SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Co-Registrants __X__
Filed by a Party other than the Registrant _____
Check the appropriate box:
__X__ Preliminary Proxy Statement
_____ Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2)
_____ Definitive Proxy Statement
_____ Definitive Additional materials
_____ Soliciting Material Pursuant to ss.240.14a-l l(c) or ss.240.14a-12
AMERICAN CENTURY CALIFORNIA TAX-FREE AND MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY TARGET MATURITIES TRUST
- --------------------------------------------------------------------------------
(Name of Co-Registrant as Specified in Their Charters)
Payment of Filing Fee (Check the appropriate box):
__X__ No fee required.
_____ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
_____ Fee paid previously with preliminary materials.
<PAGE>
[American Century logo and address]
June 2, 1997
Dear American Century Shareholder,
I am writing to inform you of the upcoming special meeting of the
shareholders of your fund. At this meeting, you are being asked to vote on
important proposals effecting your fund. These include the approval of a new
management agreement, the ratification of independent auditors, the elimination
or amendment of certain fundamental investment restrictions, the approval of the
subadvisory agreement and a change in investment objective for the Benham
European Government Bond Fund, and a change in investment objective for the
Benham Adjustable Rate Government Securities Fund. The Board of Directors of
your fund, including myself, unanimously believes that these proposals are in
the fund's and your best interest.
I'm sure that you, like most people, lead a busy life and are tempted
to put this proxy aside for another day. Please don't. When shareholders do not
return their proxies, additional expenses are incurred to pay for follow-up
mailings and telephone calls. PLEASE TAKE A FEW MINUTES TO REVIEW THIS PROXY
STATEMENT AND SIGN AND RETURN ALL PROXY CARDS TODAY. If you hold shares in more
than one fund, you will receive a separate proxy card for each fund you hold.
Please be sure to sign and return each proxy card regardless of how many you
receive.
The Board of Directors of your fund has unanimously approved these
proposals and recommends a vote "FOR" each proposal. If you have any questions
regarding the issues to be voted on or need assistance in completing your proxy
card, please contact our proxy solicitor D.F. King & Co., Inc. at
1-800-___-____.
Thank you for your time in considering these important proposals. Thank
you for investing with American Century and for your continuing support.
Very truly yours,
James E. Stowers III
President
<PAGE>
AMERICAN CENTURY CALIFORNIA TAX-FREE AND MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY TARGET MATURITIES TRUST
American Century Investments
4500 Main Street; P.O. Box 419200
Kansas City, Missouri 64141-6200
(800) ___-____
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 30, 1997
NOTICE IS HEREBY GIVEN that a joint special meeting of shareholders of
the various series ("Funds" and, individually, a "Fund") of American Century
California Tax-Free and Municipal Funds, American Century Government Income
Trust, American Century International Bond Funds, American Century Investment
Trust, American Century Municipal Trust, American Century Quantitative Equity
Funds and American Century Target Maturities Trust, each a registered open-end
investment company (individually a "Company" and, collectively, the
"Companies"), will be held at the Companies' offices at 4500 Main Street, Kansas
City, Missouri, on July 30, 1997 at _____ p.m.
Central Time, for the following purposes:
1. To ratify the selection of Coopers & Lybrand LLP as the independent
auditors of the Companies for each Company's current fiscal year;
2. To vote on the approval of a Management Agreement with American Century
Investment Management, Inc.;
3. To approve the adoption of standardized investment limitations by
amending or eliminating certain of the Companies' current fundamental
investment limitations;
4. ONLY FOR BENHAM EUROPEAN GOVERNMENT BOND FUND. To vote on the approval
of a Subadvisory Agreement with J.P. Morgan Investment Management, Inc.
5. ONLY FOR BENHAM ADJUSTABLE RATE GOVERNMENT SECURITIES FUND. Approval of
amendments to its fundamental investment objective.
6. ONLY FOR BENHAM EUROPEAN GOVERNMENT BOND FUND. Approval of amendments
to its fundamental investment objective.
7. To transact such other business as may properly come before the meeting
or any adjournment thereof.
This is a combined Notice and Proxy Statement for the Funds. The
shareholders of each Fund will vote only on those matters being considered by
their Fund. If you own shares of more than one of the Funds, you have received a
separate proxy for each Fund. Please complete, sign and return all proxies.
