SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _X__
File No. 33-43321:
Pre-Effective Amendment No.______ ____
Post-Effective Amendment No.__6___ _X__
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 _X__
File No. 811-6441:
Amendment No.__7__
BENHAM INTERNATIONAL 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 Proposed Public Offering: First Offered 1/7/92
It is proposed that this filing will become effective:
______ immediately upon filing pursuant to paragraph (b) of Rule 485
______ on (date) pursuant to paragraph (b) of Rule 485
__X___ 60 days after filing pursuant to paragraph (a) of Rule 485
______ on (date) pursuant to paragraph (a) of Rule 485
______ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
Registrant has elected 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. On February 15, 1996, Registrant filed a Rule
24f-2 Notice on Form 24f-2 with respect to its fiscal year ended December 31,
1995.
<PAGE>
FORM N-1A CROSS-REFERENCE SHEET
BENHAM INTERNATIONAL FUNDS
Benham European Government Bond Fund
1933 Act Post-Effective Amendment No. 6
1940 Act Amendment No. 7
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) Cover Page, About Benham International Funds
(a)(ii), (b) How the Fund Works, Management Approach, Other Investment
Policies and Techniques
(c) Management Approach, Suitability
5 (a) About Benham International Funds
(b) - (f) The Benham Group, Advisory and Service Fees
(g) Not Applicable
5A Not Applicable
6 (a) About Benham International Funds, How to Redeem Your
Investment
(b) - (d) Not Applicable
(e) How to Invest
(f), (g) Distributions and Taxes
7 (a) Cover Page, Distribution of Shares
(b) Share Price
(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) About Benham-Sponsored Retirement Plans, How to Redeem Your
Investment
9 Not Applicable
<PAGE>
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, Techniques, and Risk Factors
(b) Investment Restrictions
(c) Investment Policies, Techniques, and Risk Factors,
Investment Restrictions
(d) Portfolio Transactions
14 (a) - (b) Trustees and Officers
(c) Not Applicable
15 (a) Not Applicable
(b) Not Applicable
(c) Trustees 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 International 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 International Funds
(b) Not Applicable
19 (a) Additional Purchase and Redemption Information
(b) Valuation of Portfolio Securities
(c) Not Applicable
20 Taxes
21 Not Applicable
22 Performance
23 Cover Page
<PAGE>
BENHAM EUROPEAN
GOVERNMENT
BOND FUND
Prospectus * April ___, 1996
[picture of map of Europe]
[company logo] The Benham Group (R)
Part of the Twentieth Century Family of Mutual Funds
<PAGE>
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[information in left margin of page]
THE BENHAM GROUP
1665 Charleston Rd.
Mountain View
California 94043
Fund
Information
1-800-331-8331
1-415-965-4274
Investor
Services
1-800-321-8321
1-415-965-4222
TDD Service
1-800-624-6338
1-415-965-4764
Benham Group
Representatives
are available
by telephone
weekdays from
5 a.m. to 5 p.m.
Pacific Time.
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BENHAM EUROPEAN GOVERNMENT BOND FUND
A Series of Benham International Funds
Prospectus * April ___, 1996
BENHAM EUROPEAN GOVERNMENT BOND FUND seeks over the long term as high a level of
total return as is consistent with investment in the highest-quality European
government debt securities. This no-load, open-end mutual fund is rated by a
nationally recognized statistical rating organization (a "rating agency") based
on analyses of portfolio credit quality and management.
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 April __, 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 return 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
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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
April ___, 1996.
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A. SHAREHOLDER TRANSACTION EXPENSES
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Sales load imposed on purchases ........................ None
Sales load imposed on reinvested dividends ............. None
Deferred sales load .................................... None
Redemption fee ......................................... None
Exchange fee ........................................... None
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B. ANNUAL FUND OPERATING EXPENSES*
As a Percentage of Average Daily Net Assets
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Investment advisory fee .............................. .45%
12b-1 fee ............................................ None
Other expenses ....................................... .37%
Total Fund operating expenses ........................ .82%
* 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 .90% of average daily net assets.
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, 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.
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).
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[information in right margin of page]
Please read this Prospectus carefully and retain it for future reference. It is
designed to help you decide if the Fund's goals match your own.
- ---------------
3
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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, as follows:
One Year Three Years Five Years Ten Years
$8 $26 $46 $101
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
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<TABLE>
<CAPTION>
====================================================================================================================================
BENHAM EUROPEAN GOVERNMENT BOND FUND
Years ended December 31 (except as noted)
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992+
------- ------- ------- -------
PER-SHARE DATA
- ------------------
<S> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $10.36 $10.82 $10.01 $10.00
Income From
Investment Operations
Net Investment Income .61 .78 .69 .79
Net Realized and Unrealized
Gains (Losses) on Investments
and Foreign Currency Contracts
and Transactions 1.88 (.63) .49 .38
------ ------ ------ ------
Total Income From
Investment Operations 2.49 .15 1.18 1.17
------ ------ ------ ------
Less Distributions
Dividends from Net
Investment Income (.90) (.60) (.37) (.66)
Distributions from Net Realized
Gains on Investments and
Foreign Currency Contracts
and Transactions 0 (.01) 0 (.50)
------ ------ ------ ------
Total Distributions (.90) (.61) (.37) (1.16)
------ ------ ------ ------
Net Asset Value at End of Period $11.95 $10.36 $10.82 $10.01
====== ====== ====== ======
TOTAL RETURN* 24.40% 1.52% 11.79% 7.08%
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SUPPLEMENTAL DATA AND RATIOS
- -----------------------------------
Net Assets at End of Period
(in thousands of dollars) $252,247 $194,301 $355,615 $337,043
Ratio of Expenses to Average
Daily Net Assets++ .82% .86% .85% .51%**
Ratio of Net Investment Income
to Average Daily Net Assets 6.14% 6.09% 6.27% 7.59%**
Portfolio Turnover Rate 167% 166% 310% 252%
- -----------------------
+ From January 7, 1992 (commencement of operations), to December 31, 1992.
++ The ratio for the year ended December 31, 1995, includes expenses paid through expense offset arrangements.
* Total return figures assume reinvestment of dividends and capital gain distributions and are not annualized.
** Annualized.
</TABLE>
5
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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 10
for a more detailed discussion of the types of securities the Fund may buy and
the risks associated with them.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek over the long term as high a level of
total return as is consistent with investment in the highest-quality European
government debt securities. The Fund's investment objective and concentration
policy 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 trustees. There is no assurance that the Fund
will achieve its investment objective.
CORE INVESTMENT POLICIES
ISSUER DIVERSIFICATION. The Fund invests primarily in bonds issued or guaranteed
by European governments and their political subdivisions. The Fund currently
intends to invest in bonds issued by governments and political subdivisions of
Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the
Netherlands, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
Political subdivisions include states, provinces, and municipalities, as well as
federal, regional, state, and municipal agencies or instrumentalities. The Fund
may also invest in bonds issued by supranational organizations such as the World
Bank or the European Investment Bank.
Typically, the Fund invests more than 25% of its total assets in securities
issued by the German government or its political subdivisions. For temporary
defensive purposes, however, the Fund may invest less than 25% of its total
assets in these securities. The Fund does not expect to invest more than 25% of
its total assets in government debt securities of any one foreign country other
than Germany.
To provide a margin of liquidity for shareholder redemptions and exchanges, the
Fund may invest up to 5% of its total assets in U.S. government securities held
directly or
6
<PAGE>
under a repurchase agreement. For temporary defensive purposes, the
Fund may invest more than 5% of its total assets in U.S. government securities.
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.
The Fund may invest in AAA-rated corporate bonds denominated in European
currencies or European Currency Units (ECUs). However, the Fund will limit its
investments in such corporate bonds to those amounts which will help it satisfy
the diversification requirements under Subchapter M of the Internal Revenue Code
of 1986 (the "Code"), as amended.
CREDIT QUALITY. Like U.S. Treasury securities, direct obligations of a European
government are backed by the full faith and credit of that government. European
government agency debt may or may not be backed by federal government
guarantees.
Under normal market conditions, the Fund invests at least 65% of its total
assets in European government bonds rated AAA by a rating agency or considered
by the subadvisor to be of comparable quality. If a rating agency downgraded a
security held by the Fund or judged a security to be less than AAA quality, the
security would be sold as quickly as possible without unnecessarily
destabilizing the Fund's share price or yield.
CURRENCY DIVERSIFICATION. Bonds eligible for inclusion in the Fund's portfolio
may be denominated in European currencies or ECUs. ECUs are a composite currency
consisting of fixed amounts of currency of European Economic Community member
countries. A government may issue bonds in domestic currency, ECUs, or the
currency of another sovereign government. In this regard, the Fund may buy
Australian or Canadian bonds issued in European currencies or ECUs. Under normal
market conditions, at least 30% of the Fund's assets are invested in securities
denominated in German marks.
DOLLAR-WEIGHTED AVERAGE MATURITY. The Fund's dollar-weighted average portfolio
maturity ranges from two to ten years.
- --------------------
[information in right margin of page]
Under normal conditions, at least 65% of the Fund's total assets are invested
in European government bonds rated AAA or judged to be of comparable quality
by the subadvisor.
Under normal conditions, at least 30% of the Fund's assets are invested in
securities denominated in German marks.
- --------------------
7
<PAGE>
[information in left margin of page]
The Fund is designed for U.S. investors seeking currency and interest rate
diversification. Accordingly, JPMIM limits its use of currency hedging
strategies intended to minimize the effect of currency fluctuations.
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MANAGEMENT APPROACH
INTERNATIONAL SUBADVISOR
J.P. Morgan Investment Management Inc. (JPMIM) is the Fund's subadvisor and is
responsible for its day-to-day operations. JPMIM is headquartered in New York
and maintains offices in most of the world's financial centers, including London
and Frankfurt.
STRATEGY
JPMIM selects the Fund's investments by using a combination of fundamental
research and bond and currency valuation models. The following is a brief
summary of factors considered by JPMIM in selecting the Fund's investments:
[] ECONOMIC/POLITICAL FUNDAMENTALS: JPMIM evaluates each country's economic
climate and political discipline for controlling deficits and inflation.
[] EXPECTED RETURN: Using economic forecasts, JPMIM projects the expected
return for each country.
[] RELATIVE VALUE: By contrasting expected risks and returns in each country,
JPMIM selects those countries expected to produce the best return at
reasonable risk.
CURRENCY MANAGEMENT
The rate of exchange between U.S. dollars and European currencies fluctuates,
which results in gains and losses to the Fund. Even if the Fund's foreign
security holdings perform well, an increase in the value of the dollar relative
to the currencies in which portfolio securities are denominated can offset
security gains.
Because the Fund is designed for U.S. investors seeking currency and interest
rate diversification, JPMIM limits its use of hedging strategies intended to
minimize the effect of currency fluctuations. Although hedging strategies (if
they are successful) reduce exchange rate risk, they also reduce the potential
for share price appreciation when European currencies increase in value relative
to the U.S. dollar.
When JPMIM considers the U.S. dollar to be attractive relative to European
currencies, as much as 25% of the Fund's assets may be hedged into dollars. For
temporary defensive purposes and under extraordinary circum-
8
<PAGE>
stances (such as significant political events), more than 25% of the Fund's
assets may be hedged in this manner.
In managing the Fund's currency exposure, JPMIM will buy and sell foreign
currencies regularly, either in the spot (i.e., cash) market or the forward
market. Forward foreign currency exchange contracts (forward contracts) are
individually negotiated and privately traded between currency traders (usually
large commercial banks) and their customers. In most cases, there are no deposit
requirements, and the contracts are traded at a net price without commission.
These contracts involve an obligation to purchase or sell a specific currency at
an agreed-upon price on a future date. Most contracts expire in less than one
year.
INVESTMENT CONSIDERATIONS
The Fund may be appropriate for U.S. investors who:
[] Want to protect their income against a decline in the purchasing power of
the U.S. dollar relative to that of foreign currencies.
[] Want to diversify their investments beyond U.S. dollar-denominated
securities and interest rate exposure.
As market conditions change (i.e., interest rate, political, and economic
changes occur), the Fund's value will vary. The Fund's performance will be
affected by currency values, foreign economies, and other foreign investment
factors.
The Fund itself is not a balanced investment plan and works best for investors
prepared to ride out the international markets' ups and downs.
The risks which the Fund faces most frequently are those posed by fluctuations
in currency values. The value of the investments held by the Fund is calculated
in U.S. dollars on each day that the New York Stock Exchange (the "Exchange") is
open for business. As a result, to the extent that the Fund's assets are
invested in instruments denominated in currencies other than the U.S. dollar and
such currencies appreciate relative to the U.S. dollar, the Fund's net asset
value per share as expressed in U.S. dollars (and, therefore, the value of a
shareholder's
- -------------------
[information in the rght margin of page]
The Fund may be appropriate for U.S. investors who want to protect their income
against a decline in the purchasing power of the U.S. dollar relative to that
of foreign currencies.
- -------------------
9
<PAGE>
investment in the Fund as expressed in U.S. dollars) should increase. If the
U.S. dollar appreciates relative to such other currencies, the converse should
occur, except to the extent that losses are offset by net investment income
generated by the U.S. dollar-denominated instruments in which the Fund invests.
The currency-related gains and losses experienced by the Fund will be based on
changes in the value of portfolio securities attributable to currency
fluctuations only in relation to the original purchase price of such securities
stated in U.S. dollars. An individual shareholder's gains or losses on his or
her shares will be based on changes attributable to fluctuations in the net
asset value of such shares, expressed in U.S. dollars, in relation to the
original U.S. dollar purchase price of such shares. The relative amount of
appreciation or depreciation in the Fund's assets also will be affected by
changes in the value of the securities that are unrelated to changes in currency
exchange rates.
Interest rates paid on instruments denominated in foreign currencies may be
higher or lower than those paid on comparable U.S. dollar instruments.
Consequently, the Fund may have a higher or lower yield than a fund which
invests strictly in U.S. dollar-denominated instruments.
OTHER INVESTMENT POLICIES AND TECHNIQUES
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 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.
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 European-currency-denominated obligations of
European governments, European government agencies, and supranational
organizations, as well as high-quality certificates of deposit.
10
<PAGE>
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 trustees. 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.
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.
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 engage in buying and
selling 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 increase return or if certain markets pose liquidity
difficulties, the Fund may incur losses or suffer from devaluation. 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 trustees, 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 PORTFOLIO MANAGEMENT TECHNIQUES. JPMIM 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 engage in futures and options transactions, including currency
futures transactions.
- ---------------------
11
<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 includeld in the Fund's annual and
seminannual reports to shareholders.
- ------------------
PORTFOLIO TRANSACTIONS
JPMIM will not trade portfolio securities in pursuit of short-term profits for
the Fund, although, when circumstances warrant, securities may be sold without
regard to their remaining maturities. Under normal conditions, the Fund's annual
portfolio turnover rate is expected to be approximately 250% and may vary from
year to year. Higher turnover rates increase transaction costs and may increase
taxable capital gains (or losses). Short-term capital gains distributed to
shareholders are treated as ordinary income. JPMIM carefully weighs the
potential benefits of short-term investing against these considerations.
Transaction costs are normally higher for foreign bonds than for U.S.
securities; therefore, the Fund's anticipated portfolio turnover rate may have a
larger negative impact on total return than it would if the Fund invested
primarily or exclusively in U.S. securities.
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 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.
12
<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. These reports are routinely delivered to the
Fund's shareholders. For a free copy, call one of the Fund Information numbers
on page 2.
SHARE PRICE
The price of your shares is the net asset value (the "NAV") for the Fund next
determined after receipt of your instruction to purchase, convert or redeem. The
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 on
each day that 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 on the Exchange, usually
1:00 p.m. Pacific Time, will receive that day's price. Investments and
instructions received after that time will receive the price determined on the
next business day.
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[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.
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13
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[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.
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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 24 and 25.
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 21 for details.
Benham Group Representatives are available at the telephone numbers listed below
weekdays from 5:00 a.m. to 5:00 p.m. Pacific Time. For your protection, Benham
records all telephone conversations with its telephone representatives.
FUND INFORMATION: for information about any Benham fund or other investment
product, call 1-800-331-8331 or 1-415-965-4274.
INVESTOR SERVICES: to open an account, receive a Prospectus or Statement of
Additional Information for a Benham Fund, or to inquire about 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.
14
<PAGE>
HOW TO BUY SHARES (Retirement investors, see pages 24 and 25).
================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------
By Check Minimum initial investment: $1,000
Minimum additional investment: $100
MAKE YOUR INVESTMENT CHECK PAYABLE TO THE BENHAM GROUP. Mail
the check with your completed application to
The Benham Group
P.O. Box 7730
San Francisco, California 94120-9853
FOR ADDITIONAL INVESTMENTS, enclose an investment slip
preprinted with the account number to which your investment
should be credited. If the payee information provided on the
check does not agree with the information preprinted on the
investment slip, we will follow the instructions preprinted on
the 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 the written instructions, we
will follow the written instructions.
You may also invest your check in person at a Benham Investor
Center. One is located at 1665 Charleston Road in Mountain
View, California; the other is located at 2000 South Colorado
Boulevard, Suite 1000, in Denver, Colorado.
WE WILL NOT ACCEPT CASH INVESTMENTS OR THIRD-PARTY CHECKS. We
will, however, accept properly endorsed second-party checks
made payable to the investor(s) to whose account the investment
is to be credited.
We will also accept checks drawn on foreign banks or foreign
branches of domestic banks and checks that are not drawn in
U.S. dollars (U.S. $100 minimum). The cost of collecting
payment on such checks will be passed on to the investor. These
costs may be substantial, and settlement may involve
considerable delays.
Investors will be charged $5 for every investment check
returned unpaid.
15
<PAGE>
================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------
BY BANK WIRE Minimum initial investment: $25,000
Minimum additional investment: $100
If you wish to open an account by bank wire, please call our
Investor Services Department for more information and an
account number. Bank wire investments should be addressed as
follows:
State Street Bank and Trust Company
Boston, Massachusetts
ABA Routing Number 011000028
Beneficiary = Benham European Government Bond Fund
Fund Account Number 05060868
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 "Telephone
Transactions" on page 17 and "Exchange Privilege" on page 18
for details. You may open a new account by telephone exchange,
provided that you meet the minimum initial investment
requirement.
- --------------------------------------------------------------------------------
AUTOMATIC Minimum: $25
INVESTMENT These services are offered with respect to additional Services
INVESTMENTS only. See details on page 19.
16
<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.
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.
17
<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.
Currently, there are no restrictions on exchanges out of the Benham money market
funds. 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
18
<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 18), 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
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
investment strategy.
- ------------------------
19
<PAGE>
- ------------------------
[inforamtion 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
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 already 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 sub-transfer agent
has received and accepted your redemption request. The
20
<PAGE>
Fund's NAV is calculated at the close of business of the Exchange, usually
1:00 p.m. Pacific Time. See page 13 for further information.
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. 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 should see pages 24 and 25 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.
21
<PAGE>
HOW TO REDEEM SHARES (Retirement investors, see pages 24 and 25).
