated utility
operations; or companies with a combination of regulated and non-regulated
utility operations. Within this 75% category, the Fund will not buy shares of a
company unless 50% or more of the company's revenues or net profits are derived
from the ownership or operation of facilities used to provide electricity,
natural gas, telecommunications services, pay television (e.g., cable), water,
or sanitary services to the public.

To enhance dividend income, increase portfolio diversification, or support share
price stability, the Fund may invest up to 25% of its total assets in
fixed-income securities (i.e., bonds issued by the U.S. government or its
agencies, bonds issued by companies engaged in the utilities industry (utility
bonds), or bonds issued by non-utility corporations).

6
<PAGE>

BMC normally expects to invest 10-20% of the Fund's total assets in utility
bonds and may invest up to 5% of the Fund's total assets in non-utility
corporate bonds. The Fund's corporate debt holdings must be of investment-grade
quality.

To be considered investment grade, a bond must be rated BBB/Baa or better by a
nationally recognized statistical rating organization (a "rating agency") or be
judged to be of comparable quality by BMC under the direction of the board of
directors. If a bond held by the Fund is downgraded by a rating agency, BMC will
not necessarily sell the bond unless it determines that the bond is no longer of
investment-grade quality.

For a brief description of the Fund's other permitted investments, see the
section entitled "Other Investment Policies and Techniques," which begins on
page 11.

MANAGEMENT APPROACH

In recent years, changes in the regulatory climate have allowed public utility
companies to provide products and services outside of their traditional
geographic areas. BMC seeks to maximize the benefits from both increased
competition and expanded growth prospects that are expected to arise from these
changes.

BMC uses quantitative management strategies in pursuit of the Fund's investment
objective. Quantitative investment management combines a disciplined management
approach with the flexibility to respond to events that may affect the value of
the Fund's investments. This approach is a compromise between active management,
which allows the advisor to select investments for a fund without reference to
an index or investment model, and indexing, in which the advisor tries to match
a fund's portfolio composition to that of a particular index.

The Fund is a "diversified" investment company as defined in the Investment
Company Act of 1940 (the "1940 Act"). This means that investments in any single
issuer are limited by restrictions under the 1940 Act.

- -------------------
[information in right margin of page]
Under normal market conditions, BMC expects to invest 10-20% of the Fund's total
assets in utility bonds.
- -------------------

7
<PAGE>
- -------------------
[information in left margin of page]
Public utilities companies have historically provided above-average dividends,
which may make their stocks useful to long-term, income-oriented investors.
- -------------------

INVESTMENT CONSIDERATIONS

The Fund may be appropriate for conservative investors seeking income and growth
potential through exposure to public utilities companies. These companies have
historically provided above-average dividends, which may make their stocks
appropriate for long-term, income-oriented investors. Historically, utility
stocks have generally been considered to be among the most conservative equity
securities despite their vulnerability to inflation and regulation. However,
increased competition and a trend toward deregulation have created opportunities
for growth, as well as greater price volatility, among utilities stocks. The
Fund, by itself, is not a balanced investment plan and works best for long-term
investors prepared to ride out the markets' ups and downs.

DIVIDEND GROWTH, YIELD, AND HISTORICAL RISK/RETURN COMPARISONS

As indicated below, Chart 1 compares the rate of dividend growth for the
Standard & Poor's Utilities Index (S&P Utilities Index) with the rate of
inflation as measured by the Consumer Price Index (CPI) over a 50-year period.

CHART 1 - Growth of Utility Stock Dividends vs. Inflation
[line graph]

[graph data]
Index Dividends
Inflation (CPI) S&P Utilities
$ 1 $ 1
1.09 1.08
1.12 1.1
1.1 1.19
1.16 1.27
1.23 1.32
1.24 1.32
1.25 1.41
1.25 1.48
1.25 1.56
1.29 1.69
1.33 1.79
1.35 1.84
1.37 1.95
1.39 2.04
1.4 2.15
1.41 2.25
1.44 2.37
1.46 2.55
1.48 2.74
1.53 2.96
1.58 3.14
1.66 3.29
1.76 3.38
1.85 3.48
1.91 3.57
1.98 3.64
2.16 3.74
2.42 3.8
2.59 3.95
2.72 4.13
2.9 4.45
3.16 4.76
3.58 5.12
4.02 5.45
4.38 5.87
4.55 6.29
4.72 6.65
4.91 7.11
5.1 7.4
5.16 7.73
5.39 8.11
5.62 8.37
5.89 8.67
6.25 9.11
6.44 9.35
6.63 9.4
6.81 9.52
6.99 9.74
7.17 9.76

Sources: Standard & Poor's Security Price Index Record and U.S. Department of
Labor.

<PAGE>

Historically, common stock dividend yields for public utility companies have
exceeded comparable figures for the broader market while offering investors
comparatively less share price volatility. As indicated below, Chart 2 compares
common stock dividend yields for the S&P Utilities Index with those of the
broader Standard & Poor's 500 Composite Stock Price Index (S&P 500) from 1946 to
1995.

CHART 2 - Stock Dividend Yields S&P Utilities Index vs. S&P 500
[line graph]

[graph data]
S&P 500 Yield S&P Utilities Index Yield
% 4.64 % 4.65
5.49 6.02
6.12 6.23
6.8 5.42
7.2 5.98
5.93 5.52
5.31 4.89
5.84 5.1
4.28 4.53
3.61 4.48
3.73 4.85
4.48 5.07
3.17 3.86
3.06 3.96
3.36 3.59
2.82 3.02
3.38 3.36
3.04 3.25
2.95 3.11
2.94 3.3
3.57 3.88
3.03 4.33
2.96 4.29
3.43 5.49
3.41 5.14
3.01 5.43
2.67 5.42
3.46 7.25
5.25 10.32
4.08 8.08
3.77 6.93
4.9 7.4
5.28 8.93
5.23 9.28
4.54 9.46
5.41 10.08
4.88 9.46
4.3 9.14
4.5 8.53
3.74 7.22
3.42 6.26
3.57 7.23
3.5 6.76
3.13 5.05
3.66 5.77
2.93 5.48
2.84 5.4
2.7 5.02
2.87 5.9
2.24 4.38

Source: Standard & Poor's Security Price Index Record.

9
<PAGE>

As indicated below, Chart 3 illustrates historical risk (or volatility) in the
utilities sector by comparing the historical risk and return characteristics of
the S&P Utilities Index with comparable figures for the S&P 500 and a U.S.
Treasury bond with a remaining maturity of 20 years.

CHART 3 - Risk vs. Reward (1946-1995)
[dot graph]

[graph data] Risk - Average Annual
Reward - Standard Deviation Total Return
S&P 500 11.94 16.57
U.S. Treasury Bond 5.35 10.54
S&P Utilities 9.26 15.79

Sources: Standard & Poor's Security Price Index Record and Ibbotson Associates,
Stocks, Bonds, Bills and Inflation. (S&P 500 is a registered service mark of
Standard & Poor's Corporation.)

Note that while the S&P Utilities Index was less volatile than the S&P 500, it
also produced lower returns than the S&P 500 during the period illustrated
above. The S&P 500 is an unmanaged index representing the performance of 500
major companies, most of which are listed on the New York Stock Exchange.
Investors cannot invest directly in the S&P 500.

The charts above and on the previous page show the characteristics of utilities
stocks that have attracted investors in the past. Regulatory and competitive
factors are changing the utilities industry considerably, and there is no
assurance that these historic trends will continue. Within any one market
sector, a period of above average performance may be followed by a period of
below average performance.

10
<PAGE>

OTHER INVESTMENT POLICIES AND TECHNIQUES

CONVERTIBLE SECURITIES. Although the Fund's equity investments consist primarily
of common stocks, it may buy securities convertible into common stock, such as
convertible bonds, convertible preferred stocks, or warrants. BMC may purchase
these securities if it believes that a company's convertible securities are
undervalued in the market.

WHEN-ISSUED SECURITIES AND FORWARD-COMMITMENT AGREEMENTS. When-issued securities
and forward-commitment agreements fix a security's price and yield for future
payment and delivery. The market value of a security may change during this
period, or a party to the agreement may fail to pay for the security. Either of
these situations could affect the market value of the Fund's assets. As an
operating policy, the Fund will not commit greater than 35% of its total assets
to when-issued or forward-commitment agreements.

SHORT-TERM INSTRUMENTS. For liquidity purposes, the Fund may invest in
high-quality money market instruments with remaining maturities of one year or
less. Such instruments may include U.S. government securities, certificates of
deposit, commercial paper, or bankers' acceptances.

The Fund may also enter into repurchase agreements, collateralized by U.S.
government securities, with banks or broker-dealers that are deemed to present
minimal credit risk. Credit risk determinations are made by BMC pursuant to
guidelines established by the board of directors. A repurchase agreement
involves the purchase of a security and a simultaneous agreement to sell it back
to the seller at a higher price. At the direction of the board, BMC has
established procedures to minimize potential losses due to credit risk. Delays
or losses could result if the other party to the agreement defaults or becomes
bankrupt.

The Fund's fixed-income investments may be affected by changes in their issuers'
credit standings.

Bonds rated in the lowest investment-grade category (BBB/Baa) may have
speculative characteristics. Changes in economic conditions or other
circumstances may affect principal and interest payments.

- -------------------
[information in right margin of page]
The Fund's fixed-income investments may be affected by changes in the credit
standing of their issuers and may decline in value if an issuer's
credit-worthiness deteriorates.
- -------------------

11
<PAGE>

- -------------------
[information in left margin of page]
The Fund may use futures and options transactions to a limited extent.
- -------------------

By investing in bonds, the Fund also incurs "call risk." If a bond held by the
Fund is called for redemption, the Fund will have cash to invest at prevailing
interest rates, which may be lower than the interest rate on the called bond.

The Fund may invest up to 5% of its total assets in any money market fund
advised by BMC, provided that the investment is consistent with the Fund's
policies and restrictions. For temporary, defensive purposes, the Fund may
invest up to 100% of its assets in short-term instruments.

FUTURES AND OPTIONS TRANSACTIONS. In order to manage the Fund's exposure to
changes in market conditions, such as movements in securities prices, interest
rates, and domestic and foreign economies, the Fund may invest up to 20% of its
total assets in futures and options. As with many investments, futures and
options can be highly volatile. If BMC incorrectly judges market conditions in
an attempt to reduce risk or enhance return or if certain markets pose liquidity
difficulties, losses may occur, and the Fund's value may be affected. The Fund
will not utilize futures and options for speculative purposes.

SECURITIES LENDING. The Fund may lend its portfolio securities to banks and
broker-dealers to earn additional income. Securities loans are subject to
guidelines prescribed by the board of directors, which are set forth in the
Statement of Additional Information.

This practice could result in a loss or a delay in recovering the Fund's
securities. Loans are limited to 33-1/3% of the Fund's total assets.

12
<PAGE>

- -------------------
[information in right margin of page]
The Fund may invest up to 10% of its assets in securities of foreign utility
companies.
- -------------------

FOREIGN SECURITIES. The Fund may invest up to 10% of its assets in securities of
foreign utility companies. The Fund's foreign holdings may include instruments
that trade on domestic or foreign securities exchanges in U.S. dollars or
foreign currencies.

ILLIQUID AND RESTRICTED SECURITIES AND PRIVATE PLACEMENTS. The Fund may acquire
some securities that are difficult to sell promptly at an acceptable price
(i.e., illiquid). Difficulty in selling securities may result in losses and
extra expenses to the Fund. In addition, legal restrictions may apply to the
sale of these securities.

The Fund may invest up to 15% of its net assets in illiquid securities,
including restricted securities and private placements.

OTHER INVESTMENT MANAGEMENT TECHNIQUES. BMC may buy other types of securities or
employ other portfolio management techniques on behalf of the Fund. When
required by SEC guidelines, the Fund will set aside cash or appropriate liquid
assets in a segregated account to cover its portfolio obligations. See the
Statement of Additional Information for a more detailed discussion of these
investments and some of the risks associated with them.

- -------------------
[information in right margin of page]
The Fund may invest up to 10% of its assets in securities of foreign utility
companies.
- -------------------

13
<PAGE>

- -------------------
[information in left margin of page]
Performance data and a discussion of factors that affected performance during
the Fund's most recent reporting period are included in the Fund's annual and
semiannual reports to shareholders.
- -------------------

PORTFOLIO TRANSACTIONS

BMC selects brokerage firms solely on the basis of best net price and execution
and expects to engage in regular trading on behalf of the Fund. Under normal
conditions, the Fund's annual portfolio turnover rate is not expected to exceed
150% and may vary from year to year. Higher portfolio turnover rates increase
transaction costs and can increase the incidence of short-term capital gains (or
losses). Short-term capital gains distributed to shareholders are treated as
ordinary income.

PERFORMANCE

Mutual fund performance is commonly expressed in terms of historical yield or
total return and may be quoted in advertising and sales literature. Past
performance is no guarantee of future results.

TOTAL RETURN represents the Fund's changes over a specified time period,
assuming reinvestment of dividends and capital gains, if any. CUMULATIVE TOTAL
RETURN illustrates the Fund's actual performance over a stated period of time.
AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that illustrates
the annually compounded return that would have produced the same cumulative
total return if the Fund's performance had been constant over an entire period.
Average annual total returns smooth out variations in the Fund's performance;
they are not the same as year-by-year results.

Performance data and a discussion of factors that affected performance during
the Fund's most recent reporting period are included in the Fund's annual and
semiannual reports to shareholders. These reports are routinely delivered to the
Fund's shareholders. For a free copy, call one of the Fund Information numbers
on page 2.

14
<PAGE>

SHARE PRICE

15
<PAGE>

HOW TO INVEST

Fund Information: for information about any Benham fund or other investment
product, call 1-800-331-8331 or 1-415-965-4274.

INVESTOR SERVICES: to open an account, receive a Prospectus or Statement of
Additional Information for a Benham Fund, or to inquire about or make
transactions in an existing account, call 1-800-321-8321 or 1-415-965-4222.

16
<PAGE>

HOW TO BUY SHARES (Retirement investors, see pages 26 and 27).

MAKE YOUR INVESTMENT CHECK PAYABLE TO THE BENHAM GROUP. Mail
the check with your completed application to:

The Benham Group
P.O. Box 7730
San Francisco, CA 94120-9853

If you do not have a preprinted investment slip, send your
check with written instructions indicating the fund name and
the account number. If the payee information provided on the
check does not agree with your written instructions, we will
follow the written instructions.

Investors will be charged $5 for every investment check
returned unpaid.

17
<PAGE>

If you wish to open an account by bank wire, please call our
Investor Services Department for more information and an
account number. Bank wire investments should be addressed as
follows:

State Street Bank and Trust Company
Boston, Massachusetts
ABA Routing Number 011000028
Beneficiary = Benham Equity Funds: Benham Utilities Income Fund
Fund Account Number 0506 080 1
FBO [Your Name, Your Benham Fund Account Number]

- --------------------------------------------------------------------------------
BY EXCHANGE Minimum initial investment: $1,000
Minimum additional investment: $100

You may exchange your shares for shares of any other Benham
fund registered for sale in your state if you have received and
read the fund's prospectus. Exchanges may be made by telephone
(for identically registered accounts only), by written request,
or in person. Certain restrictions apply; please see "Telephone
Transactions" on page 19 and "Exchange Privilege" on page 20
for details. You may open a new account by telephone exchange,
provided that you meet the minimum initial investment
requirement.