Shareholders of record as of the close of business on June 2, 1997 (for
American Century Quantitative Equity Funds) or May 17, 1997 (for the rest of the
Companies) are the only persons entitled to notice of and to vote at the meeting
and any adjournments thereof. Your attention is directed to the attached Proxy
Statement. YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT
THE MEETING, PLEASE COMPLETE, SIGN, AND RETURN THE ENCLOSED PROXY OR PROXIES AS
SOON AS POSSIBLE IN ORDER TO SAVE FURTHER SOLICITATION EXPENSE. There is
enclosed with the proxy an addressed envelope for which no postage is required.
The Board of Directors of each Company recommends that you cast your
vote:
o FOR the selection of Coopers & Lybrand LLP as the independent
auditors of the Companies for each Company's current fiscal
year;
o FOR the approval of a Management Agreement with American
Century Investment Management, Inc.;
o FOR the adoption of standardized investment limitations by
amending or eliminating certain of the Companies' current
fundamental investment limitations;
o FOR the approval of the Benham European Government Bond Fund's
Subadvisory Agreement with J.P. Morgan Investment Management,
Inc.
o FOR the amendments to the Benham Adjustable Rate Government
Securities Fund's fundamental investment objective.
o FOR the amendments to the Benham European Government Bond
Fund's fundamental investment objective.
BY ORDER OF THE BOARDS OF DIRECTORS
Dated: June __,1997 William M. Lyons, Executive Vice President
<PAGE>
AMERICAN CENTURY INVESTMENTS
4500 Main Street; P.O. Box 419200
Kansas City, Missouri 64141-6200
(800) ___-____
PROXY STATEMENT
for
JOINT MEETING OF SHAREHOLDERS OF
AMERICAN CENTURY CALIFORNIA TAX-FREE AND MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY TARGET MATURITIES TRUST
TO BE HELD ON JULY 30, 1997
The enclosed Proxy is solicited by the Board of Directors/Trustees (the
"Board of Directors") of the American Century investment companies listed above
in connection with a joint special meeting of shareholders to be held on
Wednesday, July 30, 1997, at the Companies' offices at 4500 Main Street, Kansas
City, Missouri, at _____ p.m. Central Time, and any adjournments thereof. In
this proxy, an individual company will be referred to as a "Company," while, as
a group, they will be called the "Companies." The shares of the capital stock of
each Company entitled to vote at the meeting are issued in series representing
different investment portfolios. A single series is called a "Fund," while the
series as a group will be called the "Funds."
The costs of soliciting proxies will be paid by American Century
Investment Management, Inc. (referred to in this Proxy Statement as "ACIM"), the
proposed investment manager of each Fund. The cost of preparing and mailing the
Notice of Meeting and this Proxy Statement will be paid by the Funds under their
current investment advisory agreement with Benham Management Corporation
("BMC"). This Notice of Meeting and the Proxy Statement is first being mailed to
shareholders around June __, 1997. ACIM, at its expense, has hired the proxy
solicitation firm of D. F. King & Co., Inc. to help solicit proxies for the
Meeting. Supplemental solicitations for the meeting may be made by D. F. King &
Co., Inc. or by ACIM, either personally or by mail, telephone, or facsimile.
VOTING OF PROXIES. If you provide a proxy, you may revoke it before the
meeting by mailing written notice of revocation to the Secretary of the
respective Company before the meeting, or personally delivering your revocation
to the Secretary any time prior to the taking of the vote at the meeting. Unless
revoked, proxies that have been returned by shareholders will be voted in favor
of all proposals. In instances where choices are specified on the Proxy, those
Proxies will be voted as the shareholder has instructed it be voted.
Common stock (in the case of American Century Quantitative Equity
Funds) and common shares (in the case of the other Companies) currently
represent the only class of securities of each Fund. The number of outstanding
votes of each Fund, as of the close of business on April 30, 1997, are shown on
Schedule 1, which you will find at the end of this proxy statement.
Only those shareholders owning shares as of the close of business on
May 17, 1997 (for all Companies except American Century Quantitative Equity
Funds) and June 2, 1997 (for American Century Quantitative Equity Funds), may
vote at the meeting or any adjournments thereof. Each share of each series or
class gets one vote for each dollar of a Fund's net asset value the share
represents. If we do not receive enough "yes" votes by July 30, 1997, to approve
the proposals being considered at the meeting, the named proxies may propose
adjourning the meeting to allow the gathering of more proxy votes. An
adjournment requires a vote "for" by a majority of the votes present at the
meeting (whether in person or by proxy). The named proxies will vote the "for"
votes they have received in favor of the adjournment, and any "against" or
"abstain" votes will count as votes against adjournment. An abstention on any
proposal will be counted as present for purposes of determining whether a quorum
of shares is present at the meeting with respect to the proposal on which the
abstention is noted, but will be counted as a vote against such proposal.
