BENHAM PRIME
MONEY MARKET FUND
------------
Semiannual Report
August 31, 1995
[picture of desk with books,
lamp, glasses, and writing materials]
[company logo] The Benham Group
Part of the Twentieth Century Family of Mutual Funds
<PAGE>
Contents
U.S. Economic Review 1
Performance Information 2
Portfolio Statistics & Composition 3
Market Discussion 5
Management Discussion
Fund Performance and Strategy 6
Credit Quality and Diversification 8
Investment Fundamentals
Definitions 10
Money Market Instruments 11
Managing Portfolio Risk 13
Money Fund Summary 14
Financial Information
Financial Highlights 17
Financial Statements 18
Schedule of Investment Securities 24
<PAGE>
U.S. Economic Review
(head shot of
James M. Benham James M. Benham)
Chairman of the Board
Lower-than-expected inflation during the 12 months ended September 30, 1995,
helped generate optimism in the U.S. financial markets. U.S. inflation, as
measured by the consumer price index, increased at an annual rate of just 2.5%
during the 12-month period. Corporate mergers, downsizing and global job
competition kept labor costs low, and technological advances made U.S. workers
more efficient, boosting U.S. productivity to a 10-year high.
[graph data described below]
Slow economic growth also contributed significantly to the low inflation rate.
The Federal Reserve (the Fed) surprised almost everyone by achieving its goal of
slow economic growth and low inflation, the so-called "soft landing." The Fed
raised short-term interest rates seven times from February 1994 to February 1995
(see the accompanying graph) to slow the economy and prevent inflation. The
higher interest rates caused slowdowns in auto, home and retail sales in the
first quarter of 1995. Growth was even slower in the second quarter. U.S.
employment suffered the biggest monthly jobs decline in four years, and
industrial production declined for three consecutive months. As a result, real
annual growth was just 1.3% in the second quarter.
Evidence of economic weakness was so pronounced by the summer of 1995 that the
Fed reduced interest rates in early July. The Fed lowered its target for the
federal funds rate from 6.00% to 5.75%, the Fed's first rate cut since September
1992. Despite this action, economic signals remained mixed through the third
quarter. Signs of strength appeared in the housing and manufacturing sectors,
but consumer confidence ebbed and retail sales lagged. As a result, the Fed's
interest rate policy committee left interest rates unchanged at its August and
September meetings.
Despite the Fed's inaction in September, many analysts still expect interest
rates to decline by the end of the year. Some believe that the Fed could cut
rates at its next policy committee meeting on November 15, but it looks more
likely that the Fed will wait to see if Congress and President Clinton agree on
a meaningful budget deficit reduction plan.
[graph data mentioned above]
Short-Term U.S. Interest Rates
9/91-9/95
Discount Rate Fed Funds Rate
Sep-91 5 5.45
Oct-91 5 5.21
Nov-91 4.5 4.81
Dec-91 3.5 4.43
Jan-92 3.5 4.03
Feb-92 3.5 4.06
Mar-92 3.5 3.98
Apr-92 3.5 3.73
May-92 3.5 3.82
Jun-92 3.5 3.76
Jul-92 3 3.25
Aug-92 3 3.3
Sep-92 3 3.22
Oct-92 3 3.1
Nov-92 3 3.09
Dec-92 3 2.92
Jan-93 3 3.02
Feb-93 3 3.03
Mar-93 3 3.07
Apr-93 3 2.96
May-93 3 3
Jun-93 3 3.04
Jul-93 3 3.06
Aug-93 3 3.03
Sep-93 3 3.09
Oct-93 3 2.99
Nov-93 3 3.02
Dec-93 3 2.96
Jan-94 3 3.05
Feb-94 3 3.25
Mar-94 3 3.34
Apr-94 3 3.56
May-94 3.5 4.01
Jun-94 3.5 4.25
Jul-94 3.5 4.26
Aug-94 4 4.47
Sep-94 4 4.73
Oct-94 4 4.76
Nov-94 4.75 5.29
Dec-94 4.75 5.45
Jan-95 4.75 5.53
Feb-95 5.25 5.92
Mar-95 5.25 5.98
Apr-95 5.25 6.05
May-95 5.25 6.01
Jun-95 5.25 5.98
Jul-95 5.25 5.77
Aug-95 5.25 5.75
Sep-95 5.25 5.8
1
<PAGE>
Performance Information
Yield and Total Return Summary
For Periods Ended August 31, 1995
Average Annual Total Returns
Net Asset 7-Day 7-Day ----------------------------
Value Current Effective Life of
(3/1/95-8/31/95) Yield Yield 1 Year 5 Years Fund
$1.00 5.40% 5.55% 5.71% N/A 4.94%
The Fund commenced operations on November 17, 1993.
Please Note: Yields and total returns are based on historical Fund performance
and do not guarantee future results. The Fund's yields and total returns will
vary. The U.S. government neither insures nor guarantees investments in the
Fund. The Fund is managed to maintain a stable $1.00 share price, but, as with
all money market funds, there is no assurance that the Fund will be able to do
so.
Performance Definitions
The 7-day current yield is calculated based on the income generated by an
investment in the Fund over a seven-day period and is expressed as an annual
percentage rate. The 7-day effective yield is calculated similarly, although
this figure is slightly higher than the Fund's 7-day current yield because of
the effects of compounding. The 7-day effective yield assumes that income earned
from the Fund's investments is reinvested and generating additional income.
Total return figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Fund and assume that all of the Fund's
distributions are reinvested. An average annual total return illustrates the
annually compounded return that would have produced the Fund's cumulative total
return if the Fund's performance had been constant over the entire period.
Average annual total returns smooth out variations in a fund's return; they are
not the same as year-by-year results. For fiscal year-by-year total returns,
please refer to the Fund's "Financial Highlights" on page 17.
Lipper Performance Comparison
Lipper Analytical Services (Lipper) is an independent mutual fund ranking
service located in Summit, NJ. Category average total returns are based on
cumulative and average annual total returns for the periods ended 8/31/95 for
the funds in Lipper's "Money Market Funds" category.
6 Months 1 Year Life of Fund+
The Fund's Total Return: 2.88% 5.71% 4.98%
Category Average Total Return: 2.69% 5.13% 4.28%
The Fund's Ranking N/A 8 out of 256 2 out of 238
+ From November 30, 1993, to August 31, 1995.
Total returns are based on historical performance and do not guarantee future
results.
2
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Portfolio Statistics & Composition*
Key Portfolio Statistics
8/31/95 2/28/95
Market Value: $1,325,455,083 $1,498,055,552
Number of Issues: 88 105
Average Maturity: 65 days 51 days
Average Coupon: 5.46% 6.15%
For definitions of these terms, see page 10.
Portfolio Composition by Country
(pie charts)
8/31/95 2/28/95
[graph data] [graph data]
Other: 11.0% Other: 17.6%
Other European: 16.3% Other European: 15.6%
Sweden: 6.4% Netherlands: 7.2%
Canada: 8.2% Germany: 8.3%
Japan: 11.7% Japan: 15.8%
U.S.: 46.4% U.S.: 35.5%
"Other European" includes Germany and the Netherlands in the 8/31/95 graph, and
France, the United Kingdom, Italy and Switzerland in both graphs. "Other"
includes Australia, Mexico and the Cayman Islands. See page 8 for a discussion
of the Fund's country limits and foreign vs. domestic limits.