18
<PAGE>

PROCESSING YOUR PURCHASE

TELEPHONE TRANSACTIONS

Shareholders may order certain transactions (e.g., exchanges, wires, some types
of redemptions) by telephone. This privilege is granted to Benham fund
shareholders automatically; you need not specifically request this service, and
you may not specifically decline it. Once your telephone order has been placed,
it may not be modified or cancelled.

The Benham Group will not be liable for losses resulting from unauthorized or
fraudulent instructions if it follows procedures designed to verify the caller's
identity. BMC will request personal identification, record telephone calls, and
send confirmation statements for every telephone transaction to the
shareholder's record address. The Fund reserves the right to revise or terminate
telephone transaction privileges at any time.

CONFIRMATION AND QUARTERLY STATEMENTS

19
<PAGE>

- -------------------
[information in left margin of page]
The free exchange privilege is a convenient way to buy shares in other Benham
funds if your investment goals change.

Benham Open Orders allow investors to utilize a "buy low, sell high" investment
strategy.
- -------------------

ACCOUNT SERVICES

EXCHANGE PRIVILEGE

Currently, there are no restrictions on exchanges out of a Benham money market
fund. However, each Benham fund reserves the right to modify or revoke the
exchange privilege of any shareholder or to limit or reject any exchange.
Although each fund will attempt to give shareholders prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.

OPEN ORDER SERVICE

The Benham Group's Open Order Service allows you to designate a price at which
to buy or sell shares of a variable-price fund by exchange from or to a money
market fund. To place a "buy" order, you designate a purchase price that is
equal to or lower than the current NAV. To place a "sell" order, designate a
sales price that is equal to or higher than the current NAV. If the designated
price is met within 90 calendar days, we will automatically execute your order
at the NAV calculated that day as of the close of the Exchange. If the
designated price is not met within 90 calendar days, your Open Order to buy or
sell shares automatically expires. If you are buying shares of a variable-price
fund, we will

20
<PAGE>

exchange money from your money market account to purchase them. If you are
selling shares of a variable-price fund, we will transfer the proceeds of that
sale to your money market account. If you do not have a money market account, we
will open one for you when we execute your Open Order.

If the fund you have selected deducts a distribution from its share price, your
order price will be adjusted accordingly so that the distribution does not
inadvertently trigger an Open Order transaction on your behalf. If you close or
reregister the account from which shares are to be redeemed, your Open Order
will be canceled. Because of their time-sensitive nature, Open Order
transactions may be made only by telephone or in person. These transactions are
subject to the exchange limitations described in this prospectus (see "Exchange
Privilege" on page 20), except that all orders and cancellations received by one
hour prior to the close of the Exchange, usually 12:00 p.m. Pacific Time, are
effective the same day, otherwise they are effective the following business day.

AUTOMATIC INVESTMENT SERVICES (AIS)

TREASURY DIRECT allows you to deposit interest and principal payments from
Treasury securities directly into a Benham fund account.

PAYROLL DIRECT allows you to deposit any amount of your paycheck directly into a
Benham fund account.

GOVERNMENT DIRECT allows you to deposit your entire U.S. government payment
directly into a Benham fund account.

BANK DIRECT allows you to deposit a fixed amount from your bank account directly
into a Benham fund account on the 1st and/or the 15th of each month (or the next
business day).

DIRECTED DIVIDENDS allows you to invest all or part of your dividend earnings
from one Benham fund account in one or more other Benham fund accounts. You may
choose to receive a portion of your dividends in cash and to invest the
remainder in another Benham fund account.

SYSTEMATIC EXCHANGES allow you to exchange from one Benham fund account to
another Benham fund account on the 1st and/or the 15th of each month (or the
next business day).

- -------------------
[information in right margin of page]
Automatic Investment Services enable you to benefit from a dollar-cost averaging
investment strategy.
- -------------------

21
<PAGE>

- -------------------
[information in left margin of page]
You may redeem shares without charge.
- -------------------

For more information about any of these services, please call our Shareholder
Relations Department at 1-800-321-8321 or 1-415-965-4222.

BROKER-DEALER TRANSACTIONS

TDD SERVICE FOR THE HEARING IMPAIRED

TDD users may contact The Benham Group at 1-800-624-6338 or 1-415-965-4764.
California residents may wish to contact us through the California Relay Service
(CRS) at 1-800-735-2929.

Your transaction requests via CRS will be handled on a recorded line. The Benham
Group cannot accept responsibility for instructions miscommunicated by CRS.

EMERGENCY SERVICES

From within the U.S., including Alaska and Hawaii, call 1-800-321-8321.

From all foreign countries, call collect, 1-303-759-9337 or 1-510-820-1409. The
operator will request your Benham fund account number before accepting the call.

HOW TO REDEEM YOUR INVESTMENT

22
<PAGE>

Fund's NAV is normally calculated at the close of business of the Exchange,
usually 1:00 p.m. Pacific Time. See page 15 for further information.

*Does not include bank direct deposits, which take 8 business days to mature.
- --------------------------------------------------------------------------------

If you hold shares in certificate form, redemption requests must be accompanied
by properly endorsed certificates.

23
<PAGE>

HOW TO REDEEM SHARES (Retirement investors, see pages 26 and 27).

================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------
BY TELEPHONE The Benham Group will accept telephone redemption
requests for any amount if the proceeds are to be sent to your
predesignated bank account. Redemptions of $25,000 or less
payable to the registered account owner(s) may also be ordered
by telephone. All other redemption requests must be made in
writing. ONCE YOUR TELEPHONE ORDER HAS BEEN PLACED, IT MAY NOT
BE MODIFIED OR CANCELLED.

- --------------------------------------------------------------------------------
IN WRITING Send a letter of instruction to

The Benham Group
Investor Services Department
1665 Charleston Road
Mountain View, California 94043

Your letter of instruction should specify
* Your name
* Your account number
* The name of the Fund from which you wish to redeem shares
* The dollar amount or number of shares you wish to redeem

24
<PAGE>

BFS may require written consent of all account owners prior to
acting on the written instructions of any account owner.

- --------------------------------------------------------------------------------
BY EXCHANGE See details on pages 18 and 20.

SYSTEMATIC EXCHANGES. You may arrange for periodic exchange
redemptions from one Benham fund account to another Benham
fund account.

25
<PAGE>

ABOUT BENHAM-SPONSORED RETIREMENT PLANS

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

SEP-IRA A self-employed indi- $22,500 or 15% of compensation
vidual or a business. (whichever is less).*

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

* Self-employed individuals should consult IRS Publication 560 for their annual
contribution limits.

26
<PAGE>

Same as for Contributory IRA. Same as for Contributory IRA.

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

You may open a Rollover IRA Eligible rollover contributions must
anytime. be made within 60 days of receiv-
ing your distribution. There is no
age limit on rollover contributions.
- --------------------------------------------------------------------------------

The end of the employer's plan Same as for SEP-IRA.
year, usually December 31.

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

The end of the employer's plan Same as for SEP-IRA.
year, usually December 31.

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

27
<PAGE>

DISTRIBUTIONS AND TAXES

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

The Fund's dividends are declared daily, accrued throughout the month, and
distributed at the end of the month. In December, the Fund may distribute an
additional ordinary income dividend (consisting of net short-term capital gains
and undistributed income) in order to preserve its status as a regulated
investment company (mutual fund) under Subchapter M of the Internal Revenue Code
of 1986 (the "Code"), as amended. Net long-term capital gains, if any, are also
declared and distributed in December. The Fund`s board of directors may modify
the Fund's distribution policies at any time.

DISTRIBUTION OPTIONS. You may choose to receive dividends and capital gain
distributions in cash or to reinvest them in additional shares (see "Directed
Dividends" on page 21 for further information). Please indicate your choice on
your account application or contact our Investor Services Department. See page
23 for a description of our policy regarding uncashed distribution checks.

TAXES

The Fund intends to qualify annually and elect to be treated as a regulated
investment company under the Code by distributing all or substantially all, of
its net investment income and net realized capital gains to shareholders each
year.

The Fund's dividends and capital gain distributions are subject to federal
income tax and applicable state and local taxes whether they are received in
cash or reinvested in additional shares. Distributions are generally taxable in
the year they are declared.

Dividends from net investment income (including net short-term capital gains, if
any) are taxable as ordinary income. Distributions of any net capital gains (the
excess

28
<PAGE>

of net long-term capital gains over net short-term capital losses), if any,
designated by the Fund as capital gain dividends are taxable as long-term
capital gains, regardless of how long you have held your shares.

The Fund will send you a tax statement (Form 1099) by January 31 showing the tax
status of distributions you received in the previous year and will file a copy
with the Internal Revenue Service (IRS). You may realize a capital gain or loss
when you redeem (sell) or exchange shares. For most types of accounts, the
proceeds from your redemption transactions will be reported to the IRS annually.
However, because the tax treatment depends on your purchase price and personal
tax situation, you should keep your regular account statements to use in
determining your taxes.

BUYING A DIVIDEND. The timing of your investment could have undesirable tax
consequences. If you open a new account or buy more shares for your current
account just before the day a dividend or distribution is reflected in your
Fund's share price, you will receive a portion of your investment back as a
taxable dividend or distribution.

BACKUP WITHHOLDING. The Fund is required by federal law to withhold 31% of
reportable dividends, capital gain distributions, or redemptions payable to
shareholders who have not complied with IRS regulations. These regulations
require you to certify on your account application or on IRS Form W-9 that your
social security or taxpayer identification number ("TIN") is correct and that
you are not subject to backup withholding from previous underreporting to the
IRS, or that you are exempt from backup withholding.

29
<PAGE>

- -------------------
[information in left margin of page]
The Benham Group serves more than 475,000 investors.

Benham Management Corporation provides investment advice and portfolio
management services to the Fund.
- -------------------

MANAGEMENT INFORMATION

ABOUT BENHAM EQUITY FUNDS

BEF is a registered open-end management investment company that was organized as
a California corporation on December 31, 1987. BEF currently consists of five
series.

A board of directors oversees the Fund's activities and is responsible for
protecting shareholders' interests. The majority of directors are not otherwise
affiliated with BMC. BEF is not required nor expected to hold annual meetings,
although special meetings may be called for purposes such as electing or
removing directors or amending a series' advisory agreement or investment
policies. The number of votes you are entitled to is based upon the dollar value
of your investment. Each Fund votes separately on matters that pertain to it
exclusively. Voting rights are not cumulative except under California corporate
law, where shareholders have the right to cumulate votes in the election (or
removal) of directors.

THE BENHAM GROUP

BMC is investment advisor to the funds in The Benham Group, which currently
constitute more than $12 billion in assets. BMC, incorporated in California in
1971, became a wholly owned subsidiary of Twentieth Century Companies, Inc.
(TCC), a Delaware corporation, on June 1, 1995, upon the merger of Benham
Management International, Inc., BMC's former parent, into TCC. TCC is a holding
company that owns the operating companies that provide the investment
management, transfer agency, shareholder service, and other services for the
Twentieth Century family of funds, which now includes the Benham Group. The
combined company offers 62 mutual funds and, as of January 23, 1996, has
combined assets under management in excess of $46 billion.

30
<PAGE>

holdings in the funds' portfolios deemed appropriate in pursuit of the funds'
investment objectives. Individual portfolio managers may also adjust portfolio
holdings of the funds as necessary between team meetings.

MR. STEVEN COLTON, Portfolio Manager, has been primarily responsible for the
day-to-day operation of the Fund since its inception in March, 1993. Mr. Colton
joined BMC in 1987 and has also managed Benham Income & Growth Fund since
December of 1990 and Benham Equity Growth Fund since May of 1991.

ADVISORY AND SERVICE FEES

For investment advice and portfolio management services, the Fund pays BMC a
monthly investment advisory fee equal to its pro rata share of the dollar amount
derived from applying BEF's average daily net assets to an investment advisory
fee schedule. The investment advisory fee rate cannot exceed .50% of average
daily net assets, and it drops to a marginal rate of .19% of BEF's average daily
net assets, as BEF's assets increase.

Investment advisory fees paid by the Fund to BMC for the fiscal year ended
December 31, 1995, were equal to .30% of the Fund's average daily net assets or
$3.00 per $1,000 of the Fund's average daily net assets. These figures are net
of expense limitations.

To avoid duplicative investment advisory fees, the Fund does not pay BMC
investment advisory fees with respect to assets invested in shares of Benham
money market funds.

BFS, a wholly owned subsidiary of TCC, is BEF's agent for transfer and
administrative services. For administrative services, the Fund pays BFS a
monthly fee equal to its pro rata share of the dollar amount derived from
applying the average daily net assets of all of the funds in The Benham Group.
The administrative fee rate ranges from .11% to .08% of average daily net
assets, dropping as Benham Group assets increase. For transfer agent services,
the Fund pays BFS monthly fees for each shareholder account maintained and for
each shareholder transaction executed during that month.

- -------------------
[information in right margin of page]
Benham Financial Services, Inc. provides administrative and transfer agent
services to the Fund.
- -------------------

31
<PAGE>

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

EXPENSE LIMITATION AGREEMENT

The expense limitation agreement between BMC and the Fund is described on page
3.

The Fund's total operating expenses for the fiscal year ended December 31, 1995,
were equal to .75% of the Fund's average daily net assets, or $7.50 per $1,000
of the Fund's average daily net assets. These figures are net of expense
limitations.

In compliance with rules set forth by the SEC, the total operating expenses
include amounts paid by third parties under expense offset arrangements with the
Fund.

DISTRIBUTION OF SHARES

Benham Distributors Inc. (BDI) and BMC distribute and market Benham products and
services. BMC pays all expenses for promoting sales of and distributing the
Fund's shares. The Fund does not pay commissions to, or receive compensation
from, broker-dealers.

BDI is a wholly-owned subsidiary of TCC.

32
<PAGE>

INVESTMENT ADVISOR

BENHAM MANAGEMENT CORPORATION
1665 Charleston Road
Mountain View, California 94043

DISTRIBUTOR

BENHAM DISTRIBUTORS, INC.
1665 Charleston Road
Mountain View, California 94043

CUSTODIAN

STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, Massachusetts 02101

TRANSFER AGENT

BENHAM FINANCIAL SERVICES, INC.
1665 Charleston Road
Mountain View, California 94043

INDEPENDENT AUDITORS

KPMG PEAT MARWICK LLP
3 Embarcadero Center
San Francisco, California 94111

DIRECTORS

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

33
<PAGE>
The Benham Group of Investment Companies

* Available only to residents of California, Arizona, Colorado, Hawaii,
Nevada, New Mexico, Oregon, Texas, Utah, and Washington.

** Available only to residents of Florida, California, Georgia, Illinois,
Michigan, New Jersey, New York, and Pennsylvania.