================================================================================
METHOD INSTRUCTIONS
- --------------------------------------------------------------------------------
BY TELEPHONE The Benham Group will accept telephone redemption
requests for any amount if the proceeds are to be sent to your
predesignated bank account. Redemptions of $25,000 or less
payable to the registered account owner(s) may also be ordered
by telephone. All other redemption requests must be made in
writing. ONCE YOUR TELEPHONE ORDER HAS BEEN PLACED, IT MAY NOT
BE MODIFIED OR CANCELLED.
IN WRITING Send a letter of instruction to
The Benham Group
Investor Services Department
1665 Charleston Road
Mountain View, California 94043
Your letter of instruction should specify
[] Your name
[] Your account number
[] The name of the Fund from which you wish to redeem shares
[] The dollar amount or number of shares you wish to redeem.
For your protection, written redemption requests must be
accompanied by SIGNATURE GUARANTEES under the following
circumstances
[] Redemption proceeds go to a party other than the
registered account owner(s)
[] Redemption proceeds go to an account other than your
predesignated bank account
[] Redemption proceeds go to the registered account owner(s),
but the amount exceeds $25,000.
If you have instructed The Benham Group to require more than
one signature on written redemption requests, each of the
required number of signers must have his or her signature
guaranteed on the redemption requests.
22
<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 pages 16 and 18.
- --------------------------------------------------------------------------------
AUTOMATIC DIRECTED PAYMENTS. You may arrange for periodic redemp-
REDEMPTION tions from your Benham fund account to your bank
SERVICES account or to another designated payee.
SYSTEMATIC EXCHANGES. You may arrange for periodic exchange
redemptions from one Benham fund account to another Benham
fund account.
23
<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 minimum,
[chart continues on next page]
================================================================================
PLAN TYPE AVAILABLE TO MAXIMUM ANNUAL CONTRIBUTION
PER PARTICIPANT
- --------------------------------------------------------------------------------
Contributory An employed indi- $2,000 or 100% of compensation
IRA vidual under age 70 1/2. (whichever is less).
- --------------------------------------------------------------------------------
Spousal IRA A nonworking spouse $2,250 (can be split between
(under age 70 1/2) of a Spousal and Contributory IRAs,
wage earner. provided that no IRA receives
more than a total of $2,000).
- --------------------------------------------------------------------------------
Rollover IRA An individual with a None, as long as total amount is
distribution from an eligible.
employer's retirement
plan or a rollover IRA.
- --------------------------------------------------------------------------------
SEP-IRA A self-employed indi- $22,500 or 15% of compensation
vidual or a business. (whichever is less).*
- --------------------------------------------------------------------------------
Money Same as for SEP-IRA. $30,000 or 25% of compensation
Purchase Plan (whichever is less). Annual
(Keogh) contribution is mandatory.*
- --------------------------------------------------------------------------------
Profit Same as for SEP-IRA. $22,500 or 15% of compensation
Sharing Plan (whichever is less). Annual
(Keogh) contribution is optional.*
- --------------------------------------------------------------------------------
* Self-employed individuals should consult IRS Publication 560 for their annual
contribution limits.
24
<PAGE>
your account may be closed (see page 21 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.
[chart continued from previous page]
================================================================================
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.
25
<PAGE>
- -----------------
[information in left margin of page]
Each January, you will be informed of the dividends and capital gain
distributions for the previous year.
- -----------------
DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund expects to pay dividends from net investment income quarterly (in
March, June, September, and December), although it may elect not to do so in any
given quarter. The Fund may forego a dividend if, for example, net foreign
currency losses exceed investment income. Net capital gains and net foreign
currency gains, if any, are declared and distributed annually in December. The
trustees 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 19 for further information). Please indicate your choice on
your account application or contact our Investor Services Department. See page
21 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. Dividends declared in November or
December and paid by the following January 31st are generally taxable in the
year in which 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 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
26
<PAGE>
the Internal Revenue Service (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.
RETURN OF CAPITAL. If, during a given year, the Fund pays dividends that exceed
income earned on investments and any net realized gains from the sale of
securities, 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.
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 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 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.
27
<PAGE>
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 paid 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 or social security number, we may redeem your shares
in the Fund at any time.
MANAGEMENT INFORMATION
ABOUT BENHAM INTERNATIONAL FUNDS
Benham International Funds (BIF) is a registered open-end management investment
company that was organized as a Massachusetts business trust on August 28, 1991.
BIF currently consists of five series.
A board of trustees oversees the Fund's activities and is responsible for
protecting shareholders' interests. The majority of trustees are not otherwise
affiliated with BMC. BIF is not required nor expected to hold annual meetings,
although special meetings may be called for purposes such as electing or
removing trustees or amending the Fund's 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.
28
<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 company, 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 to manage the
assets of the funds. 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 managers may also adjust portfolio holdings of the funds as
necessary between team meetings.
The portfolio manager members of the team managing the Fund described in this
prospectus and their work experience for the last five years is as follows:
MR. ROBERT P. BROWNE, Portfolio Manager, has primary responsibility for the
day-to-day operations of the Fund. Mr. Browne transferred to the Fixed-Income
Group in London in 1994. He was previously located in the Tokyo office and
managed domestic and foreign fixed income as well as overall currency exposure
for J.P. Morgan Trust Bank's international portfolios. Mr. Browne joined JPMIM
in 1989. He holds a B.A. in Economics from Holy Cross College and a Masters of
International Business Studies from the University of South Carolina.
- --------------------
[information in right margin of page]
The Benham Group serves more than 475,000 investors.
- --------------------
29
<PAGE>
- ------------------
[information in left margin of page]
Subadvisory fees are paid by BMC, not by the Fund.
- ------------------
MR. JEFFREY R. TYLER oversees the portfolio manager's operation of the Fund. He
is a vice president of The Benham Group's portfolio management team. He is also
manager of Benham Capital Manager Fund and co-manager of Benham GNMA Income
Fund.
ADVISORY AND SERVICE FEES
For investment advice and portfolio management services, the Fund pays BMC a
monthly investment advisory fee based on the dollar amount derived from applying
the Fund's average daily net assets to an investment advisory fee rate schedule.
The investment advisory fee rate cannot exceed .45% of average daily net assets,
and it drops to a marginal rate of .29% of average daily net assets as the
Fund's assets increase.
Investment advisory fees paid by the Fund to BMC for the fiscal year ended
December 31, 1995, were equal to .45% of average daily net assets or $4.50 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 Benham
money market funds.
JPMIM is the Fund's investment subadvisor. JPMIM is a leading manager of pension
funds, institutional accounts, and private accounts, with approximately $112
billion in assets under management. JPMIM makes investment decisions for the
Fund in accordance with the Fund's investment objective, policies, and
restrictions under the supervision of BMC and the board of trustees. JPMIM is a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated.
For subadvisory services, BMC pays JPMIM a monthly fee at the annual rate of
.20% of average daily net assets up to $200 million and .15% of average daily
net assets in excess of $200 million. For the fiscal year ended December 31,
1995, BMC paid JPMIM subadvisory fees equal to .19% of the Fund's average daily
net assets.
30
<PAGE>
BFS, a wholly owned subsidiary of TCC, is BIF'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 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.
The Fund pays certain operating expenses directly, including, but not limited
to: custodian, audit, and legal fees; fees of the independent trustees; costs of
printing and mailing prospectuses, statements of additional information, proxy
statements, notices, and reports to shareholders; insurance expenses; and costs
of registering the Fund's shares for sale under federal and state securities
laws. See the Statement of Additional Information for a more detailed discussion
of independent trustee compensation.
EXPENSE LIMITATION AGREEMENT
An expense limitation agreement between BMC and the Fund is described on page 3.
The Fund's total operating expenses for the fiscal year ended December 31, 1995,
were equal to .82% of average daily net assets or $8.20 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.
- ----------------------
31
<PAGE>
INVESTMENT ADVISOR
BENHAM MANAGEMENT CORPORATION
1665 Charleston Road
Mountain View, California 94043
INVESTMENT SUBADVISOR
J.P. MORGAN INVESTMENT MANAGEMENT INC.
522 Fifth Avenue
New York, New York 10036
DISTRIBUTOR
BENHAM DISTRIBUTORS, INC.
1665 Charleston Road
Mountain View, California 94043
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, Massachusetts 02101
TRANSFER AGENT
BENHAM FINANCIAL SERVICES, INC.
1665 Charleston Road
Mountain View, California 94043
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
3 Embarcadero Center
San Francisco, California 94111
TRUSTEES
James M. Benham
Albert A. Eisenstat
Ronald J. Gilson
Myron S. Scholes
Kenneth E. Scott
Ezra Solomon
Isaac Stein
James E. Stowers III
Jeanne D. Wohlers
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The Benham Group of Investment Companies
Capital Preservation Fund
Capital Preservation Fund II
Benham Government Agency Fund
Benham Prime Money Market Fund
Benham Short-Term Treasury and Agency Fund
Benham Treasury Note Fund
Benham Long-Term Treasury and Agency Fund
Benham Adjustable Rate Government Securities Fund
Benham GNMA Income Fund
Benham Target Maturities Trust
Benham California Tax-Free and Municipal Funds*
Benham National Tax-Free Money Market Fund
Benham National Tax-Free Intermediate-Term Fund
Benham National Tax-Free Long-Term Fund
Benham Florida Municipal Money Market Fund**
Benham Florida Municipal Intermediate-Term Fund**
Benham Arizona Municipal Intermediate-Term Fund***
Benham Global Gold Fund
Benham Income & Growth Fund
Benham Equity Growth Fund
Benham Utilities Income Fund
Benham Global Natural Resources Index Fund
Benham European Government Bond Fund
Benham Capital Manager Fund
* Available only to residents of California, Arizona, Colorado, Hawaii,
Nevada, New Mexico, Oregon, Texas, Utah, and Washington.
** Available only to residents of Florida, California, Georgia, Illinois,
Michigan, New Jersey, New York, and Pennsylvania.
*** Available only to residents of Arizona, California, Colorado, Nevada,
Oregon, Washington, and Texas.
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NOTES:
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NOTES:
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CONTENTS
Summary of Fund Expenses ................................ 3
Financial Highlights .................................... 4
How The Fund Works ...................................... 6
Investment Objective ................................. 6
Core Investment Policies ............................. 6
Management Approach ..................................... 8
Investment Considerations ............................... 9
Other Investment Policies and Techniques ................ 10
Portfolio Transactions .................................. 12
Performance ............................................. 12
Share Price ............................................. 13
How to Invest ........................................... 14
How to Buy Shares ....................................... 15
Account Services ........................................ 18
Exchange Privilege ................................... 18
Open Order Service ................................... 18
Automatic Investment Services ........................ 19
Broker-Dealer Transactions ........................... 20
TDD Service .......................................... 20
Emergency Services ................................... 20
How to Redeem Your Investment ........................... 20
How to Redeem Shares .................................... 22
About Benham-Sponsored Retirement Plans ................. 24
Distributions and Taxes ................................. 26
Management Information .................................. 28
About Benham International Funds ..................... 28
The Benham Group ..................................... 29
Advisory and Service Fees ............................ 30
Expense Limitation Agreement ......................... 31
Distribution of Shares ............................... 31
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BENHAM EUROPEAN GOVERNMENT BOND FUND
A SERIES OF BENHAM INTERNATIONAL 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
April ___, 1996
This Statement is not a prospectus but should be read in conjunction with the
Fund's current Prospectus dated April ___, 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, Techniques and Risk Factors .............. 2
Investment Restrictions ....................................... 11
Portfolio Transactions ........................................ 12
Valuation of Portfolio Securities ............................. 14
Performance ................................................... 14
Taxes ......................................................... 16
About Benham International Funds .............................. 19
Trustees and Officers ......................................... 20
Investment Advisory Services .................................. 22
Administrative and Transfer Agent Services .................... 24
Direct Fund Expenses .......................................... 24
Expense Limitation Agreement .................................. 24
Additional Purchase and Redemption Information ................ 25
Other Information ............................................. 25
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INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS
The following paragraphs provide a more detailed description of securities and
investment practices identified in the Prospectus and the risks associated with
these practices. Unless otherwise noted, the policies described in this
Statement of Additional Information are not fundamental and may be changed by
the board of trustees.
EUROPEAN GOVERNMENT BONDS
The Fund invests primarily in European government bonds. The market for these
bonds is active; however, there are risks associated with investing in the
European government bond market distinct from those typically associated with
investing in U.S. government bonds. The following is a brief list of the primary
risks you should consider.
1. Tax Risk--Interest income from European government bonds may be taxed by
foreign governments at significantly higher rates than interest income from
domestic investments. As has happened in the past, the U.S. government or
European governments may adopt tax policies that discourage overseas
investing.
2. Currency Exchange Rate Risk--Currencies in which the Fund's investments are
denominated may decline significantly relative to the U.S. dollar.
3. Settlement Risk--J.P. Morgan Investment Management, Inc. (JPMIM) may
encounter difficulties resulting from delays in settling transactions with
European broker-dealers. Settlement delays may encumber portfolio management
efforts by tying up Fund assets at times when JPMIM perceives market
opportunities.
Under normal conditions, more than 25% of the Fund's total assets are invested
in securities issued by the German government or its political subdivisions.
This policy is currently viewed by the Securities and Exchange Commission (SEC)
staff as a concentration policy. Under Section 13 of the Investment Company Act
of 1940 (the "1940 Act"), a Fund may not change its concentration policy without
shareholder approval.
EUROPEAN CORPORATE BONDS
If necessary to satisfy diversification requirements under Subchapter M of the
Internal Revenue Code (the "Code"), the Fund may invest a portion of its assets
in AAA-rated European corporate bonds. The risks of investing in European
corporate bonds are somewhat greater than the risks associated with investing in
European government bonds. In addition to the risks outlined above with respect
to European government bonds, JPMIM may encounter difficulty obtaining adequate
public information about corporate bond issuers. Investment decisions may be
encumbered by the lack of uniform accounting, audit, or financial reporting
standards among European issuers or nations. The Fund may encounter greater
volatility and less liquidity in foreign corporate bond markets than it would in
U.S. bond markets and less government regulation of foreign exchanges and
broker-dealers than is typical in the United States.
The Fund's European investments (government or corporate) may be affected by
political or economic developments within or among European nations, or between
European nations and the United States.
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U.S. GOVERNMENT SECURITIES
To accommodate shareholder redemptions and exchanges, up to 5% of the Fund's
total assets may be invested in U.S. government securities held directly or
under repurchase agreement. U.S. government securities include 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 (FNMA), 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"), 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. Delay or losses could result if the other party
to the agreement defaults or becomes bankrupt.
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) that are deemed to be
creditworthy under guidelines established by a nationally recognized
statistical rating organization (a "rating agency") and approved by the
Fund's board of trustees
(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
trustees 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 the Fund's total assets in repurchase
agreements that mature in more than seven days
(6) Taking delivery of securities subject to repurchase agreement and holding
them in an account at the Fund's custodian bank.
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The Fund has received permission from the 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 Fund can earn from
repo transactions without increasing the risks associated with these
transactions.
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. Although 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 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 a segregated account consisting of cash, cash
equivalents, or high-quality securities in an amount sufficient to meet the
purchase price until the settlement date. 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 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 total assets to be
committed under when-issued or forward-commitment agreements, JPMIM does not
need to sell such agreements, 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.
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 trustees:
(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,
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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.
(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.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
The Fund expects to exchange dollars for the Fund`s underlying currencies, and
vice versa, in the normal course of managing the Fund`s underlying investments.
JPMIM does not expect that the Fund will hold currency that is not earning
income on a regular basis, although the Fund may do so temporarily when suitable
investments are not available. The Fund may exchange currencies on a "spot"
basis (i.e., for prompt delivery and settlement), or by entering into forward
currency exchange contracts (also called forward contracts) or other contracts
to purchase and sell currencies for settlement at a future date. The Fund will
incur costs in converting assets from one currency to another. Foreign exchange
dealers may charge a fee for conversion; in addition, they also realize a profit
based on the difference (i.e., the spread) between the prices at which they buy
and sell various currencies in the spot and forward markets. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, and repurchase it at a
lesser rate should the fund desire to resell the currency to the dealer.
Forward contracts are agreements to exchange a specific amount of one currency
for a specified amount of another at a future date. The date may be any agreed
fixed number of days in the future. The amount of currency to be exchanged, the
price at which the exchange will take place, and the date of the exchange are
negotiated when the Fund enters into the contract and are fixed for the term of
the contract. Forward contracts are traded in an interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement and is
consummated without payment of any commission. However, the Fund may enter into
forward contracts with deposit requirements or commissions.
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At the maturity of a forward contract, the Fund may complete the contract by
paying for and receiving the underlying currency, may seek to roll forward its
contractual obligation by entering into an "offsetting" transaction with the
same currency trader and paying or receiving the difference between the
contractual exchange rate and the current exchange rate. The Fund may also be
able to enter into an offsetting contract prior to the maturity of the
underlying contract. This practice is sometimes referred to as "cross hedging"
and may be employed if, for example, JPMIM believes that one foreign currency
(in which a portion of the Fund's foreign currency holdings are denominated)
will change in value relative to the U.S. dollar differently than another
foreign currency. There is no assurance that offsetting transactions, or new
forward contracts, will always be available to the Fund.
Investors should realize that the use of forward contracts does not eliminate
fluctuations in the underlying prices of the securities. Such contracts simply
establish a rate of exchange that the Fund can achieve at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to fluctuations in the value of the hedged currency when used as a hedge
against foreign currency declines, at the same time they tend to limit any
potential gain which might result from the change in the value of such currency.
Because investments in, and redemptions from, the Fund will be in U.S. dollars,
JPMIM expects that the Fund`s normal investment activity will involve a
significant amount of currency exchange. For example, the Fund may exchange
dollars for its underlying foreign currencies for dollars in order to meet
shareholder redemption requests or to pay expenses.
These transactions may be executed in the spot or forward markets.
In addition, the Fund may combine forward transactions in its underlying
currency with investments in U.S. dollar-denominated instruments, in an attempt
to construct an investment position whose overall performance will be similar to
that of a security denominated in its underlying currency. If the amount of
dollars to be exchange is properly matched with the anticipated value of the
dollar-denominated securities, the Fund should be able to "lock in" the foreign
currency value of the securities, and the Fund`s overall investment return from
the combined position should be similar to the return from purchasing a foreign
currency-denominated instrument. This is sometimes referred to as a "synthetic"
investment position or a "position hedge".
The execution of a synthetic investment position may not be successful. It is
impossible to forecast with absolute precision what the dollar value of a
particular security will be at any given time. If the value of a
dollar-denominated security is not exactly matched with the Fund`s obligation
under the forward contract on the contract`s maturity date, the Fund may be
exposed to some risk of loss from fluctuation of the dollar. Although JPMIM will
attempt to hold such mismatchings to a minimum, there can be no assurance that
JPMIM will be successful in doing so.
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.
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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, 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.
Those who trade futures contracts may be broadly classifed as either "hedgers"
or "speculators". Hedgers, such as the Fund, 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. The Fund will not
utilize futures contracts for speculative purposes.
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.
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).