Under the Rules of the New York Stock Exchange, Proposals 2 through 6
are considered "nondiscretionary" proposals; therefore, brokers who hold Fund
shares in "street name" for customers cannot vote a customer's shares if that
customer has not given the broker specific voting instructions on the proposal.
These "broker non-votes" will be counted as present for the purposes of
Proposals 2 through 6. Proposal 1 is considered a discretionary proposal upon
which brokers may vote their customers' shares.
INVESTMENT ADVISER. Benham Management Corporation ("BMC") is each
Fund's investment adviser. American Century Services Corporation ("ACSC"), an
affiliate of BMC, provides each Fund with transfer agency and administrative
services. American Century Investment Management, Inc. ("ACIM"), the proposed
investment manager, is also an affiliate of BMC. BMC, ACSC and ACIM are
wholly-owned subsidiaries of American Century Companies, Inc. ("ACC"). The
mailing address of ACC, BMC, ACIM, ACSC and the Funds is P.O. Box 419200, Kansas
City, Missouri 64141-6200.
ANNUAL REPORT. Each Fund will furnish, without charge, a copy of its
most recent annual report and semi-annual report upon request. To request these
materials, please call American Century at 1-800-345-2021.
IMPORTANT INFORMATION YOU SHOULD CONSIDER
The following Q&A is a brief summary of the proposals to be considered
at the Special Meeting of shareholders. As is true with all summaries, however,
perhaps not all of the information or topics that you may think are important
will be included below. As a result, this Q&A is qualified in its entirety by
the more detailed information contained elsewhere in this Proxy Statement or
attached as an Appendix. Accordingly, please read all the enclosed proxy
materials before voting. Please remember to vote your shares as soon as
possible.
Q. When will the Special Meeting be held? Who is eligible to vote?
A. The meeting will be held on Wednesday, July 30, 1997 at 10:00 a.m. at
the Companies' offices at 4500 Main Street, Kansas City, Missouri.
Please note that this will be a business meeting only. There will be no
presentations about the Funds. The record date for the meeting is May
17, 1997. Only shareholders who own shares on that date are entitled to
vote at the meeting. The process of mailing to shareholders the Notice
of Meeting, the proxy and this Proxy Statement began June 2, 1997.
Q. What is being voted on at the Special Meeting?
A. Your Board of Directors is recommending that shareholders consider the
approval of the following proposals:
1. To ratify the selection of Coopers & Lybrand LLP as the
independent auditors of the Companies for each Company's
current fiscal year;
2. To vote on the approval of a Management Agreement with
American Century Investment Management, Inc.;
3. To approve the adoption of standardized investment limitations
by amending or eliminating certain of the Companies' current
fundamental investment limitations;
4. Only for Benham European Government Bond Fund. To vote on the
approval of a Subadvisory Agreement with J.P. Morgan
Investment Management, Inc.
5. Only for Benham Adjustable Rate Government Securities Fund.
Approval of amendments to its fundamental investment
objective.
6. Only for Benham European Government Bond Fund. Approval of
amendments to its fundamental investment objective.
7. To transact such other business which may come before the
meeting, although we are not aware of any other items to be
considered.
Q. How do the Directors recommend that shareholders vote on these
proposals?
A. The Directors unanimously recommend that you vote
1. For the selection of Coopers & Lybrand LLP as the independent
auditors of the Companies for each Company's current fiscal
year;
2. For the approval of a Management Agreement with American
Century Investment Management, Inc.;
3. For the adoption of standardized investment limitations by
amending or eliminating certain of the Companies' current
fundamental investment limitations;
4. For the approval of the Benham European Government Bond Fund's
Subadvisory Agreement with J.P. Morgan Investment Management,
Inc.
5. For the amendments to the Benham Adjustable Rate Government
Securities Fund's fundamental investment objective.
6. For the amendments to the Benham European Government Bond
Fund's fundamental investment objective.
Q. What is the "ratification" of the independent auditors? Have
shareholders voted on Coopers & Lybrand LLP before?