*** Available only to residents of Arizona, California, Colorado, Nevada,
Oregon, Washington, and Texas.

34
<PAGE>

NOTES:

35
<PAGE>

CONTENTS

Summary of Fund Expenses ............... 3
Financial Highlights ................... 4
How the Fund Works ..................... 6
Investment Considerations .............. 8
Other Investment Policies and Techniques 11
Portfolio Transactions ................. 14
Performance ............................ 14
Share Price ............................ 15
How to Invest .......................... 16
How to Buy Shares ...................... 17
Account Services ....................... 20
Exchange Privilege .................. 20
Open Order Service .................. 20
Automatic Investment Services ....... 21
Broker-Dealer Transactions .......... 22
TDD Service ......................... 22
Emergency Services .................. 22
How to Redeem Your Investment .......... 22
How to Redeem Shares ................... 24
About Benham-Sponsored Retirement Plans 26
Distributions and Taxes ................ 28
Management Information ................. 30
About Benham Equity Funds ........... 30
The Benham Group .................... 30
Advisory and Service Fees ........... 31
Expense Limitation Agreement ........ 32
Distribution of Shares .............. 32

J012

<PAGE>
BENHAM UTILITIES INCOME FUND

A Series of Benham Equity Funds

The Benham Group(R)
1665 Charleston Road
Mountain View, CA 94043

Investor Services: 1-800-321-8321 or 1-415-965-4222

Fund Information: 1-800-331-8331 or 1-415-965-4274

STATEMENT OF ADDITIONAL INFORMATION

February 26, 1996

TABLE OF CONTENTS

Page
----

Investment Policies and Techniques ........................ 2
Investment Restrictions ................................... 11
Risk Factors .............................................. 13
Portfolio Transactions .................................... 14
Valuation of Portfolio Securities ......................... 14
Performance ............................................... 15
Taxes ..................................................... 17
About Benham Equity Funds ................................. 18
Directors and Officers .................................... 18
Investment Advisory Services .............................. 21
Administrative and Transfer Agent Services ................ 22
Direct Fund Expenses ...................................... 23
Expense Limitation Agreement .............................. 23
Additional Purchase and Redemption Information ............ 23
Other Information ......................................... 24

1
<PAGE>

INVESTMENT POLICIES AND TECHNIQUES

U.S. GOVERNMENT SECURITIES

WHEN-ISSUED AND FORWARD-COMMITMENT AGREEMENTS

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

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

As an operating policy, the Fund will not commit greater than 35% of its total
assets to when-issued or forward-commitment agreements. If fluctuations in the
value of securities held cause more than 35% of the Fund's assets to be
committed under when-issued or forward-commitment agreements, the advisor need
not sell such commitments, but it will be restricted from entering into further
agreements on behalf of the Fund until the percentage of assets committed to
such agreements is reduced to 35%. In addition, as an operating policy, the Fund
will not enter into when-issued or forward-commitment transactions with
settlement dates exceeding 120 days.

2
<PAGE>

CONVERTIBLE SECURITIES

The Fund may buy securities that are convertible into common stock shares of
utility companies. Listed below is a brief description of the various types of
convertible securities the Fund may buy.

CONVERTIBLE BONDS are issued with lower coupons than nonconvertible bonds of the
same quality and maturity, but they give holders the option to exchange their
bonds for a specific number of shares of the company's common stock at a
predetermined price. This structure allows the convertible bond holder to
participate in share price movements in the company's common stock. The actual
return on a convertible bond may exceed its stated yield if the company's common
stock appreciates in value and if the option to convert to common shares becomes
more valuable.

WARRANTS entitle the holder to buy the issuer's stock at a specific price for a
specific period of time. The price of a warrant tends to be more volatile than,
and does not always track, the price of the underlying stock. Warrants are
issued with expiration dates. Once a warrant expires, it has no value in the
market.

REPURCHASE AGREEMENTS

The advisor attempts to minimize the risks associated with repurchase agreements
by adhering to the following criteria:

(1) Limiting the securities acquired and held by the Fund under repurchase
agreements to U.S. government securities;

(3) Monitoring the creditworthiness of all firms involved in repurchase
agreement transactions;

(4) Requiring the seller to establish and maintain collateral equal to 102% of
the agreed-upon resale price, provided, however, that the board of
directors may determine that a broker-dealer's credit standing is
sufficient to allow collateral to fall to as low as 101% of the agreed-upon
resale price before the broker-dealer deposits additional securities with
the Fund's custodian or sub-custodian;

3
<PAGE>

(5) Investing no more than 15% of the Fund's net assets in repurchase
agreements that mature in more than seven days (together with any other
illiquid securities the Fund holds); and

(6) Taking delivery of securities subject to a repurchase agreement and holding
them in a segregated account at the Fund's custodian bank.

The Fund has received permission from the Securities and Exchange Commission
(SEC) to participate in pooled repurchase agreements collateralized by U.S.
government securities with other mutual funds advised by Benham Management
Corporation (BMC), the Fund's investment advisor. Pooled repos are expected to
increase the income the Fund can earn from repo transactions without increasing
the risks associated with these transactions.

FOREIGN SECURITIES

Although the Fund may buy securities of foreign issuers in foreign markets, most
of its foreign securities investments are made by purchasing American Depositary
Receipts ("ADR"s), "ordinary shares," or "New York shares." The Fund may invest
in foreign-currency-denominated debt or equity securities of companies engaged
in the utilities industry if BMC believes that such investments will be
advantageous to the Fund.

4
<PAGE>

or to convert currency into U.S. dollars. There may be a greater possibility of
default by foreign governments or foreign-government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments.

Currencies may be exchanged on a spot (i.e., cash) basis or by entering into
forward contracts to purchase or sell foreign currencies at a future date and
price. By entering into a forward contract to buy or sell the amount of foreign
currency involved in a security transaction for a fixed amount of U.S. dollars,
the advisor can protect the Fund against losses resulting from adverse changes
in the relationship between the U.S. dollar and the foreign currency during the
period between the date the security is purchased or sold and the date on which
payment is made or received. However, it should be noted that using forward
contracts to protect the Fund's foreign investments from currency fluctuations
does not eliminate fluctuations in the prices of the underlying securities
themselves. Forward contracts simply establish a rate of exchange that can be
achieved at some future point in time. Additionally, although forward contracts
tend to minimize the risk of loss due to a decline in the value of the hedged
currency, they also limit any gain that might result if the hedged currency's
value were to increase.

Foreign exchange dealers do not charge fees for currency conversions. Instead,
they realize a profit based on the difference (i.e., the spread) between the
prices at which they are buying and selling various currencies. A dealer may
offer to sell a foreign currency at one rate while simultaneously offering a
lesser rate of exchange on the purchase of that currency.

The advisor uses forward contracts for currency hedging purposes only and not
for speculative purposes. The Fund is not required to enter into forward
contracts with regard to its foreign holdings and will not do so unless this
procedure is deemed appropriate by the advisor.

The Fund's assets are valued daily in U.S. dollars, although foreign currency
holdings are not physically converted into U.S. dollars on a daily basis.

DEPOSITARY RECEIPTS

American Depositary Receipts and European Depositary Receipts ("EDR"s) are
receipts representing ownership of shares of a foreign-based issuer held in
trust by a bank or similar financial institution. These are designed for U.S.
and European securities markets as alternatives to purchasing underlying
securities in their corresponding national markets and currencies. ADRs and EDRs
can be sponsored or unsponsored.

5
<PAGE>

RESTRICTED SECURITIES

Restricted securities held by the Fund generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where registration
is required, the Fund may be required to pay all or a part of the registration
expense, and a considerable period may elapse between the time it decides to
seek registration of the securities and the time it is permitted to sell them
under an effective registration statement. If, during this period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to try to register the securities.

SECURITIES LENDING

To minimize the risk of default on securities loans, BMC adheres to the
following guidelines prescribed by the board of directors:

(5) LIMITATIONS ON PERCENTAGE OF PORTFOLIO SECURITIES ON LOAN. The Fund's
loans may not exceed 33-1/3% of its total assets.

6
<PAGE>

SHORT SALES AND PUT OPTIONS ON INDIVIDUAL SECURITIES

The Fund may buy puts and enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if the advisor
anticipates a decline in the price of the stock underlying a convertible
security the Fund holds, it may purchase a put option on the stock or sell the
stock short. If the stock price subsequently declines, the proceeds of the short
sale or an increase in the value of the put option could be expected to offset
all or a portion of the effect of the stock's decline on the value of the
convertible security.

When the Fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to those sold short (or securities
convertible or exchangeable into such securities) and will be required to
continue to hold them while the short sale is outstanding. The Fund will incur
transaction costs, including interest expenses, in connection with opening,
maintaining, and closing short sales.

FUTURES AND OPTIONS TRANSACTIONS

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

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

7
<PAGE>

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

PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Fund obtains
the right (but not the obligation) to sell the option's underlying instrument at
a fixed "strike" price. In return for this right, the Fund pays the current
market price for the option (known as the option premium). Options have various
types of underlying instruments, including specific securities, indexes of
securities prices, and futures contracts. The Fund may terminate its position in
a put option it has purchased by allowing it to expire or by exercising the
option. If the option is allowed to expire, the Fund will lose the entire
premium it paid. If the Fund exercises the option, it completes the sale of the
underlying instrument at the strike price. The Fund may also terminate a put
option position by closing it out in the secondary market at its current price
if a liquid secondary market exists.

WRITING PUT AND CALL OPTIONS. If the Fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party chooses to exercise
the option. When writing an option on a futures contract, the Fund will be
required to make margin payments to a broker or custodian as described above for
futures contracts. The Fund may seek to terminate its position in a put option
it writes before exercise by closing out the option in the secondary market at
its current price. If the secondary market is not liquid for a put option the
Fund has written, however, the Fund must continue to be prepared to pay the
strike price while the option is outstanding, regardless of price changes, and
must continue to set aside assets to cover its position.

If security prices were to rise, a put writer would generally expect to profit,
although the gain would be limited to the amount of the premium received. If
security prices were to remain the same over time, it would be likely that the
writer would also profit by being able to close out the option at a lower price.
If security prices were to fall, the put writer would expect to suffer a loss.
This loss should be less than the loss from purchasing the underlying instrument
directly, however, because the premium received for writing the option should
mitigate the effects of the decline.

Writing a call option obligates the Fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are

8
<PAGE>

similar to those of writing put options, except that writing calls generally is
a profitable strategy if prices remain the same or fall. Through receipt of the
option premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price even if its current value is greater,
a call writer gives up some ability to participate in security price increases.

COMBINED POSITIONS. The Fund may purchase and write options in combination with
one another, or in combination with futures or forward contracts, in order to
adjust the risk and return characteristics of the overall position. For example,
the Fund may purchase a put option and write a call option on the same
underlying instrument in order to construct a combined position whose risk and
return characteristics are similar to a futures contract. Another possible
combined position would involve writing a call option at one strike price and
buying a call option at a lower price, in order to reduce the risk of the
written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.

OVER-THE-COUNTER OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter ("OTC") options (options not traded
on exchanges) generally are established through negotiation with the other party
to the option contract. While this type of arrangement allows the Fund greater
flexibility in tailoring an option to its needs, OTC options generally involve
greater credit risk than exchange-traded options, which are guaranteed by the
clearing organizations of the exchanges where they are traded. The risk of
illiquidity is also greater with OTC options, because these options generally
can be closed out only by negotiation with the other party to the option.

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

CORRELATION OF PRICE CHANGES. Because there are a limited number of types of
exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the Fund's current or
anticipated investments exactly. The Fund may invest in options and futures
contracts based on securities with issuers, maturities, or other characteristics
different from those of the securities in which it typically invests for
example, it may hedge intermediate-term securities with a futures contract based
on an index of long-term bond prices or hedge stock holdings with futures
contracts on a broad-based stock index such as the Standard & Poor's 500
Composite Stock Price Index (S&P 500) which involves a risk that the options or
futures position will not track the performance of the Fund's other investments.

Options and futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments are well correlated with the
Fund's investments. Options and futures prices are affected by factors such as
current and anticipated short-term interest rates, changes in the volatility of
the underlying instrument, and the time remaining until expiration of the
contract; these factors may not affect security prices in the same way.
Imperfect correlation may also result from differing levels of demand in the
options and futures markets and the securities markets, from

9
<PAGE>

structural differences in how options and futures and securities are traded, or
from the imposition of daily price fluctuation limits or trading halts. The Fund
may purchase or sell options and futures contracts with a greater or lesser
value than the securities it wishes to hedge or intends to purchase in an effort
to compensate for differences in volatility between the contract and the
securities, although this strategy may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains or
result in losses that are not offset by gains in other investments.

LIQUIDITY OF FUTURES CONTRACTS AND OPTIONS. There is no assurance a liquid
secondary market will exist for any particular futures contract or option at any
particular time. Options may have relatively low trading volume and liquidity if
their strike prices are not close to the underlying instrument's current price.
In addition, exchanges may establish daily price fluctuation limits for futures
contracts and options and may halt trading if a contract's price increases or
decreases more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached or a trading halt is imposed, it may be
impossible for the Fund to enter into new positions or close out existing
positions. If the secondary market for a contract were not liquid, because of
price fluctuation limits or otherwise, prompt liquidation of unfavorable
positions could be difficult or impossible, and the Fund could be required to
continue holding a position until delivery or expiration regardless of changes
in its value. Under these circumstances, the Fund's access to assets held to
cover its future and options positions also could be impaired.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS. The Fund has filed a
notice of eligibility for exclusion as a "commodity pool operator" with the CFTC
and the National Futures Association which regulates trading in the futures
markets. The Fund intends to comply with Section 4.5 of the regulations under
the extent to which the Fund can commit assets to initial margin deposits and
options premiums.

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

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

FUTURES AND OPTIONS RELATING TO FOREIGN CURRENCIES. The Fund may purchase and
sell currency futures and purchase and write currency options to increase or
decrease its exposure to different foreign currencies. The Fund may also
purchase and write currency options in conjunction with each other or with
currency futures or forward contracts.

10
<PAGE>

instrument of a currency option may be a foreign currency, which generally is
purchased or delivered in exchange for U.S. dollars, although it may be a
futures contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the right
to sell the underlying currency.

The uses and risks of currency futures and options are similar to those of
futures and options relating to securities or indexes, as described above.
Currency futures and options values can be expected to correlate with exchange
rates but may not reflect other factors that affect the value of the Fund's
investments. A currency hedge, for example, should protect a German
mark-denominated security from a decline in the German mark, but it will not
protect the Fund against a price decline resulting from a deterioration in the
issuer's creditworthiness. Because the value of the Fund's
foreign-currency-denominated investments will change in response to many factors
other than exchange rates, it may not be possible to match the amount of
currency options and futures to the value of the Fund's investments over time.

INVESTMENT RESTRICTIONS

The Fund's investment restrictions, set forth below, are fundamental and may not
be changed without approval of a majority of the outstanding votes of the
shareholders of the Fund as determined in accordance with the Investment Company
Act of 1940 (the "1940 Act"). Unless otherwise indicated, percentage limitations
included in the restrictions apply at the time transactions are entered into.
Accordingly, any later increase or decrease beyond the specified limitation
resulting from a change in the Fund's net assets will not be considered in
determining whether it has complied with its investment restrictions.

The Fund may not:

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

(2) Issue senior securities, except as permitted under the 1940 Act.

(3) Borrow money except for temporary or emergency purposes (not for
leveraging or investment) in an amount exceeding 33-1/3% of its total
assets (including the amount borrowed) less liabilities (other than
borrowings). Any borrowings that exceed this amount will be reduced within
three days (not including Sundays and holidays) to the extent necessary to
comply with the 33-1/3% limitation.