Portfolio Composition by Industry
(pie charts)
8/31/95
[graph data]
Other: 18%
Misc. Financial Services: 9%
U.S. Treasury & Govt. Agency Securities: 12%
Corporate Leasing & Financing: 15%
Banks: 46%
2/28/95
[graph data]
Other: 24%
U.S. Govt. Agency Securities: 10%
Misc. Financial Services: 13%
Corporate Leasing & Financing: 15%
Banks: 38%
See page 8 for a discussion of the Fund's issuer limits, industry limits, and
financial institution vs. industrial exposure.
* The composition of the Fund's portfolio is subject to change.
3
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Portfolio Composition*
Composition By Maturity
(pie charts)
8/31/95 2/28/95
[graph data] [graph data]
121-397 Days: 14.0% 121-397 Days: 13.5%
91-120 Days: 7.0% 91-120 Days: 11.5%
61-90 Days: 13.0% 61-90 Days: 13.0%
31-60 Days: 22.0% 31-60 Days: 32.0%
1-30 Days: 44.0% 1-30 Days: 30.0%
The Fund buys only U.S. dollar-denominated obligations with remaining maturities
of 13 months (397 days) or less. The Fund also maintains a dollar-weighted
average portfolio maturity of 90 days or less, with 50-60 days considered a
"neutral" position.
Composition By Investment Type
(pie charts)
8/31/95
[graph data]
Other: 9.0%
Eurodollar CDs: 5.0%
Floating-Rate Notes: 5.0%
U.S. Govt. Agency Notes: 7.0%
Yankee Certificates of Deposit: 16.0%
Commercial Paper: 58.0%
2/28/95
[graph data]
Other: 9.0%
Bankers' Acceptances: 5.0%
Floating-Rate Notes: 5.2%
U.S. Govt. Agency Discount Notes: 6.3%
Yankee Certificates of Deposit: 16.2%
Commercial Paper: 58.3%
These investment types are defined on page 10.
Composition By S&P Credit Rating
(pie charts)
8/31/95 2/28/95
[graph data] [graph data]
U.S. Govt. Agency Securities: 11% U.S. Govt. Agency Securities: 10%
A-2: 5% A-2: 3%
A-1: 20% A-1: 18%
A-1+: 64% A-1+: 69%
The Fund restricts its investments to obligations considered "first-tier" by the
SEC or "high-quality" according to guidelines established by the Fund's Board of
Trustees. First-tier obligations have received the highest rating from at least
two credit rating agencies such as Moody's and Standard & Poor's (S&P). For
example, A-1 (which includes A-1+) is S&P's highest commercial paper credit
rating. The A-2 rated securities shown above are considered first-tier because
they received top ratings from two rating services other than S&P. The U.S.
government agency securities are nonrated obligations of government-sponsored
enterprises that have been determined to be of comparable quality to A-1 rated
obligations.
* The composition of the Fund's portfolio is subject to change.
4
<PAGE>
Market Discussion
Questions and Answers
with Amy O`Donnell, Portfolio Manager
Q: How have U.S. money market yields behaved so far in 1995?
A: Treasury bill yields, which are generally tracked by other U.S. money
market instruments, have held fairly steady during 1995, remaining mostly
in the 5.50% to 6.00% range. This steadiness reflects low inflation and
slow U.S. economic growth (see page 1), plus the fact that the Fed made
only two offsetting interest rate adjustments in the first nine months of
1995. Treasury bill yields hovered around 5.70-5.80% at the beginning of
1995, then rose to 6.00% after the Fed raised short-term interest rates by
50 basis points* in February. In June, yields fell back toward 5.50% as the
economy ground to a halt and the market anticipated an interest rate cut by
the Fed. After the Fed cut rates by 25 basis points in July, yields stayed
in the neighborhood of 5.60% until September. That's when weakness in the
manufacturing sector and expectations of another Fed interest rate cut by
year end caused yields to dip below 5.50%.
Q: Have there been any other factors that affected U.S. money market yields?
A: Issuance of commercial paper declined as the economy weakened, and this
depressed supply and yields. Economic uncertainty also caused the money
market yield curve* to flatten, providing little incentive to buy
securities with longer maturities. However, the money market yield curve
developed a negative slope in June (one-month securities had higher yields
than one-year securities). That happened because there was so much issuance
in the one- to two-month area in anticipation of a Fed interest rate cut.
Issuers did not want to pay high interest rates on longer-term securities
after a rate cut, so they issued short-term securities instead. After July,
the yield curve shifted to a positive slope as demand picked up for
short-term securities, then flattened again as uncertainty prevailed.
Q: What is the outlook for Fed policy and short-term interest rates?
A: As of this writing in early October, lower rates seem more likely than
higher rates. The money market was anticipating another 25 basis point
interest rate cut by the Fed when yields dipped below 5.50% in the third
quarter. However, we believe the economic signals have been too mixed to
warrant an immediate rate cut. We believe it could take a series of weak
economic signals or a meaningful deficit reduction bill from Congress to
convince the Fed to further reduce interest rates. Until then, short-term
interest rates and money market yields are likely to stay near the lower
end of their 1995 range as long as inflation remains subdued and economic
growth is slow to moderate.
* Defined on page 10.
5
<PAGE>
Management Discussion
Fund Performance and Strategy
with Amy O`Donnell, Portfolio Manager
We recommend reviewing the Investment Fundamentals, U.S. Economic Review,
Performance Information and Market Discussion sections prior to reading this
discussion. Words and investment terms marked with an asterisk (*) are defined
on page 10.
Q: How did the Fund perform?
A: In absolute terms, the Fund continued to meet its investment objective of
seeking the highest level of current income consistent with preservation of
capital (see the top of page 2 for the Fund's net asset value, yields and
average annual total returns as of August 31, 1995). In relative terms, the
Fund continued to outperform its peer group, which consists of more than
200 funds in Lipper's "Money Market Funds" category. The Fund has
consistently and significantly outperformed the category average total
return (see the Lipper Performance Comparison on page 2).
Q: Why has the Fund's yield dropped significantly since February?
A: The main reason for the decline is the performance of the U.S. money market
(see page 5). Treasury bill yields, which other U.S. money market
instruments generally track, peaked at around 6.00% in February, after the
Fed raised the federal funds rate target to 6.00%. Later, short-term
interest rates and money market yields fell as economic reports indicated
unexpected economic weakness in the second quarter.
Two smaller contributing factors to the Fund's yield decline were higher
fees and higher credit quality. Before 1995, Benham Management Corporation
waived all management fees for the Fund and absorbed all of the Fund's
operating expenses. On January 1, 1995, the Fund began paying for
management fees and operating expenses at an annual rate of 0.10% of
average daily net assets. The Fund's expense payments increased in 0.10%
monthly increments until May, when they reached the Fund's 0.50% annual
expense cap. We also increased the Fund's credit quality and
diversification (see the discussion on pages 8 and 9). Higher credit
quality can result in lower yields because reduced risk typically
translates into reduced returns.