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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 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. However, if the secondary market is not liquid for a put
option the Fund has written, 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 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 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, 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 to construct a combined position whose risk and return
characteristics are similar to selling 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 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 to tailor an option to its needs, OTC options generally involve
greater credit
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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 futures and options 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 futures and options
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests (for example,
by hedging intermediate-term securities with a futures contract based on an
index of long-term bond prices); this involves a risk that the futures position
will not track the performance of the Fund's other investments.
Options and futures prices can diverge from the prices of their underlying
instruments even if the underlying instruments correlate well with 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,
which 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 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. 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 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.
FUTURES AND OPTIONS CONTRACTS 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. A Fund may
also purchase and write currency options in connection 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 standard contract sizes and
delivery dates. Most currency futures contracts call for payment or delivery in
U.S. dollars.
The uses and risks of currency futures are similar to those of futures relating
to securities or indexes, as previously described. Currency futures 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 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.
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LIQUIDITY OF FUTURES CONTRACTS AND OPTIONS. There is no assurance that 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 on 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 was 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 positions could also be impaired.
Futures and options trading on foreign exchanges may not be regulated as
effectively as similar transactions in the U.S. and may not involve clearing
mechanisms or guarantees similar to those available in the U.S. The value of a
futures contract or option traded on a foreign exchange may be adversely
affected by the imposition of different exercise and settlement terms, trading
procedures, and margin requirements, and lesser trading volume.
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
Commodity Futures Trading Commission (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 Commodity Exchange Act,
which limits the extent to which the Fund can commit assets to initial margin
deposits and options premiums.
The Fund may enter into futures transactions (including related options) for
hedging purposes without regard to the percentage of assets committed to initial
margin and for other than hedging purposes provided that assets committed to
initial margin deposits on such instruments, plus premiums paid for open futures
options positions, less the amount by which any such positions are
"in-the-money," do not exceed 5% of the Fund's total 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.
Financial futures or options purchased or sold by the Fund will be standardized
and traded through the facilities of a U.S. or foreign securities association or
listed on a U.S. or foreign securities or commodities exchange, board of trade,
or similar entity, or quoted on an automatic quotation system, except that the
Fund may effect transactions in over-the-counter options with primary U.S.
government securities dealers recognized by the Federal Reserve Bank of New
York. In addition, the Fund has undertaken to limit aggregate premiums paid on
all options purchased by the Fund to no more than 20% of the Fund's total net
asset value.
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
these instruments.
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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
shareholders of the Fund as determined in accordance with the 1940 Act.
THE FUND MAY NOT:
(1) Borrow money except from a bank as a temporary measure to satisfy
redemption requests or for extraordinary or emergency purposes provided
that the Fund maintains asset coverage of at least 300% for all such
borrowings. The Fund may borrow money for temporary or emergency purposes
from other funds or portfolios for which BMC is the investment advisor or
from a joint account of such funds or portfolios, as permitted by federal
regulatory agencies.
(2) Act as an 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.
(3) 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
investing in securities or other instruments backed by real estate or
securities of issuers engaged in the real estate business); physical
commodities; contracts relating to physical commodities; or interests in
oil, gas and/or mineral exploration or development programs or leases.
This restriction shall not be deemed to prohibit the Fund from purchasing
or selling currencies; entering into futures contracts on securities,
currencies, or on indexes of such securities or currencies, or any other
financial instruments; and purchasing and selling options on such futures
contracts.
(4) Make loans to others, except for the lending of portfolio securities
pursuant to guidelines established by the board of trustees or for the
purchase of debt securities in accordance with the Fund's investment
objective and policies.
(5) Issue senior securities, except as permitted under the 1940 Act.
The Fund is also subject to the following restrictions that are not fundamental
and may therefore be changed by the board of trustees without shareholder
approval.
THE FUND MAY NOT:
(a) Purchase any equity securities in any companies, including warrants or
bonds with warrants attached, or any preferred stocks, convertible bonds,
or convertible debentures.
(b) 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 options and futures contracts are not deemed
to constitute short sales of securities.
(c) Purchase warrants, valued at the lower of cost or market, in excess of 10%
of the Fund's net assets. Included within that amount, but not to exceed
2% of the Fund's 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.
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(d) 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 the purchase of
securities on margin.
(e) Invest in securities that are not readily marketable or the disposition of
which is restricted under federal securities laws (collectively, "illiquid
securities") if as a result, more than 10% of the Fund's net assets would
be invested in illiquid securities. The Fund may not invest more than 10%
of its net assets in repurchase agreements providing for settlement in
more than seven days or options which are traded in the over-the-counter
market and investments hedged by such options.
(f) Acquire or retain the securities of any other investment company if, as a
result, more than 3% of such investment company's outstanding shares would
be held by the Fund, more than 5% of the value of the Fund's assets would
be invested in shares of such investment company, or more than 10% of the
value of the Fund's assets would be invested in shares of investment
companies in the aggregate, or except in connection with a merger,
consolidation, acquisition, or reorganization.
(g) 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.
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.
PORTFOLIO TRANSACTIONS
In selecting broker-dealers to execute transactions on behalf of the Fund, JPMIM
seeks the best net price and execution available. In assessing the best net
price and execution available for any Fund transaction, JPMIM will consider all
factors it deems relevant including, but not limited to, (i) the breadth of the
market for the security, (ii) the price of the security, (iii) the financial
condition and execution capability of the broker-dealer, and (iv) the
reasonableness of any commission for the specific transaction. When the
execution and price offered by two or more broker-dealers are comparable, JPMIM
may, with discretion, in recognition of the value of brokerage or research
services provided by the broker-dealer, purchase and sell portfolio securities
to and from broker-dealers who provide the Fund with research and other services
provided, however, that in all instances best net price and execution shall be
the controlling factor, and in no event may JPMIM pay to a broker-dealer a
commission in excess of that which another broker-dealer would have charged for
effecting the same transaction.
When JPMIM deems the purchase or sale of a security to be in the best interest
of the Fund as well as its other clients, it may, to the extent permitted by
applicable law, aggregate the securities to be sold or purchased with those of
its other clients. In such an event, the allocation of securities so purchased
or sold will be made by JPMIM in a manner it considers to be the most equitable
and consistent with its fiduciary obligations to the Fund and its other clients.
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JPMIM is authorized to execute such documents as may be required to affect
forward foreign currency exchange contracts on behalf of the Fund. In selecting
counterparties for such contracts, JPMIM seeks the best overall terms available
and executes or directs the execution of all such transactions as permitted by
law and consistent with the best interest of the Fund.
For the fiscal years ended December 31, 1995, and 1994, the Fund's portfolio
turnover rates were 167% and 166%, respectively.
TRANSACTIONS WITH JPMIM AFFILIATES
As described in further detail on pages 22 and 23, JPMIM is subadvisor to the
Fund pursuant to an agreement with Benham Management Corporation.
JPMIM, Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), J.P.
Morgan Securities Inc., and J.P. Morgan Securities Limited are wholly owned
subsidiaries of J.P. Morgan & Co. Incorporated, hereafter referred to
collectively as "Morgan affiliates."
J. P. Morgan Securities Inc. is a broker-dealer registered with the Securities
and Exchange Commission and is a member of the National Association of
Securities Dealers. It is active as a dealer in U.S. government securities and
an underwriter of and dealer in U.S. government agency securities and money
market instruments.
J.P. Morgan Securities Limited underwrites, distributes, and trades
international securities, including Eurobonds, commercial paper, and foreign
government bonds. J.P. Morgan & Co. Incorporated issues commercial paper and
long-term debt securities. Morgan Guaranty and some of its affiliates issue
certificates of deposit and create bankers' acceptances.
To the extent that the Fund invests a portion of its assets in such obligations,
it will not invest in securities issued or created by Morgan affiliates.
Certain activities of Morgan affiliates may affect the Fund's portfolio or the
markets for securities in which the Fund invests. In particular, activities of
Morgan affiliates may affect the prices of securities held by the Fund and the
supply of issues available for purchase by the Fund. Where a Morgan affiliate
holds a large portion of a given issue, the price at which that issue is traded
may influence the price of similar securities the Fund holds or is considering
purchasing.
The Fund will not purchase securities directly from Morgan affiliates, and the
size of Morgan affiliates' holdings may limit the selection of available
securities in a particular maturity, yield, or price range. The Fund will not
execute any transactions with Morgan affiliates and will use only unaffiliated
broker-dealers. In addition, the Fund will not purchase any securities of U.S.
government agencies during the existence of an underwriting or selling group of
which a Morgan affiliate is a member, except to the extent permitted by law.
The Fund's ability to engage in transactions with Morgan affiliates is
restricted by the SEC and the Federal Reserve Board. In JPMIM's opinion, these
limitations should not significantly impair the Fund's ability to pursue its
investment objectives. However, there may be circumstances in which the Fund is
disadvantaged by these limitations compared to other funds with similar
investment objectives that are not subject to these limitations.
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In acting for its fiduciary accounts, including the Fund, JPMIM will not discuss
its investment decisions or positions with the personnel of any Morgan
affiliate. JPMIM has informed the Fund that, in making investment decisions, it
will not obtain or use material, non-public information in the possession of any
division or department of JPMIM or other Morgan affiliates.
The commercial banking divisions of Morgan Guaranty and its affiliates may have
deposit, loan, and other commercial banking relationships with issuers of
securities the Fund purchases, including loans that may be repaid in whole or in
part with the proceeds of securities purchased by the Fund. Except as may be
permitted by applicable law, the Fund will not purchase securities in any
primary public offering when the prospectus discloses that the proceeds will be
used to repay a loan from Morgan Guaranty. JPMIM will not cause the Fund to make
investments for the direct purpose of benefitting other commercial interests of
Morgan affiliates at the Fund's expense.
VALUATION OF PORTFOLIO SECURITIES
The Fund's net asset value per share ("NAV") is determined by Benham Financial
Services, Inc. (BFS), as of the close of business of the New York Stock Exchange
(the "Exchange") each day 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 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
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 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.
JPMIM typically completes its trading on behalf of the Fund in various markets
before the Exchange closes for the day, and the value of portfolio securities is
determined when the primary market for those securities closes for the day.
Foreign currency exchange rates are also determined prior to the close of the
Exchange. However, if extraordinary events occur that are expected to affect the
value of a portfolio security after the close of the primary exchange on which
it is traded, the security will be valued at fair market value as determined in
good faith under the direction of the board of trustees.
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.
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<PAGE>
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:
6
YIELD = 2 [(a - b + 1) - 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 6.14%.
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 NAV 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.
In addition to average annual total 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 one year and life of fund average annual total return through
December 31, 1995 are 24.40% and 10.95%, respectively. The Fund commenced
operations on January 7, 1992. 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
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<PAGE>
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.
The Fund's shares are sold without a sale 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 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 will be treated as a separate corporation for federal income tax
purposes and intends to qualify annually as a "regulated investment company"
under Subchapter M of the Code. By so qualifying, the Fund will not be subject
to federal income taxes on its investment company taxable income or net capital
gains distributed to shareholders.
The Fund may be subject to a 4% excise tax on a portion of its undistributed
income. To avoid the tax, the Fund must distribute annually at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year and at least 98% of its capital gain net income for the 12-month
period ending on October 31 of the calendar year. Any dividend declared by the
Fund in October, November, or December of any year and payable to shareholders
of record on a specified date in such a month shall be deemed to have been
received by each shareholder on December 31 of such year and to have been paid
by the Fund not later than December 31 of such year, provided that such dividend
is actually paid by the Fund during January of the following year.
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<PAGE>
As of December 31, 1995, the Fund had a capital loss carryover of $2,287,194
that will expire on December 31, 2002. No capital gain distributions will be
made by the Fund until its capital loss carryovers have been offset or have
expired.
The Fund's transactions in foreign currencies, forward contracts, options and
futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by the Fund (i.e.,
may affect whether gains or losses are ordinary or capital), accelerate
recognition of income to the Fund, defer Fund losses, and affect the
determination of whether capital gains and losses are characterized as long-term
or short-term capital gains or losses. These rules could therefore affect the
character, amount and timing of distributions to shareholders. These provisions
also may require the Fund to mark to market certain types of the positions in
its portfolio (i.e., treat them as if they were sold), which may cause the Fund
to recognize income without receiving cash with which to make distributions in
amounts necessary to satisfy the 90% and 98% distribution requirements for
relief from income and excise taxes, respectively. The Fund will monitor its
transactions and may make such tax elections as Fund management deems
appropriate with respect to foreign currency, options, futures contracts or
forward contracts. The Fund's status as a regulated investment company may limit
its transactions involving foreign currency, futures, options and forward
contracts.
Under the Code, gains or losses attributable to fluctuations in exchange rates
that occur between the time the Fund accrues income or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or loss. Similarly, in disposing of
debt securities denominated in foreign currencies, certain forward currency
contracts, or other instruments, gains or losses attributable to fluctuations in
the value of a foreign currency between the date the security, contract, or
other instrument is acquired and the date it is disposed of are also usually
treated as ordinary income or loss. Under Section 988 of the Code, these gains
or losses may increase or decrease the amount of the Fund's investment company
taxable income distributed to shareholders as ordinary income.
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 may be reduced or
eliminated under the terms of a U.S. income tax treaty, and the Fund intends to
undertake any procedural steps required to claim the benefits of such a treaty.
With respect to any non-U.S. taxes actually paid by the Fund, if more than 50%
in 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.
Some of the debt securities that may be acquired by the Fund may be treated as
debt securities originally issued at a discount. Generally, the amount of the
original issue discount (OID) is treated as interest income and is included in
income over the term of the debt security even though payment of that amount is
not received until a later time, usually when the debt security matures.
Some of the debt securities may be purchased by the Fund at a discount that
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes.
The gain realized on the disposition of any taxable debt security
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<PAGE>
having market discount will be treated as ordinary income to the extent it does
not exceed the accrued market discount on such debt security if such market
discount was not previously included in taxable income. Generally, market
discount accrues on a daily basis for each day the debt security is held by the
Fund at a constant rate over the time remaining to the debt security's maturity
or, at the election of the Fund, at a constant yield to maturity that takes into
account the semiannual compounding of interest.
Exchange control regulations that may restrict repatriation of investment
income, capital, or the proceeds of securities sales by foreign investors may
limit the Fund's ability to make sufficient distributions to satisfy the 90% and
excise tax distribution requirements.
TAXATION OF U.S. SHAREHOLDERS
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 a capital gain or loss, if the
shares are capital assets in the shareholder's hands, and 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 a 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 on which the shares were disposed. Under such circumstances, the basis of
the shares acquired would be adjusted to reflect the disallowed loss.
TAXATION OF NON-U.S. SHAREHOLDERS
U.S. taxation of a shareholder who is a non-resident alien or a non-U.S.
corporation, partnership, trust, or estate depends on whether the payments
received from a Fund are "effectively connected" with a U.S. trade or business
carried on by such a shareholder. Ordinarily, income from the Fund will not be
treated as "effectively connected."
If the payments received from the Fund are effectively connected with a U.S.
trade or business of the shareholder, then all distributions of net investment
income and net capital gains of the Fund and gains realized upon the redemption,
exchange, or other taxable disposition of shares will be subject to U.S. federal
income tax at the graduated rates applicable to U.S. citizens, residents, or
domestic entities, although the tax may be eliminated under the terms of an
applicable U.S. income tax treaty. Non-U.S. corporate shareholders also may be
subject to a branch profits tax with respect to payments from the Fund.
If the shareholder is not engaged in a U.S. trade or business, or the payments
received from the Fund are not effectively connected with the conduct of such a
trade or business, the shareholder will generally be subject to U.S. tax
withholding at the rate of 30% (or a lower rate under an applicable U.S. income
tax treaty) on distributions of net investment income and net realized
short-term capital received. Non-U.S. shareholders not engaged in a U.S. trade
or business, or having no effectively
18
<PAGE>
connected income, may also be subject to U.S. tax at the rate of 30% (or a lower
treaty rate) on additional distributions resulting from the Fund's election to
treat any non-U.S. taxes it pays as though the taxes were paid by its
shareholders.
Distributions of net realized long-term capital gains to non-U.S. shareholders
and any capital gains realized by them upon the redemption or other taxable
disposition of shares generally will not be subject to U.S. tax. In the case of
individuals and other non-exempt, non-U.S. shareholders who fail to furnish the
Fund with required certifications regarding their foreign status on IRS Form W-8
or an appropriate substitute, the Fund may be required to impose backup
withholding of U.S. tax at the rate of 31% on distributions of net realized
capital gains and proceeds of redemptions and exchanges.
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. The Fund and the Fund's distributions may also 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 his or her tax situation.
ABOUT BENHAM INTERNATIONAL FUNDS
Benham International Funds (BIF) was organized as a Massachusetts business trust
on August 28, 1991. Currently, there are five series of the Trust; one of which
is described herein. The board of trustees may create additional series from
time to time.
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest without par value, which may
be issued in series (funds). Shares issued are fully paid and nonassessable and
have no preemptive, conversion, or similar rights.
Shares of the Fund have equal voting rights, provided that each series votes
separately on matters affecting only that series. Voting rights are not
cumulative. In the election of trustees, each nominee may receive only one vote
from each shareholder, and, because the election requires only a simple
majority, more than 50% of the shares voting in an election can elect all of the
trustees. Shares of the Fund have equal rights as to dividends and distributions
declared by the Fund and in the net assets of the Fund upon its liquidation or
dissolution.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust. The Declaration of Trust also
provides for indemnification and reimbursement of expenses of any shareholder
held personally liable for obligations of the Trust. The Declaration of Trust
provides that the Trust will, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the Trust and satisfy any
judgment thereon. The Declaration of Trust further provides that the Trust may
maintain appropriate insurance (for example, fidelity, bonding, and errors and
omissions insurance) for the protection of the Trust, its shareholders,
trustees, officers, employees, and agents to cover possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance exists and the Trust is unable to meet its obligations.
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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 the Trust's independent auditors and
provides services including (i) audit of annual financial statements and (ii)
preparation of annual federal income tax returns filed on behalf of the Fund.
TRUSTEES AND OFFICERS
The BIF's activities are overseen by a board of trustees, including seven
independent trustees. The individuals listed below whose names are marked by an
asterisk (*) are "interested persons" of BIF (as defined in the 1940 Act) by
virtue of, among other considerations, their affiliation with either the BIF;
BIF's investment advisor, BMC; BIF's agent for transfer and administrative
services, BFS; BIF's distribution agent, Benham Distributors, Inc. (BDI); the
parent corporation, Twentieth Century Companies, Inc. (TCC) or TCC's
subsidiaries; or other funds advised by BMC. Each trustee listed below also
serves as a trustee or director of other funds in The Benham Group. Unless
otherwise noted, dates in parentheses indicate the dates the trustee or officer
began his or her service in a particular capacity. The trustees' and officers'
address is 1665 Charleston Road, Mountain View, California 94043 and 4500 Main
Street, Kansas City, Missouri 64111.