(4) Underwrite securities issued by others, except to the extent that the Fund
may be considered an underwriter within the meaning of the Securities Act
of 1933 in the disposition of restricted securities.

(5) Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this will not prevent the Fund from
investing in securities or other instruments backed by real estate or the
securities of companies engaged in the real estate business).

11
<PAGE>

(6) Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this will not prevent
the Fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities).

(7) Lend any security or make any other loan if, as a result, more than
33-1/3% of its total assets would be lent to other parties, provided that
this restriction does not apply to purchases of debt securities or to
repurchase agreements.

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

THE FUND MAY NOT:

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

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

(c) Purchase any security if, as a result, more than 15% of its net assets
would be invested in securities that are illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily available
market.

(d) Purchase securities of other investment companies, except in the open
market where no commission except the ordinary broker's commission is paid
or purchase or retain securities issued by other open-end investment
companies. These restrictions do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.

(e) Purchase securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or political subdivisions
thereof) if, as a result, more than 5% of its total assets would be
invested in the securities of business enterprises that, including
predecessors, have a record of less than three years of continuous
operation.

(f) Purchase warrants, valued at the lower of cost or market, in excess of 5%
of the Fund's net assets. Included in that amount, but not to exceed 2% of
the Fund's net assets, may be warrants that are not listed on the New York
Stock Exchange or the American Stock Exchange. Warrants acquired by the
Fund in units or attached to securities are not subject to these
restrictions.

(g) Invest in oil, gas, or other mineral exploration or development programs
or leases.

(h) Purchase the securities of any issuer if those officers and directors of
BEF and those officers and directors of BMC who individually own more than
1/2 of 1% of the securities of such issuer together own more than 5% of
such issuer's securities.

12
<PAGE>

(i) Invest in securities of real estate investment trusts that are not readily
marketable or invest in securities of real estate limited partnerships
that are not listed on the New York Stock Exchange or the American Stock
Exchange or traded on the NASDAQ National Market System.

(j) Purchase any security when borrowings representing more than 5% of its
total assets are outstanding.

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

RISK FACTORS

Because the Fund concentrates its assets in the utilities industry, its
performance depends in part on how favorably investors perceive this sector of
the market relative to other sectors (such as transportation or technology). Of
course, investor perceptions of the utilities industry are driven not only by
comparisons with other market sectors but by trends and events within the
utilities industry. The following is a brief outline of risk factors associated
with investment in the utilities industry.

REGULATORY RISKS. Regulators (primarily at the state level) monitor and control
public utility company revenues and costs. Regulators can limit profits and
dividends paid to investors; they may also restrict a company's access to new
markets. Some analysts observe that state regulators have become increasingly
active in developing and promoting energy policy through the regulatory process.

NATURAL RESOURCE RISKS. Swift and unpredictable changes in the price and supply
of natural resources can hamper utility company profitability. These changes may
be caused by political events, energy conservation programs, the success of
exploration projects, or tax and other regulatory policies of various
governments.

ENVIRONMENTAL RISKS. There are considerable costs associated with environmental
compliance, nuclear waste cleanup, and safety regulation. For example,
coal-burning utilities are under pressure to curtail sulfur emissions, and
utilities in general increasingly are called upon by regulators to bear
environmental costs, which may not be easily recovered through rate increases or
business growth.

Changing weather patterns and natural disasters affect consumer demand for
utility services (e.g., electricity, heat, and air conditioning), which, in
turn, affects utility revenues.

TECHNOLOGY AND COMPETITIVE RISKS. The introduction and phase-in of new
technologies can affect a utility company's competitive strength. The race by
long-distance telephone providers to incorporate fiber optic technology is one
example of competitive risk within the utilities industry.

The increasing role of independent power producers ("IPP"s) in the natural gas
and electric utility segments of the utilities industry is another example of
competitive risk. Typically, IPPs wholesale power to established local
providers, but there is a trend toward letting them sell power directly to
industrial consumers. Co-generation facilities, such as those of landfill
operators that produce

13
<PAGE>

methane gas as a byproduct of their core business, pose another competitive
challenge to gas and electric utilities. In addition to offering a less
expensive source of power, these companies may receive more favorable regulatory
treatment than utilities seeking to expand facilities that consume nonrenewable
energy sources.

INTEREST RATE RISKS. Utility companies usually finance capital expenditures
(e.g., new plant construction) by issuing long-term debt. Rising long-term
interest rates increase interest expenses and reduce company earnings.

PORTFOLIO TRANSACTIONS

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

The Fund's annual portfolio turnover rate is not expected to exceed 150%.
Because a higher turnover rate increases transaction costs and may increase
taxable capital gains, BMC carefully weighs the potential benefits of short-term
investing against these considerations.

The Fund's portfolio turnover rates for the fiscal years ended December 31, 1995
and December 31, 1994 were 68.17% and 61.42%, respectively. For the fiscal years
ended December 31, 1995, December 31, 1994, and December 31, 1993, the Fund paid
brokerage commissions of $205,544, $180,145 and $266,365, respectively.

VALUATION OF PORTFOLIO SECURITIES

The Fund's net asset value ("NAV") per share is determined by Benham Financial
Services, Inc. (BFS) as of the close of business on each day the New York Stock
Exchange (the "Exchange") is open for business, usually at 1:00 p.m. Pacific
Time. The Exchange has designated the following holiday closings for 1996: New
Year's Day (observed), Presidents` Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day (observed). Although BFS
expects the same holiday schedule to be observed in the future, the Exchange may
modify its holiday schedule at any time.

BMC typically completes its trading on behalf of the Fund in various markets
before the Exchange closes for the day. Securities are priced at market value,
depending upon the market or exchange on which they trade. Price quotations for
exchange-listed securities are taken from the primary exchanges on which these
securities trade. Securities traded on exchanges will be valued at their last
sale prices. If no sale is reported, the mean between the latest bid and asked
prices is used. Securities traded over-the-counter will be valued at the mean
between the latest bid and asked prices. Fixed-income securities are priced at
market value on the basis of market quotations supplied by independent pricing
services. Trading of securities in foreign markets may not take place every day
the Exchange is open, and trading takes place in various foreign markets on days
on which the

14
<PAGE>

Exchange and the Fund's offices are not open and the Fund's net
asset value is not calculated. The Fund's net asset value may be significantly
affected on days when shareholders have no access to the Fund. Securities for
which market quotations are not readily available, or which may change in value
due to events occuring after their primary exchange has closed for the day, are
valued at fair market value as determined in good faith under the direction of
the board of directors.

PERFORMANCE

The Fund's yields and total returns may be quoted in advertising and sales
literature. These figures, as well as the Fund's share price, will vary. Past
performance should not be considered an indication of future results.

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

YIELD = 2 [(a - b + 1)6 - 1]
cd

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

For the 30-day period ended December 31, 1995, the Fund's yield was 3.78%.

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

Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in the Fund over a stated
period and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual return of 7.18%, which is the
steady annual rate that would equal 100% growth on a compounded basis in 10
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the Fund's performance is
not constant over time but changes from year to year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.

Average annual total returns for periods of less than one year are calculated by
determining the Fund's total return for the period, extending that return for a
full year (assuming that performance remains constant throughout the year), and
quoting the result as an annual return. Because the Fund's return may not remain
constant over the course of a year, these performance figures should be viewed
as strictly hypothetical.

15
<PAGE>

In addition to average annual returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return. The Fund's average annual total return for the fiscal year ended
December 31, 1995 was 35.70%; its average annual total return from March 1, 1993
(commencement of operations), through December 31, 1995, was 9.76%. Performance
information may be quoted numerically or in a table, graph, or similar
illustration.

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

Indexes may assume reinvestment of dividends, but generally they do not reflect
administrative and management costs such as those incurred by a mutual fund.

Occasionally, statistics may be used to illustrate Fund volatility or risk.
Measures of volatility or risk are generally used to compare the Fund's net
asset value or performance to a market index. One measure of volatility is
"beta." Beta expresses Fund volatility relative to the total market as
represented by the S&P 500. A beta of more than 1.00 indicates volatility
greater than the market, and a beta of less than 1.00 indicates volatility less
than the market. Another measure of volatility or risk is "standard deviation."
Standard deviation is used to measure the variability of net asset value or
total return relative to an average over a specified period of time. The premise
is that greater volatility connotes greater risk undertaken to achieve a desired
performance.

The Fund's shares are sold without a sales charge (a "load"). No-load funds
offer an advantage to investors when compared to load funds with comparable
investment objectives and strategies. For example, if an investor pays $10,000
to buy shares of a load fund with an 8.5% sales charge, $850 of that $10,000 is
paid as a commission to a salesperson, leaving only $9,150 to put to work for
the investor. Over time, the difference between paying a sales load and not
paying one can have a

16
<PAGE>

significant effect on an investor's total return. The Mutual Fund Education
Alliance provides a comparison of $10,000 invested in each of two mutual funds,
one with an 8.5% sales load and one without a sales load. Assuming a compounded
annual growth rate of 10% for both investments, the no-load fund investment is
worth $25,937 after ten years, and the load fund investment is worth only
$23,732.

The Benham Group has distinguished itself as an innovative provider of low-cost,
true no-load mutual funds. Among other innovations, The Benham Group established
the first no-load fund that invests primarily in zero-coupon U.S. Treasury
securities; the first no-load double tax-free California money market and
short-term bond funds; the first no-load adjustable rate government securities
fund; and the first no-load utilities fund designed to pay monthly dividends.

The advisor may obtain ratings on the safety of Fund shares from one or more
rating agencies and may publish such ratings in advertisements and sales
literature.

TAXES

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

Distributions of net investment income and net short-term capital gains are
taxable to shareholders as ordinary income. To the extent that the Fund's
dividends consist of dividend income from domestic corporations, such dividends
may be eligible for the dividends-received deduction available to corporations.
Shareholders will be notified annually of the federal tax status of
distributions.

As of December 31, 1995, the Fund had a capital loss carryover of $7,035,543
that will expire on December 31, 2002 and $4,356,683 that will expire on
December 31, 2003. No capital gain distributions will be made by the Fund until
its capital loss carryovers have been offset or have expired.

Upon redeeming, selling, or exchanging shares of the Fund, a shareholder will
realize a taxable gain or loss depending upon his or her basis in the shares
liquidated. The gain or loss generally will be long-term or short-term,
depending on the length of time the shares were held. However, a loss recognized
by a shareholder in the disposition of shares on which capital gain dividends
were paid (or deemed paid) before the shareholder had held his or her shares for
more than six months would be treated as a long-term capital loss for tax
purposes. A gain realized on the redemption, sale, or exchange of shares would
not be affected by the reacquisition of shares. A loss realized on the
redemption, sale, or exchange of shares would be disallowed to the extent that
the shares disposed of were replaced (whether through reinvestment of
distributions or otherwise) within a period of 61 days beginning 30 days before
and ending 30 days after the date shares were disposed of. Under such
circumstances, the basis of the shares acquired would be adjusted to reflect the
disallowed loss.

17
<PAGE>

The information above is only a summary of some of the tax considerations
affecting the Fund and its shareholders; no attempt has been made to discuss
individual tax consequences. Shareholders who are neither citizens nor residents
of the U.S. may be subject to a nonresident alien withholding tax of 30% or a
lower treaty rate, depending on the country in which they reside. The Fund's
distributions also may be subject to state, local, or foreign taxes. A
prospective investor may wish to consult a tax advisor to determine whether the
Fund is a suitable investment based on the investor's tax situation.

ABOUT BENHAM EQUITY FUNDS

Benham Equity Funds (BEF) was organized as a California corporation on December
31, 1987, under the name "Benham Equities, Inc." The corporation was renamed
Benham Equity Funds on September 2, 1988. BEF is authorized to issue ten series
and to issue two billion (2,000,000,000) shares of each such series. Within each
series, the directors may issue an unlimited number of shares. Currently, there
are four series: Benham Global Gold Fund, Benham Income & Growth Fund, Benham
Equity Growth Fund, and Benham Utilities Income Fund. With respect to each
series, shares issued are fully paid and nonassessable and have no preemptive,
conversion, or similar rights. All consideration received by BEF for shares of
any series, and all assets, income, and gains (or losses) earned thereon, belong
to that series exclusively and are subject to related liabilities.

Shares of each series have equal voting rights, provided that each series votes
separately on matters that pertain to it exclusively. Each shareholder is
entitled to vote based on the total dollar interest in the Fund as of the record
date for a shareholder meeting. Under California Corporations Code Section 708,
shareholders have the right to cumulate votes in the election (or removal) of
directors. For example, if six directors are proposed for election, a
shareholder may cast six votes for a single candidate, three votes for each of
two candidates, etc.

INDEPENDENT AUDITORS: KPMG Peat Marwick LLP, 3 Embarcadero Center, San
Francisco, California 94111, serves as BEF's auditors. KPMG audits the annual
report and provides tax and other services as auditors.

DIRECTORS AND OFFICERS

BEF's activities are overseen by a board of directors, including seven
independent directors. The individuals listed below whose names are marked with
an asterisk (*) are "interested persons" of BEF (as defined in the Investment
Company Act of 1940) by virtue of, among other things, their affiliation with
either BEF; BEF's investment advisor, BMC; BEF's agent for transfer and
administrative services, BFS; BEF's distribution agent, Benham Distributors,
Inc. (BDI); the parent corporation, Twentieth Century Companies, Inc. ("TCC") or
TCC's subsidiaries; or other funds advised by BMC. Each director listed below
also serves as a trustee or director of other funds in The Benham Group. Unless
otherwise noted, dates in parentheses indicate the dates the director or officer
began his or her service in a particular capacity. The directors' and officers'
address is 1665 Charleston Road, Mountain View, California 94043 and 4500 Main
Street, Kansas City, Missouri 64111.

18
<PAGE>

DIRECTORS

MYRON S. SCHOLES, independent director (1988). Mr. Scholes, a principal of
Long-Term Capital Management (1993), is also Frank E. Buck Professor of Finance
at the Stanford Graduate School of Business (1983), and a director of
Dimensional Fund Advisors (1982) and the Smith Breeden Family of Funds (1992).
From August 1991 to June 1993, Mr. Scholes was a managing director of Salomon
Brothers Inc. (securities brokerage).

KENNETH E. SCOTT, independent director (1988). Mr. Scott is Ralph M. Parsons
Professor of Law and Business at Stanford Law School (1972) and a director of
RCM Capital Management (June 1994).

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

19
<PAGE>

OFFICERS

*JAMES E. STOWERS III, president and chief executive officer (1996).

*DOUGLAS A. PAUL, secretary (1988), vice president (1990), and general counsel
(1990).

*ANN N. McCOID, controller (1988).

*MARYANNE ROEPKE, chief financial officer and treasurer (1995).

