BENHAM
CAPITAL MANAGER
FUND
-------------
Annual Report
November 30, 1995
[picture of pie slices representing
investments in the fund]
[company logo] The Benham Group
<PAGE>
CONTENTS
ECONOMIC REVIEW...................................... 1
PERFORMANCE INFORMATION
Total Returns and Performance Comparison............. 2
Performance Review................................... 3
ASSET ALLOCATION
Fund Asset Mix....................................... 4
Strategy Review...................................... 5
PORTFOLIO SNAPSHOT
U.S. Stocks, Foreign Stocks &
Natural Resources-Linked Investments........... 6
U.S. Bonds, Foreign Bonds & Money Market Securities.. 7
INVESTMENT MARKET SUMMARIES.......................... 8
MANAGEMENT DISCUSSION.................................11
INVESTMENT FUNDAMENTALS
Asset Allocation Basics...............................13
Stock Terms and Management Approach...................14
Fixed-Income Security Types...........................15
Fixed-Income Sensitivity Measures.....................16
Foreign Investments...................................17
FINANCIAL INFORMATION (AUDITED)
Financial Highlights..................................19
Financial Statements and Notes........................20
Schedule of Investments...............................28
<PAGE>
ECONOMIC REVIEW
JAMES M. BENHAM [photo of James M.
Chairman, Benham Funds Benham]
In 1995, global economic growth slowed dramatically from its strong pace in
1994. In the U.S., the Federal Reserve engineered a "soft landing"--slower,
steady economic growth coupled with low inflation--through a series of
short-term interest rate increases that culminated in early 1995. Japan remained
mired in recession, and a crisis in its banking system added to its economic
woes. Restrictive monetary policy and a strong currency led to sluggish growth
in Germany, and this extended to the rest of Europe.
[line graph in left margin. graph data described below]
Surprisingly, global inflation remained low throughout 1995. As the global
economic engine heated up at the end of 1994, many observers expected rising
prices in 1995. However, restrictive interest rate policy and low wage increases
kept inflation under control in the U.S. and Europe, and Japan's continuing
recession was accompanied by deflation (declining prices). Although prices have
increased at the wholesale level, retail businesses appear to be absorbing these
additional costs.
Slower economic growth and low levels of inflation convinced the central banks
in many countries to cut short-term interest rates in 1995 (see the graph
above). Germany's rate cuts in March, September and December paved the way for
similar cuts in Austria, Belgium, France and other western European nations.
Even Japanese short-term rates, which remain at historic lows, were reduced by
the Bank of Japan in an effort to bring the country's economy out of its
prolonged recession.
Despite slowing economic growth, we believe that a global recession is unlikely
in 1996. Many central banks are expected to continue lowering short-term
interest rates as they move toward a more stimulative monetary policy, and this
should encourage economic growth worldwide. Efforts to cut government budget
deficits in the U.S. and Europe should also have a positive effect on economic
growth. The Japanese economy still faces some obstacles, but conditions are
improving--the country's banking system is going through a restructuring process
that should make it stronger in the long run, and the recent decline in the
Japanese currency should help make Japan's exports more attractive.
[graph data]
Short-Term Interest Rate Cuts in 1995
U.S. Germany Japan
1/6/95 5.5% 4.5% 1.75%
1/13/95 5.5 4.5 1.75
1/20/95 5.5 4.5 1.75
1/27/95 5.5 4.5 1.75
2/3/95 6 4.5 1.75
2/10/95 6 4.5 1.75
2/17/95 6 4.5 1.75
2/24/95 6 4.5 1.75
3/3/95 6 4.5 1.75
3/10/95 6 4.5 1.75
3/17/95 6 4.5 1.75
3/24/95 6 4.5 1.75
3/31/95 6 4 1.75
4/7/95 6 4 1.75
4/14/95 6 4 1
4/21/95 6 4 1
4/28/95 6 4 1
5/5/95 6 4 1
5/12/95 6 4 1
5/19/95 6 4 1
5/26/95 6 4 1
6/2/95 6 4 1
6/9/95 6 4 1
6/16/95 6 4 1
6/23/95 6 4 1
6/30/95 6 4 1
7/7/95 5.75 4 1
7/14/95 5.75 4 1
7/21/95 5.75 4 1
7/28/95 5.75 4 1
8/4/95 5.75 4 1
8/11/95 5.75 4 1
8/18/95 5.75 4 1
8/25/95 5.75 3.5 1
9/1/95 5.75 3.5 1
9/8/95 5.75 3.5 0.5
9/15/95 5.75 3.5 0.5
9/22/95 5.75 3.5 0.5
9/29/95 5.75 3.5 0.5
10/6/95 5.75 3.5 0.5
10/13/95 5.75 3.5 0.5
10/20/95 5.75 3.5 0.5
10/27/95 5.75 3.5 0.5
11/3/95 5.75 3.5 0.5
11/10/95 5.75 3.5 0.5
11/17/95 5.75 3.5 0.5
11/24/95 5.75 3.5 0.5
12/1/95 5.75 3.5 0.5
12/8/95 5.75 3.5 0.5
12/15/95 5.75 3 0.5
12/22/95 5.5 3 0.5
12/29/95 5.5 3 0.5
Source: Bloomberg Financial Markets
1
<PAGE>
PERFORMANCE INFORMATION
NAV AND AVERAGE ANNUAL TOTAL RETURNS
For Periods Ended November 30, 1995
Net Asset Value Range Average Annual Total Returns
(12/1/94-11/30/95) ------------------------------------------------
1 Year 3 Years 5 Years Life of Fund
------------------------------------------------
$10.00-$11.70 20.12% N/A N/A 20.12%
The Fund commenced operations on December 1, 1994.
NET ASSET VALUE (NAV) RANGE indicates the Fund's share price movements over the
stated period and can be used to gauge the stability of the Fund's share price.
TOTAL RETURN figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Fund and assume that all of the Fund's
distributions are reinvested. AVERAGE ANNUAL TOTAL RETURNS illustrate the
annually compounded returns that would have produced the Fund's cumulative total
returns if the Fund's performance had been constant over the entire period.
Average annual total returns smooth out variations in a fund's return; they are
not the same as year-by-year results. For fiscal year-by-year total returns,
please refer to the Fund's "Financial Highlights" on page 19.
PLEASE NOTE: Total returns are based on historical Fund performance and do not
guarantee future results. The Fund's share price and total returns will vary, so
that shares, when redeemed, may be worth more or less than their original cost.
SEC PERFORMANCE COMPARISON
Comparative Performance of $10,000 Invested on 12/1/94 in the Fund,
in the S&P 500, in the Lehman Brothers, Inc. Aggregate Bond Index and
in the Three-Month U.S. Treasury Bill
[line graph]
[graph data]
S&P 500 Bond Index 3-Month T-Bill Fund
11/94 $10000 $10000 $10000 $10000
12/94 10148.3 10069 10045 10163.7
1/95 10411.5 10268.4 10092.2 10264
2/95 10817.2 10512.8 10136.6 10504.8
3/95 11136.4 10576.9 10187.3 10745.7
4/95 11464.4 10725 10237.2 10937.6
5/95 11922.6 11140 10288.4 11281
6/95 12199.5 11221.3 10337.8 11361.9
7/95 12604.1 11196.6 10388.4 11545.2
8/95 12635.7 11332.1 10438.3 11535
9/95 13169 11442 10485.3 11738.8
10/95 13121.9 11590.8 10533.5 11697.7
11/95 13698 11764.7 10579.9 12005.6
Past performance does not guarantee future results.
This graph compares the Fund's performance with a broad-based market index over
the life of the Fund. We have selected the Standard & Poor's 500 Stock Index
(S&P 500) to be the comparative index for the Fund. Because the S&P 500 is made
up exclusively of U.S. stocks and the Fund holds securities other than U.S.
stocks, we have also included the Lehman Brothers, Inc. Aggregate Bond Index and
the Three-Month U.S. Treasury Bill. The securities owned by the Fund and those
composing the indexes are likely to be different, and any securities that the
Fund and the indexes have in common are likely to have different weightings in
the respective portfolios. Investors cannot invest directly in the indexes.
PLEASE NOTE: The line representing the Fund's total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total return lines of the indexes do not.
2
<PAGE>
PERFORMANCE INFORMATION
PERFORMANCE REVIEW
The Fund completed its first year of operations on November 30, 1995, with a
total return of 20.12%. The Fund's strong performance in its inaugural year was
due mostly to sizable gains in U.S. stocks and bonds, which made up 65-75% of
the Fund's portfolio during the one-year period. However, all of the investment
markets in which the Fund invests posted positive returns during the period (see
the chart below).
The Fund's 20.12% total return during the period was lower than the 25.08%
average total return for the 151 funds in its peer group (the "Flexible Funds"
category tracked by Lipper Analytical Services, an independent mutual fund
ranking service). The Fund's lower return compared to the category average is
due primarily to the Fund's conservative nature--the Fund holds a smaller
percentage of stocks and a higher percentage of cash than many of its peers. As
a result, when stocks have a big year (as they did in 1995), the Fund tends to
underperform the category average.
Lipper's "Flexible Funds" category lumps together several different types of
funds under its broad definition of "flexible." Whereas the Fund's asset mix
remains within narrow ranges and changes gradually, some flexible funds are
permitted to concentrate their entire portfolios in a single type of asset
(e.g., 100% domestic stocks), and their portfolio managers can shift in and out
of different assets at will.
Investment Market Returns
Total Returns for the One-Year Period Ended November 30, 1995
U.S. STOCKS: Standard & Poor's 500 Stock Index............... 36.98%
U.S. BONDS: Salomon Brothers Broad
Investment Grade Bond Index..................... 17.81%
MONEY MARKET
SECURITIES: Three-Month U.S. Treasury Bill.................. 5.80%
FOREIGN STOCKS: Morgan Stanley Europe Australia
Far East (EAFE) Index........................... 5.84%
FOREIGN BONDS: J.P. Morgan Foreign Government Bond Index....... 19.66%
GOLD STOCKS: Philadelphia Gold and Silver Index.............. 19.03%
Sources: Bloomberg Financial Markets; Salomon Brothers, Inc.; J.P. Morgan
Investment Management Inc.