6
<PAGE>
Management Discussion
Fund Performance and Strategy
(continued from the previous page)
Q: Do the new credit limits (see page 8) explain why the Fund increased its
U.S. exposure and reduced its Japanese exposure between February and
August? (See the Portfolio Composition by Country graphs on page 3.)
A: That's part of the reason. We were also continuing a strategy to reduce the
Fund's Japanese exposure that began a year ago. In August 1994, the Fund's
Japanese position exceeded 50% of the portfolio. We became uncomfortable
when we saw conditions developing in the Japanese banking industry that
increased the credit risk among Japanese banks that issue commercial paper,
especially the smaller issuers.
By the time the Japanese banking crisis became front page headlines in June
1995, we had cut the Fund's exposure to less than 15%. Even after that
significant reduction, we still were not finished. As of this writing in
early October, we have reduced the Fund's Japanese exposure to just 5% of
the portfolio. The Japanese bank securities still held by the Fund were
issued by Japan's seven largest and most creditworthy banks.
Q: In the Fund's February 28, 1995, annual report, you discussed two taxable
municipal notes owned by the Fund that were issued by municipalities that
participated in Orange County's investment pool. You said that the $5
million note issued by the City of Anaheim was fully repaid on April 4.
What happened with the remaining $5 million City of Irvine note that was
due on July 26?
A: The Irvine note was repaid in full with accrued interest on May 24, prior
to maturity. Since the note repayment date, the Fund has not owned any debt
issued by municipalities that participated in Orange County's investment
pool.
Q: Does the Fund own municipal securities issued by any other California
municipality?
A: No. Since May 24, the Fund has not owned debt issued by any California
municipality. That's not to say that the Fund will not own taxable
California municipal notes in the future, but those investments would
receive careful scrutiny. Furthermore, we would keep the size of the
investment within preset limits (see the Credit Quality and Diversification
discussion on pages 8 and 9).
7
<PAGE>
Management Discussion
Credit Quality and Diversification
with Vicki Zesses, Manager of Corporate Credit Research
Vicki Zesses is responsible for managing credit research and credit risk
reduction for all Twentieth Century and Benham corporate money market and bond
funds. She has 11 years of experience in managing corporate credit research and
risk.
Q: The Fund's February 28, 1995, annual report referred to plans to expand the
credit analysis team and increase its resources. What changes have been
made? What changes are in progress?
A: The most significant changes that have been made so far have been in our
systems and procedures. We are in the process of implementing a credit
management system based on a series of limits. These limits help the fund
managers maintain sufficient diversification and credit quality in the
funds to minimize credit risk (see page 13 for a further discussion of
credit quality and credit risk).
Q: Can you describe these limits?
A: Basically, the limits are a way to cap the exposure to each issuer, country
and industry. For example, issuer limits are based on each issuer's credit
quality, size and market share--how much paper it issues. We are willing to
hold more securities issued by a large AAA-rated company than from a
smaller A-rated company, but we still have limits on how much of the
AAA-rated company's paper we can hold. This protects the funds from
unexpected developments that might affect an issuer's ability to repay its
debt or make interest payments.
For the same reasons, we do not want the funds overexposed to any single
country or industry. Country limits are determined by each country's
financial strength, economic condition and political environment. Industry
limits take into account each industry's sensitivity to the ups and downs
of the business cycle, as well as the economic and regulatory environment.
8
<PAGE>
Management Discussion
Credit Quality and Diversification
(continued from the previous page)
Q: What other changes have occurred?
A: The merger between Benham and Twentieth Century has benefited the Prime
Fund because fund management can now share Twentieth Century's resources
and experience. Twentieth Century has managed its Cash Reserve fund (with
$1.45 billion in assets as of 9/30/95) since March 1985, so it brings over
10 years of experience in managing corporate money market funds. Cash
Reserve's management team moved recently from Kansas City to Mountain View
and now shares offices with the Prime Fund's management. As a result, we
have been able to work alongside Cash Reserve's managers and use their
analytical resources.
We have also received financial backing from Twentieth Century to add staff
and resources. In the next year, we plan to continue to expand our staff of
credit analysts. In addition, we plan to increase and build our analytical
tools, including databases of company financial information.
Q: What motivated these changes?
A: Our objective is to become less reliant upon the research of outside rating
agencies such as Standard & Poor's and Moody's. We want to increase our
capability to scrutinize investments and potential investments for the
Twentieth Century and Benham corporate bond and money market funds.
The Orange County bankruptcy at the end of 1994 reinforced the importance
of corporate credit research and demonstrated the shortcomings of the
outside agencies. The sheer number of financial entities these agencies
have to review each year can cause lags in their review process and lead to
dated and unreliable information. Their divided focus can also call their
data into question--the outside agencies have two sets of clients, while we
have only one. The primary clients of the agencies are security issuers,
who need the ratings so they can sell their securities. The secondary
clients of the agencies are investors, who need to know the credit quality
of what they are buying. By contrast, we serve only the funds and their
shareholders.
9
<PAGE>
Investment Fundamentals
Definitions
Common Money Market Instruments
Bankers' Acceptances (BAs)--securities issued by banks to finance commercial
trade. BAs bear an importer's name and allow the importer to back its pledge to
pay for imported goods with a bank's pledge to cover the transaction if the
importer cannot do so.
Certificates of Deposit(CDs)/Eurodollar CDs/Yankee CDs--see page 12.
Commercial Paper--see page 11.
Floating-Rate Notes--see page 12.
Government Agency Notes--see page 11.
Government Agency Discount Notes--see page 11.
Portfolio Statistics
Market Value--the market value of a fund's investments on a given date.
Number of Issues--the number of different securities issuances held by a fund on
a given date.
Average Maturity--a weighted average of all bond maturities. See page 13.
Average Coupon--a weighted average of all coupons held. See the coupon
definition below.
Investment Terms
Basis Points--a basis point equals one one-hundredth of a percentage point (or
0.01%). Therefore, 100 basis points equals one percentage point (or 1%). Basis
points are used to avoid confusion about interest rate changes. For example, if
an economist says that interest rates rose 1%, does that mean 1% of the previous
rate, or one percentage point? Saying that interest rates increased 100 basis
points is a more precise way of describing the change.
Coupon--the stated interest rate on a security.
Credit Ratings/Credit Quality/Credit Risk--see page 13.
Diversification--a strategy designed to reduce investment risk by owning assets
that behave differently when market conditions change.
Federal Reserve (Fed)--the U.S. central bank. It controls U.S. interest rate
policy.
Money Market--see page 11.
Yield Curve--a graphic representation of the relationship between maturity and
yield for fixed-income securities. Yield curve graphs plot lengthening
maturities along the horizontal axis and rising yields along the vertical axis.
Most "normal" yield curves start in the lower left corner of the graph and rise
to the upper right corner, indicating that yields rise as maturities lengthen.
This upward sloping yield curve illustrates a normal risk/return
relationship--more return (yield) for more risk (a longer maturity). Conversely,
a "flat" yield curve provides little or no extra return for taking on more risk.
10
<PAGE>
Investment Fundamentals
Money Market Instruments
Q: What is the "money market?"