The following table summarizes the compensation that the directors of the Fund
received for the Fund's fiscal year ended December 31, 1995, as well as the
compensation received for serving as director or trustee of all other Benham
funds.
<TABLE>
<CAPTION>
DIRECTOR COMPENSATION FOR THE FISCAL YEAR ENDED
December 31, 1995
- -------------------------------------------------------------------------------------------------------------------
Name of Aggregate Pension or Estimated Total
Director* Compensation Retirement Benefits Annual Benefits Compensation
From Fund Accrued As Part of Upon Retirement From Fund and
Fund Expenses Fund Complex
Paid to Directors**
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert A. Eisenstat $ 0 Not Applicable Not Applicable $ 0
- -------------------------------------------------------------------------------------------------------------------
Ronald J. Gilson $ 801 Not Applicable Not Applicable $48,833
- -------------------------------------------------------------------------------------------------------------------
Myron S. Scholes $1452 Not Applicable Not Applicable $65,625
- -------------------------------------------------------------------------------------------------------------------
Kenneth E. Scott $1394 Not Applicable Not Applicable $65,125
- -------------------------------------------------------------------------------------------------------------------
Ezra Solomon $1465 Not Applicable Not Applicable $58,792
- -------------------------------------------------------------------------------------------------------------------
Isaac Stein $1402 Not Applicable Not Applicable $63,625
- -------------------------------------------------------------------------------------------------------------------
Jeanne D. Wohlers $1469 Not Applicable Not Applicable $67,375
- -------------------------------------------------------------------------------------------------------------------

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

** The Benham Group Fund Complex currently consists of 10 registered investment companies.

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

</TABLE>

20
<PAGE>

INVESTMENT ADVISORY SERVICES

The Fund has an investment advisory agreement with BMC, dated June 1, 1995, that
was approved by the Fund's shareholders on May 31, 1995.

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

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

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

For these services, the Fund pays BMC a monthly investment advisory fee based on
the dollar amount derived from applying BEF's average daily net assets to the
following investment advisory fee rate schedule:

.50% of the first $100 million;
.45% of the next $100 million;
.40% of the next $100 million;
.35% of the next $100 million;
.30% of the next $100 million;
.25% of the next $1 billion;
.24% of the next $1 billion;
.23% of the next $1 billion;
.22% of the next $1 billion;
.21% of the next $1 billion;
.20% of the next $1 billion; and
.19% of net assets over $6.5 billion.

21
<PAGE>

For the fiscal years ending December 31, 1995, and December 31, 1994, the Fund
paid $540,339 and $415,129, respectively, in investment advisory fees net of the
fee waiver to BMC. The Funds paid no investment advisory fees to BMC for the
fiscal period March 1, 1993 (commencement of operations), through December 31,
1993.

ADMINISTRATIVE AND TRANSFER AGENT SERVICES

BFS, a wholly owned subsidiary of TCC, is BEF's agent for transfer and
administrative services. For administrative services, the Fund pays BFS a
monthly fee based on its pro rata share of the dollar amount derived from
applying the aggregate average daily net assets of all of the funds in The
Benham Group to the following administrative fee rate schedule:

GROUP ASSETS ADMINISTRATIVE FEE RATE

up to $4.5 billion .11%
up to $6 billion .10
up to $9 billion .09
over $9 billion .08

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

Administrative service and transfer agent fees paid by the Fund to BFS for the
fiscal years ended December 31, 1995, 1994 and 1993 are indicated in the tables
below. Fee amounts are net of expense limitations as described on the next page.

ADMINISTRATIVE FEES

FISCAL FISCAL FISCAL
1995 1994 1993*

$170,950 $163,339 $113,358

TRANSFER AGENT FEES

FISCAL FISCAL FISCAL
1995 1994 1993*

$414,319 $447,668 $184,307

*For the fiscal period March 1, 1993 (commencement of operations), through
December 31, 1993.

22
<PAGE>

DIRECT FUND EXPENSES

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

EXPENSE LIMITATION AGREEMENT

BMC may recover amounts absorbed on behalf of the Fund during the preceding 11
months if, and to the extent that, for any given month, the Fund's expenses were
less than the expense limitation in effect at that time. BMC has agreed to limit
the Fund expenses to .75% of the Fund's average daily net assets during the year
ending May 31, 1996. The Fund's contractual expense limitation is subject to
annual renewal.

For the fiscal years ended 1995 and 1994, BMC reimbursed $8,882 and $112,324.00
respectively, of the Fund's expenses. For the fiscal period March 1, 1993
(commencement of operations) through December 31, 1993, BMC and BFS reimbursed
$515,240.00 of the Fund's expenses.

VOLUNTARY EXPENSE LIMITATION. BMC voluntarily agreed to absorb all the Fund's
expenses through May 31, 1993. On June 1, 1993, the Fund began absorbing
expenses equal to .15% of average daily net assets. This expense cap was raised
by .15% of average daily net assets as of the first day of each subsequent month
until the .75% contractual cap was reached on October 1, 1993. BMC's voluntary
expense limitations are not eligible for recoupment (as described above with
respect to the contractual expense limitation agreement).

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Fund's shares are continuously offered at net asset value. Share
certificates are issued (without charge) only when requested in writing.
Certificates are not issued for fractional shares. Dividend and voting rights
are not affected by the issuance of certificates.

The Benham Group may reject or limit the amount of an investment to prevent any
one shareholder or affiliated group from controlling BEF or one of its series;
to avoid jeopardizing a series' tax status; or whenever, in management's
opinion, such rejection is in BEF's or a series' best interest. As of January
31, 1996, Charles Schwab & Company, 101 Montgomery Street, San Francisco,
California 94104, was the omnibus record holder of 27.4% of the Fund's total
outstanding shares.

The Benham Group charges neither fees nor commissions on the purchase and sale
of Benham fund shares. However, BFS may charge fees for special services
requested by a shareholder or necessitated by acts or omissions of a
shareholder. For example, BFS may charge a fee for processing dishonored
investment checks or stop-payment requests. BFS charges $10 per hour for account
research requested by investors. This charge will be assessed, for example, when
a shareholder request requires more than one hour of research on historical
account records. The fees charged are based on the estimated cost of performing
shareholder-requested services and are not intended to increase income to BFS.
Share purchases and redemptions are governed by California law.

23
<PAGE>

OTHER INFORMATION

BEF's investment advisor, BMC, has been continuously registered with the SEC
under the Investment Advisers Act of 1940 since December 14, 1971. BEF has filed
a registration statement under the Securities Act of 1933 and the 1940 Act with
respect to the shares offered. These registrations do not imply approval or
supervision of BEF or the advisor by the SEC.

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

<PAGE>

BENHAM
GLOBAL GOLD
FUND

Prospectus * February 26, 1996

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

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

<PAGE>

- -------------------
[information in left margin of page]
THE BENHAM GROUP
1665 Charleston Rd.
Mountain View
California 94043

Fund
Information
1-800-331-8331
1-415-965-4274

Investor Services
1-800-321-8321
1-415-965-4222

TDD Service
1-800-624-6338
1-415-965-4764

Benham Group
Representatives
are available
by telephone weekdays from
5 a.m. to 5 p.m. Pacific Time.
- -------------------

BENHAM GLOBAL GOLD FUND

Formerly known as the Benham Gold Equities Index Fund

A Series of Benham Equity Funds

Prospectus o February 26, 1996

Mutual fund shares are not insured by the FDIC, the Federal Reserve Board, or
any other agency. The value of the investment and its returns will fluctuate and
is not guaranteed.

2
<PAGE>

SUMMARY OF FUND EXPENSES

================================================================================
A. SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------

3
<PAGE>

================================================================================
C. EXAMPLE OF EXPENSES
- --------------------------------------------------------------------------------

ONE YEAR THREE YEARS FIVE YEARS TEN YEARS

$6 $20 $34 $76

FINANCIAL HIGHLIGHTS

4
<PAGE>
<TABLE>
<CAPTION>

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

Less Distributions

Dividends from Net
Investment Income (.0085) (.0214) (.0114) (.0157) (.0194) (.0006) (.0372) (.0666)

Total Distributions (.0085) (.0486) (.0121) (.0157) (.0194) (.0915) (.1319) (.0707)

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
Per Share $.035 N/A N/A N/A N/A N/A N/A N/A

** Annualized (The period ended December 31, 1988, includes .76% from nonrecurring income).

</TABLE>

5
<PAGE>

HOW THE FUND WORKS

INVESTMENT OBJECTIVE

CORE INVESTMENT STRATEGIES

6
<PAGE>

7
<PAGE>

risks exist under the Current Objective, their significance to the Fund
and its shareholders may be greater as the Fund increases its investments in
regions outside North America.

BMC works to balance three goals:

* To keep enough cash on hand to meet shareholder redemption requests and pay
operational expenses; and

* To keep portfolio transaction costs low.

RISK FACTORS AND INVESTMENT TECHNIQUES

GENERAL

8
<PAGE>

CONVERTIBLE SECURITIES

FOREIGN SECURITIES

9
<PAGE>

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

10
<PAGE>

WHEN-ISSUED SECURITIES AND FORWARD-COMMITMENT AGREEMENTS

GOLD INVESTMENTS

11
<PAGE>

The Fund purchases Gold Investments only to the extent necessary to meet
Internal Revenue Service ("IRS") income requirements and state restrictions on
the purchase of gold and other commodities.

IRS income tests and certain state laws effectively limit the amount of Gold
Investments the Fund may make. The Fund intends to make such investments only to
the extent permitted by these limits.

SHORT-TERM INSTRUMENTS

For liquidity purposes, the Fund may invest in high-quality money market
instruments with remaining maturities of one year or less.

The Fund may invest up to 5% of its total assets in any money market fund
advised by BMC, provided that the investment is consistent with the Fund's
investment policies and restrictions.

OPTIONS

12
<PAGE>

INTEREST RATE SWAPS

SECURITIES LENDING

This practice could result in a loss or a delay in recovering the Fund's
securities. Loans are limited to 33-1/3% of the Fund's total assets.

OTHER INVESTMENT MANAGEMENT TECHNIQUES

13
<PAGE>

PORTFOLIO TRANSACTIONS

PERFORMANCE

Mutual fund performance is commonly expressed in terms of historical yield or
total return and may be quoted in advertising and sales literature. Past
performance is no guarantee of future results.

14
<PAGE>

SHARE PRICE

HOW TO INVEST

FUND INFORMATION: for information about any Benham fund or other investment
product, call 1-800-331-8331 or 1-415-965-4274.

16
<PAGE>

HOW TO BUY SHARES (Retirement investors, see pages 26 and 27).

MAKE YOUR INVESTMENT CHECK PAYABLE TO THE BENHAM GROUP. Mail
the check with your completed application to

The Benham Group
P.O. Box 7730
San Francisco, CA 94120-9853

Investors will be charged $5 for every investment check
returned unpaid.

17
<PAGE>

If you wish to open an account by bank wire, please call our
Investor Services Department for more information and an
account number. Bank wire investments should be addressed as
follows:

- --------------------------------------------------------------------------------
BY EXCHANGE Minimum initial investment: $1,000
Minimum additional investment: $100

18
<PAGE>

PROCESSING YOUR PURCHASE

TELEPHONE TRANSACTIONS

CONFIRMATION AND QUARTERLY STATEMENTS

19
<PAGE>
- -------------------
[information in left margin of page]
The free exchange privilege is a convenient way to buy shares in other Benham
funds if your investment goals change.

Benham Open Orders allow investors to utilize a "buy low, sell high" investment
strategy.
- -------------------

ACCOUNT SERVICES

EXCHANGE PRIVILEGE

OPEN ORDER SERVICE

20
<PAGE>

AUTOMATIC INVESTMENT SERVICES (AIS)

TREASURY DIRECT allows you to deposit interest and principal payments from
Treasury securities directly into a Benham fund account.

PAYROLL DIRECT allows you to deposit any amount of your paycheck directly into a
Benham fund account.

GOVERNMENT DIRECT allows you to deposit your entire U.S. government payment
directly into a Benham fund account.

BANK DIRECT allows you to deposit a fixed amount from your bank account directly
into a Benham fund account on the 1st and/or 15th of each month (or the next
business day).

SYSTEMATIC EXCHANGES allow you to exchange from one Benham fund account to
another Benham fund account on the 1st and/or the 15th of each month (or the
next business day).

For more information about any of these services, please call our Investor
Services Department at 1-800-321-8321 or 1-415-965-4222.

- -------------------
[information in right margin of page]
Automatic Investment Services enable you to benefit from a dollar-cost averaging
investment strategy.
- -------------------

21
<PAGE>

- -------------------
[information in left margin of page]
You may redeem shares without charge.
- -------------------

BROKER-DEALER TRANSACTIONS

TDD SERVICE FOR THE HEARING IMPAIRED

TDD users may contact The Benham Group at 1-800-624-6338 or 1-415-965-4764.
California residents may wish to contact us through the California Relay Service
(CRS) at 1-800-735-2929.

Your transaction requests via CRS will be handled on a recorded line. The Benham
Group cannot accept responsibility for instructions miscommunicated by CRS.

EMERGENCY SERVICES

From within the U.S., including Alaska and Hawaii, call 1-800-321-8321.

From all foreign countries, call collect, 1-303-759-9337 or 1-510-820-1409. The
operator will request your Benham fund account number before accepting the call.

HOW TO REDEEM YOUR INVESTMENT

22
<PAGE>

*Does not include bank direct deposits, which take 8 business days to mature.
- --------------------------------------------------------------------------------

If you hold shares in certificate form, redemption requests must be accompanied
by properly endorsed certificates.

23
<PAGE>

HOW TO REDEEM SHARES (Retirement investors, see pages 26 and 27).

================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
IN WRITING Send a letter of instruction to

The Benham Group
Investor Services Department
1665 Charleston Road
Mountain View, California 94043

Your letter of instruction should specify
* Your name
* Your account number
* The name of the Fund from which you wish to redeem shares
* The dollar amount or number of shares you wish to redeem

24
<PAGE>

BFS may require written consent of all account owners prior to
acting on the written instructions of any account owner.

- --------------------------------------------------------------------------------
BY EXCHANGE See details on page 20.

SYSTEMATIC EXCHANGES. You may arrange for periodic exchange
redemptions from one Benham fund account to another Benham
fund account.

25
<PAGE>

ABOUT BENHAM-SPONSORED RETIREMENT PLANS

Contributory An employed indi- $2,000 or 100% of compensation
IRA vidual under age 70 1/2. (whichever is less).

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

SEP-IRA A self-employed indi- $22,500 or 15% of compensation
vidual or a business. (whichever is less).*

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

* Self-employed individuals should consult IRS Publication 560 for their annual
contribution limits.

26
<PAGE>

Same as for Contributory IRA. Same as for Contributory IRA.

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

You may open a Rollover IRA Eligible rollover contributions must
anytime. be made within 60 days of receiv-
ing your distribution. There is no
age limit on rollover contributions.

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

The end of the employer's plan Same as for SEP-IRA.
year, usually December 31.

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

The end of the employer's plan Same as for SEP-IRA.
year, usually December 31.

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

27
<PAGE>

DISTRIBUTIONS AND TAXES

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

Dividends, if any, will be declared semiannually in June and December. Long-term
capital gain distributions, if any, will be declared once a year, typically in
December.

TAXES

28
<PAGE>

However, because the tax treatment depends on your purchase price and personal
tax position, you should keep your regular account statements to use in
determining your taxes.

(1) The amount of taxable dividends (as reported on your 1099-DIV from the Fund)
will be less than the amount of dividends you actually received during the tax
year.

29
<PAGE>

may wish to consult the Statement of Additional Information and your tax advisor
for more information regarding the tax consequences of an investment in the
Fund.