3
<PAGE>
ASSET ALLOCATION
FUND ASSET MIX
As of November 30, 1995
[pie chart]
[graph data]
U.S. Stocks: 37.7%
Natural Resources -Linked Investments 3.0%
Foreign Bonds: 5.9%
Foreign Stocks: 6.8%
Money Market Securities: 13.5%
U.S. Bonds: 33.1%
COMPARISON TO NEUTRAL ASSET MIX
FUND AS OF FUND AS OF "NEUTRAL"
ASSET 11/30/95 5/31/95 ASSET MIX*
- ------ -------------- ---------- -----------
U.S. Stocks 37.7% 34.0% 35.0%
U.S. Bonds 33.1% 32.1% 35.0%
Money Market Securities 13.5% 17.9% 15.0%
Foreign Stocks 6.8% 7.3% 6.0%
Foreign Bonds 5.9% 5.7% 6.0%
Natural Resources 3.0% 3.0% 3.0%
------- ------- ------
TOTALS 100.0% 100.0% 100.0%
* See page 13 for more details about the Fund's neutral asset mix.
The Fund's asset mix may change over time.
4
<PAGE>
ASSET ALLOCATION
STRATEGY REVIEW
by Jeff Tyler, Senior Vice President and Portfolio Manager
The Fund's asset allocation structure was fairly neutral at the beginning of
1995 (see the Fund's neutral asset mix on page 4), with the exception of an
overweighted position in U.S. bonds. At that time, long-term U.S. bond yields
were hovering around 8%, which we considered to be an excellent value compared
to an inflation rate of 3%. We maintained this asset mix until April, when we
sold off some of the Fund's U.S. bonds (which had appreciated in value as U.S.
interest rates fell) and purchased foreign bonds.
In May, we rebalanced the Fund's portfolio back toward a neutral position.
Rebalancing involves selling assets that have appreciated in value and buying
assets that have lagged behind. Accordingly, we sold a portion of the Fund's
U.S. stock and bond holdings, which had rallied substantially in the first half
of the year, and shifted these assets into foreign stocks. In fact, we believed
that the lagging performance of foreign stocks justified an overweighted
position in these securities. In exchange, we chose to underweight U.S. bonds,
largely because of uncertainty in the domestic bond market.
Although foreign stocks performed somewhat better in the second half of the
year, their performance continued to trail the returns of domestic stocks.
Fortunately, we added to the Fund's U.S. stock holdings in June and maintained
an overweighted position in U.S. stocks during the last half of 1995. This asset
allocation structure (overweighted U.S. and foreign stocks, underweighted U.S.
bonds and money market securities) remained in place through the end of the
year.
During the last six months of the year, we hedged the currency exposure of a
portion of the Fund's foreign investments (see page 17 for a description of
currency hedging). We hedged about 60% of the Fund's Japanese investments, which
made up the Fund's largest single foreign currency position. This strategy
enhanced the performance of the Fund's Japanese holdings in the second half of
1995 as the dollar strengthened against the Japanese currency (the yen). We also
hedged about 35% of the Fund's German holdings, but this had little impact on
the Fund's performance as the dollar remained steady against the German currency
(the mark) over the last half of the year.
NOTE: THE MARKET SUMMARIES SECTION ON PAGES 8-10 PROVIDES A REVIEW OF THE
PERFORMANCES OF THE VARIOUS INVESTMENT MARKETS MENTIONED ABOVE. IN
ADDITION, THE MANAGEMENT DISCUSSION SECTION ON PAGES 11-12 ADDRESSES
THE FUND'S ASSET ALLOCATION STRATEGY FOR THE FIRST HALF OF 1996.
5
<PAGE>
PORTFOLIO SNAPSHOT
U.S. STOCKS--37.7%
As of November 30, 1995
Number of Companies: 152
Dividend Yield:* 2.15%
Price/Earnings Ratio:* 16.2
TOP FIVE STOCKS
COMPANY % OF FUND'S U.S. STOCKS % OF FUND
- --------- ---------------------- ----------
Exxon Corporation 3.6% 1.4%
Bristol Myers Squibb 2.5% 0.9%
Sprint Corporation 2.5% 0.9%
General Electric Company 2.4% 0.9%
Mobil Corporation 2.3% 0.9%
- --------------------------------------------------------------------------------
FOREIGN STOCKS--6.8%
As of November 30, 1995
Number of Companies: 46
Dividend Yield:* 2.40%
Price/Earnings Ratio:* 14.6
[pie chart]
[graph data]
Asia/Pacific: 51.5%
Euorpe: 48.5%
TOP FIVE STOCKS
% OF FUND'S
COMPANY COUNTRY FOREIGN STOCKS % OF FUND
- --------- -------- -------------- ----------
Nestle SA Switzerland 5.2% 0.4%
Asahi Chemical Industries Japan 5.1% 0.4%
Royal Dutch Petroleum Netherlands 4.8% 0.3%
Toyota Motor Corporation Japan 4.0% 0.3%
Mitsubishi Heavy Industries Japan 3.9% 0.3%
- --------------------------------------------------------------------------------
NATURAL RESOURCES-LINKED INVESTMENTS--3.0%
As of November 30, 1995
Number of Companies: 11
[pie chart] [pie chart]
[graph data] [graph data]
U.S.: 51.8% Gold Mining Stocks: 78.8%
Canada: 26.2% Other Mining Stocks: 21.2%
United Kingdom: 11.9%
South Africa: 5.5%
Ghana: 4.6%
* Defined on page 14.
The composition of the Fund's holdings may change over time.
6
<PAGE>
PORTFOLIO SNAPSHOT
U.S. BONDS--33.1%
As of November 30, 1995
Number of Issues: 20
Average Maturity:+ 6.90 years
Average Duration:+ 4.34 years
[pie chart]
[graph data]
U.S. Treasury Notes: 41.8%
Mortgage-Backed Securities: 33.9%
Corporate Securities: 16.3%
U.S. Treasury Bonds: 8.0%
These security types are defined on page 15.
- --------------------------------------------------------------------------------
FOREIGN BONDS--5.9%
As of November 30, 1995
Number of Issues: 12
Average Maturity:+ 5.90 years
Average Duration:+ 4.78 years
[pie chart]
[graph data]
Europe: 74.9%
Asia/Pacific: 25.1%
- --------------------------------------------------------------------------------
MONEY MARKET SECURITIES--13.5%
As of November 30, 1995
Number of Issues: 5
Average Maturity:+ 27 days
[pie chart]
[graph data]
Commercial Paper: 81.6%
Certificates of Deposit: 14.4%
Repurchase Agreements: 4.0%
These security types are defined on page 15.
+ Defined on page 16.
The composition of the Fund's holdings may change over time.
7
<PAGE>
MARKET SUMMARIES
INVESTMENT MARKETS REVIEW
by Jeff Tyler, Senior Vice President and Portfolio Manager
U.S. Stocks
During the fiscal year ended November 30, 1995, the U.S. stock market enjoyed
its best rally in years. Most of the major stock indexes posted returns in
excess of 30% and set new record highs during the year.
[line graph in left margin of page. graph data described below]
U.S. stocks soared in the first half of the fiscal year as corporate earnings
growth exceeded expectations. Strong U.S. economic growth in late 1994
translated into rising profits in early 1995. In particular, technology
companies reported remarkable earnings growth, fueled by heavy demand for
computers and other technology-related products.
In the second half of the fiscal year, corporate earnings reports provided fewer
positive surprises, but increased cash flows into the market sustained the stock
rally. Investors who had left the market following 1994's tepid stock
performance shifted back into stocks. An increased focus on retirement planning
for aging "baby boomers" also brought money into the stock market. This
increased cash flow pushed stock prices higher.
Much of the cash that flowed into the stock market later in the year came from
conservative investors, who put their money into large, reliable blue-chip
stocks with steady earnings growth. This trend helped large-company stocks
outperform small-company stocks during the fiscal year. The S&P 500, a broad
index of large-capitalization U.S. stocks, had a total return of 36.98% during
the year ended November 30, 1995, while the Russell 2000, a broad index of
small-capitalization U.S. stocks, posted a total return of 28.45% over the same
period (see the graph above).
Large companies also benefited from a weaker U.S. dollar, primarily with respect
to European currencies. As the dollar's value declined, large U.S. companies
with sizable foreign sales reaped additional profits as their foreign revenues
translated into more dollars. In addition, many large companies increased their
profitability through corporate restructuring and downsizing.
[graph data]
U.S. STOCKS: $1 Invested in the S&P 500 and Russell 2000 Indexes
12/1/94-11/30/95
Russell 2000 Index S&P 500 Index
11/94 $1 $1
12/94 1.03 1.01
1/95 1.01 1.04
2/95 1.06 1.08
3/95 1.07 1.11
4/95 1.1 1.15
5/95 1.12 1.19
6/95 1.17 1.22
7/95 1.24 1.26
8/95 1.27 1.26
9/95 1.29 1.32
10/95 1.23 1.31
11/95 1.28 1.37
Source: Ibbotson Associates
8
<PAGE>
MARKET SUMMARIES
INVESTMENT MARKETS REVIEW
(Continued from the previous page)
U.S. Bonds
The U.S. bond market had one of its best years in a decade during the fiscal
year ended November 30. Bonds were the biggest benefactor of the "soft landing"
(slow, steady economic growth and low inflation) engineered by the Federal
Reserve. The Fed was so successful in slowing the economy that it lowered
short-term interest rates in July, and the possibility of further interest rate
cuts sent bond yields lower and bond prices higher. Optimism about the federal
government's efforts to balance the federal budget also contributed to the bond
market rally.
[line graph in right margin of page. graph data described below]
The 1995 bond rally led to a significant change in the level and shape of the
U.S. Treasury yield curve (see the accompanying graph). As the entire yield
curve shifted lower during the fiscal year, the short-term portion of the yield
curve (1-5 years) flattened dramatically. By November 30, expectations of
another interest rate cut by the Fed caused the one-year Treasury bill to have a
higher yield than the two-year Treasury note. The remainder of the Treasury
yield curve (5-30 years) steepened during the fiscal year.