TRUSTEES
*JAMES M. BENHAM, chairman of the board of trustees (1991). Mr. Benham is also
chairman of the boards of BFS (1985), BMC (1971), and BDI (1988); president of
BMC (1971), and BDI (1988); and a member of the board of governors of the
Investment Company Institute (1988). Mr. Benham has been in the securities
business since 1963, and he frequently comments through the media on economic
conditions, investment strategies, and the securities markets.
ALBERT A. EISENSTAT, independent trustee (1995). Mr. Eisenstat is an independent
director of each of Commercial Metals Co. (1982), Sungard Data Systems (1991)
and Business Objects S/A (1994). Previously, he served as vice president of
corporate development and corporate secretary of Apple Computer and served on
its Board of Directors (1985 to 1993).
RONALD J. GILSON, independent trustee (1995). 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 School of Law
(1992). He is counsel to Marron, Ried & Sheehy (a San Francisco law firm, 1984).
MYRON S. SCHOLES, independent trustee (1991). 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).
20
<PAGE>
KENNETH E. SCOTT, independent trustee (1991). 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 trustee (1991). Mr. Solomon is Dean Witter Professor
of Finance Emeritus at the Stanford Graduate School of Business, where he served
as Dean Witter Professor of Finance from 1965 to 1990, and a director of
Encyclopedia Britannica.
ISAAC STEIN, independent trustee (1992). Mr. Stein is former chairman of the
board (1990 to 1992) and chief executive officer (1991 to 1992) of Esprit de
Corp. (clothing manufacturer). He is a member of the board of Raychem
Corporation (electrical equipment, 1993), president of Waverley Associates, Inc.
(private investment firm, 1983), and a director of ALZA Corporation
(pharmaceuticals, 1987). He is also a trustee of Stanford University (1994) and
chairman of Stanford Health Services (hospital, 1994).
*JAMES E. STOWERS III, trustee (1995), president and chief executive officer
(1996). Mr. Stowers is 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 trustee (1991). 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).
*DOUGLAS A. PAUL, secretary, vice president, and general counsel (1991).
*ANN N. McCOID, controller (1991).
*MARYANNE ROEPKE, chief financial officer and treasurer (1995).
As of January 31, 1996, the trustees and officers, as a group, owned less than
1% of the Fund's outstanding shares.
The table on the following page summarizes the compensation that the trustees 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.
21
<PAGE>
<TABLE>
<CAPTION>
TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED
December 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------
Name of Aggregate Pension or Estimated Total
Trustee* Compensation Retirement Benefits Annual Benefits Compensation
From Fund Accrued As Part of Upon Retirement From Fund and
Fund Expenses Fund Complex
Paid to Trustees**
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert A. Eisenstat $0 Not Applicable Not Applicable $0
- ---------------------------------------------------------------------------------------------------------------------------
Ronald J. Gilson $2,472 Not Applicable Not Applicable $48,833
- ---------------------------------------------------------------------------------------------------------------------------
Myron S. Scholes $4,523 Not Applicable Not Applicable $65,625
- ---------------------------------------------------------------------------------------------------------------------------
Kenneth E. Scott $4,178 Not Applicable Not Applicable $65,125
- ---------------------------------------------------------------------------------------------------------------------------
Ezra Solomon $4,341 Not Applicable Not Applicable $58,792
- ---------------------------------------------------------------------------------------------------------------------------
Isaac Stein $4,185 Not Applicable Not Applicable $63,625
- ---------------------------------------------------------------------------------------------------------------------------
Jeanne D. Wohlers $4,354 Not Applicable Not Applicable $67,375
- ---------------------------------------------------------------------------------------------------------------------------
* Interested trustees 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 Benham Management Corporation
(BMC), dated June 1, 1995, that was approved by the Fund's shareholders on May
31, 1995. The fee schedules for the agreements are illustrated on the next 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.
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 Trust's trustees,
including a majority of those trustees who are neither parties to the agreement
nor interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval.
The agreement is terminable on 60 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 objective, policies,
22
<PAGE>
and restrictions. BMC determines which securities will be purchased and sold by
the Fund. It also assists the Trust's officers in carrying out decisions made by
the board of trustees.
For these services, the Fund pays BMC a monthly investment advisory fee based on
the dollar amount derived from applying the Fund's average daily net assets to
the following investment advisory fee rate schedule:
.45% of the first $200 million;
.40% of the next $300 million;
.35% of the next $1 billion;
.34% of the next $1 billion;
.33% of the next $1 billion;
.32% of the next $1 billion;
.31% of the next $1 billion;
.30% of the next $1 billion; and
.29% of net assets over $6.5 billion
Prior to June 1, 1994, the Fund's advisory fee schedule ranged from .50% to .19%
of the Fund's average daily net assets, dropping as the Fund's assets increased.
For the fiscal years ended December 31, 1995, 1994 and 1993, the Fund paid
$1,017,677, $1,124,210, and $1,740,333, respectively, in investment advisory
fees (including recoupments described below) to BMC.
The investment advisory agreement provides that BMC may delegate certain
responsibilities under the agreement to a subadvisor. Currently, JPMIM serves as
subadvisor to the Fund under a subadvisory agreement between BMC and JPMIM dated
June 1, 1995, that was approved by shareholders on May 31, 1995. This superseded
subadvisory agreements dated December 31, 1991 and June 1, 1994. The subadvisory
agreement continues for an initial period of two years and thereafter so long as
continuance is specifically approved by vote of a majority of the Fund's
outstanding voting securities or by vote of a majority of the Fund's trustees,
including a majority of those trustees who are neither parties to the agreement
nor interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. The subadvisory agreement is subject to
termination without penalty on 60 days' written notice by BMC, the board of
trustees, or a majority of the Fund's outstanding shares or 12 months' written
notice by JPMIM and will terminate automatically in the event of (i) its
assignment or (ii) termination of the investment advisory agreement between the
Fund and BMC.
The subadvisory agreement provides that JPMIM will make investment decisions for
the Fund in accordance with the Fund's investment objective, policies, and
restrictions, and whatever additional written guidelines it may receive from BMC
from time to time. For these services, BMC pays JPMIM a monthly fee at an annual
rate of .20% of the Fund's average daily net assets up to $200 million; and .15%
of average daily net assets over $200 million. Under the 1991 subadvisory
agreement, BMC paid JPMIM a monthly fee at an annual rate of .25% of average
daily net assets up to $200 million, and .05% of average daily net assets in
excess of $200 million, with a minimum annual fee of $250,000.
For the fiscal years ended December 31, 1995, 1994 and 1993, BMC paid JPMIM
subadvisory fees of $434,795, $480,751 and $580,770, respectively.
23
<PAGE>
ADMINISTRATIVE AND TRANSFER AGENT SERVICES
BFS, a wholly owned subsidiary of TCC, is BIF'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 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
more than $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.
For the fiscal years ended December 31, 1995 and 1994, the Fund paid BFS
$222,006 and $249,273 for administrative services and $264,019 and $275,941 for
transfer agent services, respectively.
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 trustees; custodian, audit,
tax preparation and pricing fees; fees of outside counsel and counsel employed
directly by the Trust; costs of printing and mailing prospectuses, statements of
additional information, proxy statements, notices, confirmations, and reports to
shareholders; fees for registering the 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 under
contract to limit the Fund expenses to .90% 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 December 31, 1995, 1994 and 1993, BMC recouped $0,
$1,215 and $178,230 respectively, of the Fund's expenses. BMC paid no
reimbursements to the Fund for the fiscal year ended December 31, 1993.
24
<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Fund's 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.
The Benham Group may reject or limit the amount of an investment to prevent any
one shareholder or affiliated group from controlling the Trust or one of its
series; to avoid jeopardizing a series' tax status; or whenever, in management's
opinion, such rejection is in the Trust's or a series' best interest. As of
January 31, 1996, Charles Schwab & Co., 101 Montgomery Street, San Francisco,
California 94104, was the record holder of 29.6% of the outstanding shares of
the Fund. As of that date, 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. BFS may, however, 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 to BFS.
Share purchases and redemptions are governed by California law.
OTHER INFORMATION
The Trust's investment advisor, BMC, has been continuously registered with the
SEC under the Investment Advisers Act of 1940 since December 14, 1971. The Trust
has filed a registration statement under the Securities Act of 1933 and the
Investment Company Act of 1940 with respect to the shares offered. Such
registrations do not imply approval or supervision of the Trust or the advisor
by the SEC.
For further information, 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.
25
<PAGE>
BENHAM INTERNATIONAL FUNDS
1933 Act Post-Effective Amendment No. 6
1940 Act Amendment No. 7
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS. Audited financial statements for Benham European
Government Bond Fund for the fiscal year ended December 31, 1995, are
filed herein as included in the Fund's Statement of Additional
Information by reference to the Annual Report dated December 31, 1995,
filed on February 26, 1996.
(b) EXHIBITS.
(1) a) Declaration of Trust dated August 28, 1991, is incorporated
by reference to Exhibit 1 to Post-Effective Amendment No. 1.
b) Amendment to the Declaration of Trust, dated February 3,
1994, is incorporated herein by reference to Exhibit 1(b) to
Post-Effective Amendment No. 3.
c) Amendment to the Declaration of Trust, dated May 31, 1995,
is incorporated herein as EX-99.B1c.
(2) Bylaws dated May 17, 1995 incorporated herein as Ex-99.B2.
(3) Not applicable.
(4) Specimen copy of Benham European Government Bond Fund's
share certificate is incorporated by reference to Exhibit 4 to
Post-Effective Amendment No. 1.
(5) (a) Investment Sub-Advisory Agreement among Benham European
Government Bond Fund, Benham Management Corporation, and J.P.
Morgan Investment Management Inc., dated June 1, 1994, is
incorporated herein by reference to Exhibit 5(e) to
Post-Effective Amendment No. 4.
(b) Investment Advisory Agreement between Benham International
Funds and Benham Management Corporation dated June 1, 1995, is
incorporated herein as Ex-99.B5b.
(6) Distribution Agreement between Benham International Funds and
Benham Distributors, Inc., dated June 1, 1995, is incorporated
herein as Ex-99.B6.
(7) Not applicable.
(8) Custodian Agreement between Benham International Funds and
Morgan Guaranty Trust Company of New York, dated December 13,
1991, is incorporated by reference to Exhibit 8 to
Pre-Effective Amendment No. 1.
(9) Administrative Services and Transfer Agency Agreement between
Benham International Funds and Benham Financial Services,
Inc., dated June 1, 1995, is incorporated herein as Ex-99.B9.
(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.
(11) Consent of KPMG Peat Marwick LLP, independent auditors,
is filed herein as Ex-99.B11a.
(12) Not applicable.
(13) Letter of Understanding relating to initial capital, dated
December 20, 1991, is incorporated herein by reference to
Exhibit 13 to Pre-Effective Amendment No. 1.
(14) (a) Benham Individual Retirement Account Plan, including all
instructions and other relevant documents, dated February
1992, is incorporated herein by reference to Exhibit 14(a) to
Post-Effective Amendment No. 2.
(b) Benham Pension/Profit Sharing Plan, including all
instructions and other relevant documents, dated February
1992, is incorporated herein by reference to Exhibit 14(b) to
Post-Effective Amendment No. 2.
(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.
(27) Financial Data Schedule-Benham European Government Bond Fund,
is filed herein as EX-27.5.
Item 25. Persons Controlled by or Under Common Control with Registrant.
None
Item 26. Number of Holders of Securities.
As of December 31, 1995, Benham European Government Bond Fund
(the sole operating series of Benham International Funds) had
11,362 shareholders of record.
<PAGE>
Item 27. Indemnification.
As stated in Article VI, Section 4 of the Registrant's Bylaws:
"Notwithstanding any provision to the contrary contained
herein, there shall be no right to indemnification for any liability arising by
reason of willful misfeasance, bad faith, gross negligence, or the reckless
disregard of the duties involved in the conduct of the agent's office with this
Trust.
No indemnification shall be made under Sections 2 or 3 of this
Article:
(a) In respect of any claim, issue or matter as to which that
person shall have been adjudged to be liable in the
performance of that person's duty to this Trust, unless and
only to the extent that the court in which that action was
brought shall determine upon application that in view of all
the circumstances of the case, that person was not liable by
reason of the disabling conduct set forth in the preceding
paragraph and is fairly and reasonably entitled to indemnity
for the expenses which the court shall determine; or
(b) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval,
or of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval, unless the required approval set forth in Section 6
of this Article is obtained."
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Notwithstanding the provisions contained in the Registrant's
Bylaws, in the absence of authorization by the appropriate court on the merits
pursuant to Sections 4 and 5 of Article VI of said Bylaws, any indemnification
under said Article shall be made by Registrant only if authorized in the manner
provided in either subsection (a) or (b) of Section 6 of Article VI.
Item 28. Business and other Connections of Investment Advisor.
The Fund's investment advisor, Benham Management Corporation,
is also investment advisor to Capital Preservation Fund, Inc., Capital
Preservation Fund II, Inc., Benham Target Maturities Trust, Benham California
Tax-Free and Municipal Funds, Benham Municipal Trust (formerly, Benham National
Tax-Free Trust), Benham Government Income Trust, Benham Equity Funds, Benham
Investment Trust, and Benham Manager Funds.
<PAGE>
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 (formerly, Benham National Tax-Free Trust), Benham Target
Maturities Trust, Benham Government Income Trust, Benham Equity Funds, Benham
Investment Trust, and Benham Manager Funds.
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 has duly caused this Post-Effective
Amendment No. 6 /Amendment No. 7 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 INTERNATIONAL 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. 6 /Amendment No. 7 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* Trustees
/s/ James E. Stowers, III Trustee February 16, 1996
James E. Stowers, III*
/s/ Albert A. Eisenstat Trustee February 16, 1996
Albert A. Eisenstat*
/s/ Ronald J. Gilson Trustee February 16, 1996
Ronald J. Gilson*
/s/ Myron S. Scholes Trustee February 16, 1996
Myron S. Scholes*
/s/ Kenneth E. Scott Trustee February 16, 1996
Kenneth E. Scott*
/s/ Ezra Solomon Trustee February 16, 1996
Ezra Solomon*
/s/ Isaac Stein Trustee February 16, 1996
Isaac Stein*
/s/ Jeanne D. Wohlers Trustee 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.B1a Declaration of Trust dated August 28, 1991, is incorporated
by reference to Exhibit 1 to Post-Effective Amendment No. 1.
EX-99.B1b Amendment to the Declaration of Trust, dated February 3,
1994, is incorporated herein by reference to Exhibit 1(b) to
Post-Effective Amendment No. 3.
EX-99.B1c Amendment to the Declaration of Trust, dated May 31, 1995.
EX-99.B2 Bylaws dated May 17, 1995.
EX-99.B4 Specimen copy of Benham European Government Bond Fund's
share certificate is incorporated by reference to Exhibit 4 to
Post-Effective Amendment No. 1.
EX-99B.5a Investment Sub-Advisory Agreement among Benham European
Government Bond Fund, Benham Management Corporation, and J.P.
Morgan Investment Management Inc., dated June 1, 1994, is
incorporated herein by reference to Exhibit 5(e) to
Post-Effective Amendment No. 4.
EX-99B.5b Investment Advisory Agreement between Benham International
Funds and Benham Management Corporation dated June 1, 1995.
EX-99B.6 Distribution Agreement between Benham International Funds and
Benham Distributors, Inc., dated June 1, 1995.
EX-99.B8 Custodian Agreement between Benham International Funds and
Morgan Guaranty Trust Company of New York, dated December 13,
1991, is incorporated by reference to Exhibit 8 to
Pre-Effective Amendment No. 1.
EX-99.B9 Administrative Services and Transfer Agency Agreement between
Benham International Funds and Benham Financial Services,
Inc., dated June 1, 1995.
EX-99.B10 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.
EX-99.B11 Consent of KPMG Peat Marwick LLP, independent auditors.
EX-99.B13 Letter of Understanding relating to initial capital, dated
December 20, 1991, is incorporated herein by reference to
Exhibit 13 to Pre-Effective Amendment No. 1.
EX-99.B14a Benham Individual Retirement Account Plan, including all
instructions and other relevant documents, dated February
1992, is incorporated herein by reference to Exhibit 14(a) to
Post-Effective Amendment No. 2.
EX-99.B14b Benham Pension/Profit Sharing Plan, including all
instructions and other relevant documents, dated February
1992, is incorporated herein by reference to Exhibit 14(b) to
Post-Effective Amendment No. 2.
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-27.5 Financial Data Schedule - Benham European Government Bond
Fund.
CERTIFICATE
I, Douglas A. Paul, hereby certify that I am the Secretary of Benham
International Funds (the "Trust"), a registered management investment company
existing under the laws of the Commonwealth of Massachusetts as a business
trust.
I do further certify that the following is a true and correct copy of
the amendments approved by the Board of Trustees at a meeting on April 3, 1995
and by a majority of the shareholders by proxy at a shareholders meeting held on
May 31, 1995:
Article V, Section 1 and Article III, Section 6(d) of the Declaration
of Trust of Benham International Funds to establish dollar-based voting is
hereby amended as follows:
Article V Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Subject to the provisions of Article III,
Section 6(d), the Shareholders shall have power to vote only (i) for
the election of Trustees as provided in Article IV, Section 1; (ii) to
the same extent as the stockholders of a California business
corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a
class action on behalf of the Trust or the Shareholders; (iii) with
respect to the termination of the Trust or any Series to the extent and
as provided in Article VIII, Section 4, and (iv) with respect to such
additional matters relating to the Trust as may be required by this
Declaration of Trust, the Bylaws or any registration of the Trust with
the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. A Shareholder of each
Series shall be entitled to one vote for each dollar of net asset value
per Share of such Series, on any matter on which such Shareholder is
entitled to vote and each fractional dollar amount shall be entitled to
a proportionate fractional vote. All references in this Declaration of
Trust or the Bylaws to a vote of or the holders of a percentage of
Shares shall mean a vote of, or the holders of, that percentage of
total votes representing dollars of net asset value of a Series or of
the Trust, as the case may be. There shall be no cumulative voting in
the election of Trustees. Shares may be voted in person or by proxy. A
proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to
the contrary from any one of them. A proxy purporting to be executed by
or on behalf of a
<PAGE>
Shareholder shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the
challenger. At any time when no Shares of a Series are outstanding, the
Trustees may exercise all rights of Shareholders of that Series with
respect to matters affecting that Series, take any action required by
law, this Declaration of Trust or the Bylaws to be taken by the
Shareholders.
Article III Shares
Section 6. Establishment and Designation of Series
(d) Voting. The Trustees may from time to time establish
conditions according to which the several Series shall
have separate voting rights. If any Series would not,
in the Trustees' sole judgment, be materially affected
by a voting proposal, the Trustees may determine that
such Series shall have no rights to vote on such
proposal. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any
action required by law, this Declaration or the Bylaws
to be taken by Shareholders. The Bylaws may include
further provisions for Shareholders' votes and meetings
and related matters.
IN WITNESS WHEREOF, I have executed this Certificate at the principal
office of the Trust in the City of Mountain View, State of California, with the
common seal of the Trust affixed hereto by the undersigned, having custody of
said seal as Secretary of the Trust, this fifteenth day of June 1995.