A. The Investment Company Act of 1940 (the "Investment Company Act") not
only requires your Board of Directors to select independent auditors
for the Funds, but also requires them to submit their selection to the
shareholders for their approval (technically called a "ratification")
in any year that a shareholders meeting is being held. Shareholders
have not voted on Coopers & Lybrand LLP previously. Your Board of
Directors selected Coopers & Lybrand LLP for the first time in early
1997. This meeting is the first opportunity for shareholders to vote on
that selection.
A full discussion of the proposal to ratify the selection of Coopers &
Lybrand LLP begins on page __.
Q. What changes are being proposed to the Management Agreement?
A. The proposed Management Agreement with ACIM is substantially different
from the Funds' current Advisory Agreements with BMC. The most
important change is a difference in the way management fees are
calculated under the proposed agreement. Rather than paying separate
investment advisory fees, transfer agency fees, and operating costs, it
is proposed that the Funds pay one "unified" fee which would cover not
just the investment advisory fee, but nearly all expenses of the Funds.
The expenses covered under the unified fee would include fees for
administrative services, transfer agency services, custodian fees,
printing and mailing costs for shareholder materials and shareholder
meeting expenses, all of which are charged to the Funds under the
current arrangements with BMC. While the fees paid under the proposed
Management Agreement are not directly comparable to those of the
Companies' current agreements with their service providers, the effect
of the Proposed Management Agreement would have been a net decrease in
total expenses paid by all of the Funds as a group if the proposed
Management Agreement had been in effect during the year ended December
31, 1996. However, if the proposed Management Agreement had been in
effect during such period, the total expense ratios of some Funds may
have been higher. In no case is the proposed management fee of any Fund
higher than the maximum total expense ratio payable under the current
advisory agreement. An extensive discussion detailing the changes
begins in this proxy statement on page __.
Q. Will the change in investment manager change the way my fund is
managed?
A. No. If the proposed Management Agreement is approved, the investment
management of the Funds will not change in any way. Certain employees
of ACIM currently provide investment management services to the Funds
through an arrangement with BMC by which certain employees of BMC also
provide investment management services to funds managed by ACIM. If the
proposed Investment Management Agreement is approved, ACIM intends to
consolidate the investment management capabilities of the two advisers
in ACIM. The same investment teams that currently manage the Funds will
continue under the proposed Management Agreement with ACIM.
Q. Why are the Directors recommending the Proposed Management Agreement?
A. The Directors have considered various matters in determining the
reasonableness and fairness of the fees payable by the Funds under the
proposed Management Agreement. In reaching their decision, the
Directors examined and weighed many factors, many of which are
discussed in this Proxy Statement. Some of the factors the Directors
used in reaching their determination: (1) the benefits of the unified
fee payable under the proposed Management Agreement over the benefits
payable under the current agreements through which the Funds currently
receive services; (2) the logical total expense ratio relationships
which result from the proposed Management Agreements; (3) the overall
financial impact to shareholders of the Funds as a group; (4)
information concerning the Funds' expense ratios on both an existing
and pro forma basis; and (5) competitive industry fee structures and
expense ratios including, specifically, the relationship of the total
expense ratios under the proposed Management Agreement and those of
similar funds.
Q. Why are shareholders being asked to adopt standardized fundamental
investment limitations?
A. Currently the Funds have fundamental investment restrictions which vary
between Companies and between Funds within the same Company. The funds
also have investment restrictions which reflect legal and other
requirements which are no longer applicable to the Funds. In the
interests of efficiency in fund management and compliance, the fund
management has analyzed the fundamental investment limitations and
policies of the Funds in an effort to formulate a standard set of
policies for all Funds which reflect current industry practice and will
allow the Funds to respond to changes in regulatory and industry
practice without the expense and delay of a shareholder vote.
It should be noted that the adoption of the proposed changes is not
expected to substantially affect the way the Funds are managed.
Some of the proposed changes are quite technical. A full discussion of
all of the specific changes, as well as a further discussion of the
benefits of standardization, begins on page __.
Q. Why are the investment objectives of the Benham Adjustable Rate
Government Securities Fund and Benham European Government Bond Fund
being proposed for amendment?