MANAGEMENT INFORMATION

ABOUT BENHAM EQUITY FUNDS

Benham Equity Funds (BEF) is a registered open-end management investment company
that was organized as a California corporation on December 31, 1987. BEF
currently consists of five series.

30
<PAGE>

THE BENHAM GROUP

The portfolio manager member of the team managing the funds described in the
prospectus and his work experience for the last five years is as follows:

- -------------------
[information in right margin of page]
The Benham Group serves more than 475,000 investors.
- -------------------

31
<PAGE>

- -------------------
[information in left margin of page]
Benham Management Corporation provides investment advice and portfolio
management services to the Fund.
- -------------------

ADVISORY AND SERVICE FEES

The investment advisory fee cannot exceed .50% of average daily net assets, and
it drops to a marginal rate of .19% of average daily net assets as BEF's assets
increase.

To avoid duplicative investment advisory fees, the Fund does not pay BMC
investment advisory fees with respect to assets invested in shares of any Benham
money market fund.

32
<PAGE>

EXPENSE LIMITATION AGREEMENT

A contractual expense limitation agreement between BMC and the Fund is described
on page 3.

The Fund's total operating expenses for the fiscal year ended December 31, 1995,
were equal to .61% of the Fund's average daily net assets, or $6.10 per $1,000
of average daily net assets.

DISTRIBUTION OF SHARES

BDI is a wholly owned subsidiary of TCC.

- -------------------
[information in right margin of page]
Benham Financial Services, Inc. provides administrative and transfer agent
services to the Fund.
- -------------------

33
<PAGE>

INVESTMENT ADVISOR

BENHAM MANAGEMENT CORPORATION
1665 Charleston Road
Mountain View, California 94043

DISTRIBUTOR

BENHAM DISTRIBUTORS, INC.
1665 Charleston Road
Mountain View, California 94043

CUSTODIAN

STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, Massachusetts 02101

TRANSFER AGENT

BENHAM FINANCIAL SERVICES, INC.
1665 Charleston Road
Mountain View, California 94043

INDEPENDENT AUDITORS

KPMG PEAT MARWICK LLP
3 Embarcadero Center
San Francisco, California 94111

DIRECTORS

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

34
<PAGE>

The Benham Group of Investment Companies

* Available only to residents of California, Arizona, Colorado, Hawaii,
Nevada, New Mexico, Oregon, Texas, Utah, and Washington.

** Available only to residents of Florida, California, Georgia, Illinois,
Michigan, New Jersey, New York, and Pennsylvania.

*** Available only to residents of Arizona, California, Colorado, Nevada,
Oregon, Washington, and Texas.

35
<PAGE>

CONTENTS

<PAGE>
BENHAM GLOBAL GOLD FUND

A SERIES OF BENHAM EQUITY FUNDS

THE BENHAM GROUP(R)
1665 Charleston Road
Mountain View, CA 94043

Investor Services: 1-800-321-8321 or 1-415-965-4222

Fund Information: 1-800-331-8331 or 1-415-965-4274

STATEMENT OF ADDITIONAL INFORMATION

FEBRUARY 26, 1996

TABLE OF CONTENTS

Page
----

1
<PAGE>

INVESTMENT POLICIES AND TECHNIQUES

U.S. GOVERNMENT SECURITIES

WHEN-ISSUED AND FORWARD-COMMITMENT AGREEMENTS

2
<PAGE>

CONVERTIBLE SECURITIES

The Fund may buy securities that are convertible into common stock. The
following is a brief description of the various types of convertible securities
the Fund may buy.

REPURCHASE AGREEMENTS

The advisor attempts to minimize the risks associated with repurchase agreements
by adhering to the following criteria:

(1) Limiting the securities acquired and held by the Fund under repurchase
agreements to U.S. government securities;

(3) Monitoring the creditworthiness of all firms involved in repurchase
agreement transactions;

3
<PAGE>

(5) Investing no more than 5% of the Fund's total assets in repurchase
agreements that mature in more than seven days; and

(6) Taking delivery of securities subject to repurchase agreement and holding
them in a segregated account at the Fund's custodian bank.

FOREIGN SECURITIES

4
<PAGE>

The Fund's assets are valued daily in U.S. dollars, although foreign currency
holdings are not physically converted into U.S. dollars on a daily basis.

INTEREST RATE SWAPS

5
<PAGE>

GOLD FUTURES CONTRACTS

6
<PAGE>

SECURITIES LENDING

To minimize the risk of default on securities loans, BMC adheres to the
following guidelines prescribed by the board of directors:

(5) LIMITATIONS ON PERCENTAGE OF PORTFOLIO SECURITIES ON LOAN. The Fund's
loans may not exceed 33-1/3% of its total assets.

7
<PAGE>

RESTRICTED SECURITIES

GOLD INVESTMENTS

8
<PAGE>

SPECIAL CONSIDERATIONS AS A RESULT OF THE FUND'S INVESTMENT POLICIES

9
<PAGE>

INVESTMENT RESTRICTIONS

THE FUND MAY NOT:

(1) Issue senior securities, except as permitted under the 1940 Act.

10
<PAGE>

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

THE FUND MAY NOT:

(g) Invest in oil, gas or other mineral exploration or development programs or
leases.

11
<PAGE>

(l) Purchase or sell options of any kind.

PORTFOLIO TRANSACTIONS

PORTFOLIO TURNOVER RATES

Fiscal Fiscal Fiscal
1995 1994 1993

28.40% 41.67% 28.38%

Brokerage commissions paid by the Fund during the fiscal years ended December
31, 1995, 1994, and 1993, are indicated in the following table.

12
<PAGE>

BROKERAGE COMMISSIONS

Fiscal Fiscal Fiscal
1995 1994 1993

$1,122,431 $1,533,658 $1,465,792

VALUATION OF PORTFOLIO SECURITIES

PERFORMANCE

13
<PAGE>

The Fund's average annual total returns for the one-year, five-year, and
life-of-fund periods ended December 31, 1995, are indicated in the table below.

AVERAGE ANNUAL TOTAL RETURNS

One Year Five Years Life of Fund*

9.25% 5.97% 3.30%

* The Fund commenced operations on August 17, 1988.

Indexes may assume reinvestment of dividends, but generally they do not reflect
administrative and management costs such as those incurred by a mutual fund.

14
<PAGE>

TAXES

15
<PAGE>

ABOUT BENHAM EQUITY FUNDS

16
<PAGE>

DIRECTORS AND OFFICERS

DIRECTORS

17
<PAGE>

KENNETH E. SCOTT, independent director (1988). Mr. Scott is Ralph M. Parsons
Professor of Law and Business at Stanford Law School (1972) and a director of
RCM Capital Management (June 1994).

OFFICERS

*JAMES E. STOWERS III, president, and chief executive officer (1996).

*ANN N. MCCOID, controller (1988).

*DOUGLAS A. PAUL, secretary (1988), vice president (1990), and general counsel
(1990).

*MARYANNE ROEPKE, chief financial officer and treasurer (1995).

As of January 31, 1996, BEF's directors and officers, as a group, owned less
than 1% of the Fund's outstanding shares.

18
<PAGE>

** The Benham Group Fund Complex currently consists of 10 registered investment companies.
</TABLE>

INVESTMENT ADVISORY SERVICES

The Fund has an investment advisory agreement with BMC, dated June 1, 1995, that
was approved by the Fund`s shareholders on May 31, 1995.

19
<PAGE>

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

INVESTMENT ADVISORY FEE SCHEDULE FOR BEF

INVESTMENT ADVISORY FEES*

Fiscal Fiscal Fiscal
1995 1994 1993

$1,776,728 $1,884,679 $1,325,964

* Net of reimbursements

ADMINISTRATIVE AND TRANSFER AGENT SERVICES

20
<PAGE>

GROUP ASSETS ADMINISTRATIVE FEE RATE

up to $4.5 billion .11%
up to $6 billion .10
up to $9 billion .09
over $9 billion .08

For transfer agent services, the Fund pays BFS monthly fees of $1.1875 for each
shareholder account maintained and $1.35 for each shareholder transaction
executed during the month.

ADMINISTRATIVE FEES

Fiscal Fiscal Fiscal
1995 1994 1993

$549,463 $583,896 $356,629

TRANSFER AGENT FEES

Fiscal Fiscal Fiscal
1995 1994 1993

$702,149 $645,099 $428,747

DIRECT FUND EXPENSES

21
<PAGE>

EXPENSE LIMITATION AGREEMENT

The Funds' contractual expense limit is subject to annual renewal. The expense
limit for the year ended December 31, 1995, was .75% of average daily net
assets.

Net amounts absorbed and recouped for the fiscal years ended December 31, 1995,
1994, and 1993, are indicated in the table below.

NET REIMBURSEMENTS(RECOUPMENTS) BY BMC AND BFS

Fiscal Fiscal Fiscal
1995 1994 1993

$0 $0 $47,247

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

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

- -------------------------------------------------------------------------------------------------
</TABLE>

As of January 31, 1996, to BEF`s knowledge, no other shareholder was the record
holder or beneficial owner of 5% or more of the Fund`s total shares outstanding.

Share purchases and redemptions are governed by California law.

22
<PAGE>

OTHER INFORMATION

23
<PAGE>
BENHAM EQUITY FUNDS

1933 Act Post-Effective Amendment No. 17
1940 Act Amendment No. 19

PART C OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) FINANCIAL STATEMENTS. Audited financial statements for the fiscal year
ended December 31, 1995, for Benham Global Gold Fund (formerly known as
the Benham Gold Equities Index Fund), Benham Income & Growth Fund,
Benham Equity Growth Fund, Benham Utilities Index Fund and Benham
Global Natural Resources Index Fund are filed herein as included in the
Statement of Additional Information by reference to the Annual Reports
dated December 31, 1995, filed on February 22, 1996, accession
#0000827060-96-000007

(b) EXHIBITS.

(1) a) Articles of Incorporation dated December 31, 1987, are
incorporated herein by reference to Exhibit 1 to Post-Effective
Amendment No. 1.

b) Restated Articles of Incorporation dated December 21, 1992, are
incorporated herein by reference to Exhibit 1(b) to Post-Effective
Amendment No. 11.

c) Restated Articles of Incorporation dated August 2, 1995, are
incorporated herein by reference to EX-99.B1c,
accession #0000827060-95-000006.

(2) a) Bylaws dated January 6, 1988, as amended through February 13,
1992, are incorporated herein by reference to Exhibit 2 to
Post-Effective Amendment No. 7.

b) Amendment to Bylaws dated July 24, 1992, is incorporated herein
by reference to Exhibit 2(b) to Post-Effective Amendment No. 10.

c) Amendment to Bylaws dated May 31, 1995, is incorporated herein
by reference to EX-99.B2c, accession #0000827060-95-000006.

(3) Not applicable.

(4) a) A specimen copy of the Benham Global Gold Fund (formerly known
as the Benham Gold Equities Index Fund) share certificate is
incorporated herein by reference to Exhibit 4 to Pre-Effective
Amendment No. 2 filed July 12, 1988.

b) A specimen copy of the Benham Income & Growth Fund share
certificate is incorporated herein by reference to Exhibit 4
to Post-Effective Amendment No 5 filed March 1, 1991.

c) A specimen copy of the Benham Equity Growth Fund share
certificate is incorporated herein by reference to Exhibit 4 to
Post-Effective Amendment No 5 filed March 1, 1991.

d) A specimen copy of the Benham Utilities Index Fund share
certificate is incorporated herein by reference to Exhibit 4(d) to
Post-Effective Amendment No. 11 filed February 28, 1993.

e) A specimen copy of the Benham Global Natural Resources Index
Fund share certificate is incorporated herein by reference to
Exhibit 4(e) to Post-Effective Amendment No. 13 filed July 7,
1994.

(5) Investment Advisory Agreement between Benham Equity Funds and
Benham Management Corporation, dated June 1, 1995, is incorporated
herein as EX-99.B5.

(6) Distribution Agreement between Benham Equity Funds and Benham
Distributors, Inc., dated June 1, 1995, is incorporated herein by
reference to EX-99.B6, accession #0000827060-95-000006.

(7) Not applicable.

(8) Omnibus Custodian Agreement between Benham Equity Funds and State
Street Bank and Trust Company, dated August 10, 1993, is
incorporated herein by reference to Exhibit 8 to Post-Effective
Amendment No. 12.

(9) Administrative Services and Transfer Agency Agreement between
Benham Equity Funds and Benham Financial Services, Inc., dated
June 1, 1995, is incorporated herein by reference to EX-99.B9,
accession #0000827060-95-000006.

<PAGE>
(10) Opinion and consent of counsel as to the legality of the
securities being registered, dated February 15, 1996, is
incorporated herein by reference to Rule 24f-2 Notice filed on
February 15, 1996, accession #0000827060-95-000006.

(11) (a) Consent of KPMG Peat Marwick, LLP, independent auditors, is
filed herein as EX-99.B11a.

(b) Written representation pursuant to Rule 485(b) under the
Securities Act of 1933 is filed herein as EX-99.B11b.

(12) Not applicable.

(13) Not applicable.

(14) a) Benham Individual Retirement Account plan, including all
instructions and other relevant documents, is incorporated herein
by reference to Exhibit 14(a) to Post-Effective Amendment No. 9
filed October 3, 1992.

(b) Benham Pension/Profit-Sharing plan, including all instructions
and other relevant documents, is incorporated herein by reference
to Exhibit 14(b) to Post-Effective Amendment No. 9 filed October
3, 1992.

(15) Not applicable.

(16) Schedule for computation of each performance quotation
provided in response to Item 22 is filed herein as EX-99.B16.

(17) Power of Attorney dated December 15, 1995, is filed herein as
EX-99.B17.

Item 25. Persons Controlled by or Under Control with Registrant.

None.

Item 26. Number of Holders of Securities.

As of December 31, 1995, the Fund's had the following number of
shareholders of record:

Benham Global Gold Fund 29,873
Benham Income & Growth Fund 22,313
Benham Equity Growth Fund 12,423
Benham Utilities Index Fund 14,158
Benham Global Natural Resources Index Fund 2,753

Item 27. Indemnification.

Registrant hereby incorporates by reference, as though set forth fully
herein, Article II, Section 16 of Registrant's restated bylaws, dated February
13, 1992, and amended on July 24, 1992, appearing as Exhibit 2 to Post-Effective
Amendment No. 7, and Exhibit 2(b) to Post-Effective Amendment No. 10,
respectively.

<PAGE>

Item 28. Business and Other Connections of Investment Advisor.

The Registrant's investment advisor, Benham Management Corporation, is also
investment advisor to Capital Preservation Fund, Capital Preservation Fund II,
Benham California Tax-Free and Municipal Funds, Benham Municipal Trust, Benham
Target Maturities Trust, Benham Government Income Trust, Benham International
Funds, Benham Investment Trust, and Benham Manager Funds.

Item 29. Principal Underwriters.

The Registrant's distribution agent, Benham Distributors, Inc., is also
distribution agent for Capital Preservation Fund, Inc., Capital Preservation
Fund II, Inc., Benham California Tax-Free and Municipal Funds, Benham Municipal
Trust, Benham Target Maturities Trust, Benham Government Income Trust, Benham
International Funds, Benham Investment Trust, and Benham Manager Funds.

Item 30. Location of Accounts and Records.