/s/ Douglas A. Paul
Douglas A. Paul, Secretary
TABLE OF CONTENTS
BENHAM INTERNATIONAL FUNDS
BYLAWS
(amended through May 17, 1995)
ARTICLE I OFFICES
1. Principal Office
2. Other Offices
ARTICLE II MEETINGS OF SHAREHOLDERS
1. Place of Meetings
2. Call of Meeting
3. Notice of Shareholders' Meeting
4. Manner of Giving Notice; Affidavit
of Notice
5. Adjourned Meeting; Notice
6. Voting
7. Waiver of Notice of Consent by
Absent Shareholders
8. Shareholder Action by Written
Consent without a Meeting
9. Record Date for Shareholder
Notice, Voting and Giving Consents
10. Proxies
11. Inspectors of Election
ARTICLE III TRUSTEES
1. Powers
2. Number and Qualification of
Trustees
3. Vacancies
4. Place of Meetings and Meetings by
Telephone
5. Regular Meetings
6. Special Meetings
7. Quorum
8. Waiver of Notice
9. Adjournment
10. Notice of Adjournment
11. Action Without a Meeting
12. Fees and Compensation of Trustees
ARTICLE IV COMMITTEES
1. Committees of Trustees
2. Meetings and Action of Committees
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ARTICLE V OFFICERS
1. Officers
2. Election of Officers
3. Subordinate Officers
4. Removal and Resignation of Officers
5. Vacancies in Offices
6. Chairman of the Board
7. President
8. Vice President
9. Secretary
10. Chief Financial Officer
ARTICLE VI INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND
OTHER AGENTS
1. Agents, Proceedings and Expenses
2. Actions Other than by Trust
3. Actions by the Trust
4. Exclusion and Indemnification
5. Successful Defense by Agent
6. Required Approval
7. Advance of Expenses
8. Other Contractual Rights
9. Limitations
10. Insurance
11. Fiduciaries of Corporate Employee
Benefit Plan
ARTICLE VII RECORDS AND REPORTS
1. Maintenance and Inspection of
Share Register
2. Maintenance and Inspection of Bylaws
3. Maintenance and Inspection of Other
Records
4. Inspection by Trustees
5. Financial Statements
ARTICLE VIII GENERAL MATTERS
1. Checks, Drafts, Evidence of
Indebtedness
2. Contracts and Instruments; How
Executed
3. Certificate of Shares
4. Lost Certificates
5. Representation of Shares of Other
Entities
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ARTICLE IX CUSTODY OF SECURITIES
1. Employment of a Custodian
2. Action Upon Termination of
Custodian Agreement
3. Central Certificate System
4. Acceptance of Receipts in Lieu of
Certificates
ARTICLE X AMENDMENTS
1. Amendment by Shareholders
2. Amendment by Trustees
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BYLAWS
OF
BENHAM INTERNATIONAL FUNDS
A Massachusetts Business Trust
(amended through May 17, 1995)
ARTICLE 1
OFFICES
Section 1. PRINCIPAL OFFICE. The Board of Trustees shall fix the
location of the principal executive office of the Trust at any place within or
outside The Commonwealth of Massachusetts.
Section 2. OTHER OFFICES. The Board of Trustees may at any time
establish branch or subordinate offices at any place or places where the Trust
intends to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or outside The Commonwealth of Massachusetts designated by the
Board of Trustees. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the Trust.
Section 2. CALL OF MEETING. A meeting of the shareholders may be called
at any time by the Board of Trustees or by the chairman of the Board or by the
president.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than ten (10) nor more than seventy-five (75) days
before the date of the meeting. The notice shall specify (i) the place, date and
hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which trustees are to be elected also
shall include the name of any nominee or nominees whom at the time of the notice
are intended to be presented for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a trustee has a direct or indirect financial
interest, (ii) an amendment of the Declaration of Trust, (iii) a reorganization
of the Trust, or (iv) a voluntary dissolution of the Trust, the notice shall
also state the general nature of that proposal.
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class mail
or telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
Trust or its transfer agent or given by the shareholder to the Trust for the
purpose of notice. If no such address appears on the Trust's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-
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class mail or telegraphic or other written communication to the Trust's
principal executive office, or if published at least once in a newspaper of
general circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the Trust by the
United States Postal Service marked to indicate that the Postal Service is
unable to deliver the notice to the shareholder at the address, all future
notices or reports shall be deemed to have been duly given without further
mailing if these shall be available to the shareholder on written demand of the
shareholder at the principal executive office of the Trust for a period of one
year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the Trust giving the notice and shall be filed and
maintained in the minute book of the Trust.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholder's meeting,
whether or not a quorum is present, may be adjourned from time to time by the
vote of the majority of the shares represented at that meeting, either in person
or by proxy.
When any meeting of shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than sixty (60) days from the date set for the original
meeting, in which case the Board of Trustees shall set a new record date. Where
required, notice of any such adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Section 3 and 4 of this Article II. At any adjourned
meeting, the Trust may transact any business which might have been transacted at
the original meeting.
Section 6. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of the
Declaration of Trust, as in effect at such time. The shareholders' vote may be
by voice vote or by ballot, provided, however, that any election for trustees
must be by ballot if demanded by any shareholder before the voting has begun. On
any matter other than elections of trustees, any shareholder may vote part of
the shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, but if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
the total shares that the shareholder is entitled to vote on such proposal.
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of the meeting of shareholders, however called and noticed and
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy and
if either before or after the meeting, each person entitled to vote who was not
present in person or by proxy signs a written waiver of notice or a consent to a
holding of the meeting or an approval of the minutes. The waiver of notice or
consent need not specify either the business to be transacted or the purpose of
any meeting of shareholders.
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Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the beginning of the
meeting.
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
action which may be taken at any meeting of shareholders may be taken without a
meeting and without prior notice if a consent in writing setting forth the
action so taken is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
that action at a meeting at which all shares entitled to vote on that action
were present and voted. All such consents shall be filed with the Secretary of
the Trust and shall be maintained in the Trust's records. Any shareholder giving
a written consent or the shareholder's proxy holders or a transferee of the
shares or a personal representative of the shareholder or their respective proxy
holders may revoke the consent by a writing received by the Secretary of the
Trust before written consents of the number of shares required to authorize the
proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II. In the
case of approval of (i) contracts or transactions in which a trustee has a
direct or indirect financial interest, (ii) indemnification of agents of the
Trust, and (iii) a reorganization of the Trust, the notice shall be given at
least ten (10) days before the consummation of any action authorized by that
approval.
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING
CONSENTS. For purposes of determining the shareholders entitled to notice of any
meeting or to vote or entitled to give consent to action without a meeting, the
Board of Trustees may fix in advance a record date which shall not be more than
seventy-five (75) days nor less than ten (10) days before the date of any such
meeting as provided in the Declaration of Trust.
If the Board of Trustees does not so fix a record date:
(a) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held.
(b) The record date for determining shareholders entitled to give
consent to action in writing without a meeting, (i) when no prior action by the
Board of Trustees has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the Board of Trustees has been
taken, shall be at the close of business on the day on which the Board of
Trustees adopt the resolution relating to that action or the seventy-fifth day
before the date of such other action, whichever is later.
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Section 10. PROXIES. Every person entitled to vote for trustees or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the Secretary of the Trust. A proxy shall be deemed signed if the shareholder's
name is placed on the proxy (whether by manual signature, typewriting,
telegraphic transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) revoked by the
person executing it before the vote pursuant to that proxy by a writing
delivered to the Trust stating that the proxy is revoked or by a subsequent
proxy executed by or attendance at the meeting and voting in person by the
person executing that proxy; or (ii) written notice of the death or incapacity
of the maker of that proxy is received by the Trust before the vote pursuant to
that proxy is counted; provided however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy unless otherwise
provided in the proxy. The revocability of a proxy that states on its face that
it is irrevocable shall be governed by the provisions of the California General
Corporation Law.
Section 11. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Trustees may appoint any persons other than nominees for office to
act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may and on
the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3). If inspectors are appointed at a meeting on the request of
one or more shareholders or proxies, the holders of a majority of shares or
their proxies present at the meeting shall determine whether one (1) or three
(3) inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, the chairman of the meeting may and on the
request of any shareholder or a shareholder's proxy, shall appoint a person to
fill the vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
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ARTICLE III
TRUSTEES
Section 1. POWERS. Subject to the applicable provisions of the
Declaration of Trust and these Bylaws relating to action required to be approved
by the shareholders or by the outstanding shares, the business and affairs of
the Trust shall be managed and all powers shall be exercised by or under the
direction of the Board of Trustees.
Section 2. NUMBER AND QUALIFICATION OF TRUSTEES. The authorized number
of trustees shall be not less than 7 nor more than 11 until changed by a duly
adopted amendment to the Bylaws or by resolution of the Trustees. The selection
and nomination of disinterested directors is committed solely to the discretion
of a Nominating Committee consisting of all sitting disinterested directors
except where the remaining director or directors are interested persons.
Section 3. VACANCIES. Vacancies in the Board of Trustees may be filled
by a majority of the remaining trustees, though less than a quorum, or by a sole
remaining trustee, unless the Board of Trustees calls a meeting of shareholders
for the purposes of electing trustees. In the event that at any time less than a
majority of the trustees holding office at that time were so elected by the
holders of the outstanding voting securities of the Trust, the Board of Trustees
shall forthwith cause to be held as promptly as possible, and in any event
within sixty (60) days, a meeting of such holders for the purpose of electing
trustees to fill any existing vacancies in the Board of Trustees, unless such
period is extended by order of the United States Securities and Exchange
Commission.
Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of
the Board of Trustees may be held at any place within or outside The
Commonwealth of Massachusetts that has been designated from time to time by
resolution of the Board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the Trust. Any meeting,
regular or special, may be held by conference telephone or similar communication
equipment, so long as all trustees participating in the meeting can hear one
another, and all such trustees shall be deemed to be present in person at the
meeting; provided that, in accordance with the provisions of the Investment
Company Act of 1940, the Board may not transact by such a meeting any business
which involves the entering into, or the approval, performance, or renewal of
any contract or agreement, whereby a person undertakes regularly to serve or act
as the Fund's Investment Advisor or principal underwriter.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of Trustees
shall be held without call at such time as shall from time to time be fixed by
the Board of Trustees. Such regular meetings may be held without notice.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of Trustees
for any purpose or purposes may be called at any time by the chairman of the
board or the president or any vice president or the secretary or any two (2)
trustees.
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Notice of the time and place of special meetings shall be delivered
personally or by telephone to each trustee or sent by first-class mail or
telegram, charges prepaid, addressed to each trustee at that trustee's address
as it is shown on the records of the Trust. In case the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. In case the notice is delivered personally
or by telephone or to the telegraph company, it shall be given at least
forty-eight (48) hours before the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated either to the
trustee or to a person at the office of the trustee who the person giving the
notice has reason to believe will promptly communicate it to the trustee. The
notice need not specify the purpose of the meeting or the place if the meeting
is to be held at the principal executive office of the Trust.
Section 7. QUORUM. A majority of the authorized number of trustees
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Trustees, subject to the
provisions of the Declaration of Trust. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
trustees if any action taken is approved by at least a majority of the required
quorum for that meeting.
Section 8. WAIVER OF NOTICE. Notice of any meeting need not be given to
any trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting or an approval of the minutes. The
waiver of notice of consent need not specify the purpose of the meeting. All
such waivers, consents and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any trustee who attends the meeting without protesting
before or at its commencement the lack of notice to that trustee.
Section 9. ADJOURNMENT. A majority of the trustees present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.
Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is adjourned
for more than forty-eight (48) hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting in the manner specified
in Section 6 of this Article III to the trustees who were present at the time of
the adjournment.
Section 11. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken by the Board of Trustees may be taken without a meeting if a
majority of the members of the Board of Trustees shall individually or
collectively consent in writing to that action; provided that, in accordance
with the Investment Company Act of 1940, such written consent does not approve
the entering into, or the renewal or performance of any contract or agreement,
whereby a person undertakes regularly to serve or act as the Fund's Investment
Advisor or principal underwriter. Any other action by written consent shall have
the same force and effect as a majority vote of the Board of Trustees. Written
consents shall be filed with the minutes of the proceedings of the Board of
Trustees.
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Section 12. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Trustees. This Section 12 shall not be construed to preclude any
trustee from serving the Trust in any other capacity as an officer, agent,
employee or otherwise and receiving compensation for those services.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Board of Trustees may by
resolution adopted by a majority of the authorized number of trustees designate
one or more committees, each consisting of two (2) or more trustees, to serve at
the pleasure of the Board. The Board may designate one or more trustees as
alternate members of any committee who may replace any absent member at any
meeting of the committee. Any committee to the extent provided in the resolution
of the Board, shall have the authority of the Board, except with respect to:
(a) the approval of any action which under applicable law also requires
shareholders' approval or approval of the outstanding shares, or requires
approval by a majority of the entire Board or certain members of said Board;
(b) the filling of vacancies on the Board of Trustees or in any
committee;
(c) the fixing of compensation of the trustees for serving on the Board
of Trustees or on any committee;
(d) the amendment or repeal of the Declaration of Trust or of the
Bylaws or the adoption of new Bylaws;
(e) the amendment or repeal of any resolution of the Board of Trustees
which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the Trust, except at a rate
or in a periodic amount or within a designated range determined by the Board of
Trustees; or
(g) the appointment of any other committees of the Board of Trustees or
the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these Bylaws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Board of Trustees and its members, except that the time of regular meetings of
committees may be determined either by resolution of the Board of Trustees or by
resolution of the committee. Special meetings of committees may also be called
by resolution of the Board of Trustees, and notice of special meetings of
committees shall also be given to all alternate members who shall have the right
to attend all meetings of the committee. The Board of Trustees may adopt rules
for the government of any committee not inconsistent with the provisions of
these Bylaws.
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ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the Trust shall be a president, a
secretary, and a treasurer. The Trust may also have, at the discretion of the
Board of Trustees, a chairman of the Board, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article V. Any number of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the Trust, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Board of Trustees, and each
shall serve at the pleasure of the Board of Trustees, subject to the rights, if
any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Trustees may appoint and
may empower the president to appoint such other officers as the business of the
Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these Bylaws or as the
Board of Trustees may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Board of Trustees at any regular
or special meeting of the Board of Trustees or except in the case of an officer
upon whom such power of removal may be conferred by the Board of Trustees.
Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these Bylaws for regular appointment to that office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an
officer is elected, shall if present preside at meetings of the Board of
Trustees and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Trustees or prescribed by the
Bylaws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Trustees to the chairman of the board, if there be
such an officer, the president shall be the principal executive officer and the
principal operating officer of the Trust and shall, subject to the control of
the Board of Trustees, have general supervision, direction and control of the
business and the officers of the Trust. He shall preside at all meetings of the
shareholders and in the absence of the chairman of the board or if there be
none, at all meetings of the Board of Trustees. He shall have the general powers
and duties of management usually vested in the
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office of president of a corporation and shall have such other powers and duties
as may be prescribed by the Board of Trustees or these Bylaws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Trustees or if not ranked, a vice president designated by the Board of
Trustees, shall perform all the duties of the president and when so acting shall
have all powers of and be subject to all the restrictions upon the president.
The vice presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Board of
Trustees or by these Bylaws and the president or the chairman of the board.
Section 9. SECRETARY. The secretary shall keep or cause to be kept at
the principal executive office of the Trust or such other place as the Board of
Trustees may direct a book of minutes of all meetings and actions of trustees,
committees of trustees and shareholders with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at trustees' meetings or committee meetings, the
number of shares present or represented at shareholders' meetings and the
proceedings.
The secretary shall keep or cause to be kept at the principal executive
office of the Trust or at the office of the Trust's transfer agent or registrar,
as determined by resolution of the Board of Trustees, a share register or a
duplicate share register showing the names of all shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same and the number and date of cancellation of
every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all meetings of
the shareholders and the Board of Trustees required by these Bylaws or by
applicable law to be given and shall have such other powers and perform such
other duties as may be prescribed by the Board of Trustees or by these Bylaws.
Section 10. CHIEF FINANCIAL OFFICER. The chief financial officer shall
be the principal financial and accounting officer of the Trust and shall keep
and maintain or cause to be kept and maintained adequate and correct books and
records of accounts of the properties and business transactions of the Trust,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings and shares. The books of account shall at all
reasonable times be open to inspection by any trustee.
The chief financial officer shall deposit all monies and other
valuables in the name and to the credit of the Trust with such depositories as
may be designated by the Board of Trustees. He shall disburse the funds of the
Trust as may be ordered by the Board of Trustees, shall render to the president
and trustees, whenever they request it, an account of all of his transactions as
chief financial officer and of the financial condition of the Trust and shall
have other powers and perform such other duties as may be prescribed by the
Board of Trustees or these Bylaws.
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS
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Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as a
trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST: This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding if that person acted in good faith and in a
manner that person reasonably believed to be in the best interests of this Trust
and in the case of a criminal proceeding, had no reasonable cause to believe the
conduct of that person was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the person did not act
in good faith and in a manner which the person reasonably believed to be in the
best interests of this Trust or that the person had reasonable cause to believe
that the person's conduct was unlawful.
Section 3. ACTIONS BY THE TRUST. This Trust shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of this Trust to procure a
judgment in its favor by reason of the fact that that person is or was an agent
of this Trust, against expenses actually and reasonably incurred by that person
in connection with the defense or settlement of that action if that person acted
in good faith, in a manner that person believed to be in the best interests of
this Trust and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision
to the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with this Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that person
shall have been adjudged to be liable in the performance of that person's duty
to this Trust, unless and only to the extent that the court in which that action
was brought shall determine upon application that in view of all the
circumstances of the case, that person was not liable by reason of the disabling
conduct set forth in the preceding paragraph and is fairly and reasonably
entitled to indemnity for the expenses which the court shall determine; or
13
<PAGE>
(b) Of amounts paid in settling or otherwise disposing of a threatened
or pending action, with or without court approval, or of expenses incurred in
defending a threatened or pending action which is settled or otherwise disposed
of without court approval, unless the required approval set forth in Section 6
of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided that the Board of
Trustees, including a majority who are disinterested, non-party trustees, also
determines that based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in each specific case. No indemnification shall be made without a
determination that indemnification of the agent is proper in the circumstances
because the agent has met the applicable standard of conduct set forth in
Sections 2 or 3 of this Article and that such agent is not prohibited from
indemnification because of the disabling conduct set forth in Section 4 of this
Article,
Such determination shall be evidenced by:
(a) A majority vote of a quorum consisting of trustees who are not
parties to the proceeding and are not interested persons of the Trust (as
defined in the Investment Company Act of 1940); or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding on receipt of an undertaking by or on behalf of the agent to repay
the amount of the advance unless it shall be determined ultimately that the
agent is entitled to be indemnified as authorized in this Article, provided the
agent provides a security for his undertaking, or a majority of a quorum of the
disinterested, non-party trustees, or an independent legal counsel in a written
opinion, determine that based on a review of readily available facts, there is
reason to believe that said agent ultimately will be found entitled to
indemnification.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than trustees
and officers of this Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6 in any circumstances
where it appears:
(a) That it would be inconsistent with a provision of the Declaration
of Trust, a resolution of the shareholders or an agreement in effect at the time
of accrual of the alleged
14
<PAGE>
cause of action asserted in the proceeding in which the expenses were incurred
or other amounts were paid which prohibits or otherwise limits indemnification;
or
(b) That it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that this Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a trustee, investment manager or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. This Trust
shall keep at its principal executive office or at the office of its transfer
agent or registrar, if either be appointed and as determined by resolution of
the Board of Trustees, a record of its shareholders, giving the names and
addresses of all shareholders and the number and series of shares held by each
shareholder.