A. Changes in the markets in which both Funds invest have made changes
advisable for these Funds to effectively pursue their respective
investment objectives.
o Benham Adjustable Rate Government Securities Fund. The
amendment would allow the Fund to broaden its investment
universe to include other types of short-term U.S. government
securities. This is, in part, a response to the investment
manager's opinion that the market for adjustable rate
government securities has not developed as fully as the
overall market for government securities.
o Benham European Government Bond Fund. The amendment would
allow the Fund to broaden its investment universe to include
high quality foreign debt securities from all countries
(except the United States) that satisfy its credit quality
standards. This is a response to changes in the market for
European government debt securities, particularly the prospect
of currency unification in Europe.
Q. If the proposals are approved, when will they take effect?
A. If approved, the Proposed Management Agreement, the Proposed
Subadvisory Agreement, and the proposed changes to the fundamental
investment limitations will take effect on August 1, 1997. The
proposals to change the investment objectives of the Benham Adjustable
Rate Government Securities Fund and the Benham European Government Bond
Fund will be effective on August 25, 1997. The proposal regarding the
ratification of Coopers & Lybrand LLP does not involve any changes from
the Funds' current operations, so it will be effective immediately upon
approval.
Q. Who is asking for your vote?
A. Your Board of Directors is asking you to sign and return the enclosed
proxy so your votes can be cast at the Special Meeting. In the unlikely
event your Fund's meeting is adjourned, these proxies would also be
voted at the reconvened meeting.
Q. If shareholders send their proxies in now as requested, can they later
change their vote?
A. Yes. A proxy can be revoked at any time by writing to us, or by sending
us another proxy, or by attending the meeting and voting in person.
Even if you plan to attend the meeting to vote in person, we ask that
you return the enclosed proxy. Doing so will help us ensure that an
adequate number of shares are present at the meeting.
Q. How do shareholders vote their shares?
A. You can vote by mail or in person at the meeting. The most convenient
way to vote is to complete, sign and mail the enclosed proxy voting
card to us in the enclosed postage-paid envelope. We will vote your
shares exactly as you tell us. If you simply sign the card and return
it, we will follow the recommendation of your Board of Directors and
vote your shares "FOR" all of the proposals. If you have any questions
regarding the enclosed proxy statement or need assistance in voting
your shares, please call our proxy solicitor, D.F. King & Co., Inc., at
1-800-___-____.
SHARE OWNERSHIP
The following table sets forth, as of April 30, 1997, the share
ownership of those shareholders known by ACIM to own more than 5% of a Fund's
outstanding shares.
<TABLE>
Owners of More than 5%:
- ----------------------------------------- ----------------------------------------------- ---------------------------
<S> <C> <C>
Percent of Outstanding
Name of Beneficial Owner Shares Beneficially Owned Shares
- ----------------------------------------- ----------------------------------------------- ---------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
PROPOSAL 1: RATIFICATION OF INDEPENDENT AUDITORS
The Investment Company Act, which is the primary federal law that
regulates the Companies, requires every registered investment company be audited
at least once a year by independent auditors selected by the Board of Directors,
including a majority of the Directors who are not "interested persons" (as
defined in the Investment Company Act). The Investment Company Act also requires
that the selection be submitted for ratification or rejection by the
shareholders at their next meeting following the selection.
At the meeting, the shareholders of each Company will be asked to
ratify the selection of Coopers & Lybrand LLP as each Company's independent
auditors. The Board of Directors chose Coopers & Lybrand upon the recommendation
of the Audit Committee of the Board following an exhaustive selection process
during which the Audit Committee reviewed proposals and conducted interviews
with representatives from each of the so-called "big six" accounting firms and
one regional firm with significant investment company experience. The Board
selected Cooper & Lybrand based upon its expertise as an auditor of investment
companies, the quality of its audit services, its commitment of experienced
audit personnel to the Funds, its tax and international experience in the mutual
fund area, and its use and commitment of technology in performing its audit
functions.
Coopers & Lybrand has no direct or material indirect financial interest
in the Companies or in BMC, ACIM or ACC, other than receipt of fees for services
to the Companies. Coopers & Lybrand representatives will be present at the
meeting and will have an opportunity to make a statement to the shareholders and
to respond to questions.
The approval of a majority of the votes of each Company represented at
the meeting, provided at least a quorum is represented in person or by proxy, is
necessary to ratify the selection of the independent auditors. Unless otherwise
instructed, the proxies will vote for the ratification of the selection of
Coopers & Lybrand LLP as each Company's independent auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND LLP.
PROPOSAL 2: APPROVAL OF NEW MANAGEMENT AGREEMENT FOR EACH FUND
SUMMARY.