With interest rates falling across the board, bonds with longer maturities
posted the best returns. The 30-year Treasury bond yield fell from 8.02% to
6.13% during the fiscal year, resulting in a total return of 32%. Short- and
intermediate-term bonds, especially those with maturities of 2-5 years, also
performed well. This maturity sector benefited from increased foreign demand,
particularly from Japanese investors looking for higher-yielding alternatives to
the historically low rates in Japan.
Money Market Securities
U.S. money market yields declined during the fiscal year. Yields were as high as
6% in early 1995, but the Fed's interest rate cut in early July brought money
market rates down to 5.5%. Money market yields continued to fall steadily during
the remainder of the fiscal year as the market reflected expectations that the
Fed would lower short-term rates again (the Fed obliged with a rate cut in
mid-December).
[graph data]
U.S. BONDS: The Shifting Treasury Yield Curve
Years to
Maturity 11/30/94 5/31/95 11/30/95
"1" 6.93% 5.792% 5.353%
"2" 7.447 5.839 5.35
"3" 7.631 5.907 5.402
7.7175 5.98 5.463
"5" 7.804 6.052 5.524
7.827 6.091 5.562
"7" 7.85 6.13 5.6
7.8733 6.18 5.649
7.8967 6.23 5.699
"10" 7.92 6.28 5.748
7.9249 6.298 5.767
7.9297 6.317 5.787
7.9346 6.335 5.806
7.9394 6.354 5.825
"15" 7.9443 6.372 5.845
7.9491 6.39 5.864
7.954 6.409 5.883
7.9588 6.427 5.902
7.9637 6.446 5.922
"20" 7.9685 6.464 5.941
7.9734 6.482 5.96
7.9782 6.501 5.98
7.9831 6.519 5.999
7.9879 6.538 6.018
"25" 7.9928 6.556 6.038
7.9976 6.574 6.057
8.0025 6.593 6.076
8.0073 6.611 6.095
8.0122 6.63 6.115
"30" 8.017 6.648 6.134
Source: Bloomberg Financial Markets
9
<PAGE>
MARKET SUMMARIES
INVESTMENT MARKETS REVIEW
(Continued from the previous page)
Foreign Stocks
During the fiscal year ended November 30, foreign stock markets posted mixed
results. Despite slowing economic growth, European stock markets averaged a
return of more than 10% during the fiscal year. Like the U.S. market, the
best-performing European stock markets (Switzerland, Ireland, Sweden) were
driven by declining interest rates, low inflation levels and strong corporate
earnings. The Japanese stock market experienced dramatic losses in the first
half of the year but eventually rebounded to post narrow gains overall.
[line graph in left margin of page. graph data described below]
Volatility was the common factor in the "emerging" markets in Asia and Latin
America. Most were battered early in the year after a currency devaluation in
Mexico caused investors to run for the exits. Some of these markets, such as
those in Venezuela and Peru, bounced back to record strong gains during the
year, while others, such as Taiwan, continued to languish.
For U.S. investors, currency values played a crucial role in international stock
returns. The U.S. dollar's decline against the German mark (see the accompanying
graph) and other European currencies enhanced returns from these markets. For
example, the 20% gain in the Swiss stock market converted to a 33% gain in
dollar terms. The dollar's value fluctuated dramatically against the Japanese
yen (see the graph) and ultimately had a slightly negative impact on returns
from Japanese stocks.
Foreign Bonds
The decline in global interest rates led to strong performances in the world's
bond markets. Slowing global economic growth and interest rate cuts by many
central banks led to falling bond yields and rising bond prices. Japanese bond
yields, which were already at historically low levels, continued to fall in 1995
as Japan's recession persisted. In Europe, efforts to reduce government budget
deficits helped boost bond prices.
European bond returns were enhanced by the U.S. dollar's decline relative to
most European currencies, but currency fluctuations had little overall impact on
Japanese bond returns.
[graph data]
U.S. Dollar Priced in Yen and Deutschemarks 12/94-11/95
DM/$ (left scale) Yen/$ (right scale)
12/2/94 1.555 12/2/94 99.78
12/9/94 1.582 12/9/94 100.45
12/16/94 1.572 12/16/94 100.28
12/23/94 1.575 12/23/94 100.16
12/30/94 1.555 12/30/94 99.8
1/6/95 1.551 1/6/95 101.05
1/13/95 1.529 1/13/95 98.8
1/20/95 1.515 1/20/95 99.28
1/27/95 1.515 1/27/95 99.47
2/3/95 1.519 2/3/95 99.57
2/10/95 1.528 2/10/95 98.94
2/17/95 1.484 2/17/95 97.3
2/24/95 1.47 2/24/95 96.98
3/3/95 1.449 3/3/95 95.05
3/10/95 1.402 3/10/95 91.1
3/17/95 1.386 3/17/95 89.29
3/24/95 1.406 3/24/95 88.35
3/31/95 1.379 3/31/95 87.05
4/7/95 1.377 4/7/95 84.15
4/14/95 1.4 4/14/95 83.32
4/21/95 1.386 4/21/95 83.6
4/28/95 1.376 4/28/95 84.15
5/5/95 1.374 5/5/95 83.85
5/12/95 1.45 5/12/95 86.85
5/19/95 1.442 5/19/95 86.83
5/26/95 1.389 5/26/95 84.18
6/2/95 1.408 6/2/95 84.66
6/9/95 1.408 6/9/95 84.7
6/16/95 1.406 6/16/95 84.55
6/23/95 1.395 6/23/95 84.52
6/30/95 1.385 6/30/95 84.79
7/7/95 1.388 7/7/95 85.99
7/14/95 1.39 7/14/95 87.48
7/21/95 1.386 7/21/95 87.48
7/28/95 1.386 7/28/95 88.55
8/4/95 1.395 8/4/95 91.04
8/11/95 1.43 8/11/95 93.65
8/18/95 1.474 8/18/95 97.55
8/25/95 1.477 8/25/95 96.65
9/1/95 1.467 9/1/95 97.55
9/8/95 1.488 9/8/95 99.97
9/15/95 1.49 9/15/95 103.55
9/22/95 1.429 9/22/95 99.83
9/29/95 1.418 9/29/95 98.25
10/6/95 1.422 10/6/95 99.95
10/13/95 1.419 10/13/95 100.15
10/20/95 1.41 10/20/95 100.51
10/27/95 1.393 10/27/95 101.3
11/3/95 1.425 11/3/95 103.96
11/10/95 1.412 11/10/95 100.45
11/17/95 1.405 11/17/95 101.97
11/24/95 1.413 11/24/95 101.15
Source: Bloomberg Financial Markets
10
<PAGE>
MANAGEMENT DISCUSSION
QUESTIONS AND ANSWERS
with Jeff Tyler, Senior Vice President and Portfolio Manager
Q: What is your asset allocation strategy for the first half of 1996?
A: For now, we plan to maintain the Fund's current structure--overweighted
in stocks (both foreign and domestic), neutral in foreign bonds, and
underweighted in U.S. bonds and cash. Over the next few months, though,
we will look to reduce the Fund's U.S. stock exposure and add more
foreign stocks.
Q: Sounds like you intend to take profits from the 1995 U.S. stock rally.
Are you planning to underweight U.S. stocks in anticipation of a
correction?
A: I don't think we'll go that far. Despite the big gains in 1995, we
believe that there are still some good values to be found among
domestic stocks. In addition, economic conditions in the U.S. are still
favorable for stocks--economic growth is moderate, inflation is low and
interest rates are declining.
That being said, we do have some reservations about U.S. stock market
earnings in 1996. Declines in consumer spending, most recently evident
in the 1995 holiday shopping season, could have an adverse effect on
retail profits. In addition, intense competition has forced many
businesses to absorb rising production costs, and this may eventually
reduce their profit margins. Because of the increased likelihood of
earnings disappointments going forward, we will look to gradually
reduce the Fund's U.S. stock holdings over the next six months.
Q: You said that you plan to shift these assets into foreign stocks. Why
are you adding to an already overweighted position in foreign stocks?
A: We think that the best investment opportunities for 1996 are in
overseas stock markets, especially those in southeast Asia and the
Pacific Rim. In 1995, many Asian markets suffered after the financial
crisis in Mexico scared investors away from all "emerging markets." But
this region has experienced the strongest economic growth in the world
in recent years, and this should lead to strong corporate earnings. We
are focusing on selected stocks in Singapore and Malaysia, as well as
more established markets such as Hong Kong. Even the Japanese stock
market is attractively valued if its economy gets back on track.
We also like European stocks, which should benefit from central bank
efforts to stimulate economic growth. Historically, an accommodative
interest rate policy has been favorable for stocks--it lowers corporate
borrowing rates and encourages consumer spending.
11
<PAGE>
MANAGEMENT DISCUSSION
QUESTIONS AND ANSWERS
(Continued from the previous page)
Q: Will this accommodative shift also be good for European bonds?
A: We think so--that's why the Fund's foreign bond holdings are primarily
concentrated in Europe (see page 7). European bonds should also benefit
from the progress that many European governments have made toward
reducing their budget deficits. Unfortunately, the good news in Europe
is offset by unfavorable scenarios in other global fixed-income
markets. In Japan, bond yields are at historical lows, providing
minimal income and little potential for price appreciation.
Q: In the Asset Allocation Strategy Review (see page 5), you said that you
hedged the currency exposure of some of the Fund's foreign investments
over the past six months. Do you intend to continue this practice in
1996?
A: Yes, we expect to continue hedging a portion of the Fund's Japanese and
German investments (see page 17 for a description of currency hedging).
Our current decision to hedge these currencies has more to do with
interest rate differences than our expectations for the U.S. dollar.
Because of higher interest rates in the U.S., we earn 5% to hedge
against the Japanese yen and 2% to hedge against the German mark. This
extra return makes it worthwhile for us to hedge these investments--and
thereby reduce the Fund's currency risk--even if we're uncertain about
future exchange rates.
Q: The Fund's main underweighted position is in U.S. bonds. Shouldn't
domestic bonds, like those in Europe, benefit from a shift toward
accommodative interest rate policy?
A: The Federal Reserve is not necessarily moving toward a stimulative
posture. The European central banks lowered interest rates in 1995 to
revitalize a derailed economic recovery; the Fed, on the other hand,
lowered rates to fine-tune and maintain an already successful recovery.