A: The money market is a highly liquid, multi-trillion dollar worldwide
financial market that matches supply from corporations, banks and
governments that have short-term cash or borrowing needs with demand from
investors who want to buy short-term, low-risk, interest-bearing
instruments. On the supply side, corporate, financial and fiscal entities
sometimes have more current obligations to meet than cash on hand, and they
need to raise money. They are therefore willing to sell short-term IOUs to
investors in exchange for cash. For example, corporations issue short-term
securities called commercial paper to raise cash to cover current expenses
that are incurred before anticipated revenues. On the demand side,
investors want a place to "park" their money in the short term where it can
earn interest, retain value and be readily available for other
opportunities or expense payments. Finance officers at corporations, banks,
government offices and securities firms saw how they could satisfy both
sides by issuing certain types of debt securities. Most money market
securities are issued at a discount and pay full value at maturity (13
months or less). The difference between the purchase value and the maturity
value is the imputed interest.
Q: What is commercial paper (CP)?
A: CP is short-term debt issued by large corporations to raise cash and to
cover current expenses in anticipation of future revenues. The maximum
maturity for CP is 270 days, although most CP is issued in a one- to 50-day
maturity range. CP rates generally track those of other widely traded money
market instruments such as Treasury bills and certificates of deposit, but
they are also influenced by the maturity date and the size and credit
rating of the issuer.
Q: What are U.S. government agency notes?
A: Government agency notes are intermediate-term obligations issued by U.S.
government agencies such as the Federal Farm Credit Bank, the Federal Home
Loan Bank and the Federal National Mortgage Association. They are available
in maturities ranging from three months to 30 years. The Fund typically
buys these notes with remaining terms of 120 days or less.
Q: What are U.S. government agency discount notes?
A: U.S. government agency discount notes are short-term debt securities
(ranging in maturity from one day to 12 months) issued by U.S. government
agencies. These notes are sold at a discount and achieve face value at
maturity.
11
<PAGE>
Investment Fundamentals
Money Market Instruments
(Continued from the previous page)
Q: What are certificates of deposit (CDs)? What are Yankee CDs? What are
Eurodollar CDs?
A: CDs represent a bank's obligation to repay money deposited with it for a
specified period of time. Different types of CDs have different issuers.
For example, Yankee CDs are issued by U.S. branches of foreign banks, and
Eurodollar CDs are issued in London by U.S., Canadian, European and
Japanese banks.
Q: What are floating-rate notes (FRNs)? Are they derivatives?
A: FRNs are debt securities whose interest rates change when a designated base
rate changes. The base rate is often a bank's prime rate, the federal funds
rate, the 90-day U.S. Treasury bill rate or the London Interbank Offered
Rate (LIBOR) on Eurodollar deposits traded between banks. FRNs derive their
interest rates from their designated base rates, so they can be considered
derivatives. However, FRNs are not "risky derivatives." Their behavior is
similar to that of their designated base rates. The SEC has recognized this
similarity and does not consider FRNs to be inappropriate money market fund
securities.
FRNs are useful because they can save money for both issuers and investors.
Issuers can save money because issuing one set of FRNs allows them to
borrow short-term money without refiling each month with the SEC or
incurring monthly brokerage costs. Issuers share the savings with investors
in the form of lower prices, which they use to attract investors away from
traditional securities.
Q: What is Benham's general policy toward derivatives?
A: We use derivatives carefully and sparingly in just a handful of funds. The
derivatives are just a small percentage of the funds' total holdings. These
funds own derivatives primarily as substitutes for other securities or for
risk reduction.
Because of the existence of favorable, nonspeculative uses for derivatives,
investors who are concerned about derivatives may want to focus more on use
than ownership. Instead of "Do you own derivatives?," better questions
might include:
o "What types of derivatives are you using?"
o "For what purpose are you using derivatives?"
o "What percentage of your investment portfolio consists of derivatives?"
12
<PAGE>
Investment Fundamentals
Managing Portfolio Risk
Q: What is average maturity? Why is it important?
A: Average maturity measures the interest rate sensitivity and interest rate
exposure of a portfolio. It shows the average amount of time that will pass
until a portfolio receives its principal payments from matured securities.
The longer a portfolio's average maturity is, the more interest rate
exposure and interest rate sensitivity it has. For example, a portfolio
with a 90-day average maturity will take much longer to reinvest its
maturing securities than a portfolio with a 30-day average maturity.
Portfolios with longer average maturities generally pay higher yields to
compensate for the greater interest rate exposure. To help ensure the share
price stability of money funds, the SEC mandates that a money fund's
average maturity cannot exceed 90 days.
a Average maturity is also an important strategic tool. Reducing a fund's
average maturity as interest rates rise allows the portfolio manager to
more quickly reinvest matured assets in higher-yielding securities.
Conversely, lengthening a fund's average maturity as interest rates fall
allows the portfolio manager to "lock in" higher yields.
Q: Why are credit quality and credit ratings so important?
A: Because of credit risk--the risk of an issuer of a money market security
defaulting on its debt. Each Benham money fund must meet stringent credit
standards that help assure the preservation of invested capital. The credit
ratings reflect the financial strength of the issuers and assess their
ability to repay debt.
Credit ratings issued by independent rating and research companies such as
Standard & Poor's help quantify credit quality--the stronger the issuer,
the higher the credit rating. In turn, credit quality and ratings greatly
influence the prices and yields of money market securities--high ratings
mean higher prices and less current income (yield) as compensation for
risk.
But credit ratings are subjective. They reflect the opinions of the rating
agencies that issue them and are not absolute standards of quality, as the
Orange County bankruptcy made painfully clear. In that case, highly rated
securities issued by a wealthy county still suffered defaults. Furthermore,
in addition to the credit risk, there is still market risk. High credit
ratings do not guarantee good investment performance. They do not reflect
the price stability of a security when economic or market conditions
change.
13
<PAGE>
Investment Fundamentals
Money Fund Summary
Q: What is the advantage of investing in a money market fund instead of
investing directly in money market instruments?
A: Aside from convenience, there are actually several advantages. One is
professional management--money fund shareholders don't have to make any
investment decisions after selecting their money fund or funds. Another is
diversification (a strategy with the objective of reducing risk by owning
multiple securities), particularly for smaller investors who cannot afford
to create a diversified portfolio with the money they have available.
Relying on professional management and diversifying your investment
portfolio with a money fund can reduce two kinds of risk. The first is
market risk--the risk of an individual security declining in value because
of changing economic or market conditions (such as rising interest rates or
lower demand from investors). The second is credit risk, as defined on page
13. Investors are less likely to be affected by these risks if their
portfolios have multiple security types and multiple issues that have been
selected and evaluated by investment professionals.
Q: What are other advantages of investing in a money market fund over
investing directly in money market instruments? What are the drawbacks?
A: Another advantage is greater investment flexibility. Unlike investors who
own CDs and other time deposits, money fund investors can move their money
around with relative ease. Money fund investors can also invest smaller
amounts than the minimums for some types of money market instruments (for
example, the minimum Treasury bill purchase is $5,000), and they can make
odd-size investments (for example, $3,335.43 instead of a round number,
such as $5,000). Money fund investors also have the flexibility to invest
in securities (through their funds) that are not available to individual
investors.
The drawbacks relate to insurance and guarantees. Money fund shareholders
should remember that unlike FDIC-insured CDs, the U.S. government neither
insures nor guarantees investments in money funds, and no matter how
conservative they are, money fund managers cannot assure that the funds
will be able to maintain their $1 share price.