Section 2. MAINTENANCE AND INSPECTION OF BYLAWS. The Trust shall keep
at its principal executive office the original or a copy of these Bylaws as
amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting
books and records and minutes of proceedings of the shareholders and the Board
of Trustees and any committee or committees of the Board of Trustees shall be
kept at such place or places designated by the Board of Trustees or in the
absence of such designation, at the principal executive office of the Trust. The
minutes shall be kept in written form and the accounting books and records shall
be kept either in written form or in any other form capable of being converted
into written form. The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate at any reasonable time during usual business hours for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or by
an agent or attorney and shall include the right to copy and make extracts.
15
<PAGE>
Section 4. INSPECTION BY TRUSTEES. Every trustee shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.
Section 5. FINANCIAL STATEMENTS. A copy of any financial statements and
any income statement of the Trust for each quarterly period of each fiscal year
and accompanying balance sheet of the Trust as of the end of each such period
that has been prepared by the Trust shall be kept on file in the principal
executive office of the Trust for at least twelve (12) months and each such
statement shall be exhibited at all reasonable times to any shareholder
demanding an examination of any such statement or a copy shall be mailed to any
such shareholder.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer of
the Trust that the financial statements were prepared without audit from the
books and records of the Trust.
ARTICLE VIII
GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed by such person or persons and in such manner as from time to time shall
be determined by resolution of the Board of Trustees.
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of
Trustees, except as otherwise provided in these Bylaws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Trust and this authority may be
general or confined to specific instances; and unless so authorized or ratified
by the Board of Trustees or within the agency power of an officer, no officer,
agent, or employee shall have any power or authority to bind the Trust by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of beneficial interest in any Fund of the Trust shall be issued to each
shareholder when any of these shares are fully paid. All certificates shall be
signed in the name of the Trust by the Chairman of the Board, President or any
Vice President and by the Chief Financial Officer, Controller, any Assistant
Controller, or the Secretary or any Assistant Secretary, certifying the number
of shares and the Fund for which the shareholder owns the shares. Any or all of
the signatures on the certificate may be facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed on a certificate shall have ceased to be that officer, transfer
agent, or registrar before that certificate is issued, it may be issued by the
Trust with the same effect as if that person were an officer, transfer agent or
registrar at the date of issue. Notwithstanding the foregoing, the Trust may
adopt and use a system of issuance, recordation and transfer of its shares by
electronic or other means.
16
<PAGE>
Section 4. LOST CERTIFICATES. Except as provided in this Section 4, no
new certificates for shares shall be issued to replace an old certificate unless
the latter is surrendered to the Trust and cancelled at the same time. The Board
of Trustees may in case any share certificate or certificate for any other
security is lost, stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the Board of Trustees may require,
including a provision for indemnification of the Trust secured by a bond or
other adequate security sufficient to protect the Trust against any claim that
may be made against it, including any expense or liability on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES. The chairman of
the board, the president or any vice president or any other person authorized by
resolution of the Board of Trustees or by any of the foregoing designated
officers, is authorized to vote on behalf of the Trust any and all shares of any
corporation or corporations, partnerships, trusts, or other entities, foreign or
domestic, standing in the name of the Trust. The authority granted to these
officers to vote or represent on behalf of the Trust any and all shares held by
the Trust in any form of entity may be exercised by any of these officers in
person of by any person authorized to do so by a proxy duly executed by these
officers.
ARTICLE IX
CUSTODY OF SECURITIES
Section 1. EMPLOYMENT OF A CUSTODIAN. The Trust shall place and at all
times maintain in the custody of a Custodian (including any sub-custodian for
the Custodian) all funds, securities and similar investments included in the
Trust property. The Custodian (and any sub-custodian) shall be a bank having not
less than $2,000,000 aggregate capital, surplus and undivided profits and shall
be appointed from time to time by the Trustees, who shall fix its remuneration.
Section 2. ACTION UPON TERMINATION OF CUSTODIAN AGREEMENT. Upon
termination of a Custodian Agreement or inability of the Custodian to continue
to serve, the Trustees shall promptly appoint a successor custodian, but in the
event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Trustees shall call as promptly as
possible a special meeting of the Shareholders to determine whether the Trust
shall function without a custodian or shall be liquidated. If so directed by
vote of the holders of a majority of the outstanding voting securities, the
Custodian shall deliver and pay over all Trust property held by it as specified
in such vote.
Section 3. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
Custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are tested
17
<PAGE>
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such deposits shall be
subject to withdrawal only upon the order of the Trust or its custodian.
Section 4. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the Custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
ARTICLE X
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. New Bylaws may be amended or
repealed by the affirmative vote or written consent of a majority of the
outstanding shares entitled to vote, except as otherwise provided by applicable
law or by the Declaration of Trust or these Bylaws.
Section 2. AMENDMENT BY TRUSTEES. Subject to the right of shareholders
as provided in Section 1 of this Article to adopt, amend or repeal Bylaws, and
except as otherwise provided by applicable law or by the Declaration of Trust,
these Bylaws may be adopted, amended, or repealed by the Board of Trustees.
18
INVESTMENT ADVISORY AGREEMENT
BENHAM INTERNATIONAL FUNDS
Agreement effective this 1st day of June, 1995, between BENHAM
INTERNATIONAL FUNDS (the "Trust"), a registered open-end management investment
company organized as a business trust in the Commonwealth of Massachusetts, and
BENHAM MANAGEMENT CORPORATION (the "Advisor"), a corporation organized under the
laws of the State of California, with offices located at 1665 Charleston Road,
Mountain View, California 94043.
Whereas, the Trust is authorized to issue shares of beneficial interest in
one or more series with each such series representing interests in a separate
portfolio of securities and other assets; and
Whereas, the Trust currently offers its shares in one series designated as
the Benham European Government Bond Fund, (the "Initial Series"), (such Initial
Series together with all other series subsequently established by the Trust with
respect to which the Trust 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
Trust 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 Trust 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 Trust's
registration statement with the Securities and Exchange Commission as amended
from time to time and such instructions as the Trust's board of trustees may
issue. Consistent with the foregoing, the Advisor shall make all the
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 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 Trust's board of trustees 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 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
1
<PAGE>
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 Trust and to such other customers.
C. Reports and Information. The Advisor shall render regular reports
to the Trust at quarterly meetings of the board of trustees and at such other
times as may reasonably be requested by the Trust'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 Trust 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 regulations and such additional documents and information as
the Trust may reasonably request for the management of its affairs.
D. Subcontracts. In rendering the services required under this
agreement, the Advisor may, from time to time, engage or associate itself with
such persons or entities as it believes necessary to assist it in carrying out
its obligation under this agreement and may contract with such other parties as
the Advisor deems appropriate to obtain information, advisory and management
services, and other assistance. Any fees, compensation or expenses to be paid to
any such party shall be paid by the Advisor and no obligation to any such party
shall be incurred on the Series' behalf. Such arrangements as described in this
paragraph shall be subject to the approval of the trustees, including a majority
of the trustees who are not party to nor interested persons of such an
arrangement, and of the shareholders, to the extent required by law.
E. 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 Trust's board of
trustees 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 Trust, 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 Trust Fee (if any) 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,
2
<PAGE>
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 Trust Fee (if any) and Individual Fund Fee (if any),
plus any recoupment due, the Advisor will reimburse the Series for such excess.
(b) Determination of Trust Fee and Individual Fund Fee. No Trust Fee
hall be paid by the Benham European Government Bond Fund.
With respect to the Benham European Government Bond Fund, the
Individual Fund Fee shall be determined based on the average daily net assets of
the Benham European Government Bond Fund, pursuant to the following schedule of
annualized rates:
0.45% of the first $200 million;
0.40% of the next $300 million;
0.35% of the next $1 billion;
0.34% of the next $1 billion
0.33% of the next $1 billion;
0.32% of the next $1 billion;
0.31% of the next $1 billion;
0.30% of the next $1 billion; and
0.29% of the net assets over $6.5 billion.
(c) Limitation of Fund Expenses.
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 Trust's board of trustees.
2. The term "Expenses" as used in Section II of this agreement
shall mean:
A. The Trust Fee (if any) 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 Trust's board of trustees 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,
3
<PAGE>
the Series' 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 Trust 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
Declaration of Trust and the Bylaws of the Trust and to Section 10(a) of the
Investment Company Act of 1940, it is understood that trustees, officers, agents
and shareholders of the Trust 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 Trust as
trustees, officers, shareholders or otherwise, that the Advisor is or may be
interested in the Trust as a shareholder or otherwise, and that the effect of
any such interest shall be governed by the Trust's Declaration of Trust, 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 trustee or officer of the Trust
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 TRUST'S LIABILITY. The Advisor acknowledges that it has
received notice of and accepts the limitations of the Trust's liability set
forth in its Declaration of Trust. The Advisor agrees that the Trust'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 trustee, officer, employee or agent of
the Trust.
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 Trust's trustees, and the vote of a majority of the Trust's
trustees who are neither parties to the agreement nor interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval. "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 the agreement became effective. This agreement may be
terminated at any time without payment of any penalty, by the board of trustees
of the Trust, 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 Trust. The
agreement shall terminate automatically inthe 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.
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<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 INTERNATIONAL FUNDS
By /s/ John T. Kataoka
John T. Kataoka, President
BENHAM MANAGEMENT CORPORATION
By /s/ James M. Benham
James M. Benham, President
5
<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>
DISTRIBUTION AGREEMENT
The Benham Group
AGREEMENT between each of the open-end management investment companies
listed on Schedule A, attached hereto, as of the dates noted on such Schedule A,
together with all other open-end management investment companies subsequently
established and made subject to this agreement in accordance with paragraph X
(each a "Fund", or, collectively, the "Funds") and BENHAM DISTRIBUTORS, INC.
("Distributor"), a wholly-owned subsidiary of TWENTIETH CENTURY COMPANIES, INC.
("TCC") and a California corporation registered as a broker-dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934 and
with the California Department of Corporations under the California Corporations
Code, and a member of the National Association of Securities Dealers, Inc., as
follows:
I. GENERAL RESPONSIBILITIES. Each Fund herewith engages Distributor to
act as exclusive distributor of the shares of its separate series, and
any other series which may be designated from time to time hereafter
("Series"), named and described on Schedule A. Said sales shall be
made only to Investors residing in those states in which each Fund is
registered. After effectiveness of each Fund's registration statement,
Distributor will hold itself available to receive by mail, telex
and/or telephone, orders for the purchase of shares and will receive
by mail, telex and/or telephone, orders for the purchase of shares and
will accept or reject such orders on behalf of the Funds in accordance
with the provisions of the applicable Funds prospectus, and will be
available to transmit such orders as are so accepted to the Funds'
transfer agent as promptly as possible for processing at the shares'
net asset value next determined in accordance with the prospectuses.
A. Offering Price. All shares sold by Distributor under this
Agreement shall be sold at the net asset value per share
("Offering Price") determined in the manner described in each
Fund's prospectus, as it may be amended from time to time, next
computed after the order is accepted by Distributor. Each Fund
shall determine and promptly furnish to Distributor a statement
of the Offering Price of shares of said Fund's series at least
once on each day on which the Fund is open for trading as
described in its current prospectus.
B. Promotion. Each Fund shall furnish to Distributor for use in
connection with the sale of its shares such written information
with respect to said Fund as Distributor may reasonably request.
Each Fund represents and warrants that such information, when
authenticated by the signature of one of its officers, shall be
true and correct. Each Fund shall also furnish to Distributor
copies of its reports to its shareholders and such additional
information regarding said Fund's financial condition as
Distributor may reasonably request. Any and all representations,
statements and solicitations respecting a Fund's shares made in
advertisements, sales literature and in any other manner
whatsoever shall be limited to and conform in all respects to the
information provided hereunder.
C. Regulatory Compliance. Each Fund shall prepare and furnish to
Distributor from time to time such number of copies of the most
recent form of its prospectus filed with the Securities and
Exchange Commission as Distributor may reasonably request and
authorizes Distributor to use the prospectus in connection with
the sale of its shares. All such sales shall be initiated by
offer of, and conducted in accordance with, such prospectus and
all of the provisions of the Securities and Exchange Act of 1933,
the Investment Company Act of 1940 ("1940 Act") and all the rules
and regulations thereunder. Distributor shall furnish applicable
federal and state regulatory authorities with any information or
reports in connection with its services under this Agreement
which such authorities may lawfully request in order to ascertain
whether the Funds' operations are being conducted in a manner
consistent with any applicable law or regulations.
1
<PAGE>
D. Acceptance. All orders for the purchase of its shares are subject
to acceptance by each Fund.
E. Compensation. Except for the promises of the Funds contained in
this Agreement and its performance thereof, Distributor shall not
be entitled to compensation for its services hereunder.
II. EXPENSES.
A. Each Fund shall pay all fees and expenses in connection with the
preparation, printing and distribution to shareholders of its
prospectus and reports and other communications to shareholders,
future registrations of shares under the Securities Act of 1933
and the 1940 Act, amendments of the registration statement
subsequent to the initial offering of shares, the qualification
of shares for sale in jurisdictions designated by Distributor,
the issue and transfer of shares, including the expenses of
confirming purchase and redemption orders and of supplying
information, prices and other data to be furnished by the Funds
under this Agreement.
B. Distributor shall pay all fees and expenses of printing and
distributing any prospectuses or reports prepared for its use in
connection with the distribution of shares, the preparation and
mailing of any other advertisements or sales literature used by
Distributor in connection with the distribution of such shares,
its registration as a broker and the registration and
qualification of its officers, directors and representatives
under federal and state laws.
III. INDEPENDENT CONTRACTOR. Distributor shall be an independent
contractor. Neither Distributor nor any of its officers, trustees,
employees or representatives is or shall be an employee of a Fund in
connection with the performance of Distributor's duties hereunder.
Distributor shall be responsible for its own conduct and the
employment, control, compensation and conduct of its agents and
employees and for injury to such agents or employees or to others
through its agents and employees.
IV. INDEMNIFICATION. Each of the parties to this Agreement shall defend,
indemnify and hold the other harmless from and against any and all
claims, demands, suits, actions, losses, damages and other liabilities
arising from, or as a result of, the acts or omissions or acts and
omissions of such party made or omitted in the course of performing
this Agreement.
V. AFFILIATION WITH THE FUNDS. Subject to and in accordance with each
Fund's formative documents, Section 10 of the 1940 Act and Article III
of this Agreement, it is understood that the directors/trustees,
officers, agents and shareholders of the Funds are or may be
interested in Distributor as directors, officers, or shareholders of
Distributor; that directors, officers, agents or shareholders of
Distributor are or may be interested in the Funds as
directors/trustees, officers, shareholders (directly or indirectly) or
otherwise, and that the effect of any such interest shall be governed
by said Act and Article.
VI. BOOKS AND RECORDS. It is expressly understood and agreed that all
documents, reports, records, books, files and other materials relating
to this Agreement and the services to be performed hereunder shall be
the sole property of the Funds and that such property, to the extent
held by Distributor, shall be held by Distributor as agent, during the
effective term of this Agreement. This material shall be delivered to
the applicable Fund upon the termination of this Agreement free from
any claim or retention of rights by Distributor.
2
<PAGE>
VII. SERVICES NOT EXCLUSIVE. The services of Distributor to the Funds
hereunder are not to be deemed exclusive, and Distributor shall be
free to render similar services to others.
VII. RENEWAL AND TERMINATION. The term of this Agreement shall be from the
date of its approval by the vote of a majority of the board of
directors/trustees of each Fund, and it shall continue in effect from
year to year thereafter only so long as such continuance is
specifically approved at least annually by the vote of a majority of
its directors/trustees, and the vote of a majority of those said
directors/trustees who are neither parties to the Agreement nor
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. "Approved at least
annually" shall mean approval occurring, with respect to the first
continuance of the Agreement, during the ninety (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 ninety (90)
days prior to and including the first anniversary of the date upon
which the most recent previous annual continuance of the Agreement
became effective.
This Agreement may be terminated at any time without payment
of any penalty, by a Fund's board of directors/trustees, upon sixty
(60) days written notice to Distributor, and by Distributor upon sixty
(60) days written notice to the Fund. 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 meaning set forth for such terms in the Investment 1940 Act
and Rule 18f-2 thereunder.
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.
3
<PAGE>
X. AMENDMENT. This Agreement and the Schedule A forming a part hereof may
be amended at any time by a writing signed by each of the Parties. In
the event that one or more additional Funds are established, and the
governing bodies of said Funds by resolution indicate that the Funds
are to be made Parties to this Agreement, Schedule A hereto shall be
amended to reflect the addition of such new Funds, and such new Funds
shall become Parties hereto. In the event that any of the Funds listed
on Schedule A terminates its registration as a management investment
company, or otherwise ceases operations, Schedule A shall be amended
to reflect the deletion of such Fund.
By /s/James M. Benham 6/1/95
James M. Benham, President Date
BENHAM DISTRIBUTORS, INC.
By /s/Douglas A. Paul 6/1/95
Douglas A. Paul, Secretary Date
to the FUNDS
4
<PAGE>
DISTRIBUTION AGREEMENT
SCHEDULE A
Effective as of the date herein below indicated, each of the open-end
management investment companies listed below is hereby made a party to the
Benham Group Distribution Agreement dated June 1, 1995.