With its two interest rate cuts in 1995, the Fed may have already
lowered rates enough to keep the U.S. economy percolating along at a
healthy pace. Corporate and mortgage borrowing rates may even be low
enough to spark additional economic growth.
We're also cautious about U.S. bonds because of some lingering
uncertainty in the various bond sectors. While mortgage-backed
securities offer attractive yields relative to Treasuries, corporate
bond yields are barely higher than Treasury yields, leaving investors
with little compensation for the additional credit risk. And further
gains in the Treasury market are dependent upon a successful conclusion
to the federal budget impasse--a conclusion that is far from certain.
12
<PAGE>
INVESTMENT FUNDAMENTALS
ASSET ALLOCATION BASICS
Diversification
One of the most important components of any investment strategy is
diversification--distributing your financial assets among investments that
respond differently to market events. Diversification enables you to pursue
multiple investment goals while helping to balance risk and return. Over the
long term, a diversified portfolio has the potential to produce competitive
returns with less risk than a portfolio concentrated in one or two types of
investments.
The Fund was created to provide a convenient and conservative way to diversify
an investment portfolio. Investors who do not have the time or inclination to
build a diversified portfolio on their own can use the Fund as a "one-stop"
diversification source. Investors who do have the time and inclination can use
the Fund as a base investment in constructing their own diversified portfolios.
The Fund's "Neutral" Asset Mix
The Fund has a conservative "neutral" asset mix (see the graph below) that
represents the Fund's general diversification strategy over the long term. The
Fund's assets are distributed primarily among three core investments--U.S.
stocks, U.S. bonds and money market securities--which make up 85% of the Fund's
neutral portfolio. The remainder of the Fund's assets are invested in
"diversifiers"--foreign stocks, foreign bonds and natural resources stocks--to
hedge against inflation and declines in the U.S. dollar.
Based on this neutral portfolio, we have the flexibility to gradually adjust the
Fund's holdings as market and economic conditions change. The key word here is
gradually--we do not make frequent or drastic changes to the Fund's portfolio.
This gradual approach enables us to respond to changing market conditions while
keeping Fund transactions to a minimum.
Key decisions relating to the Fund's asset allocation strategy are made by an
asset allocation committee, whose members include Jim Benham, Randy Merk and
several senior executives and Benham fund managers. This committee meets each
month to review the Fund manager's recommended asset allocation structure.
[pie chart]
U.S. Stocks: 35% Foreign Stocks
(operating range: 25-45%) and Bonds: 12%
U.S. Bonds: 35% (operating range: 5-25%)
(operating range: 25-45%) Natural Resources-
Money Market Linked Investments: 3%
Securities: 15% (operating range: 0-10%)
(operating range: 10-25%)
13
<PAGE>
INVESTMENT FUNDAMENTALS
STOCK TERMS AND MANAGEMENT APPROACH
Stock Definitions
Dividend Yield--a percentage return calculated by dividing a company's annual
cash dividend by the current market value of the company's stock.
Price/Earnings (P/E) Ratio--a stock value measurement calculated by dividing a
company's stock price by its earnings per share, with the result expressed as a
multiple instead of as a percentage. (Earnings per share is calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)
Stock Management Approach
We select U.S. and foreign stocks for the Fund using the active quantitative
approach employed by the Benham equity funds. Starting with a benchmark index
(see below for the domestic and foreign stock indexes used by the Fund), we
construct a stock portfolio that is intended to provide the highest expected
return with the least amount of deviation from the benchmark index.
We review various stocks and give each a "score" based on its expected
performance. Our evaluation assesses past and future earnings growth as well as
relative price. After we've given each stock a score, we employ a process called
portfolio optimization--a computer program modifies each stock's score based on
risk and diversification factors and then creates an "optimal" portfolio of
stocks. Each stock in this portfolio then undergoes a rigorous quality check by
our stock analysts before it is purchased by the Fund.
Stock Indexes
The following stock indexes are used as benchmarks in the U.S. and foreign stock
portions of the Fund's portfolio:
U.S. STOCKS: Standard & Poor's 500 Index (S&P 500)--consists of the 500 largest
companies traded on the New York Stock Exchange. Although the S&P 500 represents
less than 10% of all U.S. stocks, these 500 companies make up approximately 80%
of the total market capitalization of the U.S. stock market. The S&P 500 is
considered to be a broad measure of overall U.S. stock market performance and is
commonly used as a benchmark for the performance of individual U.S. stocks and
domestic stock mutual funds.
FOREIGN STOCKS: Morgan Stanley Europe Australia Far East (EAFE) Index--consists
of 1,600 stocks in 20 countries. The EAFE Index is concentrated in the stock
markets of developed countries; it does not include most "emerging markets." The
EAFE Index is considered to be a broad measure of international stock
performance, and it is calculated in both local currencies and in U.S. dollars.
FOR MORE INFORMATION ABOUT THE FUND'S FOREIGN HOLDINGS, SEE PAGE 17.
14
<PAGE>
INVESTMENT FUNDAMENTALS
FIXED-INCOME SECURITY TYPES
The following list of fixed-income security types includes both bonds and money
market securities.
CORPORATE SECURITIES--debt securities or instruments issued by companies and
corporations. Short-term corporate securities or instruments (e.g., commercial
paper, banker's acceptances) are typically issued to raise cash and cover
current expenses in anticipation of future revenues; long-term corporate
securities (e.g., corporate bonds) are typically issued to finance capital
expenditures such as new plant construction or equipment purchases. The Fund may
purchase corporate bonds from both domestic and foreign companies.
FOREIGN GOVERNMENT SECURITIES--debt securities issued or guaranteed by foreign
governments or their political subdivisions. Some of these securities are direct
obligations of the issuing government; others are backed by some form of
government sponsorship. (See page 17 for more details relating to foreign
securities.)
MORTGAGE-BACKED SECURITIES--debt securities that represent ownership in pools of
mortgage loans. Most mortgage-backed securities are structured as
"pass-throughs"--the monthly payments of principal and interest on the mortgages
in the pool are collected by the bank that securitized the mortgages and are
"passed through" to investors. While the payments of principal and interest are
considered secure (many are backed by government agency guarantees), the cash
flow is less certain than in other fixed-income investments. Mortgages that are
paid off early reduce future interest payments from the pool.
REPURCHASE AGREEMENTS (REPOS)--short-term agreements in which the Fund buys a
security at one price and simultaneously agrees to sell it back to the seller at
a slightly higher price on a specified date (usually within seven days). The
Fund typically invests in repos backed by U.S. Treasury securities.
U.S. GOVERNMENT AGENCY SECURITIES--debt securities issued by U.S. government
agencies (such as the Federal Home Loan Bank and the Student Loan Marketing
Association). Some agency securities are backed by the full faith and credit of
the U.S. government, while others are guaranteed only by the issuing agency.
Government agency securities include discount notes (maturing in one year or
less) and medium-term notes, debentures and bonds (maturing in three months to
50 years).
U.S. TREASURY SECURITIES--debt securities issued by the U.S. Treasury and backed
by the direct "full faith and credit" pledge of the U.S. government. Treasury
securities include bills (maturing in one year or less), notes (maturing in two
to ten years) and bonds (maturing in more than ten years).
15
<PAGE>
INVESTMENT FUNDAMENTALS
FIXED-INCOME SENSITIVITY MEASURES
Duration
Duration measures the price sensitivity of a bond or bond portfolio to changes
in interest rates. Specifically, duration represents the approximate percentage
change in the price of a bond or bond portfolio if interest rates move up or
down by 100 basis points (a basis point equals 0.01%). For example, suppose a
short-term bond's duration is 1.9 years, while a long-term bond's duration is
7.9 years. If interest rates were to rise by 100 basis points, the price of the
short-term bond would be expected to decline by 1.9%, while the long-term bond's
price would decline by 7.9%. Conversely, if interest rates were to fall by 100
basis points, the price of the short-term bond would be expected to increase by
1.9%, while the long-term bond's price would increase by 7.9%.
As this example illustrates, the longer the duration, the more bond or bond
portfolio prices move in response to interest rate changes. Therefore, portfolio
managers generally want durations to be as long as possible when interest rates
fall (to maximize bond price increases) and as short as possible when interest
rates rise (to minimize bond price declines), taking into account the objectives
of the portfolio.
Duration, measured in years, also approximates (but understates) the weighted
average life of a bond or bond portfolio. To calculate duration, the future
interest and principal payments are added together and weighted in proportion to
their time value (early payments are valued more than later payments because
early payments can be reinvested and compound additional returns).
Average duration is the weighted average of all durations in a bond portfolio.
Average Maturity
Average maturity is another measurement of the interest rate sensitivity of a
bond portfolio. Average maturity measures the average amount of time that will
pass until a bond portfolio receives its principal payments from matured bonds.
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 ten-year
average maturity has much more potential exposure to interest rate changes than
a portfolio with a one-year average maturity.
Portfolio managers generally lengthen average maturities when interest rates
fall (to maximize exposure and capture as much price appreciation as possible)
and reduce average maturities when interest rates rise (to minimize exposure and
avoid as much price depreciation as possible), as long as this strategy is
compatible with the objectives of the portfolio. Reducing the average maturity
in a rising interest rate environment allows the portfolio manager to more
quickly reinvest matured assets in higher-yielding securities.
16
<PAGE>
INVESTMENT FUNDAMENTALS
FOREIGN INVESTMENTS
Currency Fluctuations
The total returns of the Fund's foreign holdings are affected by currency
fluctuations--the movement of foreign currency values in relation to the U.S.
dollar. Currency exchange rates come into play when income, gains and losses
from foreign securities are converted into U.S. dollars.
Changing currency values may have a greater effect on the total returns of the
Fund's foreign holdings than changing interest rates and security prices. A
stronger U.S. dollar typically reduces the Fund's returns from its foreign
holdings (gains earned in foreign currencies translate into fewer dollars),
while a weaker dollar enhances the Fund's returns from its foreign holdings
(gains earned in foreign currencies translate into more dollars).