The Directors of the Companies are proposing for shareholder approval a
new management agreement between the Companies and ACIM (the "Proposed
Management Agreement"). To lessen shareholder confusion and increase shareholder
understanding of the fees each Fund pays, the Proposed Management Agreement
would replace the Companies' current investment advisory agreements with BMC, an
affiliate of ACIM. Under the Proposed Management Agreement, ACIM will provide,
or arrange for the provision of, all services required by a Fund in exchange for
one "unified" fee. If this proposal is approved, the current investment advisory
agreements will terminate. PLEASE NOTE THAT THE INVESTMENT PROFESSIONALS THAT
CURRENTLY MANAGE THE FUNDS WILL NOT CHANGE, BUT WILL CONTINUE UNDER THE PROPOSED
MANAGEMENT AGREEMENT.
While the unified fees paid under the Proposed Management Agreement are
not directly comparable to those of the Companies' current agreements with their
service providers, the effect of the Proposed Management Agreement would have
been a net decrease in total expenses paid by all of the Funds as a group if the
Proposed Management Agreement had been in effect during the year ended December
31, 1996. Additionally, the Directors considered the effect of the Proposed
Management Agreement on each of the Funds individually. The management fees
payable under the Proposed Management Agreement have been set at levels which
make the total expense ratios of each individual Fund more rational relative to
those of the other Funds. As a result, had the Proposed Management Agreement
been in effect during the year ended December 31, 1996, the total expense ratio
of some Funds would have been higher, some would have been lower, and some would
have remained unchanged. With respect to those Funds for which the total expense
ratio for the prior year would have increased, it is important to note that in
no case is the unified fee contained in the Proposed Management Agreement higher
than the maximum total expense ratio which could have been paid by the Funds
under their current agreements. More details about the changes appear in the
discussion which follows.
Shareholders are being asked to approve the Proposed Management
Agreement, which would replace the Funds' current Investment Advisory Agreement
and Administration Agreement (both of which are described below under "Current
Advisory Agreements"). The factors considered by the Directors in determining
the reasonableness and fairness of the proposed management fees are described
below under "Factors Considered by the Directors". A copy of the Proposed
Management Agreement is set forth as Appendix 1 to this Proxy Statement.
CURRENT ADVISORY AGREEMENTS
Overview. Currently, BMC provides investment advisory services to each
Fund pursuant to an investment advisory agreement between BMC and each Company
dated June 1, 1995 (collectively, the "Current Advisory Agreements"). American
Century Services Corporation ("ACSC"), an affiliate of BMC, also provides
administrative and transfer agency services to each Fund pursuant to a Transfer
Agency and Administrative Services Agreement dated September 3, 1996
(collectively, the "Administration Agreements").
Current Advisory Agreements. Under the Current Advisory Agreements, BMC
is responsible for providing each Fund with continuous investment advice with
regard to each Fund's portfolio, preparing and making available to the Fund
necessary research and statistical data, supervising the purchase and sale of
specific investments by the Fund and performing such other services as are
reasonably incidental to such duties. Additionally, BMC furnishes each Fund with
office space and persons to serve as directors and officers of the Funds. In
return for these services, each of the Companies pays BMC an annual advisory fee
as described in the table below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ---------------------------------------------------------
Company Advisory Fee*
- ----------------------------------------------------------- ---------------------------------------------------------
<S> <C>
American Century Target Maturities Trust 0.35% of the first $750 million
0.25% of the next $750 million
0.24% of the next $1 billion
0.23% of the next $1 billion
0.22% of the next $1 billion
0.21% of the next $1 billion
0.20% of the next $1 billion
0.19% of the net assets over $6.5 billion
- -----------------------------------------------------------
American Century International Bond Funds 0.45% of the first $200 million
0.40% of the next $300 million
0.35% of the next $1 billion
0.34% of the next $1 billion
0.33% of the next $1 billion
0.32% of the next $1 billion
0.31% of the next $1 billion
0.30% of the next $1 billion
0.29% of the net assets over $6.5 billion
- -----------------------------------------------------------
All Other Companies 0.50% of the first $100 million
0.45% of the next $100 million
0.40% of the next $100 million
0.35% of the next $100 million
0.30% of the next $100 million
0.25% of the next $1 billion
0.24% of the next $1 billion
0.23% of the next $1 billion
0.22% of the next $1 billion
0.21% of the next $1 billion
0.20% of the next $1 billion
0.19% of the net assets over $6.5 billion
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
The Advisory Fee is calculated by applying the net assets of each
Company to the appropriate fee schedule set forth above. Each Fund pays BMC a
monthly investment advisory fee equal to its proportionate share of its
Company's Advisory Fee. In addition to the fees set forth above, the American
Century Global Natural Resources Fund is also subject to the following
additional annualized fee based on that Fund's assets: 0.05% of the first $500
million, 0.04% of the next $500 million; and 0.03% of the net assets over $1
billion.