================================================================================
FUND BOARD APPROVAL DATE
================================================================================
Capital Preservation Fund, Inc. April 3, 1995
================================================================================
Capital Preservation Fund II, Inc. April 3, 1995
================================================================================
Benham Target Maturities Trust
================================================================================
1995 Portfolio April 3, 1995
================================================================================
2000 Portfolio "
================================================================================
2005 Portfolio "
================================================================================
2010 Portfolio "
================================================================================
2015 Portfolio "
================================================================================
2020 Portfolio "
================================================================================
Benham Government Income Trust
================================================================================
Benham Treasury Note Fund April 3, 1995
================================================================================
Benham GNMA Income Fund "
================================================================================
Benham Government Agency Fund "
================================================================================
Benham Adjustable Rate Government Securities Fund "
================================================================================
Benham Short-Term Treasury and Agency Fund "
================================================================================
Benham Long-Term Treasury and Agency Fund "
================================================================================
Benham California Tax-Free and Municipal Funds
================================================================================
Tax-Free Money Market Fund April 3, 1995
================================================================================
Tax-Free Intermediate-Term Fund "
================================================================================
Tax-Free Long-Term Fund "
================================================================================
Municipal High Yield Fund "
================================================================================
Tax-Free Insured Fund "
================================================================================
Municipal Money Market Fund "
================================================================================
Tax-Free Short-Term Fund "
================================================================================
5
<PAGE>
================================================================================
FUND BOARD APPROVAL DATE
================================================================================
Benham Municipal Trust
================================================================================
Benham National Tax-Free Money Market Fund April 3, 1995
================================================================================
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 Equity Funds
================================================================================
Benham Global Natural Resources Index Fund April 3, 1995
================================================================================
Benham Gold Equities Index Fund "
================================================================================
Benham Income & Growth Fund "
================================================================================
Benham Equity Growth Fund "
================================================================================
Benham Utilities Income Fund "
================================================================================
Benham International Funds
================================================================================
Benham European Government Bond Fund April 3, 1995
================================================================================
Benham Manager Funds
================================================================================
Benham Capital Manager Fund April 3, 1995
================================================================================
Benham Investment Trust
================================================================================
Prime Money Market Fund April 3, 1995
================================================================================
6
ADMINISTRATIVE SERVICES AND TRANSFER AGENCY AGREEMENT
The Benham Group
AGREEMENT effective this 1st day of June, 1995, by each open-end management
investment company listed on Schedule E attached hereto and made part of this
agreement by reference, each portfolio of an open-end management investment
company listed on Schedule E and all open-end management investment companies
(or portfolios thereof) subsequently established and made subject to this
Agreement in accordance with Paragraph XI. (individually, "Fund" or
collectively, "Funds"), and BENHAM FINANCIAL SERVICES, INC. ("BFS"), a
registered transfer agent incorporated under the laws of the State of California
and a wholly-owned subsidiary of TWENTIETH CENTURY COMPANIES, INC. ("TCC"), for
general administrative, transfer agency, and dividend disbursing services as
follows:
I. ADMINISTRATIVE SERVICES.
A. Description of Services. As consideration for the compensation
described in Section I.B, BFS agrees to provide the Funds with
the services described and set forth on Schedule A attached
hereto and made a part of this Agreement by reference.
B. Compensation. As consideration for the services described in
Section I.A above, each Fund shall pay BFS a fee equal to its pro
rata share of the dollar amount derived from applying the
aggregate average daily net assets of the Funds listed on
Schedule E to the rate schedule set forth on Schedule F attached
hereto and made a part of this Agreement by reference
("fund-level fee"). Each Fund's fund-level fee, or pro rata share
of the dollar amount derived from applying the Funds' aggregate
average daily net assets to the rate schedule set forth on
Schedule F, shall be determined on the basis of its average daily
net assets relative to all other Funds listed on Schedule E. Said
fund-level fees shall be calculated and accrued daily and payable
monthly in three installments, the first on the tenth of the
month (or the next business day, if not a business day), the
second on the twentieth of the month (or the next business day,
if not a business day), and the third not later than the third
business day of the following month.
II. TRANSFER AGENT SERVICES.
A. Services to be Provided. As consideration for the compensation
described in Section II.B, BFS will provide each Portfolio with
the share transfer and dividend disbursing services described on
Schedule B attached hereto and made a part of this Agreement by
reference. BFS agrees to maintain sufficient trained personnel,
equipment, and supplies to perform such services in conformity
with the current prospectus of each Fund and such other
reasonable standards of performance as the Funds may from time to
time specify, and otherwise in an accurate, timely, and efficient
manner.
B. Compensation. As consideration for the services described in
Section II.A, each Fund agrees to pay BFS the fees specified on
Schedule F for each shareholder account maintained and each
shareholder account transaction executed by BFS each month. For
purposes of this Agreement "shareholder account transaction" is
any one of the transactions described on Schedule C attached
hereto and made a part of this Agreement by reference, as it may
be amended from time to time. Such fees shall be paid monthly in
three installments, the first on the tenth of the month (or the
next business day, if not a business day), the second on the
1
<PAGE>
twentieth of the month (or the next business day, if not a
business day), and the third on the third business day of the
following month.
C. Third Party Servicing. Subject to approval by the applicable
Fund's Board of Directors/Trustees, BFS may enter into agreements
with third parties for the performance of one or more of its
obligations under this Agreement (and such other services as BFS
may desire) for all or any portion of the shareholders of the
Fund who maintain shareholder accounts through, or who are
otherwise provided services by, any such third parties. To the
extent that such third parties perform services that BFS is
obligated to perform under this Agreement, BFS shall be entitled
to receive the fees to which it would otherwise be entitled
hereunder had it performed such services directly; provided,
however, that the Fund's Board of Directors/Trustees may limit
amounts receivable by BFS under this Agreement for services
performed on its behalf by third parties. BFS will furnish the
Fund shareholder and account records and data upon which the
Fund's obligations under this Agreement are calculated, and such
other data pertaining to any services rendered by third parties
as the Fund may reasonably require. The Fund shall be entitled to
have any and all such records audited by the Fund's independent
accountants at any time upon reasonable notice to BFS.
III. EXPENSES.
A. Expenses of BFS. BFS shall pay all expenses incurred in providing
the Funds the services and facilities described in this
Agreement, whether or not such expenses are billed to BFS or the
Funds.
B. Direct Expenses. Any provision of this Agreement to the contrary
notwithstanding, each Fund shall pay, or reimburse BFS for the
payment of, the following expenses (hereinafter "direct
expenses") whether or not such direct expenses are billed to the
Funds, BFS, or any related entity:
1. Fees and expenses of the Fund's Independent Directors/Trustees
and meetings thereof;
2. Fees and costs of investment advisory services;
3. Fees and costs of independent audits, income tax preparation,
and obtaining quotations for the purpose of calculating the
Fund's net asset value;
4. Fees and costs of outside legal counsel and legal counsel
employed directly by the Fund;
5. Fees and costs of custodian and banking services;
6. Costs (including postage) of printing and mailing
prospectuses, confirmations, proxy statements, and reports to
Fund shareholders;
7. Fees and costs for the registration of Fund shares with the
Securities and Exchange Commission and the jurisdictions in
which its shares are qualified for sale;
2
<PAGE>
8. Fees and expenses associated with membership in the Investment
Company Institute and the Mutual Fund Education Alliance;
9. Expenses of fidelity bonding and liability insurance covering
the Fund;
10. Costs for incoming telephone WATS lines;
11. Organizational costs.
C. Extraordinary Expenses. Any provision of this Agreement to the
contrary notwithstanding, each Fund, as determined by its Board
of Directors/Trustees, shall pay (or reimburse BFS for payment
of) the following expenses, which shall be categorized as
Extraordinary Expenses and shall be excluded from each Fund's
expense ratio, whether or not the expense was billed to the
Funds, BFS, or any related entity:
1. Brokerage commissions
2. Taxes
3. Interest
4. Portfolio insurance premiums
5. Rating agency fees
6. Other extraordinary expenses, as authorized from time to time
by each Fund's Board of Directors/Trustees.
IV. TERM. With respect to each Fund, this Agreement shall become effective upon
its approval by vote of a majority of the Fund's shareholders at a meeting
called for the purpose of voting on such approval and a majority of the
Fund's Directors/Trustees, including a majority of those Directors/Trustees
who are not "interested persons" of the Fund or BFS (as that term is defined
in the Investment Company Act of 1940), and shall continue until it is
terminated pursuant to the provisions of Paragraph XII.
V. INSURANCE. The Funds and BFS agree to procure and maintain, separately or as
joint insureds with their Directors/Trustees, employees, agents, and others,
an insurance policy or policies against loss arising from breaches of trust
or errors and omissions and a fidelity bond meeting the requirements of the
Investment Company Act of 1940 in such amounts and with such deductibles as
are set forth on Schedule D attached to this Agreement and made a part
hereof by reference, as it may be amended from time to time, and to pay
premiums therefor, provided that if a Fund or BFS is party to a policy in
which it is named as a joint insured, its liability for premiums on said
policy shall be determined on the basis of premiums it would pay to obtain
equivalent coverage separately relative to the premiums each other joint
insured would pay to obtain equivalent coverage separately.
VI. REGISTRATION AND COMPLIANCE.
A. BFS represents that it is registered as a transfer agent with the
Securities and Exchange Commission ("SEC") pursuant to ss.17A of
the Securities Exchange Act of 1934 and the rules and regulations
thereunder, and agrees to maintain said registration and comply
3
<PAGE>
with all of the requirements of said Act, rules, and regulations
so long as this Agreement remains in force.
B. Each Fund represents that it is an open-end management investment
company registered with the SEC under the Securities Act of 1933
and the rules and regulations thereunder and the Investment
Company Act of 1940 and the rules and regulations thereunder, and
that it is authorized to sell its shares pursuant to said Acts,
and the rules and regulations thereunder.
Each Fund will furnish BFS with a list of those jurisdictions in
the United States and elsewhere in which it is authorized to sell
its shares to the general public and maintain the currency of
said list by amendment. Each Fund agrees to promptly advise BFS
of any change in or limitation upon its authority to carry on
business as an investment company pursuant to said Acts, and the
statutes, rules, and regulations of each and every jurisdiction
in which its shares are registered for sale.
VII. DOCUMENTATION. Each of the Funds and BFS shall supply to the other upon
request such documentation as is required by them to carry out their
respective obligations under this Agreement, including, but not limited
to, declarations of trust, articles of incorporation, bylaws, codes of
ethics, registration statements, permits, financial reports, third party
audits, certificates of authority, computer tapes, and related items.
VIII. PROPRIETARY INFORMATION. It is agreed that all records and documents,
except computer data processing programs and any related documentation
used or prepared by, or on behalf of, BFS for the performance of its
services hereunder, are the property of the Funds and shall be open to
audit or inspection by the Funds or their duly authorized agents during
the normal business hours of BFS, shall be maintained in such fashion as
to preserve the confidentiality thereof and to comply with applicable
federal and state laws and regulations, and shall, in whole or any
specified part, be surrendered and turned over to the Funds or their duly
authorized agents upon receipt by BFS of reasonable notice of and request
therefor.
IX. INDEMNITY. Each Fund shall indemnify and hold BFS harmless against any
losses, claims, damages, liabilities, or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action, or
suit brought by any person other than the Fund (including a shareholder
naming the Fund as a party) and not resulting from BFS's bad faith,
willful misfeasance, reckless disregard of its obligations and duties,
negligence, or breach of this Agreement, and arising out of, or in
connection with:
A. BFS's performance of its obligations under this Agreement;
B. Any error or omission in any record (including but not limited to
magnetic tapes, computer printouts, hard copies, and microfilm or
microfiche copies) delivered, or caused to be delivered, by a
Fund to BFS in connection with this Agreement;
C. Bad faith, willful misfeasance, reckless disregard of its
obligations and duties, or negligence on the part of the Fund, or
BFS's acting upon any instructions reasonably believed by it to
have been properly executed or communicated by any person duly
authorized by the Fund;
D. BFS's acting in reliance upon advice reasonably believed by it to
have been given by counsel for the Funds, or;
E. BFS's acting in reliance upon any instrument reasonably believed
by it to have been genuine and signed, countersigned, or executed
by the proper person(s) in accordance with the currently
effective certificate(s) of authority delivered to BFS by the
Funds
4
<PAGE>
In the event that BFS requests a Fund to indemnify or
hold it harmless hereunder, BFS shall use its best efforts to inform
the Fund of the relevant facts concerning the matter in question. BFS
shall use reasonable care to identify and promptly notify the Fund
concerning any matter which presents, or appears likely to present, a
claim for indemnification against the Fund.
Each Fund may elect to defend BFS against any claim which
may be the subject of indemnification hereunder. In the event that the
Fund makes such an election, it shall notify BFS and shall take over
defense of the claim and, if so requested by the Fund, BFS shall incur
no further legal or other expenses related thereto for which it is
entitled to indemnity hereunder; provided, however, that nothing herein
shall prevent BFS from retaining, at its own expense, counsel to defend
any claim. Except with the applicable Fund's prior consent, BFS shall
not confess to any claim or make any compromise in any matter in which
the Fund will be asked to indemnify or hold BFS harmless hereunder
without the Fund's prior consent.
X. LIABILITY.
A. Damages. BFS shall not be liable to any Fund, or any third party,
for punitive, exemplary, indirect, special, or consequential
damages (even if BFS has been advised of the possibility of such
damages) arising from the performance of its obligations under
this Agreement, including but not limited to loss of profits,
loss of use of the shareholder accounting system, cost of
capital, and expenses for substitute facilities, programs, or
services.
B. Force Majeure. Any provision in this Agreement to the contrary
notwithstanding, BFS shall not be liable for delays or errors
occurring by reason of circumstances beyond its control or the
control of any of its affiliates and not attributable to the
negligence of BFS or any of its affiliates, including, but not
limited to, acts of civil or military authority, national
emergencies, national or regional work stoppages, fire, flood,
catastrophe, earthquake, acts of God, insurrection, war, riot,
failure of communication systems, or interruption of power
supplies.
C. Trust Series Sole Obligor. BFS is expressly put on notice that,
for any Fund which is a series of a registered investment company
organized as a Massachusetts business trust (a "Trust Series"),
liability under this Agreement shall be limited to the Trust
Series incurring such liability and to the assets of such Trust
Series. BFS shall not have any rights or remedies against any
trustee, officer, employee, or shareholder of the Trust Series or
any other series of the Trust for breach of this Agreement nor
recourse to the property of any such persons or other series of
the Trust for satisfaction of any judgment or other claim against
the Trust Series.
XI. AMENDMENT. This Agreement and the Schedules forming a part hereof may be
amended at any time, with or without shareholder approval (except as otherwise
required by law), by a document signed by each of the parties hereto. In the
event that one or more additional Funds are established, and the governing
bodies of said Funds by resolution indicate that the Funds are to be made
parties to this Agreement, Schedule E hereto shall be amended to reflect the
addition of such new Funds, and such new Funds shall become parties hereto. Any
change in a Fund's registration statement or other compliance documents, or in
the forms relating to any plan, program, or service offered by its current
prospectus which would require a change in BFS's obligations hereunder shall be
subject to BFS's approval, which shall not be unreasonably withheld.
5
<PAGE>
XII. TERMINATION. This Agreement may be terminated by any Fund with respect to
said Fund, or by BFS, without cause, upon 120 days' written notice to the
other party, and at any time for cause in the event that such cause
remains unremedied for more than 30 days after receipt by the other party
of written specification of such cause.
In the event that a Fund designates a successor to perform any of
BFS's obligations hereunder, BFS shall, at the expense and pursuant to the
direction of the Fund, transfer to such successor all relevant books,
records, and other data of the Fund in the possession or under the control
of BFS.
XIII. SEVERABILITY. If any clause or provision of this Agreement is determined
to be illegal, invalid, or unenforceable under present or future laws
effective during the term hereof, then such clause or provision shall be
considered severed herefrom and the remainder of this Agreement shall
continue in full force and effect.
XIV. APPLICABLE LAW. This Agreement shall be subject to and construed in
accordance with the laws of the State of California.
XV. ENTIRE AGREEMENT. Except as otherwise provided herein, this Agreement
constitutes the entire and complete understanding of the parties hereto
relating to the subject matter hereof and supersedes all prior contracts
and discussions between the parties.
By /s/John T. Kataoka Date 6/1/95
John T. Kataoka, President
BENHAM FINANCIAL SERVICES, INC.
By /s/Douglas A. Paul Date 6/1/95
Douglas A. Paul, Secretary
to the FUNDS
6
<PAGE>
ADMINISTRATIVE SERVICES AND
TRANSFER AGENCY AGREEMENT
Schedule A
Administrative Services
Benham Financial Services, Inc. agrees to provide each Fund the following
administrative services:
1. Fund and Portfolio Accounting
A. Maintain Fund General Ledger and Journal.
B. Prepare and record disbursements for direct Fund expenses.
C. Prepare daily money transfers.
D. Reconcile all Fund bank and custodian accounts.
E. Assist Fund independent auditors as appropriate.
F. Prepare daily projections of available cash balances.
G. Record trading activity for purposes of determining net asset values
and dividend distributions.
H. Prepare daily portfolio evaluation reports to value portfolio
securities and determine daily accrued income.
I. Determine the daily net asset value per share.
J. Determine income and capital gain dividend distributions per share.
K. Prepare monthly, quarterly, semi-annual, and annual financial
statements.
L. Provide financial information for reports to the Securities and
Exchange Commission in compliance with the provisions of the
Investment Company Act of 1940 and the Securities Act of 1933, the
Internal Revenue Service, and any other regulatory agencies as
required.
M. Provide financial, yield, net asset value, etc. information to the
NASD and other survey and statistical agencies as instructed by the
Funds.
2. Internal Audit
Provide an internal audit staff for independent review of Fund operations.
Internal audit staff will assist the independent accountants as
appropriate, and report directly to the Audit Committee of the Board of
Directors/Trustees.
7
<PAGE>
3. Legal
A. Provide registration and other administrative services necessary to
qualify the Fund's shares for sale in those jurisdictions determined
from time to time by each Fund's Board of Directors/Trustees.
B. Maintain registration statements and make all other filings required
by the Securities and Exchange Commission in compliance with the
provisions of the Investment Company Act of 1940 and the Securities
Act of 1933.
C. Prepare and review Fund prospectuses.
D. Prepare proxy statements.
E. Prepare board materials and maintain minutes of board meetings.
F. Provide legal advice.
The Funds' outside counsel may provide the services listed above as a
direct Fund expense; however, the Funds have the option to employ their own
counsel to provide any or all of these services.
4. Insurance
A. Obtain errors and omissions policy.
B. Obtain fidelity bond.
5. Administrative Management
Provide each Fund with a president, a chief financial officer, a secretary,
and such other officers as are necessary to manage the Fund and administer
its affairs in accordance with law and appropriate business practice, all
subject to the approval of the Fund's Board of Directors/Trustees.
8
<PAGE>
ADMINISTRATIVE SERVICES AND
TRANSFER AGENCY AGREEMENT
Schedule B
Share Transfer and Dividend Disbursing Services
Benham Financial Services, Inc. agrees to provide each Fund the following
transfer agency and dividend disbursing services:
1. Maintain shareholder accounts, including processing of new accounts.
2. Post address changes and other file maintenance for shareholder accounts.
3. Post all monetary transactions to the shareholder file, including:
* Dividends, capital gains, and reverse share splits (BTMT)
* Direct (including lock box) purchases
* Wire order purchases and redemptions
* Letter and telephone redemptions
* Draft redemptions
* Letter and telephone exchanges (as well as auto exchanges via VRU
and PC transmissions)
* Letter and telephone transfers
* Certificate issuances
* Certificate deposits
* Account fees
* Automated Clearing House ("ACH") transactions
* Exchanges initiated via Open Order Service
4. Conduct quality control reviews, by a separate dedicated group using
statistically reliable samples, of transactions and account maintenance
functions before mailing confirmations, checks, and/or share certificates
to shareholders.
5. Monitor fiduciary processing to ensure accuracy and proper deduction of
fees.
6. Prepare daily reconciliations of shareholder processing including money
movement instructions.
7. Process bounced check collections, including the immediate liquidation of
shares purchased and return of check, together with confirmation of entire
transaction, to investor.