Currency Hedges
Currency hedging is an investment strategy designed to reduce or eliminate the
effects of currency fluctuations on foreign stock and bond returns. Because a
weaker U.S. dollar enhances returns from foreign holdings, currency hedging is
typically used to offset currency losses when the dollar is strengthening.
Hedging can also be used to simply create a "pure play" on foreign securities.
For the Fund, currency hedges typically involve forward currency contracts that
allow the Fund to lock in a specific exchange rate. Although the Fund is
permitted to hedge as much as 100% of its foreign holdings, it generally will
not do so--one of the main purposes of the Fund's foreign assets is to diversify
a portion of the Fund's portfolio out of U.S.
dollar-denominated investments.
The Fund's Exposure to Foreign Currencies
As of November 30, 1995, the Fund owned securities denominated in 19 different
foreign currencies. The Fund's ten largest currency positions (as of November
30, 1995) are listed below.
COUNTRY % OF FUND
Japan (yen)................................................3.6%
Germany (deutschemark).....................................1.8%
United Kingdom (pound).....................................1.3%
France (franc).............................................1.1%
Denmark (krone)............................................1.1%
Canada (dollar)............................................0.8%
Italy (lira)...............................................0.8%
Netherlands (guilder)......................................0.6%
Australia (dollar).........................................0.5%
Spain (peseta).............................................0.4%
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
Benham Manager Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investment securities, of Benham Capital Manager Fund
constituting Benham Manager Funds as of November 30, 1995, and the related
statements of operations, changes in net assets, and the financial highlights
for the year then ended. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1995, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
Benham Capital Manager Fund as of November 30, 1995, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
San Francisco, California
January 5, 1996
18
<PAGE>
<TABLE>
<CAPTION>
BENHAM MANAGER FUNDS
Benham Capital Manager Fund
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Year Ended November 30, 1995
<S> <C>
PER SHARE DATA
- --------------
NET ASSET VALUE AT BEGINNING OF PERIOD ............................................................... $ 10.00
Income from Investment Operations
Net Investment Income .............................................................................. .36
Net Realized and Unrealized Gains on Investments and Foreign Currency Contracts and Transactions ... 1.62
----------
Total Income from Investment Operations ........................................................... 1.98
----------
Less Distributions
Dividends from Net Investment Income ............................................................... (.28)
Distributions from Net Realized Gains on Investments and Foreign Currency Contracts and Transactions 0
----------
Total Distributions ............................................................................... (.28)
----------
NET ASSET VALUE AT END OF PERIOD ..................................................................... $ 11.70
==========
TOTAL RETURN* ........................................................................................ 20.12%
- ------------
SUPPLEMENTAL DATA AND RATIOS
- ----------------------------
Net Assets at End of Period (in thousands of dollars) ................................................ $ 51,157
Ratio of Expenses to Average Daily Net Assets ........................................................ 1.01%**
Ratio of Net Investment Income to Average Daily Net Assets ........................................... 3.70%**
Portfolio Turnover Rate .............................................................................. 100%
- -------------------
* The total return figures assume reinvestment of dividend and capital gain distributions and are not annualized.
** The ratios include expenses paid through expense offset arrangements.
See the accompanying notes to financial statements.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
BENHAM MANAGER FUNDS
Benham Capital Manager Fund
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995
<S> <C>
ASSETS
Investment securities at value (cost $48,126,725) (Notes 1 and 4) ....................................... $51,192,709
Cash .................................................................................................... 269
Cash denominated in foreign currency (cost $23,695) ..................................................... 22,905
Interest receivable ..................................................................................... 253,794
Dividends receivable .................................................................................... 66,168
Receivables for securities sold ......................................................................... 240,365
Net unrealized appreciation on forward foreign currency exchange contracts held, at value (Notes 1 and 5) 87,085
Prepaid expenses ........................................................................................ 67,850
Receivables for fund shares sold ........................................................................ 31,389
-----------
Total assets .......................................................................................... 51,962,534
-----------
LIABILITIES
Payable for securities purchased .......................................................................... 689,622
Payable for fund shares redeemed .......................................................................... 4,466
Payable to affiliates (Note 2) ............................................................................ 30,667
Accrued expenses and other liabilities (Note 2)............................................................ 81,249
-----------
Total liabilities ....................................................................................... 806,004
-----------
NET ASSETS................................................................................................. $51,156,530
===========
Net assets consist of:
Capital paid in ......................................................................................... 46,677,031
Undistributed net investment income ..................................................................... 326,266
Undistributed net realized gain from:
Investments ................................................................................. 926,827
Foreign currency and futures contracts and transactions ..................................... 75,978 1,002,805
----------
Net unrealized appreciation on:
Investments ................................................................................. 3,065,984
Foreign currency contracts and transactions ................................................. 84,444 3,150,428
----------- -----------
Net assets ................................................................................................ $51,156,530
===========
Net asset value, offering price and redemption price per share based on 4,374,062 shares of beneficial interest
outstanding (unlimited number of shares authorized) ..................................................... $ 11.70
===========
- -------------------
See the accompanying notes to financial statements.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
BENHAM MANAGER FUNDS
Benham Capital Manager Fund
STATEMENT OF OPERATIONS
For the Year Ended November 30, 1995
<S> <C>
INVESTMENT INCOME
Interest ........................................................................................ $ 1,147,056
Dividends (Net of $9,909 of foreign taxes withheld) ............................................. 342,154
-----------
Total income .................................................................................. 1,489,210
-----------
EXPENSES (NOTE 2)
Investment advisory fees ........................................................................ 205,950
Administrative fees ............................................................................. 29,031
Transfer agency fees ............................................................................ 59,873
Printing and postage ............................................................................ 16,391
Custodian fees .................................................................................. 68,548
Auditing and legal fees ......................................................................... 37,579
Registration and filing fees .................................................................... 45,872
Directors' fees and expenses .................................................................... 15,316
Organizational expenses ......................................................................... 16,598
Telephone expenses .............................................................................. 7,717
Other operating expenses ........................................................................ 240
-----------
Total expenses ................................................................................ 503,115
Custodial earnings credits (Note 6) ............................................................. (2,957)
Amount waived (Note 2) .......................................................................... (183,426)
-----------
Net expenses .................................................................................. 316,732
-----------
Net investment income ....................................................................... 1,172,478
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY CONTRACTS AND
TRANSACTIONS (NOTES 1, 4 AND 5) Net realized gain:
Investments ....................................................................... 926,827
Foreign currency and futures contracts and transactions ........................... 75,978 1,002,805
----------
Net unrealized appreciation for the period:
Investments ....................................................................... 3,065,984
Foreign currency contracts and transactions ....................................... 84,444 3,150,428
----------- -----------
Net realized and unrealized gain on investments and foreign currency contracts and transactions 4,153,233
-----------
Net increase in net assets resulting from operations .............................................. $ 5,325,711
===========
- -------------------
See the accompanying notes to financial statements.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
BENHAM MANAGER FUNDS
Benham Capital Manager Fund
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended November 30, 1995
<S> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income .................................................................... $ 1,172,478
Net realized gain on investments and foreign currency contracts and transactions ......... 1,002,805
Net unrealized appreciation of investments and foreign currency contracts and transactions 3,150,428
------------
Change in net assets derived from investment activities ................................. 5,325,711
------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income .................................................................... (846,212)
Net realized gain on investments and foreign currency contracts and transactions ......... 0
------------
Total distributions to shareholders ..................................................... (846,212)
------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from sales of shares ............................................................ 62,385,736
Net asset value of dividends reinvested .................................................. 801,795
Cost of shares redeemed .................................................................. (16,610,500)
------------
Change in net assets derived from capital share transactions ............................ 46,577,031
------------
Net increase in net assets .............................................................. 51,056,530
NET ASSETS:
Beginning of period ...................................................................... 100,000
------------
End of period (Including undistributed net investment income of $326,266) ............... $ 51,156,530
============
- -------------------
See the accompanying notes to financial statements.
</TABLE>
22
<PAGE>
BENHAM CAPITAL MANAGER FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1995
(1) SIGNIFICANT ACCOUNTING POLICIES
Benham Capital Manager Fund (the Fund) is an open-end, diversified management
investment company registered under the Investment Company Act of 1940. It is
currently the sole Fund of Benham Manager Funds. The Fund commenced operations
on December 1, 1994. Significant accounting policies followed by the Fund are
summarized below.
VALUATION OF INVESTMENT SECURITIES--Investment securities, both foreign and
domestic, are valued at market as provided by an independent pricing service.
The pricing service values equity securities at the closing price on their
primary exchange and fixed- income securities at the closing price in the
principal market where they are traded. Prices of non-U.S. dollar denominated
securities are converted into U.S. dollars on a daily basis using the New York
Stock Exchange closing exchange rates. Securities for which market quotations
are not readily available are valued at fair value as determined in good faith
by or under the direction of the board of trustees. Debt obligations with
remaining maturities of sixty days or less at the time of purchase are valued at
amortized cost, which approximates market value. Security transactions are
recorded on the date the order to buy or sell is executed. Realized gains and
losses from security transactions are determined on the basis of identified
cost.
INCOME TAXES--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 income or California
franchise taxes to the extent that it distributes substantially all of its net
investment income and net realized capital gains to shareholders.
Net realized gain (loss) on investments and foreign currency contracts and
transactions differ for financial statement and tax purposes primarily because
of the reclassification of foreign exchange gains (or losses) to ordinary
income. The character of distributions made during the year from net investment
income or net realized gains for financial statement purposes may, therefore,
differ from their ultimate characterizations for federal income tax purposes.
Due to the timing of dividend distributions and the differences in accounting
for gains and losses for financial statement and federal income tax purposes,
the fiscal year in which amounts are distributed may differ from the year in
which the income and realized gains (losses) were recorded by the Fund.
23
<PAGE>
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. Net asset values
fluctuate daily in response to changes in the market value of investments and
foreign currency translations.
INVESTMENT INCOME AND SHAREHOLDER DISTRIBUTIONS--Dividend income from investment
securities is recorded on the ex-dividend date. Interest income, including
amortization on a yield to maturity basis of bond discounts and premiums, and
Fund expenses are accrued daily. The Fund distributes dividends, if any,
quarterly. The Fund distributes net realized gains, if any, once per year.