Q: What are the basic differences between Benham's money market funds?
A: There are four basic differences--their investment portfolios, risk levels,
taxability of income, and derivative policies (see next page).
14
<PAGE>
Investment Fundamentals
Money Fund Summary
(Continued from the previous page)
Q: What are the differences in the investment portfolios of Benham money
funds?
A: Capital Preservation Fund (CPF)+ invests exclusively in short-term U.S.
Treasury securities. Capital Preservation Fund II (CPF II)+ invests
primarily in repurchase agreements (repos) backed by securities that are
guaranteed by the U.S. government. Benham Government Agency Fund (BGAF)+
invests exclusively in short-term securities issued by the U.S. government
and its agencies. The Prime Fund invests primarily in commercial paper and
other short-term obligations of banks, governments and corporations.
Benham's municipal and tax-free money market funds invest primarily in
short-term tax-exempt debt securities backed by state and local
municipalities.
Q: What are the differences in risk?
A: The funds' levels of risk range from the ultra-conservative CPF to the
somewhat more aggressive Prime Fund. CPF, with its portfolio of U.S.
Treasury securities, has the least credit risk, while the Prime Fund tends
to have more credit risk because it holds securities issued by corporations
rather than by the U.S. government or U.S. government agencies. The Prime
Fund also faces more market risk because it can extend its average maturity
to 90 days, while CPF, BGAF and Benham's tax-free and municipal money funds
typically do not extend their average maturities beyond 60 days. CPF II can
only extend its average maturity to seven days. See page 13 for a
discussion of average maturity.
Q: What are the differences in taxability of income?
A: At one end of the tax spectrum, the Prime Fund and CPF II pay fully taxable
income. At the other end, the California and Florida tax-free and municipal
money funds+ pay income that is completely state and federal tax free for
shareholders who reside in those states*. The National Tax-Free Money
Market Fund+ pays income that is federal tax free, while CPF and BGAF pay
income that is state tax free in most states.
+ To learn more about these Benham funds, call 1-800-331-8331 for a free
prospectus with more complete information on risks, management fees and
expenses. Read the prospectus carefully before you invest or send money.
Investments in the funds are neither insured nor guaranteed by the U.S.
government. These funds are managed to maintain a stable $1.00 share price,
but, as with all money market funds, there is no assurance that they will
be able to do so.
* For some investors, a portion of income from the California and Florida
municipal money market funds may be subject to the federal alternative
minimum tax (AMT).
15
<PAGE>
Investment Fundamentals
Money Fund Summary
(Continued from the previous page)
Q: What are the derivative policies and holdings of Benham's money market
funds?
A: CPF and CPF II do not own any derivatives. The other Benham money
funds can only own derivatives that are designated money market
fund-eligible by the SEC; they cannot own "risky derivatives" that
artificially inflate the funds' yields or behave like bonds. These
"risky derivatives" (structured notes, such as inverse floaters,
leveraged floaters and capped floaters) were largely responsible for
the much-publicized investment losses in short-term fixed-income funds
in 1994.
BGAF and the Prime Fund can own FRNs (defined on page 12). Benham's
municipal and tax-free money market funds did not own any derivatives
as of August 31, 1995. They are permitted by their prospectuses to own
tender option bonds--nonleveraged, money market fund-eligible
derivatives that the funds buy when other short-term municipal
securities are in short supply--but these substitute securities
haven't been needed recently.
Q: The Prime Fund historically has tended to have the highest yield, the
most credit risk and the longest average maturity of any Benham money
market fund, plus it owns derivatives. Is the Prime Fund overly risky?
A: No, we do not believe so. The primary objective of the Prime Fund and
every Benham money fund is the preservation of capital. We don't
artificially boost their yields and threaten their price stability to
attract investors--we offer a large selection of other fixed-income
funds for investors who are willing to take more risk and want higher
yields. Benham money funds remain competitive by keeping their
expenses low and pursuing prudent investment opportunities, not by
taking inappropriate risks.
16
<PAGE>
<TABLE>
<CAPTION>
BENHAM PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Six Months Ended August 31, 1995
and the Years Ended February 28 (except as noted)
(Unaudited)
August 31, February 28, February 28,
1995 1995 1994+
------------ ------------- ------------
PER-SHARE DATA
- - -----------------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period ....... $ 1.00 1.00 1.00
Income From Investment Operations
Net Investment Income ..................... .0285 .0493 .0095
------- ------- -------
Distributions
From Net Investment Income ................ (.0285) (.0493) (.0095)
------- ------- -------
Net Asset Value at End of Period ............. $ 1.00 1.00 1.00
======= ======= =======
TOTAL RETURN* ................................ 2.88% 4.93% .96%
- - ------------
SUPPLEMENTAL DATA AND RATIOS
- - ----------------------------
Net Assets at End of Period (in thousands) .... $ 1,340,984 1,509,863 75,168
Ratio of Expenses to Average Daily Net Assets . .46%** .04% 0%
Ratio of Net Investment Income to Average Daily
Net Assets ................................... 5.80%** 5.28% 3.35%**
- - --------------------
+ Commencement of operations for Benham Prime Money Market Fund was November 17,
1993.
* Total return figures assume reinvestment of dividends and capital gain
distributions and are not annualized.
** Annualized.
See the accompanying notes to financial statements.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
BENHAM PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
(Unaudited)
<S> <C>
ASSETS
Investment securities (cost $1,325,455,083) .............................. $1,325,455,083
Cash ..................................................................... 14,070,731
Interest receivable ...................................................... 5,803,237
Receivable for fund shares sold .......................................... 5,089,516
Prepaid expenses and other assets ........................................ 39,592
--------------
Total assets ....................................................... 1,350,458,159
--------------
LIABILITIES
Payable for fund shares redeemed ......................................... 8,443,260
Fees payable to affiliates (Note 2) ...................................... 567,578
Dividends payable ........................................................ 443,229
Accrued expenses and other liabilities ................................... 20,511
--------------
Total liabilities .................................................. 9,474,578
--------------
NET ASSETS, equivalent to $1.00 per share on 1,340,983,581 outstanding
shares of beneficial interest (unlimited number of shares authorized).. $ 1,340,983,581
================
Net asset value, offering and redemption price per share ................ $ 1.00
====
- - ----------------
See the accompanying notes to financial statements.