The Current Advisory Agreements were last approved by shareholders at a
meeting held on May 31, 1995.
Administrative Agreements. ACSC serves as each Fund's transfer agent
and administrative agent pursuant to the Administrative Agreements. Transfer
agency services include processing purchase and redemption orders, effecting
transfers of Fund shares, maintaining a Fund's stock registry records and
performing other duties usually and customarily performed by transfer agents.
Administrative services performed by ACSC under each Administrative Agreement
include maintaining and keeping current required books and records, calculating
the Fund's net asset value each business day, preparing and supplying the Funds
with required daily and periodic reports, processing dividends and
distributions, preparation and mailing of tax information forms, and mailing of
annual and semi-annual reports of the Funds.
In return for these administrative services, each of the Companies pays
ACSC an annual administration fee. The administrative fee is calculated by
applying the net assets of each Company to the appropriate fee schedule set
forth in the table below
------------------------------------------- --------------------------
Aggregate Fund Assets Fee Rate
------------------------------------------- --------------------------
Up to $4.5 billion 0.11%
Up to $6.0 billion 0.10%
Up to $9.0 billion 0.09%
Balance over $9.0 billion 0.08%
------------------------------------------- --------------------------
In return for transfer agency services provided, each of the Companies
also pay ACSC a fee based on the number of shareholder accounts maintained and
each shareholder transaction executed on behalf of the Funds. The administration
fee and the transfer agency fee are paid monthly in three installments.
Expenses. In addition to the fees paid to BMC and ACSC, each Fund pays
all of its operating expenses. Such expenses include costs incurred in the
purchase and sale of investment securities, interest, taxes, custodian fees and
charges, costs of reports and proxy materials sent to Fund shareholders, fees of
independent auditors and legal counsel, costs of printing prospectuses, costs of
registering Fund shares, postage and insurance premiums. The Current Advisory
Agreements obligate BMC to reimburse the Funds for all Fund expenses (except for
brokerage commissions and other expenditures in connection with the purchase and
sale of portfolio securities, interest expense, taxes, portfolio insurance
premiums, rating agency fees and extraordinary expenses) which for any fiscal
year exceed certain limitations ("Expense Limitations"). These expense
limitations are summarized in the table below. The current Expense Limitations
went into effect on June 1, 1996. Additionally, from time to time, BMC may
voluntarily waive fees or reimburse the Funds for expenses that exceed certain
thresholds.
Current Total Expense Ratio Limitations
(as a percentage of average daily net assets)
---------------------------------------------------------------- --------------
Expense
Fund Limitation
American Century Equity Growth Fund 0.75%
---------------------------------------------------------------- --------------
American Century Global Gold Fund 0.75%
American Century Global Natural Resources Fund 0.75%
American Century Income & Growth Fund 0.75%
American Century Utilities Fund 0.75%
Benham Adjustable Rate Government Securities Fund 0.60%
Benham Arizona Intermediate-Term Municipal Fund 0.67%
Benham California High-Yield Municipal Fund 0.59%
Benham California Insured Tax-Free Fund 0.59%
Benham California Intermediate-Term Tax-Free Fund 0.59%
Benham California Limited-Term Tax-Free Fund 0.59%
Benham California Long-Term Tax-Free Fund 0.59%
Benham California Municipal Money Market Fund 0.60%
Benham California Tax-Free Money Market Fund 0.53%
Benham European Government Bond Fund 0.90%
Benham Florida Intermediate-Term Municipal Fund 0.67%
Benham Florida Municipal Money Market Fund 0.61%
Benham GNMA Fund 0.60%
Benham Government Agency Money Market Fund 0.60%
Benham Intermediate-Term Tax-Free Fund 0.67%
Benham Intermediate-Term Treasury Fund 0.60%
Benham Long-Term Tax-Free Fund 0.67%
Benham Long-Term Treasury Fund 0.60%
Benham Prime Money Market Fund 0.50%
Benham Short-Term Treasury Fund 0.60%
Benham Target Maturities Trust: 2000 0.62%
Benham Target Maturities Trust: 2005 0.62%
Benham Target Maturities Trust: 2010 0.62%
Benham Target Maturities Trust: 2015 0.62%
Benham Target Maturities Trust: 2020 0.62%
Benham Target Maturities Trust: 2025 0.62%
Benham Tax-Free Money Market Fund 0.67%
- ---------------------------------------------------------------- ---------------
Under the Current Advisory Agreements, BMC may recover amounts absorbed
on behalf of a Fund during the preceding 11 months if, and to the extent that,
for any given month, the Fund's expenses were less than the expense limit in
effect at that time. Brokerage commissions paid in connection with the purchase
and sale of securities or other assets (which are generally considered part of
the cost of the asset), taxes (if any) paid by the Fund, or extraordinary
expenses, such as litigation and indemnification expenses do not count against
the Expense Limitations.