Distributions may be paid in cash or reinvested as additional shares.
FOREIGN CURRENCY TRANSLATIONS--The functional currency of the Fund is the U.S.
dollar. Foreign-currency-denominated assets and liabilities are translated into
U.S. dollars at current exchange rates each day the Fund is open for business.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at prevailing exchange rates on the dates these transactions occur.
Net realized gains of foreign currency and futures contracts and transactions
represent net foreign exchange gains and losses from sales and maturities of
foreign securities and currency transactions, forward foreign currency exchange
contracts, exchange gains or losses realized between the trade and settlement
dates on foreign security transactions, exchange gains or losses on the amounts
of interest accrued on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid on gains and losses from futures contracts.
Net unrealized currency gains and losses from valuing
foreign-currency-denominated assets and liabilities at period-end exchange rates
are reflected as a component of unrealized appreciation (depreciation) on
foreign currency contracts and transactions.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS--A forward contract is a commitment
to purchase or sell a foreign currency at a future date at a negotiated forward
rate. In connection with purchases and sales of Fund securities denominated in a
foreign currency, the Fund may enter into forward foreign currency exchange
contracts. Additionally, the Fund may enter into contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings or to increase or shift its exposure to a currency other than U.S.
dollars. These hedging strategies, while reducing exchange rate risk, will also
reduce the potential for share price appreciation in the event the hedged
currency increases in value. Certain risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
prescribed. Contracts are recorded at
24
<PAGE>
market value, which fluctuates with changes in currency exchange rates. When the
contracts are closed, realized gains and losses arising from the difference
between the original contracts and the closing of such contracts are included in
net realized gain (loss) on foreign currency contracts and transactions. Since
the economics of entering into offsetting contracts with the same settlement
date effectively closes a portion of the existing open contracts, purchase and
sale contracts with the same counterparty are presented net in Note 5 to the
financial statements. The Fund does not enter into forward contracts or maintain
a net exposure to forward contracts when the value of the contract would
obligate the Fund to deliver an amount of a currency in excess of the value of
its securities or other assets denominated in that currency.
ORGANIZATION COSTS--Costs incurred by the Fund in connection with the
organization, initial registration, and public offering of shares are being
amortized on a straight-line basis over a five-year period ending November 1999.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Benham Management Corporation (BMC) is a wholly owned subsidiary of Twentieth
Century Companies, Inc. (TCC). BMC's former parent company, Benham Management
International, Inc., merged into TCC on June 1, 1995. The Fund pays BMC a
monthly investment advisory fee equal to the following annual percentages of the
Fund's average daily net assets.
0.65% of the first $100 million
0.60% of the next $100 million
0.55% of the next $100 million
0.50% of the next $100 million
0.45% of the next $100 million
0.37% of the next $1 billion
0.34% of the next $1 billion
0.31% of the next $1 billion
0.30% of the next $1 billion
0.29% of the next $1 billion
0.28% of the next $1 billion
0.27% of the net assets over $6.5 billion
BMC provides the Fund with all investment advice. Twentieth Century Services,
Inc. pays all compensation of Trust officers and trustees who are officers or
directors of TCC or any of its subsidiaries. In addition, promotion and
distribution expenses are paid by BMC.
25
<PAGE>
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 service and transfer agency functions
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 and including
expense offset arrangements) to 1.00% of the Fund's average daily net assets.
The agreement provides further that BMC may recover amounts (representing
expenses in excess of the Fund's expense guarantee rate) absorbed during the
preceding 11 months, if, and to the extent that, for any given month, the Fund's
expenses are less than the expense guarantee rate in effect at that time. The
expense guarantee rate will be up for renewal in June 1996.
The payables to affiliates as of November 30, 1995, based on the above
agreements were as follows:
Investment Advisor............................................ $15,453
Administrative Services....................................... 3,925
Transfer Agent................................................ 11,289
---------
$30,667
=========
The Fund has a distribution agreement with Benham Distributors, Inc. (BDI),
which is responsible for promoting sales of and distributing the Fund's shares.
BDI is a wholly owned subsidiary of TCC.
(3) SHARE TRANSACTIONS
Share transactions for the period ended November 30, 1995:
Shares sold................................................... 5,827,372
Reinvestment of dividends..................................... 71,953
---------
5,899,325
Less shares redeemed.......................................... (1,535,263)
---------
Net increase in shares........................................ 4,364,062
=========
26
<PAGE>
(4) INVESTMENT SECURITIES--PURCHASES, SALES AND/OR MATURITIES
Purchases and sales of investment securities (at cost), excluding short-term
securities, for the year ended November 30, 1995, were as follows:
Purchases.................................................. $67,345,886
==========
Sales proceeds............................................. $27,013,573
==========
As of November 30, 1995, unrealized appreciation (depreciation) on investment
securities was as follows:
Appreciated securities..................................... $ 3,501,205
Depreciated securities..................................... $ (435,221)
----------
Net unrealized appreciation................................ $ 3,065,984
==========
For financial reporting and federal income tax purposes, the cost of securities
is the same.
(5) FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT COMMITMENTS
As of November 30, 1995, the Fund had entered into the following forward foreign
currency exchange contracts. Net unrealized appreciation of $87,085 is shown on
these contracts as an asset on the statement of assets and liabilities and is
reflected as net unrealized appreciation on forward foreign currency exchange
contracts.
<TABLE>
<CAPTION>
CURRENCY TO BE CURRENCY TO BE
DELIVERED RECEIVED
- ------------------------------------ --------------------------------
NET UNREALIZED
APPRECIATION
SETTLEMENT (DEPRECIATION)
AMOUNT US$ VALUE AMOUNT US$ VALUE DATE (US$)
----------- --------- --------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
DM 500,000 $347,029 US$ 357,142 $357,142 02/13/96 $ 10,113
DM 500,000 347,145 US$ 338,387 338,387 02/20/96 (8,758)
JP(Y) 110,000,000 1,093,402 US$ 1,179,132 1,179,132 02/13/96 85,730
--------- --------- --------
$1,787,576 $1,874,661 $ 87,085
========= ========= ========
</TABLE>
(6) EXPENSE OFFSET ARRANGEMENTS
The Fund's Statement of Operations reflects custodial earnings credits. This
amount is used to offset the custody fees payable by the Fund to the custodian
bank. The credits are earned when the Fund maintains a balance of uninvested
cash at the custodian bank. The ratio of expenses to average daily net assets
shown in the Financial Highlights is calculated as if these credits had not been
earned.
27
<PAGE>
BENHAM CAPITAL MANAGER FUND
Schedule of Investment Securities
November 30, 1995
VALUE
SHARES (NOTE 1)
-------- --------
U.S. EQUITY SECURITIES (STOCKS)
AEROSPACE & DEFENSE -- 0.9%
Litton Industries, Inc.* ........................... 2,000 $ 89,750
Lockheed Martin Corporation ........................ 1,800 132,075
McDonnell Douglas Corporation ...................... 900 80,213
Rockwell International Corporation ................. 500 24,500
United Technologies Corporation .................... 1,400 131,250
--------
457,788
--------
AIRLINES -- 0.6%
AMR Corporation Delaware* .......................... 1,800 137,925
Delta Airlines, Inc. ............................... 2,200 170,775
--------
308,700
--------
AUTOMOBILES & AUTO PARTS -- 0.1%
General Motors Corporation ......................... 700 33,950
--------
BUSINESS SERVICES & SUPPLIES -- 0.3%
CDI Corporation* ................................... 4,400 81,400
Manpower, Inc. ..................................... 3,500 93,625
--------
175,025
--------
CHEMICALS & RESINS -- 1.9%
Dow Chemical Company ............................... 4,700 333,113
Du Pont E. I. de Nemours ........................... 3,000 199,500
Eastman Chemical Company ........................... 1,200 78,750
Imperial Chemical Industries Plc-ADR................ 1,600 74,800
Monsanto Company ................................... 1,800 206,100
Morton International, Inc. ......................... 2,800 96,950
--------
989,213
--------
COMPUTER PERIPHERALS -- 0.1%
Conner Peripherals, Inc.* .......................... 1,900 42,988
--------
28
<PAGE>
VALUE
U.S. EQUITY SECURITIES (STOCKS) (CONTINUED) SHARES (NOTE 1)
--------- ---------
COMPUTER SOFTWARE & SERVICES -- 0.8%
Autodesk Incorporated .............................. 2,500 $ 88,125
Computer Associates International, Inc. ............ 300 19,650
Microsoft Corporation* ............................. 3,000 261,375
Sterling Software, Inc.* ........................... 800 47,200
--------
416,350
--------
COMPUTER SYSTEMS -- 1.0%
Compaq Computer Corporation* ....................... 1,600 79,200
Digital Equipment Corporation* ..................... 1,200 70,650
International Business Machines .................... 2,800 270,550
Sun Microsystems, Inc.* ............................ 1,000 84,125
--------
504,525
--------
CONSUMER PRODUCTS -- 0.4%
Nike, Inc. ......................................... 700 40,600
Proctor & Gamble Company ........................... 2,000 172,750
--------
213,350
--------
DIVERSIFIED COMPANIES -- 1.2%
Dover Corporation .................................. 3,400 132,175
Johnson Controls, Inc. ............................. 1,700 117,725
McKesson Corporation ............................... 5,900 303,113
Textron, Inc. ...................................... 900 68,963
--------
621,976
--------
ELECTRICAL & ELECTRONIC COMPONENTS -- 2.9%
Arrow Electronics, Inc.* ........................... 1,600 74,600
Avnet, Inc. ........................................ 3,100 145,700
Dynatech Corporation* .............................. 2,000 29,750
General Electric Company ........................... 7,000 470,750