</TABLE>
18
<PAGE>
BENHAM PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Six Months Ended August 31, 1995
(Unaudited)
Investment Income................................. $43,607,479
----------
Expenses (Note 2)
Investment advisory fees........................ $ 2,157,895
Transfer agency fees............................ 1,010,825
Administrative fees............................. 694,118
Printing and postage............................ 224,791
Custodian fees.................................. 22,545
Auditing and legal fees......................... 24,718
Registration and filing fees.................... 26,485
Directors' fees and expenses.................... 26,828
Other operating expenses........................ 101,072
---------
Total expenses............................ 4,289,277
Amount reimbursed (Note 2)........................ (1,106,232)
----------
Net expenses.............................. 3,183,045
----------
Net investment income................... $40,424,434
==========
- - ----------------
See the accompanying notes to financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
BENHAM PRIME MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended August 31, 1995, and the Year Ended February 28, 1995
(Unaudited)
August 31, February 28,
1995 1995
------------- -------------
From investment activities:
<S> <C> <C>
Net investment income.................................................................... $ 40,424,434 43,226,232
Dividends paid or payable to shareholders................................................ (40,424,434) (43,226,232)
------------- -------------
Change in net assets derived from investment activities................................ 0 0
------------- -------------
From capital share transactions:
Proceeds from sales of shares............................................................ 1,211,656,737 3,138,547,388
Net asset value of dividends reinvested.................................................. 38,435,804 41,047,289
Cost of shares redeemed.................................................................. (1,418,971,676) (1,744,900,172)
------------- -------------
Change in net assets derived from capital share transactions........................... (168,879,135) 1,434,694,505
------------- -------------
Net increase (decrease) in net assets................................................ (168,879,135) 1,434,694,505
Net assets:
Beginning of period...................................................................... 1,509,862,716 75,168,211
------------- -------------
End of period............................................................................ $1,340,983,581 1,509,862,716
============= =============
- - ----------------
See the accompanying notes to financial statements.
</TABLE>
20
<PAGE>
BENHAM PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES
Benham Prime Money Market Fund is an open-end management investment company
registered under the Investment Company Act of 1940. It is currently the sole
fund of Benham Investment Trust. Significant accounting policies followed by the
Fund are summarized below.
Valuation of Investment Securities--Securities are valued at amortized cost,
which approximates current market value. Interest receivable is composed of
coupon interest, either purchased or accrued, on investment securities.
Securities transactions are recorded on the date the order to buy or sell is
executed. Realized gains and losses from security transactions are determined on
the basis of identified cost.
Income Taxes--The Fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code. By complying with these
provisions, the Fund will not be subject to federal or state income taxes to the
extent that it distributes substantially all its net investment income and net
realized capital gains to shareholders.
Share Valuation--The Fund's net asset value per share is computed by dividing
the value of its total assets, less its liabilities, by the total number of
shares outstanding at the beginning of each business day. It is the Fund's
policy to maintain a constant net asset value of $1.00 per share, although there
is no guarantee it will be able to do so.
Investment Income, Dividends and Other Distributions--Income and expenses are
accrued daily. Discounts and premiums on securities purchased are amortized on a
straight-line basis over the life of the securities. Dividends to the
shareholders are declared and credited daily. Shareholders may elect to receive
distributions in cash or to reinvest them in additional shares. Cash dividends
are distributed on the last business day of the month.
(2) INVESTMENT ADVISORY FEES AND OTHER
TRANSACTIONS WITH AFFILIATES
Benham Management Corporation (BMC) is a wholly owned subsidiary of Twentieth
Century Companies, Inc. (TCC). BMC's former parent company, Benham Management
International, Inc., merged into TCC on June 1, 1995. The Fund pays BMC a
monthly
21
<PAGE>
investment advisory fee equal to the following annual percentages of the
Fund's average daily net assets.
.50% of the first $100 million
.45% of the next $100 million
.40% of the next $100 million
.35% of the next $100 million
.30% of the next $100 million
.25% of the next $1 billion
.24% of the next $1 billion
.23% of the next $1 billion
.22% of the next $1 billion
.21% of the next $1 billion
.20% of the next $1 billion
.19% of average daily net assets over $6.5 billion
BMC provides the Fund with all investment advice. Twentieth Century Services,
Inc. pays all compensation of Fund officers and directors who are officers or
directors of TCC or any of its subsidiaries. In addition, promotion and
distribution expenses are paid by BMC.
The Fund has an Administrative Services and Transfer Agency Agreement with
Benham Financial Services, Inc. (BFS), a wholly owned subsidiary of TCC. Under
the agreement, BFS provides administrative and transfer agency services
necessary to operate the Fund. Fees for these services are based on transaction
volume, number of accounts and average net assets of all funds in The Benham
Group.
The Fund has an additional agreement with BMC pursuant to which BMC established
a contractual expense guarantee that limits Fund expenses (excluding
extraordinary expenses such as brokerage commissions and taxes) to .50% of the
Fund's average daily net assets through May 31, 1998. The agreement provides
further that BMC may recover amounts (representing expenses in excess of the
Fund's expense guarantee rate) absorbed during the preceding 11 months, if, and
to the extent that, for any given month, the Fund's expenses are less than the
.50% expense guarantee. As a supplement to this contract, BMC voluntarily
reimbursed all Fund expenses through December 31, 1994. Effective January 1,
1995, the Fund absorbed expenses at a rate of .10% of average daily net assets
each month until the contractual cap of .50% was reached.
The payables to affiliates as of August 31, 1995, based on the above agreements,
were as follows:
Investment Advisor................................................ $253,302
Administrative Services........................................... 112,639
Transfer Agent.................................................... 201,637
22
<PAGE>
The Fund has a distribution agreement with Benham Distributors, Inc. (BDI),
which is responsible for promoting sales of and distributing the Fund's shares.
BMC pays all costs incurred by BDI. BDI is a wholly owned subsidiary of TCC.
PROXY VOTING RESULTS
A special shareholder meeting was held on May 31, 1995. A summary of the
proposals and the results of shares voted are shown below. All of the proposals
received the required majority of votes and were adopted.
Proposal I. To consider and vote on approval or disapproval of new Investment
Advisory Agreements with Benham Investment Trust (the Trust) on behalf of the
Fund with BMC to take effect upon the closing of the proposed merger of BMC's
parent company, Benham Management International, Inc., into TCC.
For Against Abstained
---------- ----------- ----------
835,190,670 38,770,373 42,871,608
Proposals II, III, and IV are not applicable to shareholders of the Trust.
Proposal V. To elect the Board of Trustees of the Trust.
For Shares Withheld*
------------ ----------------
James M. Benham............... 862,709,005 54,123,646
Ronald J. Gilson.............. 861,082,052 55,750,599
Myron S. Scholes.............. 862,652,520 54,180,131
Kenneth E. Scott.............. 861,865,579 54,967,072
Ezra Solomon.................. 859,623,405 57,209,246
Isaac Stein................... 861,786,741 55,045,910
James E. Stowers, III......... 860,347,299 56,485,352
Jeanne D. Wohlers............. 862,315,712 54,516,939
*Shares Withholding Authority to Vote
Proposal VI. To ratify the Board of Trustees' selection of KPMG Peat Marwick LLP
as independent auditors for the Trust's current fiscal year end.
For Against Abstained
---------- ----------- ----------
853,864,882 20,191,177 42,776,591
Proposal VII. To amend the Trust's Declaration of Trust to provide dollar-based
voting rights for shareholders of the Fund.