8. Process all distribution and redemption checks and replace lost checks.
9. Withhold dividends and proceeds of redemptions as required by IRS
regulations.
10. Provide draft clearing services:
* Maintain signature cards and appropriate corporate resolutions
* For drafts in amounts greater than $5,000, compare signatures on
drafts with signatures on signature cards
9
<PAGE>
* Receive checks presented for payment, verify negotiability, and
liquidate shares after verifying account balance
* For Funds that provide check writing privileges, process shareholder
check orders
* For Funds and retirement accounts that do not provide check writing
privileges, issue investment slip books
11. Mail confirmations, checks, and/or certificates resulting from
transaction requests to shareholders.
12. Process all other Fund mailings, including:
* Dividend and capital gain distributions
* Quarterly, semi-annual, and annual reports
* Year-end shareholder tax forms
* Directed payments
* Quarterly statements
* Shareholder drafts (on request)
* Combined statements
* Annual Prospectus revisions
13. Answer all service-related telephone inquiries from shareholders and
others, including:
* General and policy inquiries (research and resolve problems);
* Fund yield inquiries; and
* Shareholder transaction requests and account maintenance changes
(e.g., redemptions, transfers, exchanges, address changes, and check
book orders).
In addition:
* Monitor processing production and quality;
* Monitor online statistical performance of unit; and
* Develop reports on telephone activity.
14. Respond to written inquiries by researching and resolving problems,
including:
* Initiating shareholder account reconciliation proceedings when
appropriate
* Writing and mailing form letters
* Responding to financial institutions regarding verification of
deposits
* Initiating proceedings regarding lost share certificates
* Logging activities related to written inquiries
* Maintaining system for correspondence control
* Notifying shareholders of unacceptable transaction requests
15. Maintain and retrieve all required account history for shareholders and
provide research services as follows:
* Daily monitoring of all processing activity
* Providing exception reports
* Microfilming
* Storing, or archiving, and retrieving historical account information
* Obtaining microfiche of various reports
* Researching shareholder inquiries
* Resolving suspense items (e.g., transactions not posted due to an
error condition on the account)
10
<PAGE>
16. Prepare materials for shareholder meetings, including:
* Addressing and mailing proxy solicitation materials
* Tabulating returned proxies and supplying daily reports to inform
management about the vote
* Providing Fund with an affidavit of mailing
* Furnishing certified list of shareholders (hard copy or microfilm) and
election inspectors
17. Report and remit assets as necessary to satisfy state escheat requirements.
18. On behalf of each Fund, file tax documents with appropriate federal and
state authorities.
11
<PAGE>
ADMINISTRATIVE SERVICES AND
TRANSFER AGENCY AGREEMENT
Schedule C
Chargeable Transactions
For purposes of determining the per-transaction portion of the transfer
agency fee, the following types of transactions are considered chargeable
transactions.
1. Monetary Transactions
In general all monetary transactions are chargeable with the exception
of reversal transactions. The only chargeable reversal transaction is for
returned investment checks. The following is a current list of chargeable
transactions:
================================================================================
Description Transaction Type Sub Code Literal Code
================================================================================
Incoming Wires PUR 01 11
================================================================================
Wire Order Purchases WOF 01 00
================================================================================
Check Purchases PUR 01 02
================================================================================
PUR 01 03
================================================================================
PUR 01 05
================================================================================
PUR 01 08
================================================================================
PUR 01 09
================================================================================
PUR 07 00
================================================================================
PUR 07 01
================================================================================
PUR 08 00
================================================================================
PUR 09 00
================================================================================
PUR 09 01
================================================================================
PUR 09 14
================================================================================
PUR 10 00
================================================================================
PUR 14 00
================================================================================
PUR 15 00
================================================================================
PUR 16 01
================================================================================
PUR 22 00
================================================================================
12
<PAGE>
================================================================================
Description Transaction Type Sub Code Literal Code
================================================================================
PUR 01 97
================================================================================
PUR 01 98
================================================================================
PUR 26 00
================================================================================
RPO Purchases PUR 05 00
================================================================================
ACH Purchases PUR 01 12
================================================================================
PUR 07 02
================================================================================
PUR 09 02
================================================================================
PUR 02 00
================================================================================
PUR 17 00
================================================================================
PUR 18 00
================================================================================
PUR 19 00
================================================================================
PUR 20 00
================================================================================
Direct Dividend &
Capital Gains PUR 01 50
================================================================================
PUR 09 50
================================================================================
PUR 07 50
================================================================================
PUR 31 50
================================================================================
Systematic Exchange
Purchases PUR 01 60
================================================================================
PUR 07 60
================================================================================
PUR 31 60
================================================================================
BCM Accumulation
Purchases PUR 01 32
================================================================================
PUR 01 33
================================================================================
PUR 01 42
================================================================================
PUR 01 43
================================================================================
Exchange
Purchases/Liquidations EXI/EXO 01 00
================================================================================
EXI/EXO 01 61
================================================================================
EXI/EXO 01 81
================================================================================
EXI/EXO 01 82
================================================================================
EXI/EXO 01 85
================================================================================
EXI/EXO 01 86
================================================================================
13
<PAGE>
================================================================================
Description Transaction Type Sub Code Literal Code
================================================================================
PUR 01 06
================================================================================
PUR 01 45
================================================================================
PUR 07 61
================================================================================
PUR 07 62
================================================================================
PUR 08 61
================================================================================
PUR 09 61
================================================================================
PUR 09 63
================================================================================
PUR 10 61
================================================================================
PUR 14 61
================================================================================
PUR 16 61
================================================================================
PUR 22 61
================================================================================
PUR 01 75
================================================================================
PUR 26 61
================================================================================
Check Purchases
(Reversals) PUR 04 00
================================================================================
PUR 01 02 R
================================================================================
PUR 01 03 R
================================================================================
PUR 01 05 R
================================================================================
PUR 01 08 R
================================================================================
PUR 01 09 R
================================================================================
PUR 07 00 R
================================================================================
PUR 07 01 R
================================================================================
PUR 08 00 R
================================================================================
PUR 09 00 R
================================================================================
PUR 09 01 R
================================================================================
PUR 10 00 R
================================================================================
PUR 14 00 R
================================================================================
PUR 15 00 R
================================================================================
PUR 16 01 R
================================================================================
PUR 22 00 R
================================================================================
PUR 01 97 R
================================================================================
PUR 01 98 R
================================================================================
14
<PAGE>
================================================================================
Description Transaction Type Sub Code Literal Code
================================================================================
PUR 26 00 R
================================================================================
BCM Accumulation
Liquidations LIQ 01 32
================================================================================
LIQ 01 42
================================================================================
Transfers In/Out PUR 01 35
================================================================================
PUR 07 71
================================================================================
PUR 08 71
================================================================================
PUR 14 71
================================================================================
PUR 16 71
================================================================================
PUR 22 71
================================================================================
PUR 26 03
================================================================================
PUR 26 71
================================================================================
Transfers In & Out TFI/TFO 01 00
================================================================================
TFI/TFO 01 01
================================================================================
TFI/TFO 01 81
================================================================================
TFI/TFO 01 82
================================================================================
TFI/TFO 01 85
================================================================================
TFI/TFO 01 86
================================================================================
Check Liquidations LIQ 01 00
================================================================================
LIQ 01 01
================================================================================
LIQ 01 02
================================================================================
LIQ 01 03
================================================================================
LIQ 01 04
================================================================================
LIQ 01 05
================================================================================
LIQ 01 06
================================================================================
LIQ 01 07
================================================================================
LIQ 01 08
================================================================================
LIQ 01 09
================================================================================
LIQ 01 10
================================================================================
LIQ 01 11
================================================================================
LIQ 01 12
================================================================================
LIQ 01 39
================================================================================
15
<PAGE>
================================================================================
Description Transaction Type Sub Code Literal Code
================================================================================
LIQ 01 14
================================================================================
Wire Order Redemption WOR 01 00
================================================================================
SWIP Redemption
Checks LIQ 14 00
================================================================================
RPO Liquidations LIQ 05 00
================================================================================
Wires Out LIQ 01 20
================================================================================
Drafts Paid LIQ 03 00
================================================================================
Draft Order Fees LIQ 13 11
================================================================================
Other Fees LIQ 13 08
================================================================================
LIQ 13 13
================================================================================
LIQ 13 16
================================================================================
LIQ 13 17
================================================================================
LIQ 13 18
================================================================================
LIQ 13 19
================================================================================
LIQ 13 23
================================================================================
BCM Accumulation Fees LIQ 01 33
================================================================================
LIQ 01 43
================================================================================
Non-BCMG Advisor Fees LIQ 01 75
================================================================================
WOR 01 75
================================================================================
Certificate Issue CIS 01 00
================================================================================
CIS 02 00
================================================================================
Certificate Deposit CDP 01 00
================================================================================
ADJ Credits ADJ 01 00
================================================================================
PUR 04 01
================================================================================
PUR 26 01
================================================================================
ADJ Debits ADJ 02 00
================================================================================
16
<PAGE>
2. Non-Monetary Transactions
The only chargeable non-monetary transactions will be for
shareholder-initiated account maintenance charges and one transaction
charge for each new account added to the shareholder file. The following is
a current list of non-monetary transactions:
================================================================================
DESCRIPTION TRANSACTION TYPE
================================================================================
General Account Maintenance MNT01 - MNT08
================================================================================
Draft Stop Add and Maintenance MNT009
================================================================================
Name/Address Change MNT10
================================================================================
New Account Setup N/A
================================================================================
Combined Statement Account Setup N/A
================================================================================
17
<PAGE>
ADMINISTRATIVE SERVICES AND
TRANSFER AGENCY AGREEMENT
Schedule D
Liability Insurance
Benham Financial Services, Inc. agrees to provide each Fund at a minimum with
the following insurance coverages subject to a ratable allocation:
1. Errors and Omissions and Directors Liability.
* $10 million limit.
* $150,000 deductible for all claims.
* Individual director/trustee or officer sued - $5,000
deductible to aggregate of $25,000.
2. Fidelity Insurance (Blanket Bond).
* $25,000,000 limit (each and every occurrence).
* $150,000 deductible.
18
<PAGE>
ADMINISTRATIVE SERVICES AND
TRANSFER AGENCY AGREEMENT
Schedule E
Funds and Portfolios
Effective as of the date indicated below, each of the open-end management
investment companies and the portfolios of said open-end management investment
companies listed below is hereby made a party to the Benham Group Administrative
Services and Transfer Agency Agreement dated June 1, 1995.
Name of Fund/Portfolio Board Approval of Agreement
Capital Preservation Fund, Inc. April 3, 1995
Capital Preservation Fund II, Inc. April 3, 1995
Benham Target Maturities Trust
1995 Portfolio April 3, 1995
2000 Portfolio "
2005 Portfolio "
2010 Portfolio "
2015 Portfolio "
2020 Portfolio "
Benham Government Income Trust
Benham GNMA Income Fund April 3, 1995
Benham Treasury Note Fund "
Benham Government Agency Fund "
Benham Adjustable Rate Government Securities Fund "
Benham Short-Term Treasury and Agency Fund "
Benham Long-Term Treasury and Agency Fund "
Benham California Tax-Free and Municipal Funds
Municipal Money Market Fund April 3, 1995
Tax-Free Money Market Fund "
Tax-Free Short-Term Fund "
Tax-Free Intermediate-Term Fund "
Tax-Free Long-Term Fund "
Municipal High-Yield Fund "
Tax-Free Insured Fund "
Benham Municipal Trust
Benham National Tax-Free Money Market Fund April 3, 1995
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 Florida Municipal Long-Term Fund "
Benham Arizona Municipal Intermediate-Term Fund "
Benham Arizona Municipal Long-Term Fund "
19
<PAGE>
Name of Fund/Portfolio Board Approval of Agreement
Benham Equity Funds
Benham Gold Equities Index Fund April 3, 1995
Benham Equity Growth Fund "
Benham Income & Growth Fund "
Benham Utilities Income Fund "
Benham Global Natural Resources Fund April 3, 1995
Benham International Funds
Benham European Government Bond Fund April 3, 1995
Benham International Equity Fund "
Benham Asian Tiger Fund "
Benham Emerging Markets Fund "
Benham Global Bond Fund "
Benham Investment Trust
Benham Prime Money Market Fund April 3, 1995
Benham Manager Funds
Benham Capital Manager Fund April 3, 1995
20
<PAGE>
ADMINISTRATIVE SERVICES AND
TRANSFER AGENCY AGREEMENT
Schedule F
Compensation
<TABLE>
<CAPTION>
=====================================================================================================================
Monthly
Per-Account Fee for Per-Transaction
Fund/Portfolio Account Maintenance Fee
=====================================================================================================================
<S> <C> <C>
Capital Preservation Fund, Inc. $1.3958 $1.35
- ---------------------------------------------------------------------------------------------------------------------
Capital Preservation Fund II, Inc. $1.3958 $1.35
- ---------------------------------------------------------------------------------------------------------------------
Benham California Tax-Free and Municipal Funds $1.3958 $1.35
Municipal Money Market Fund
Tax-Free Money Market Fund
Tax-Free Short-Term Fund
Tax-Free Intermediate-Term Fund
Tax-Free Long-Term Fund
Tax-Free Insured Fund
Municipal High-Yield Fund
- ---------------------------------------------------------------------------------------------------------------------
Benham Equity Funds $1.35
Benham Gold Equities Index Fund $1.1875
Benham Equity Growth Fund $1.1875
Benham Income & Growth Fund $1.3958
Benham Utilities Income Fund $1.3958
Benham Global Natural Resources Fund $1.1875
- ---------------------------------------------------------------------------------------------------------------------
Benham Government Income Trust $1.3958 $1.35
Benham GNMA Income Fund
Benham Treasury Note Fund
Benham Government Agency Fund
Benham Adjustable Rate Government Securities Fund
Benham Short-Term Treasury and Agency Fund
Benham Long-Term Treasury and Agency Fund
- ---------------------------------------------------------------------------------------------------------------------
Benham International Funds
Benham European Government Bond Fund $1.1875 $1.35
- ---------------------------------------------------------------------------------------------------------------------
Benham Investment Trust $1.3958 $1.35
Benham Prime Money Market Fund
- ---------------------------------------------------------------------------------------------------------------------
Benham Manager Funds $1.1875 $1.35
Benham Capital Manager Fund
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================================
Monthly
Per-Account Fee for Per-Transaction
Fund/Portfolio Account Maintenance Fee
=====================================================================================================================
<S> <C> <C>
Benham Municipal Trust $1.3958 $1.35
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 Target Maturities Trust $1.1875 $1.35
1995 Portfolio
2000 Portfolio
2005 Portfolio
2010 Portfolio
2015 Portfolio
2020 Portfolio
=====================================================================================================================
</TABLE>
Administrative Services Fee Rate Schedule
Group Assets Fee Rate
up to $4.5 billion .11%
up to $6 billion .10%
up to $9 billion .09%
balance over $9 billion .08%
22
Independent Auditors' Consent
The Board of Trustees and Shareholders
Benham International Funds:
We consent to the inclusion in Benham International Funds' Post-Effective
Amendment No. 6 to the Registrations Statement No. 33-43321 on Form N-1A under
the Securities Act of 1933 and Amendment No. 7 to the Registrations Statement
No. 811-6441 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 European Government Bond Fund (the series constituting
Benham International Funds) for the periods indicated therein, which reports
have been incorporated by reference in the Statement of Additional Information
of Benham International Funds. We also consent to the reference to our firm
under the hrading "Financial Highlights" in the Prospectus of the Benham
International Funds and under the heading "About Benham International 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 EUROPEAN GOVERMENT BOND 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 $1,244.00 1.000000 24.40%
Five Years $1,000.00 5.000000 N/A
Ten Years
Date Of Inception* $1,000.00 $1,513.18 3.986300 10.95%
TR=Total return for period. TR=(ERV/P) - 1 51.32%
*Date Of Inception: January 7, 1992
<PAGE>
BENHAM EUROPEAN GOVERNMENT BOND FUND
YIELD CALCULATION
DECEMBER 31, 1995
Formula:
(A - B) 6
Yield = 2 { [------- + 1] - 1 }
(C * D)
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 = $1,404,124.91
B = $163,475.78
C = 20,539,897.568
D = $11.95
Yield = 6.14%
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, BENHAM
INTERNATIONAL FUNDS, hereinafter called the "Trust" and certain trustees and
officers of the Trust, 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 Trust 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 Trust in its behalf and
to affix its seal, and to sign the names of each of such trustees 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 a 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 Trust has caused this Power to be executed by
its duly authorized officers on this the 15th day of December, 1995.
BENHAM INTERNATIONAL FUNDS
(A Massachusetts Business Trust)
By: /s/John T. Kataoka
John T. Kataoka, President
SIGNATURE AND TITLE
/s/James M. Benham /s/Ezra Solomon
James M. Benham Ezra Solomon
Chairman Trustee
/s/Albert A. Eisenstat /s/Isaac Stein
Albert A. Eisenstat Isaac Stein
Trustee Trustee
/s/Ronald J. Gilson /s/Jeanne D. Wohlers
Ronald J. Gilson Jeanne D. Wohlers
Trustee Trustee
/s/Myron S. Scholes /s/James E. Stowers, III
Myron S. Scholes James E. Stowers, III
Trustee Trustee
/s/Kenneth E. Scott /s/Maryanne Roepke
Kenneth E. Scott Maryanne Roepke
Trustee Treasurer
Attest:
By: /s/Douglas A. Paul
Douglas A. Paul, Secretary
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> BENHAM EUROPEAN GVT BOND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 230327721
<INVESTMENTS-AT-VALUE> 245105058
<RECEIVABLES> 9412649
<ASSETS-OTHER> 2760229
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2572277936
<PAYABLE-FOR-SECURITIES> 7748
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5023133
<TOTAL-LIABILITIES> 5030881
<SENIOR-EQUITY> 211054440
<PAID-IN-CAPITAL-COMMON> 23582529
<SHARES-COMMON-STOCK> 21105444
<SHARES-COMMON-PRIOR> 18746815
<ACCUMULATED-NII-CURRENT> (3997106)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6400979
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15206213
<NET-ASSETS> 252247055
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15876625
<OTHER-INCOME> 0
<EXPENSES-NET> 1847022
<NET-INVESTMENT-INCOME> 14029603
<REALIZED-GAINS-CURRENT> 14706392
<APPREC-INCREASE-CURRENT> 17121808
<NET-CHANGE-FROM-OPS> 45857803
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17950830
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14908717
<NUMBER-OF-SHARES-REDEEMED> 13915468
<SHARES-REINVESTED> 1365380
<NET-CHANGE-IN-ASSETS> 57946460
<ACCUMULATED-NII-PRIOR> 15373619
<ACCUMULATED-GAINS-PRIOR> (13349864)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1017677
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1868015
<AVERAGE-NET-ASSETS> 228413130
<PER-SHARE-NAV-BEGIN> 10.36
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 1.88
<PER-SHARE-DIVIDEND> 0.90
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.95
<EXPENSE-RATIO> 0.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