General Instrument Corporation* .................... 1,200 30,750
W. W. Grainger, Inc. ............................... 400 26,750
Harris Corporation ................................. 1,200 69,150
Hewlett Packard Company ............................ 1,700 140,888
Honeywell, Inc. .................................... 3,000 142,875
National Semiconductor Corporation* ................ 1,300 27,788
SCI Systems, Inc.* ................................. 2,700 90,450
Sundstrand Corporation ............................. 400 25,900
Texas Instruments, Inc. ............................ 2,800 162,050
--------
1,437,401
----------
29
<PAGE>
VALUE
U.S. EQUITY SECURITIES (STOCKS) (CONTINUED) SHARES (NOTE 1)
-------- ----------
ENERGY (PRODUCTION & MARKETING) -- 3.5%
Atlantic Richfield Company ......................... 1,300 $ 140,888
Coastal Corporation ................................ 3,500 116,375
Exxon Corporation .................................. 9,000 696,375
Mobil Corporation .................................. 4,300 448,813
Panhandle Eastern Corporation ...................... 4,100 116,338
Royal Dutch Petroleum Company ADR................... 2,200 282,425
---------
1,801,214
----------
ENVIRONMENTAL SERVICES -- 0.1%
Browning Ferris Industries, Inc..................... 800 24,100
----------
FINANCIAL SERVICES -- 3.8%
American Express ................................... 4,200 178,500
BankAmerica Corporation ............................ 5,300 337,213
Chase Manhattan Corporation ........................ 300 18,263
Chemical Banking Corporation ....................... 2,200 132,000
Citicorp ........................................... 3,400 240,550
City National Corporation .......................... 7,000 96,250
Dean Witter Discover & Company ..................... 3,600 183,600
Edwards (A.G.), Inc. ............................... 1,000 27,000
First Chicago Corporation .......................... 600 41,700
First Union Corporation ............................ 900 49,163
Green Tree Financial Corporation.................... 2,000 56,500
J.P. Morgan & Company, Inc. ........................ 700 54,950
Merrill Lynch & Company, Inc. ...................... 1,100 61,188
Morgan Stanley Group, Inc. ......................... 900 77,625
NationsBank Corporation ............................ 3,600 256,950
Wells Fargo & Co. .................................. 500 105,120
----------
1,916,572
----------
FOOD & BEVERAGE -- 2.3%
Archer Daniels Midland Company ..................... 14,700 253,575
CPC International, Inc. ............................ 400 27,500
Coca Cola Company .................................. 1,400 106,050
Heinz (H.J.) Company ............................... 1,500 47,813
IBP, Inc. .......................................... 1,400 87,500
Pepsico, Inc. ...................................... 6,300 348,075
Philip Morris Companies, Inc. ...................... 3,700 324,675
----------
1,198,188
----------
30
<PAGE>
VALUE
U.S. EQUITY SECURITIES (STOCKS) (CONTINUED) SHARES (NOTE 1)
--------- ----------
HEALTHCARE -- 0.4%
Foundation Health Corporation* ..................... 3,200 $ 146,400
Healthcare COMPARE Corporation* .................... 1,000 39,125
----------
185,525
----------
HEAVY DUTY TRUCKS & PARTS -- 0.3%
Navistar International Corporation, Inc.* 7,900 85,913
Paccar, Inc. ....................................... 1,800 78,750
----------
164,663
----------
HOUSEHOLD FURNISHINGS/APPLIANCES -- 0.2%
Leggett & Platt, Inc. .............................. 3,800 91,675
----------
HOMEBUILDING -- 0.2%
Pulte Corporation .................................. 500 15,375
Toll Brothers, Inc.* ............................... 4,600 83,375
---------
98,750
----------
INSURANCE (LIFE) -- 0.5%
Aflac, Inc. ........................................ 2,500 101,875
Allstate Corp. ..................................... 2,100 86,100
American General Corporation ....................... 2,400 81,300
----------
269,275
----------
INSURANCE (MULTILINE) -- 2.4%
American International Group, Inc. ................. 3,500 314,125
Chubb Corporation .................................. 1,300 126,425
CNA Financial Corporation* ......................... 1,100 127,738
Loews Corporation .................................. 1,600 245,600
Safeco Corporation ................................. 900 63,900
Travelers Group, Inc. .............................. 5,600 333,200
----------
1,210,988
----------
INSURANCE (PROPERTY/CASUALTY) -- 0.3%
General Re Corporation ............................. 700 104,738
Transatlantic Holdings, Inc. ....................... 600 41,250
----------
145,988
----------
LEISURE -- 0.4%
CPI Corporation .................................... 5,500 114,813
Eastman Kodak Company .............................. 1,400 95,200
Marriott International, Inc. ....................... 400 14,900
----------
224,913
----------
31
<PAGE>
VALUE
U.S. EQUITY SECURITIES (STOCKS) (CONTINUED) SHARES (NOTE 1)
--------- ----------
MANUFACTURED HOUSING -- 0.1%
Champion Enterprises, Inc.* ........................ 2,300 $ 69,000
----------
MEDICAL EQUIPMENT & SUPPLIES -- 0.2%
Boston Scientific Corporation* ..................... 1,000 40,500
Cardinal Health, Inc. .............................. 1,500 81,000
----------
121,500
----------
METALS & MINING -- 0.5%
Aluminum Co. of America ............................ 3,000 175,500
Carpenter Technology Corporation ................... 400 17,300
Cleveland Cliffs, Inc. ............................. 1,100 43,038
Phelps Dodge Corporation ........................... 300 20,363
Reynolds Metals Company ............................ 300 17,325
----------
273,526
----------
OFFICE EQUIPMENT -- 0.2%
Xerox Corporation .................................. 900 123,413
----------
PAPER & FOREST PRODUCTS -- 1.5%
Boise Cascade Corporation .......................... 1,600 59,600
Champion International Corporation ................. 400 18,850
Georgia Pacific Corporation ........................ 800 62,200
Mead Corporation ................................... 1,500 85,688
Rayonier, Inc. ..................................... 900 34,425
Temple Inland, Inc. ................................ 1,800 81,675
Westvaco Corporation ............................... 7,100 194,363
Weyerhaeuser Company ............................... 4,600 208,150
Willamette Industries, Inc. ........................ 700 42,350
----------
787,301
----------
PHAMACEUTICALS -- 2.7%
Bristol Myers Squibb ............................... 6,000 481,500
Johnson & Johnson .................................. 4,300 372,488
Merck & Company, Inc. .............................. 4,900 303,188
Pfizer, Inc. ....................................... 2,900 168,200
Pharmacia & Upjohn, Inc. ........................... 1,000 35,875
----------
1,361,251
----------
32
<PAGE>
VALUE
U.S. EQUITY SECURITIES (STOCKS) (CONTINUED) SHARES (NOTE 1)
-------- ---------
PUBLISHING -- 0.6%
Jostens, Inc. ...................................... 3,900 $ 96,525
Pulitzer Publishing Company ........................ 400 18,400
Washington Post Company ............................ 700 212,800
---------
327,725
---------
RETAIL (FOOD & DRUG) -- 0.7%
Ruddick Corporation ................................ 10,200 109,650
Safeway, Inc.* ..................................... 5,000 232,500
---------
342,150
---------
RETAIL (GENERAL MERCHANDISE) -- 0.4%
Sears Roebuck & Company ............................ 5,000 196,875
Waban, Inc.* ....................................... 1,100 20,350
---------
217,225
---------
RETAIL (SPECIALTY) -- 0.4%
CompUSA, Inc.* ..................................... 1,400 51,975
Pier 1 Imports, Inc. ............................... 8,400 91,350
Ross Stores, Inc. .................................. 3,700 70,762
---------
214,087
---------
TRANSPORTATION -- 0.6%
American President Companies ....................... 1,100 27,500
Burlington Northern, Santa Fe ...................... 2,300 185,438
Conrail, Inc. ...................................... 600 41,925
CSX Corporation .................................... 400 35,050
---------
289,913
---------
UTILITIES (ELECTRIC) -- 2.3%
Central & Southwest ................................ 5,700 153,188
Consolidated Edison ................................ 7,300 210,788
FPL Group, Inc. .................................... 3,900 169,163
Northern States Power Company ...................... 2,900 136,300
Pacific Gas & Electric Company ..................... 8,100 222,750
Portland General Corporation ....................... 600 16,950
TNP Enterprises, Inc. .............................. 8,100 148,838
Unicom Corporation ................................. 3,400 108,800
---------
1,166,777
---------
33
<PAGE>
VALUE
U.S. EQUITY SECURITIES (STOCKS) (CONTINUED) SHARES (NOTE 1)
--------- ----------
UTILITIES (GAS) -- 0.7%
Atlanta Gas Light Company .......................... 4,700 $ 179,775
Pacific Enterprises ................................ 6,400 171,200
Washington Gas Light Co. ........................... 1,000 20,875
---------
371,850
---------
UTILITIES (TELECOMMUNICATIONS) -- 1.7%
Ameritech Corporation .............................. 5,300 291,500
British Telecommunications ADR ..................... 700 40,511
SBC Communications, Inc. ........................... 500 27,000
Sprint Corporation ................................. 11,800 472,000
---------
831,011
---------
MISCELLANEOUS -- 0.5%
Fluor Corporation .................................. 300 19,500
Parker Hannifin Corporation ........................ 1,700 62,475
Snap On, Inc. ...................................... 700 30,975
Teledyne, Inc. ..................................... 6,400 155,200
Teledyne, Inc.-Pfd ................................. 64 848
----------
249,498
----------
TOTAL U.S. EQUITY SECURITIES-- 37.7% (COST $17,280,717).... 19,295,844
----------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
---------- ---------
<S> <C> <C>
U.S. FIXED-INCOME SECURITIES (BONDS)
ABN AMRO Bank NV (Chicago) 7.25%, due 05/31/05 ..........................$ 500,000 $ 528,185
Bankers Trust of New York Corp. 7.13%, due 07/31/02 ..................... 500,000 514,840
Citizens Utilities Company, Delaware, 7.60%, due 06/01/06 ............... 300,000 330,914
Federal Home Loan Mortgage Corporation CMO 7.50%, due 04/25/24 .......... 2,200,000 2,288,845
Federal National Mortgage Association 6.45%, due 06/10/03 ............... 500,000 498,045
Government National Mortgage Association 7.00%, due 01/15/24 ............ 475,039 476,075
Government National Mortgage Association 7.00%, due 05/15/24 ............ 289,275 289,905
Government National Mortgage Association 7.00%, due 09/15/25 ............ 380,377 393,569
Government National Mortgage Association 8.00%, due 09/15/24 ............ 499,098 500,263
Government National Mortgage Association 8.00%, due 07/15/24 ............ 304,353 314,909
Government National Mortgage Association 8.25%, due 07/20/25 ............ 848,925 873,464
Government National Mortgage Association 9.00%, due 02/15/17 ............ 83,654 88,935
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
----------- ----------