The Registrant, its investment advisor, Benham Management Corporation, and
its agent for transfer and administrative services, Benham Financial Services,
Inc., maintain physical possession of each account, book, or other document, and
shareholder records as required by ss.31(a) of the Investment Company Act of
1940 and rules thereunder at BEF's principal office located at 1665 Charleston
Road, Mountain View, CA 94043. The computer and database for shareholder records
are located at Central Computer Facility, 401 North Broad Street, Sixth Floor,
Philadelphia, PA 19108.

Item 31. Management Services.

Not applicable.

Item 32. Undertakings.

Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of the Registrant's latest report to shareholders, upon
request and without charge.
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, and the Investment
Company Act of 1940, the Registrant certifies that this Post-Effective
Amendment No. 17 /Amendment No. 19 meets all of the requirements for
effectiveness pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Post-Effective Amendment No. 17/ Amendment No. 19 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Mountain View, and the State of California, on the 16th day of February, 1996.

BENHAM EQUITY FUNDS

By: /s/Douglas A. Paul
Douglas A. Paul
Vice President, Secretary, and General
Counsel

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 17 / Amendment No. 19 has been signed below by the following
persons in the capacities and on the dates indicated.

/s/James M. Benham Chairman of the Board of February 16, 1996
James M. Benham* Directors

/s/James E. Stowers, III Director February 16, 1996
James E. Stowers, III*

/s/Albert A. Eisenstat Director February 16, 1996
Albert A. Eisenstat*

/s/Ronald J. Gilson Director February 16, 1996
Ronald J. Gilson*

/s/Myron S. Scholes Director February 16, 1996
Myron S. Scholes*

/s/Kenneth E. Scott Director February 16, 1996
Kenneth E. Scott*

/s/Ezra Solomon Director February 16, 1996
Ezra Solomon*

/s/Isaac Stein Director February 16, 1996
Isaac Stein*

/s/Jeanne D. Wohlers Director February 16, 1996
Jeanne D. Wohlers*

/s/Maryanne Roepke Chief Financial Officer/ February 16, 1996
Maryanne Roepke* Treasurer

/s/Douglas A. Paul
Douglas A. Paul*
Attorney in Fact (Pursuant to a power of attorney dated December 15, 1995.)

EXHIBIT INDEX

EXHIBIT DESCRIPTION OF DOCUMENT
NUMBER

EX-99.B5 Investment Management Agreement between Benham Equity Funds
and Benham Management Corporation, dated June 1, 1995.

EX-99.B11a Consent of KPMG Peat Marwick LLP, independent auditors.

EX-99.B11b Written representation pursuant to Rule 485(b) under the
Securities Act of 1933.

EX-99.B16 Schedule for computation of each performance quotation
provided in response to Item 22.

EX-99.B17 Power of Attorney dated December 15, 1995.

EX-27.1 Financial Data Schedule - Benham Global Gold Fund.

EX-27.2 Financial Data Schedule - Benham Income & Growth Fund.

EX-27.3 Financial Data Schedule - Benham Equity Growth Fund.

EX-27.4 Financial Data Schedule - Benham Utilities Income Fund.

EX-27.5 Financial Data Schedule - Benham Global Natural Resources
Index Fund.

INVESTMENT ADVISORY AGREEMENT

Benham Equity Funds

Agreement effective this 1st day of June, 1995, between BENHAM EQUITY
FUNDS, a registered open-end management investment company organized as a
California Corporation (the "Company"),and BENHAM MANAGEMENT CORPORATION, a
registered investment advisor incorporated in the State of California (the
"Advisor").

Whereas, the Company is authorized to issue shares of common stock in one
or more series with each such series representing interests in a separate
portfolio of securities and other assets; and

Whereas, the Company currently offers its shares in five series designated
as the Benham Gold Equities Index Fund, Benham Income & Growth Fund, Benham
Equity Growth Fund, Benham Utilities Income Fund, and Benham Global Natural
Resources Index Fund (the "Initial Series"), (such Initial Series together with
all other series subsequently established by the Company with respect to which
the Company desires to retain the Advisor to render investment advisory services
hereunder and with respect to which the Advisor is willing to do so being herein
collectively referred to as the "Series"). In the event the Company establishes
one or more series other than the Initial Series with respect to which it
desires to retain the Advisor to render management and investment advisory
services hereunder, it shall notify the Advisor in writing, whereupon such
series shall become a Series hereunder.

I. DESCRIPTION OF SERVICES TO BE PROVIDED. In consideration for the
compensation hereinafter described, the Advisor agrees to provide the following
services to the Company and to the Series:

A. INVESTMENT ADVICE AND PORTFOLIO MANAGEMENT. The Advisor shall
manage the investment and reinvestment of the Series' assets in accordance with
the investment objectives and policies of the Series as set forth in the
Company's registration statement with the Securities and Exchange Commission as
amended from time to time and such instructions as the Company's board of
directors may issue. Consistent with the foregoing, the Advisor shall make all
determinations as to the investment of the Series' assets and the purchase and
sale of its portfolio securities and take all steps necessary to implement the
same. Such determinations and services shall also include determining the manner
in which voting rights, rights to consent to corporate actions and other rights
pertaining to the Series' portfolio securities shall be exercised. In placing
orders for the execution of the Series' portfolio transactions, the Advisor
shall use its best efforts to obtain the best possible price and execution and
shall otherwise place such orders subject to and in accordance with any
directions which the Company's board of directors may issue from time to time
with respect thereto. The Advisor shall select brokers and dealers for the
execution of portfolio transactions in accordance with the provisions of Section
I.B. of this agreement.

B. BROKERAGE. In executing transactions for the Series and selecting
brokers or dealers, the Advisor will use its best efforts to seek the best price
and execution available and shall execute or direct the execution of all such
transactions in a manner both permitted by law and that suits the best interest
of the Series and its shareholders. In assessing the best price and execution
available for any Series transaction, the Advisor will consider all factors it
deems relevant including, but not limited to, breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission for
the specific transaction and on a continuing basis. Consistent with the
obligation to obtain best execution, the Advisor may

<PAGE>

cause a Series to pay a broker which provides brokerage and research services to
the Advisor a commission for effecting a securities transaction in excess of the
amount another broker might have charged. Such higher commissions may not be
paid unless the Advisor determines in good faith that the amount paid is
reasonable in relation to the services received in terms of the particular
transaction or the Advisor's overall responsibilities to the Series and any
other of the Advisor's clients.

On occasions when the Advisor deems the purchase or sale of a security
to be in the best interest of the Series as permitted by applicable law, the
Advisor may aggregate the securities to be sold or purchased with purchases of
sales of other funds in order to obtain the best execution of the order or lower
brokerage commissions, if any. The Advisor may also on occasion purchase or sell
a particular security for one or more clients in different amounts. On either
occasion, and to the extent permitted by applicable law and regulations,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Advisor in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Company and to such other customers.

C. REPORTS AND INFORMATION. The Advisor shall render regular reports
to the Company at quarterly meetings of the board of directors and at such other
times as may reasonably be requested by the Company's board of (i) the decisions
it has made with respect to the Series' assets and the purchase and sale of its
portfolio securities, (ii) the reasons for such decisions and related actions
and, (iii) the extent to which those decisions have been implemented. In
addition, the Advisor will provide the Company with such accounting and
statistical data as it requires for the preparation of registration statements,
reports and other documents required by federal and state securities, tax and
other applicable laws and regulations and such additional documents and
information as the Company may reasonably request for the management of its
affairs.

D. PROMOTION AND DISTRIBUTION. The Advisor shall promote the sale and
distribution of the Series' shares to the general public in such a manner and at
such times and places as the Advisor shall, in the exercise of reasonable
discretion, determine; and otherwise as the Advisor and the Company's board of
directors may from time to time agree.

II. COMPENSATION FOR SERVICES.

(a) AMOUNT OF COMPENSATION. As compensation for the services rendered
and duties assumed by the Advisor, the Fund, on behalf of the Series, shall,
within ten (10) days after the last day of each calendar month, pay the Advisor
an advisory fee equal to the amount determined using the following formula: (A)
a Company Fee plus an Individual Fund Fee (if any), minus (B) the amount by
which the Series' Expenses exceed the Expense Guarantee Rate as defined below,
minus (C) any further amount by which the Advisor publicly announces it will
reduce the Series' Expenses, plus (D) the amount of any recoupment as described
below.

The Advisor's compensation shall be computed and accrued daily.

Upon termination of this agreement before the end of any calendar month,
the fee for the period from the end of the calendar month preceding the month of
termination to the date of termination shall be prorated according to the
proportion which the number of calendar days in the month prior to the date of
termination bears to the number of calendar days in the month of termination,
and shall be payable within ten (10) days after the date of termination. For
this purpose, the value of the Series' net assets shall be computed by the same
method at the end of each business day as the Series uses to compute the value
of its net assets in connection with the determination of the net asset value of
Series shares, all as more fully set forth in the Series' prospectus. To the
extent that Expenses of the Series in excess of the Series' Expense Guarantee
Rate exceed the total of the Company Fee and Individual Fund Fee (if any), plus
any recoupment due, the Advisor will reimburse the Series for such excess.

(b) DETERMINATION OF COMPANY FEE AND INDIVIDUAL FUND FEE. The Company
Fee for each Series shall be equal to that Series' pro-rata share of the value
of the aggregated average daily net

<PAGE>

assets of the Company, determined for each calendar day, pursuant to the
following schedule of annualized rates:

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; and
0.19% of the net assets over $6.5 billion.

With respect to the Benham Global Natural Resources Index Fund, the
Individual Fund Fee shall be determined based on the average daily net assets of
the Benham Global Natural Resources Index Fund, pursuant to the following
schedule of annualized rates:

0.05% of the first $500 million;
0.04% of the next $500 million; and
0.03% of the net assets over $1 billion.

1. The Expense Guarantee Rate for each Series is set
forth on Schedule A, attached hereto, as such
schedule may be amended from time to time by the
Company's board of directors.

2. The term "Expenses" as used in Section II of this
agreement shall mean:

A. The Company Fee plus the Individual Fund Fee (if
any).

B. Compensation for administrative and transfer
agent services as specified in Section I.B
and II.B of The Administrative Services
Agreement, as such agreement may be amended
from time to time by the Company's board of
directors or shareholders (the
"Administrative Services Agreement").

C. Direct expenses as specified in Section III.B of
the Administrative Services Agreement.

D. Extraordinary Expenses, as specified in Section
III.C of the Administrative Services Agreement,
are excluded from the definition of Expenses as
set forth herein.

3. The Advisor will be legally bound by any public
announcement that it will reduce, in accordance with
the terms of its announcement, the Series' Expenses
below the Expense Guarantee Rate.

(d) RECOUPMENT. The Advisor may recover amounts (representing Expenses
in excess of the Expense Guarantee Rate) which reduced the Advisor's
compensation or that it reimbursed to a Series during the preceding 11 months
if, and to the extent that, for any given month, the Series'

<PAGE>

expense ratio (net of reimbursements) was lower than the Expense Guarantee Rate
in effect at the time, but not during any period, during which the Advisor has
agreed, pursuant to paragraph (c)3 above, to limit the Series' Expenses to an
amount less than the Expense Guarantee Rate.

III. EXPENSES. Except as hereinafter provided, the Advisor shall pay all of
its expenses incurred in the performance of this agreement, including but not
limited to salaries and other compensation of its officers and employees and all
other costs of providing such advice, portfolio management and information and
reports to the Company and the Series as are required hereunder, and all
expenses associated with any activity primarily intended to result in the sale
of Series' shares, such as advertising, printing and mailing of prospectuses to
other than current shareholders, printing and mailing of sales literature and
compensation of sales personnel.

IV. ACTIVITIES OF THE ADVISOR. The services of the Advisor to the Series
hereunder are not to be deemed exclusive, and the Advisor shall be free to
render similar services to others. Subject to and in accordance with the
Articles of Incorporation and the Bylaws of the Company and to Section 10(a) of
the Investment Company Act of 1940, it is understood that directors, officers,
agents and shareholders of the Company are or may be interested in the Advisor
as directors, officers or shareholders of the Advisor, that directors, officers,
agents or shareholders of the Advisor are or may be interested in the Company as
directors, officers, shareholders or otherwise, that the Advisor is or may be
interested in the Company as a shareholder or otherwise, and that the effect of
any such interest shall be governed by the Company's Articles of Incorporation,
its Bylaws and the Investment Company Act of 1940.

V. LIABILITY OF THE ADVISOR. In the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of its obligations and duties
hereunder, the Advisor shall not be subject to liability to the Series or to any
shareholder of the Series for any act or omission in the course of, or connected
with, rendering advice or services hereunder or for any losses that may be
sustained in the purchase, retention or sale of any security. No provision of
this agreement shall be construed to protect any director or officer of the
Company or any director or officer of the Advisor from liability in violation of
Sections 17(h) and (i) of the Investment Company Act of 1940.

VI. LIMITATION OF COMPANY'S LIABILITY. The Advisor acknowledges that it has
received notice of and accepts the limitations of the Company's liability as set
forth in its Articles of Incorporation. The Advisor agrees that the Company's
obligations hereunder shall be limited to the Series and to its assets and that
the Advisor shall not seek satisfaction of any such obligation from the
shareholders of the Series nor from any director, officer, employee or agent of
the Company.

VII. RENEWAL, TERMINATION AND AMENDMENT. The term of this agreement shall
be from the date first written above, and shall continue in effect, unless
sooner terminated as provided herein, for two years from such date, and shall
continue in effect with respect to a Series from year to year thereafter only so
long as such continuance is specifically approved at least annually by the vote
of either a majority of the outstanding voting securities of that Series or a
majority of the Company's directors, and the vote of a majority of the Company's
directors who are neither parties to the agreement nor interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval. "Approved at least annually" shall mean approval occurring, with
respect to the first continuance of the agreement, during the 90 days prior to
and including the date of its termination in the absence of such approval, and
with respect to any subsequent continuance, during the 90 days prior to and
including the first anniversary of the date upon which the most recent previous
annual continuance of this agreement became effective. This agreement may be
terminated at any time without payment of any penalty, by the board of directors
of the Company, or with respect to a Series, by a vote of the majority of the
outstanding voting securities of such Series, upon 60 days' written notice to
the Advisor, and by the Advisor upon 60 days' written notice to the Company.
This agreement shall terminate automatically in the event of its assignment. The
terms "assignment" and "vote of a majority of the outstanding voting securities"
shall have the meanings set forth for such terms in the Investment Company Act
of 1940 and Rule 18f-2 thereunder.

<PAGE>

VIII. SEVERABILITY. If any provision of this agreement shall be held or
made invalid by a court decision, statute, rule or similar authority, the
remainder of this agreement shall not be affected thereby.

IX. APPLICABLE LAW. This agreement shall be construed in accordance with
the laws of the State of California.

In witness whereof, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first written
above.