For Against Abstained
---------- ----------- ----------
824,660,683 39,900,082 52,271,886
23
<PAGE>
<TABLE>
<CAPTION>
BENHAM PRIME MONEY MARKET FUND
SCHEDULE OF INVESTMENT SECURITIES
August 31, 1995
(Unaudited)
Rating
Rate1 Maturity Face Amount Value Moody's/S&P
------ -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Commercial Paper--58.43%
ABN-AMRO Bank Canada............................................. 5.42% 09/14/95 $ 8,000,000 7,983,388 P1/A-1+
A.I. Credit Corporation.......................................... 5.30% 09/11/95 10,000,000 9,984,055 P1/A-1
ANZ (Delaware), Inc.............................................. 5.76% 10/19/95 15,000,000 14,884,999 P1/A-1
BT Securities Corporation........................................ 4.65% 09/05/95 35,000,000 34,977,716 P1/A-1
Bayerische Landesbank Girozentrale............................... 5.62% 10/17/95 20,000,000 19,856,377 P1/A-1+
BIL North America, Inc........................................... 5.73% 10/12/95 8,000,000 7,947,611 P1/A-1+
BIL North America, Inc........................................... 5.73% 10/12/95 12,000,000 11,921,416 P1/A-1+
BIL North America, Inc........................................... 5.71% 10/20/95 23,000,000 22,821,558 P1/A-1+
Bank of Nova Scotia.............................................. 5.72% 10/16/95 25,000,000 24,820,937 P1/A-1+
BanCal Tri-State Corporation..................................... 5.83% 09/01/95 20,000,000 20,000,000 P1/A-1
Canadian Imperial Holdings, Inc.................................. 5.05% 09/08/95 30,000,000 29,966,808 P1/A-1+
Cargill Financial Services....................................... 5.58% 10/10/95 5,000,000 4,969,612 P1/A-1+
Commerzbank U.S. Finance, Inc.................................... 5.50% 09/18/95 18,000,000 17,951,295 P1/A-1+
Dover Corporation................................................ 5.85% 09/01/95 3,000,000 3,000,000 NR/A-1+
Dover Corporation................................................ 5.33% 09/11/95 4,550,000 4,542,707 NR/A-1+
Dover Corporation................................................ 5.57% 09/21/95 24,350,000 24,272,215 NR/A-1+
Du Pont E.I. de Nemours and Company.............................. 5.84% 07/09/96 15,000,000 14,285,000 P1/A-1+
Generale Bank, Inc............................................... 5.57% 10/05/95 25,000,000 24,867,069 P1/A-1
Generale Bank, Inc. (New York)................................... 5.70% 11/01/95 25,000,000 24,760,236 P1/A-1
Goldman Sachs Group LP........................................... 5.45% 09/11/95 21,000,000 20,965,583 P1/A-1+
Hitachi Credit America Corporation............................... 5.58% 09/13/95 10,000,000 9,980,166 P1/A-1+
Hitachi Credit America Corporation............................... 5.52% 09/14/95 15,065,000 15,033,175 P1/A-1+
Hitachi Credit America Corporation............................... 5.64% 10/10/95 8,000,000 7,950,860 P1/A-1+
Hitachi Credit America Corporation............................... 5.68% 11/02/95 2,000,000 1,980,573 P1/A-1+
IMI Funding Corporation (U.S.A.)................................. 5.32% 09/11/95 16,310,000 16,283,904 P1/A-1+
IMI Funding Corporation (U.S.A.)................................. 5.87% 10/10/95 4,487,000 4,458,320 P1/A-1+
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Rating
Rate1 Maturity Face Amount Value Moody's/S&
------ -------- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
Commercial Paper--continued
ITT Corporation.................................................. 5.49% 09/13/95 $ 7,840,000 7,824,712 P2/A-1
ITT Corporation.................................................. 5.50% 09/13/95 21,000,000 20,958,910 P2/A-1
ITT Corporation.................................................. 5.63% 09/18/95 22,000,000 21,939,121 P2/A-1
Kingdom of Sweden................................................ 5.82% 10/02/95 5,000,000 4,974,597 P1/A-1+
Kingdom of Sweden................................................ 5.79% 10/02/95 30,000,000 29,848,358 P1/A-1+
Kingdom of Sweden................................................ 5.78% 04/16/96 15,000,000 14,475,125 P1/A-1+
Merrill Lynch & Co., Inc......................................... 4.82% 09/06/95 17,000,000 16,986,541 P1/A-1+
Mitsubishi International Corporation............................. 5.32% 09/11/95 5,000,000 4,992,000 P1/A-1+
Mitsubishi International Corporation............................. 5.45% 09/12/95 40,000,000 39,928,500 P1/A-1+
MPS U.S. Commercial Paper Corporation............................ 6.11% 10/10/95 15,000,000 14,900,225 P1/A-1
National Rural Utilities Cooperative Finance Corporation......... 4.96% 09/06/95 10,000,000 9,991,861 P1/A-1+
National Rural Utilities Cooperative Finance Corporation......... 5.67% 09/21/95 10,000,000 9,967,500 P1/A-1+
National Rural Utilities Cooperative Finance Corporation......... 5.59% 11/07/95 24,000,000 23,752,546 P1/A-1+
National Rural Utilities Cooperative Finance Corporation......... 5.73% 09/26/95 5,550,000 5,527,453 P1/A-1+
Ontario Hydro.................................................... 5.31% 09/11/95 5,000,000 4,992,016 P1/A-1+
Pacific Mutual Life Insurance Co................................. 5.70% 10/16/95 32,600,000 32,367,317 P1/A-1+
Pemex Capital, Inc............................................... 5.67% 10/03/95 5,000,000 4,974,488 P1/A-1+
Royal Bank of Canada............................................. 5.96% 10/31/95 15,000,000 14,852,000 P1/A-1+
Royal Bank of Canada............................................. 5.81% 02/02/96 25,000,000 24,397,908 P1/A-1+
SPINTAB, AB...................................................... 5.07% 09/05/95 10,000,000 9,993,055 P1/A-2
SPINTAB, AB...................................................... 4.71% 09/05/95 5,455,000 5,451,484 P1/A-2
SPINTAB, AB...................................................... 5.92% 12/21/95 10,000,000 9,821,474 P1/A-2
SPINTAB, AB...................................................... 5.93% 12/22/95 10,000,000 9,819,866 P1/A-2
Stanford University.............................................. 5.73% 09/25/95 4,000,000 3,984,378 P1/A-1+
Stanford University.............................................. 5.71% 11/16/95 2,000,000 1,976,186 P1/A-1+
Toyota Motor Credit Corporation.................................. 4.71% 09/05/95 15,000,000 14,990,338 P1/A-1+
Yale University.................................................. 5.82% 10/16/95 6,000,000 5,956,279 P1/A-1+
Yale University.................................................. 5.74% 10/16/95 4,390,000 4,358,446 P1/A-1+
------------ -----------
Total Commercial Paper (cost $774,468,264)........................................... 779,597,000 774,468,264
------------ -----------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Rating
Rate1 Maturity Face Amount Value Moody's/S&P
------ -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Yankee Certificates of Deposit--15.77%
Banque Nationale De Paris S.A.................................... 5.90% 09/19/95 $ 25,000,000 24,999,461 P1/A-1
Canadian Imperial Bank of Commerce............................... 5.76% 09/21/95 10,000,000 10,000,000 P1/A-1+
Commerzbank (New York)........................................... 6.18% 05/09/96 10,000,000 10,026,669 P1/A-1+
Commerzbank (New York)........................................... 6.03% 05/10/96 10,000,000 10,016,369 P1/A-1+
Credit Suisse.................................................... 6.17% 09/21/95 27,000,000 26,999,976 P1/A-1+