<S> <C> <C>
U.S. FIXED-INCOME SECURITIES (BONDS) (CONTINUED)
Hanson Overseas BV 6.75%, due 09/15/05 ............................... $ 400,000 $ 405,888
Japanese Financial Corp. for Municipal Enterprises 7.38%, due 04/27/05 500,000 549,160
Southern California Edison Company 8.25%, due 02/01/00 ............... 400,000 432,400
United States Treasury Bonds 8.75%, due 05/15/17 ..................... 1,050,000 1,358,270
United States Treasury Notes 5.500, due 11/15/98 ..................... 600,000 601,500
United States Treasury Notes 7.25%, due 08/15/04 ..................... 1,250,000 1,373,825
United States Treasury Notes 6.88%, due 03/31/97 ..................... 1,300,000 1,324,375
United States Treasury Notes 7.75%, due 11/30/99 ..................... 3,500,000 3,774,540
-----------
TOTAL U.S. FIXED-INCOME SECURITIES-- 33.1% (COST $16,021,234) ........ 16,917,907
-----------
MONEY MARKET SECURITIES (SHORT-TERM INSTRUMENTS)
AB Spintab Commercial Paper due 01/17/96.............................. 1,984,908
Morgan Stanley Group, Inc. Commercial Paper due 01/17/96.............. 1,284,974
National Westminster Bank Plc Certificate of Deposit due 12/13/95..... 1,000,003
Pemex Capital, Inc. Commercial Paper due 12/06/95..................... 2,398,050
Repurchase Agreement with State Street Bank and Trust Company 2.50%, due 12/01/95,
in the amount of $274,000 (collateralized by $274,000 in U.S. Treasury Notes
7.125% due 02/29/00)................................................ 274,000
----------
TOTAL MONEY MARKET SECURITIES-- 13.6% (COST $6,941,935)............... 6,941,935
----------
VALUE
SHARES (NOTE 1) CURRENCY
---------- ----------- ----------
FOREIGN EQUITY SECURITIES
77th Bank............................................................. 9,000 $ 81,293 JP(Y)
Amcor Ltd............................................................. 11,000 80,122 AU$
Asahi Chemical Industries............................................. 24,000 178,692 JP(Y)
Astra AB.............................................................. 2,200 82,076 SEK
Axa................................................................... 1,200 71,757 FrF
BBC Brown Boveri...................................................... 40 45,879 CHF
Bayer AG.............................................................. 330 85,857 DM
Boots Company......................................................... 15,000 130,109 (pound)
Compagnie Francaise de Petroleum Total................................ 1,300 79,923 FrF
Cookson............................................................... 10,000 47,364 (pound)
Credit Commercial de France*.......................................... 1,500 70,472 FrF
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1) CURRENCY
---------- ----------- ----------
<S> <C> <C> <C>
FOREIGN EQUITY SECURITIES (CONTINUED)
Development Bank of Singapore......................................... 5,000 $ 58,461 SG$
Empresa Nacional de Electricidad SA................................... 1,200 64,376 Esp
Fanuc................................................................. 1,000 42,420 JP(Y)
Guinness Brewery...................................................... 10,000 70,801 (pound)
Hang Seng Bank........................................................ 8,000 69,814 HK$
Hitachi Credit CP..................................................... 5,000 90,619 JP(Y)
Hong Kong Electric.................................................... 10,000 33,549 HK$
Hong Leong Industries Bhd............................................. 4,000 18,287 MYR
HSBC Holdings Plc..................................................... 5,000 74,365 (pound)
Hutchison Whampoa Ltd................................................. 12,000 67,797 HK$
Kirin Beverage........................................................ 9,000 118,148 JP(Y)
KLM Royal Dutch Airlines NV........................................... 1,000 34,351 NLG
Kyocera Corporation................................................... 1,000 78,864 JP(Y)
Man AG................................................................ 250 70,609 DM
Mannesmann............................................................ 200 64,397 DM
Marubeni Corporation.................................................. 15,000 79,353 JP(Y)
Mitsubishi Heavy Industries........................................... 17,000 135,067 JP(Y)
NEC Corporation....................................................... 5,000 63,679 JP(Y)
Nestle SA............................................................. 170 180,977 CHF
News Corporation Ltd.................................................. 5,000 26,237 AU$
Nippon Steel Company.................................................. 25,000 85,721 JP(Y)
Nokia (AB) OY......................................................... 600 33,081 FIM
Royal Dutch Petroleum................................................. 1,300 167,299 NLG
Sanwa Bank............................................................ 5,000 96,498 JP(Y)
Sanyo Electric Company................................................ 17,000 88,268 JP(Y)
Singapore Technologies Industrial Corp................................ 20,000 37,840 SG$
Sun Alliance Group.................................................... 12,000 73,192 (pound)
Telefonica de Espana.................................................. 3,000 41,329 Esp
Telecom Italia Mobile SpA............................................. 25,000 40,363 Lit
Toda Corporation...................................................... 6,000 48,729 JP(Y)
Tokyo Electric Power.................................................. 5,050 130,610 JP(Y)
Toyota Motor Corporation.............................................. 7,000 137,840 JP(Y)
United Engineers Ltd.................................................. 5,000 31,135 MYR
Vodafone Group........................................................ 15,000 53,561 (pound)
Volvo AB.............................................................. 1,000 20,752 SEK
----------
TOTAL FOREIGN EQUITY SECURITIES-- 6.8% (COST $3,420,137).............. 3,481,933
----------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1) CURRENCY
---------- ----------- ----------
<S> <C> <C> <C>
FOREIGN FIXED-INCOME SECURITIES
Government of France 7.00%, due 11/12/99 ............................. 1,700,000 $ 351,609 Frf
Government of Netherlands 8.25%, due 02/15/02......................... 150,000 105,434 NLG
Government of New Zealand 10.00% due 07/15/97......................... 300,000 203,241 NZ
Government of Spain 10.50%, due 10/30/03.............................. 15,000,000 122,407 Esp
International Bank of Reconstruction & Development 4.75%, due 12/20/04 25,000,000 284,258 JP(Y)
International Bank of Reconstruction & Development 5.25%, due 03/20/02 10,000,000 115,907 JP(Y)
Kingdom of Belgium 8.75%, due 06/25/02................................ 2,000,000 76,169 Bfr
Kingdom of Denmark 8.00%, due 05/15/03................................ 3,000,000 563,625 Dkr
Queensland Treasury Corporation Global Note 8.00%, due 07/14/99....... 200,000 150,601 AU$
Republic of Italy 9.50%, due 12/01/97................................. 250,000,000 153,238 Lit
Treuhandanstalt 6.50%, due 04/23/03................................... 1,000,000 711,999 DM
United Kingdom Treasury 8.00%, due 12/07/00........................... 100,000 160,146 (pound)
----------
TOTAL FOREIGN FIXED-INCOME SECURITIES-- 5.9% (COST $2,989,968)........ 2,998,634
----------
TOTAL FOREIGN EQUITY AND FIXED-INCOME SECURITIES-- 12.7% (COST $6,410,105) 6,480,567
----------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1) CURRENCY
---------- ----------- ----------
<S> <C> <C> <C>
GOLD COMPANIES AND NATURAL RESOURCES LINKED INVESTMENTS (SPECIALTY)
Ashanti Goldfields.................................................... 4,000 $ 72,000 (pound)
Barrick Gold Corporation.............................................. 10,000 263,750 CD$
Diamond Fields Resources, Inc.*....................................... 8,000 144,038 CD$
Driefontein Consolidated Ltd.......................................... 8,000 85,593 SAR
Echo Bay Mines Ltd.................................................... 8,000 83,000 US$
Freeport McMoran Copper & Gold........................................ 5,900 159,300 US$
Newmont Mining Corporation............................................ 5,100 219,938 US$
Placer Dome, Inc...................................................... 5,000 123,750 US$
RTZ Corporation....................................................... 12,900 185,337 (pound)
Santa Fe Pacific Gold Company......................................... 11,000 132,000 US$
TVX Gold, Inc.*....................................................... 13,000 87,750 US$
TOTAL GOLD COMPANIES AND NATURAL RESOURCES LINKED INVESTMENTS -- 3.0%
(COST $1,472,734)................................................... 1,556,456
----------
TOTAL INVESTMENT SECURITIES-- 100.1% (COST $48,126,725)............... 51,192,709
Liabilities less other assets-- (0.1)%................................ (36,179)
----------
Net assets -- 100% -- equivalent to $11.70 per share on
4,374,062 shares outstanding........................................ $51,156,530
==========
- -------------------
*Non-income producing
</TABLE>
38
<PAGE>
FUND COUNTRY EXPOSURE
Australia .............................................. 0.50%
Belgium ................................................ 0.15
Canada ................................................. 0.80
Denmark ................................................ 1.10
Finland ................................................ 0.06
France ................................................. 1.12
Germany ................................................ 1.82
Hong Kong .............................................. 0.33
Italy .................................................. 0.80
Japan .................................................. 3.63
Malaysia ............................................... 0.10
Netherlands ............................................ 0.60
New Zealand ............................................ 0.40
Sweden ................................................. 0.20
Singapore .............................................. 0.19
South Africa ........................................... 0.17
Spain .................................................. 0.45
Switzerland ............................................ 0.44
United Kingdom ......................................... 1.28
United States .......................................... 85.86
------
TOTAL ............................................ 100.00%
======
39
<PAGE>
TRUSTEES
James M. Benham
Albert A. Eisenstat
Ronald J. Gilson
Myron S. Scholes
Kenneth E. Scott
Ezra Solomon
Isaac Stein
James E. Stowers III
Jeanne D. Wohlers
OFFICERS
James M. Benham
Chairman of the Board
John T. Kataoka
President and Chief Executive Officer
Douglas A. Paul
Vice President, Secretary
and General Counsel
Ann N. McCoid
Controller
Maryanne Roepke
Chief Financial Officer and
Treasurer
[company logo] The Benham Group
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.