BENHAM EQUITY FUNDS

By /s/John T. Kataoka
John T. Kataoka
President

BENHAM MANAGEMENT CORPORATION

By /s/James M. Benham
James M. Benham
President

<PAGE>
<TABLE>
<CAPTION>
EXPENSE GUARANTEE RATES
SCHEDULE A
Expense Guarantee Rates and Effective Dates
Approved by Board of Directors/Trustees April 3, 1995
=========================================================================================================================
(Proposed '95) BOARD EFFECTIVE
FUND EXPENSE APPROVAL DATES
GUARANTEE DATE
RATE
=========================================================================================================================
<S> <C> <C> <C>
Capital Preservation Fund .54% 4/3/95 6/1/95 to
5/31/96
- -------------------------------------------------------------------------------------------------------------------------
Capital Preservation Fund II .75% 4/3/95 6/1/95 to
5/31/96
- -------------------------------------------------------------------------------------------------------------------------
Benham California Tax-Free and Municipal Funds
- -------------------------------------------------------------------------------------------------------------------------
Municipal High-Yield Fund .62% 4/3/95 6/1/95 to
5/31/96
- -------------------------------------------------------------------------------------------------------------------------
Municipal Money Market Fund .58% " "
- -------------------------------------------------------------------------------------------------------------------------
Tax-Free Insured Fund .62% " "
- -------------------------------------------------------------------------------------------------------------------------
Tax-Free Intermediate Fund .62% " "
- -------------------------------------------------------------------------------------------------------------------------
Tax-Free Long-Term Fund .62% " "
- -------------------------------------------------------------------------------------------------------------------------
Tax-Free Money Market Fund .54% " "
- -------------------------------------------------------------------------------------------------------------------------
Tax-Free Short-Term Fund .62% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Equity Funds
- -------------------------------------------------------------------------------------------------------------------------
Benham Equity Growth Fund .75% 4/3/95 6/1/95 to
5/31/96
- -------------------------------------------------------------------------------------------------------------------------
Benham Gold Equities Index Fund .75% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Income & Growth Fund .75% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Utilities Income Fund .75% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Global Natural Resources Index Fund .75% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Government Income Trust
- -------------------------------------------------------------------------------------------------------------------------
Benham GNMA Income Fund .65% 4/3/95 6/1/95 to
5/31/96
- -------------------------------------------------------------------------------------------------------------------------
Benham Treasury Note Fund .65% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Government Agency Fund .50% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Adjustable Rate Government Securities Fund .65% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Short-Term Treasury and Agency Fund .65% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Long-Term Treasury and Agency Fund .65% " "
- -------------------------------------------------------------------------------------------------------------------------

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

EXPENSE GUARANTEE RATES
SCHEDULE A
Expense Guarantee Rates and Effective Dates
Approved by Board of Directors/Trustees April 3, 1995
=========================================================================================================================
(Proposed '95) BOARD EFFECTIVE
FUND EXPENSE APPROVAL DATES
GUARANTEE DATE
RATE
=========================================================================================================================

<S> <C> <C> <C>
Benham International Funds
- -------------------------------------------------------------------------------------------------------------------------
Benham European Government Bond Fund .90% 4/3/95 6/1/95 to
5/31/96
- -------------------------------------------------------------------------------------------------------------------------
Benham Investment Trust
- -------------------------------------------------------------------------------------------------------------------------
Benham Prime Money Market Fund .50% 4/3/95 6/1/95 to
5/31/98
- -------------------------------------------------------------------------------------------------------------------------
Benham Manager Funds
- -------------------------------------------------------------------------------------------------------------------------
Benham Capital Manager Fund 1.00% 4/3/95 6/1/95 to
5/31/96
- -------------------------------------------------------------------------------------------------------------------------
Benham Municipal Trust
- -------------------------------------------------------------------------------------------------------------------------
Benham National Tax-Free Money Market Fund .64% 4/3/95 6/1/94 to
5/31/96
- -------------------------------------------------------------------------------------------------------------------------
Benham National Tax-Free Intermediate-Term Fund .69% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham National Tax-Free Long-Term Fund .69% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Florida Municipal Money Market Fund .65% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Florida Municipal Intermediate-Term Fund .69% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Arizona Municipal Intermediate-Term Fund .69% " "
- -------------------------------------------------------------------------------------------------------------------------
Benham Target Maturities Trust
- -------------------------------------------------------------------------------------------------------------------------
1995 Portfolio .70% 4/3/95 6/1/95 to
5/31/96
- -------------------------------------------------------------------------------------------------------------------------
2000 Portfolio .70% " "
- -------------------------------------------------------------------------------------------------------------------------
2005 Portfolio .70% " "
- -------------------------------------------------------------------------------------------------------------------------
2010 Portfolio .70% " "
- -------------------------------------------------------------------------------------------------------------------------
2015 Portfolio .70% " "
- -------------------------------------------------------------------------------------------------------------------------
2020 Portfolio .70% " "
=========================================================================================================================

</TABLE>

Independent Auditors' Consent

The Board of Directors and Shareholders
Benham Equity Funds:

We consent to the inclusion in Benham Equity Funds' Post-Effective Amendment No.
17 to the Registration Statement No. 33-19589 on Form N-1A under the Securities
Act of 1933 and Amendment No. 19 to the Registration Statement No. 811-5447
filed on Form N-1A under the Investment Company Act of 1940 of our reports dated
February 5, 1996 on the financial statement and financial highlights of Benham
Global Gold Fund, Benham Income & Growth Fund, Benham Equity Growth Fund, Benham
Utilities Income Fund, and Benham Global Natural Resources Index Fund (the
series comprising Benham Equity Funds) for the periods indicated therein, which
reports have been incorporated by reference in the Statement of Additional
Information of Benham Equity Funds. We also consent to the reference to our firm
under the "Financial Highlights" in each of the Prospectuses of the Benham
Equity Funds and under the heading "About Benham Equity Funds" in the Statement
of Additional Information which is incorporated by reference in the Prospectus.

/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP

San Francisco, California
February 26, 1996

BENHAM EQUITY FUNDS
POST-EFFECTIVE AMENDMENT NO. 17

Written Representation Pursuant to Rule 485(e)
of the Securities Act of 1933.

As required by paragraph (e) of Rule 485, I hereby certify, as Vice
President, Secretary, and General Counsel of the Registrant, that this
Post-Effective Amendment No. 17 meets all of the requirements for effectiveness
set forth in paragraph (b) of Rule 485 and hereby represent that such
Post-Effective Amendment No. 17 does not contain disclosures which would render
it ineligible to become effective pursuant to paragraph (b) of Rule 485.

/s/Douglas A. Paul
------------------------------
Douglas A. Paul
Vice President, Secretary, and
General Counsel

Mountain View, California
February 16, 1996

BENHAM GOLD EQUITY INDEX FUND
AVERAGE ANNUAL TOTAL RETURN

DECEMBER 31, 1995

ERV 1/N
Formula: T = ( --- ) - 1
p

P = A hypothetical initial payment of $1,000.

ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.

N = Number of years.

T = Average annual total return.

P ERV N T
-------- --------- -------- ---------
Calculation:

One Year $1,000.00 $1,092.50 1.000000 9.25%

Five Years $1,000.00 $1,336.33 5.000000 5.97%

Ten Years

Date Of Inception* $1,000.00 $1,269.88 7.358900 3.30%

TR=Total return for period. TR=(ERV/P) - 1 26.99%

*Date Of Inception: August 17, 1988

<PAGE>

BENHAM GLOBAL NATURAL RESOURCES FUND
AVERAGE ANNUAL TOTAL RETURN

DECEMBER 31, 1995

ERV 1/N
Formula: T = ( --- ) - 1
P

P = A hypothetical initial payment of $1,000.

ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.

N = Number of years.

T = Average annual total return.

P ERV N T
-------- -------- -------- --------
Calculation:

One Year $1,000.00 $1,144.10 1.000000 14.41%

Five Years $1,000.00 5.000000

Ten Years

Date Of Inception* $1,000.00 $1,104.88 1.295890 8.00%

TR=Total return for period. TR=(ERV/P) - 1 10.49%

*Date Of Inception: September 15, 1994

<PAGE>

BENHAM INCOME & GROWTH FUND
AVERAGE ANNUAL TOTAL RETURN

DECEMBER 31, 1995

ERV 1/N
Formula: T = ( --- ) - 1
P

P = A hypothetical initial payment of $1,000.

ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.

N = Number of years.

T = Average annual total return.

P ERV N T
-------- -------- -------- --------
Calculation:

One Year $1,000.00 $1,368.80 1.000000 36.88%

Five Years $1,000.00 $2,273.25 5.000000 17.85%

Ten Years

Date Of Inception* $1,000.00 $2,303.33 5.038400 18.01%

TR=Total return for period. TR=(ERV/P) - 1 130.33%

*Date Of Inception: December 17, 1990

<PAGE>

BENHAM EQUITY GROWTH FUND
AVERAGE ANNUAL TOTAL RETURN

DECEMBER 31, 1995

ERV 1/N
Formula: T = ( --- ) - 1
P

P = A hypothetical initial payment of $1,000.

ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.

N = Number of years.

T = Average annual total return.

P ERV N T
-------- -------- -------- --------
Calculation:

One Year $1,000.00 $1,345.60 1.000000 34.56%

Five Years $1,000.00 5.000000

Ten Years

Date Of Inception* $1,000.00 $1,830.81 4.646600 13.09%

TR=Total return for period. TR=(ERV/P) - 1 83.08%

*Date Of Inception: May 9, 1991

<PAGE>

BENHAM UTILTIES INCOME FUND
AVERAGE ANNUAL TOTAL RETURN

DECEMBER 31, 1995

ERV 1/N
Formula: T = ( --- ) - 1
P

P = A hypothetical initial payment of $1,000.

ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.

N = Number of years.

T = Average annual total return.

P ERV N T
-------- -------- -------- --------
Calculation:

One Year $1,000.00 $1,357.00 1.000000 35.70%

Five Years $1,000.00 5.000000

Ten Years

Date Of Inception* $1,000.00 $1,302.56 2.838400 9.76%

TR=Total return for period. TR=(ERV/P) - 1 30.26%

*Date Of Inception: March 1, 1993

<PAGE>
BENHAM UTILTIES INCOME FUND
YIELD CALCULATION
DECEMBER 31, 1995

Formula:

Yield = 2 * [ ({A - B} OVER {C * D} + 1 ) SUP 6 - 1 ]

A = Investment income earned during the period.

B = Expenses accrued for the period (net of reimbursements).

C = The average daily number of shares outstanding during the period that
were entitled to receive dividends.

D = The per share price on the last day of the period.

Calculation:

A = $806,958.78

B = $128,405.69

C = 18,973,147.664

D = $11.43

Yield = 3.78%

<PAGE>

BENHAM INCOME & GROWTH FUND
YIELD CALCULATION
DECEMBER 31, 1995

Formula:

Yield= 2 * [ ({A - B} OVER {C * D} + 1 ) SUP 6 - 1 ]

A = Investment income earned during the period.

B = Expenses accrued for the period (net of reimbursements).

C = The average daily number of shares outstanding during the period that
were entitled to receive dividends.

D = The per share price on the last day of the period.

Calculation:

A = $867,884.73

B = $195,708.27

C = 20,062,034.908

D = $17.79

Yield = 2.27%

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, BENHAM EQUITY
FUNDS, INC., hereinafter called the "Corporation" and certain directors and
officers of the Corporation, do hereby constitute and appoint James M. Benham,
James E. Stowers, III, William M. Lyons, Douglas A. Paul, and Patrick A. Looby,
and each of them individually, their true and lawful attorneys and agents to
take any and all action and execute any and all instruments which said attorneys
and agents may deem necessary or advisable to enable the Corporation to comply
with the Securities Act of 1933 and / or the Investment Company Act of 1940, as
amended, and any rules, regulations, orders, or other requirements of the United
States Securities and Exchange Commission thereunder, in connection with the
registration under the Securities Act of 1933 and / or the Investment Company
Act of 1940, as amended, including specifically, but without limitation of the
foregoing, power and authority to sign the name of the Corporation in its behalf
and to affix its corporate seal, and to sign the names of each of such directors
and officers in their capacities as indicated, to any amendment or supplement to
the Registration Statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 and / or the Investment Company Act of 1940, as
amended, and to any instruments or documents filed or to be filed as part of or
in connection with such Registration Statement; and each of the undersigned
hereby ratifies and confirms all that said attorneys and agents shall do or
cause to be done by virtue hereof.

IN WITNESS WHEREOF, the Corporation has caused this Power to be
executed by its duly authorized officers on this the 15th day of December, 1995.

BENHAM EQUITY FUND, INC.
(A California Corporation)

By: /s/John T. Kataoka
John T. Kataoka, President

/s/James M. Benham /s/Ezra Solomon
James M. Benham Ezra Solomon
Chairman Director

/s/Albert A. Eisenstat /s/Isaac Stein
Albert A. Eisenstat Isaac Stein
Director Director

/s/Ronald J. Gilson /s/Jeanne D. Wohlers
Ronald J. Gilson Jeanne D. Wohlers
Director Director

/s/Myron S. Scholes /s/James E. Stowers, III
Myron S. Scholes James E. Stowers, III
Director Director

/s/Kenneth E. Scott /s/Maryanne Roepke
Kenneth E. Scott Maryanne Roepke
Director Treasurer

Attest:

By: /s/Douglas A. Paul
Douglas A. Paul, Secretary

<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> BENHAM GOLD EQUITIES - 1995 PORTFOLIO

<S> <C>
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<NUMBER-OF-SHARES-SOLD> 52760173
<NUMBER-OF-SHARES-REDEEMED> 59426047
<SHARES-REINVESTED> 27188
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</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> BENHAM INCOME & GROWTH - 1995 PORTFOLIO

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<NUMBER-OF-SHARES-SOLD> 8043488
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<SHARES-REINVESTED> 1210017
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</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> BENHAM EQUITY GROWTH - 1995 PORTFOLIO

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</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> BENHAM UTILITIES INCOME - 1995 PORTFOLIO

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</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> BENHAM NATURAL RESOURCES - 1995 PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 33777787
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<RECEIVABLES> 66785
<ASSETS-OTHER> 137598
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35622429
<PAYABLE-FOR-SECURITIES> 5417614
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47357
<TOTAL-LIABILITIES> 5464971
<SENIOR-EQUITY> 28295440
<PAID-IN-CAPITAL-COMMON> 178834
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<SHARES-COMMON-PRIOR> 1973763
<ACCUMULATED-NII-CURRENT> 5798
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<ACCUMULATED-NET-GAINS> 39046
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1638340
<NET-ASSETS> 30157458
<DIVIDEND-INCOME> 632316
<INTEREST-INCOME> 24229
<OTHER-INCOME> 0
<EXPENSES-NET> 177304
<NET-INVESTMENT-INCOME> 479241
<REALIZED-GAINS-CURRENT> 407901
<APPREC-INCREASE-CURRENT> 2144025
<NET-CHANGE-FROM-OPS> 3031167
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 380010
<DISTRIBUTIONS-OF-GAINS> 375581
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3649431
<NUMBER-OF-SHARES-REDEEMED> 2862561
<SHARES-REINVESTED> 68911
<NET-CHANGE-IN-ASSETS> 11185712
<ACCUMULATED-NII-PRIOR> 3762
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 79020
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 272528
<AVERAGE-NET-ASSETS> 23730501
<PER-SHARE-NAV-BEGIN> 9.61
<PER-SHARE-NII> 0.16
<PER-SHARE-GAIN-APPREC> 1.22
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<PER-SHARE-NAV-END> 10.66
<EXPENSE-RATIO> 0.76
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<AVG-DEBT-PER-SHARE> 0

</TABLE>