Fuji Bank (New York)............................................. 5.87% 09/07/95 40,000,000 40,000,066 P1/A-1
Rabobank Nederland (New York).................................... 6.31% 09/12/95 10,000,000 10,000,053 P1/A-1+
Sanwa Bank Ltd. (New York)....................................... 5.85% 09/01/95 25,000,000 25,000,000 P1/A-1+
Societe Generale (New York)...................................... 5.76% 09/14/95 7,000,000 6,999,873 P1/A-1+
Societe Generale................................................. 5.72% 07/18/96 15,000,000 15,000,000 P1/A-1+
Societe Generale................................................. 5.93% 08/16/96 10,000,000 10,000,000 P1/A-1+
Sumitomo Bank Ltd. (New York).................................... 5.89% 10/04/95 20,000,000 20,000,181 P1/A-1
------------ -----------
Total Yankee Certificates of Deposit (cost $209,042,648). 209,000,000 209,042,648
------------ -----------
Agency Discount Notes--3.91%
Federal Home Loan Mortgage Corporation........................... 5.38% 09/12/95 15,000,000 14,973,508 P1/A-1+
Federal National Mortgage Association............................ 5.55% 09/25/95 10,000,000 9,962,133 MIG1/A-1+
Federal National Mortgage Association............................ 5.56% 09/26/95 15,000,000 14,940,833 MIG1/A-1+
Federal National Mortgage Association............................ 5.56% 09/26/95 12,000,000 11,952,667 MIG1/A-1+
------------ -----------
Total Agency Discount Notes (cost $51,829,141).................................. 52,000,000 51,829,141
------------ -----------
Floating-Rate Notes--4.83%
Bankers' Trust Company New York Corp., resets off the prior day's
effective federal funds' rate + .10 with no caps,
final maturity 12/08/95...................................... 5.90% 09/10/952 15,000,000 15,000,000 P1/A-1
J.P. Morgan and Co. (Delaware), resets weekly off the 3-month
T-Bill + .08 with no caps, final maturity 01/17/96........... 5.50% 09/06/952 20,000,000 19,991,459 NR/AAA
Federal Home Loan Bank, resets monthly off the 1-month
LIBOR - .125 with no caps, final maturity 12/15/95........... 5.75% 09/15/952 15,000,000 15,000,000 MIG1/A-1+
Stanford University, resets daily off the 30-day commercial paper
rate - .03 with no caps, final maturity 11/17/95............. 5.84% 09/01/952 14,000,000 14,000,000 P1/A-1+
------------ -----------
Total Floating-Rate Notes (cost $63,991,459).................................... 64,000,000 63,991,459
------------ -----------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Rating
Rate1 Maturity Face Amount Value Moody's/S&P
------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C>
Bankers' Acceptances--.37%
U.S. Bank of Washington.......................................... 5.67% 11/15/95 $ 5,000,000 4,941,666 Pa/A-1
------------ ----------
Total Bankers' Acceptances (cost $4,941,666).................................... 5,000,000 4,941,666
------------ ----------
Eurodollar Certificates of Deposit--5.13%
Abbey National, PLC.............................................. 5.90% 10/25/95 20,000,000 19,999,753 P1/A-1+
Deutsche Bank.................................................... 6.44% 11/17/95 25,000,000 25,015,002 P1/A-1+
Harris Trust and Savings Bank.................................... 5.73% 10/13/95 5,000,000 4,999,858 P1/A-1+
National Westminster Bank, PLC................................... 5.63% 12/13/95 18,000,000 18,000,504 P1/A-1+
------------ ----------
Total Eurodollar Certificates of Deposit (cost $68,015,117)..................... 68,000,000 68,015,117
------------ ----------
Agency Notes--7.11%
Federal Farm Credit Bank......................................... 5.60% 07/01/96 20,000,000 19,970,919 P1/A-1+
Federal Farm Credit Bank......................................... 6.07% 06/03/96 10,000,000 10,018,987 Aaa/NR
Federal Home Loan Bank........................................... 5.48% 07/18/96 20,895,000 20,845,510 MIG1/A-1+
Federal Home Loan Mortgage Corporation........................... 5.51% 07/19/96 7,800,000 7,780,870 P1/A-1+
Federal Home Loan Bank........................................... 5.71% 06/10/96 5,500,000 5,495,059 P1/A-1+
Federal Home Loan Mortgage Corporation........................... 6.01% 05/13/96 30,000,000 30,048,063 Aaa/A-1+
------------ ----------
Total Agency Notes (cost $94,159,408)............................................ 94,195,000 94,159,408
------------ ----------
Bank Notes 4.45%
Bank of America (Illinois)....................................... 5.82% 11/06/95 7,000,000 6,999,874 P1/A-1
Bank of America (Illinois)....................................... 5.82% 11/06/95 22,000,000 22,004,208 P1/A-1
PNC Bank......................................................... 6.14% 11/08/95 30,000,000 30,003,298 P1/A-1
------------ ----------
Total Bank Notes (cost $59,007,380)............................................. 59,000,000 59,007,380
------------ ----------
TOTAL INVESTMENT SECURITIES (cost $1,325,455,0833)...................................... 1,330,792,000 1,325,455,083
============= =============
- - -----------
1 The rate for Commercial Paper, Bankers' Acceptances and Agency Discount Notes
is the yield to maturity as of August 31, 1995. The rate for all other
securities is the stated coupon rate.
2 These maturity dates represent the next interest rate reset date. These dates
are used to calculate the Fund's average maturity.
3 Cost for financial reporting and federal income tax purposes is the same.
</TABLE>
27
<PAGE>
DEFINITIONS
NR--Not Rated
Cap--A predetermined rate that a fixed-income security's coupon will never
exceed, regardless of where the coupon formula resets. A cap limits the
investor's coupon payments, regardless of how high interest rates rise. In
volatile interest rate environments, caps can cause and amplify price
instability for fixed-rate securities. Therefore, it has always been the policy
of the Fund to not purchase floating-rate notes with caps.
Resets--The frequency with which a fixed-income security's coupon changes, based
on current market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon will vary
significantly from current market rates.
LIBOR--London Interbank Offered Rate on Eurodollar deposits traded between
banks. LIBOR is a "money market rate." LIBOR is the interest rate that most
banks and corporations track when determining the rate they'll pay to investors
on short-term debt.
Effective Federal Funds Rate--The average rate at which the federal funds rate
traded in a given day. The federal funds rate is the rate that banks charge each
other for unsecured overnight loans, and is considered a "money market rate."
- - --------------
See the accompanying notes to financial statements.
28
<PAGE>
Trustees
James M. Benham
Ronald J. Gilson
Myron S. Scholes
Kenneth E. Scott
Ezra Solomon
Isaac Stein
James E. Stowers, III
Jeanne D. Wohlers
Officers
James M. Benham
Chairman of the Board
John T. Kataoka
President and Chief Executive Officer
Bruce R. Fitzpatrick
Vice President, Treasurer and
Chief Financial Officer
Douglas A. Paul
Vice President, Secretary
and General Counsel
Ann N. McCoid
Controller
[company logo] The Benham Group
Part of the Twentieth Century Family of Mutual Funds
1665 Charleston Road
Mountain View, CA 94043
1-800-321-8321
Not authorized for distribution unless preceded or
accompanied by a current fund prospectus.
Benham Distributors, Inc. 10/95 Q061