Affiliation of BMC and ACIM. If the Proposed Management Agreements are
approved, ACIM will become the investment manager of the Funds. However, the
investment management of the Funds, including the personnel who are responsible
for managing the Funds, will not be affected in any way as a result. Certain
investment professionals of ACIM currently provide investment management
services to the Funds through an arrangement with BMC. Similarly, certain
investment professionals of BMC also provide investment management services to
mutual funds managed by ACIM. If the Proposed Management Agreements are
approved, ACIM intends to consolidate the investment management capabilities of
the two investment advisers in a single corporate entity, ACIM. ACIM would then
be the investment manager for all funds in the American Century family. ACIM and
BMC are both wholly-owned subsidiaries of ACC.
DESCRIPTION OF PROPOSED MANAGEMENT AGREEMENT.
Duties of ACIM. The Proposed Management Agreement requires ACIM to:
(1) supervise and manage the investment portfolios of the Companies
and direct the purchase and sale of investment securities, subject
only to any directions of the Companies' Boards of Directors, and
(2) pay all the expenses of the Companies except brokerage, taxes,
interest, portfolio insurance, fees and expenses of the
non-interested person Directors (including counsel fees) and
extraordinary expenses.
The Proposed Management Agreement therefore provides that ACIM will
provide or arrange for the provision of all services needed by the Funds,
including those currently provided to the Funds by BMC under the Current
Advisory Agreements and by ACSC under the Administration Agreement. The text of
the Proposed Management Agreement is attached as Appendix 1 to this Proxy
Statement.
Unified Fee. Under the Proposed Management Agreement, the Funds will
pay to ACIM a "unified" fee which is calculated as a percentage of average daily
net assets of each Fund. The exact fee is calculated using a series of formulas
which are described below. The unified fee is an "all-inclusive" fee which
includes payment for investment advisory, administrative, shareholder and other
miscellaneous services provided to the Funds. If the Proposed Management
Agreement is approved, all of the fees payable separately under the Current
Agreements would be replaced by the unified management fee.
The formula for calculating a Fund's management fee is the sum of two
components: (1) a fee component based on the net assets of a Fund's investment
category and (2) a fee component based on the aggregate net assets under
management of the American Century family of mutual funds. The management fee
rates payable under the Proposed Management Agreement decrease as the net assets
of a particular Fund's investment category (as described below) increase. The
management fee rates also decrease as the net assets of the American Century
family of mutual funds increase. The fee components are added together to
calculate the total management fee. The total management fee is expressed as an
annual percentage of average net assets of the Fund payable to ACIM for
providing services under the Proposed Management Agreement. The management fee
is paid to ACIM monthly.
Calculation of Management Fee. The calculation of the total unified
management fee for a Fund is as follows:
(1) Each Fund has been assigned to one of three categories based on
its overall investment objective: Money Market Funds, Bond Funds
and Equity Funds. The individual Funds' investment category
assignments appear in Exhibit B to the Proposed Management
Agreement. The investment categories are defined as follows:
(a) Money Market Fund Category. The Money Market Fund Category
includes the assets of all mutual funds that are managed by ACIM
to maintain by a stable $1.00 share price (usually referred to
as money market funds), invest primarily in debt securities, and
are subject to Rule 2a-7 under the Investment Company Act. The
Money Market Fund Category assets were $6,981,684,708 as of
December 31, 1996.
(b) Bond Fund Category. The Bond Fund Category includes the assets
of all mutual funds managed by ACIM which invest primarily in
debt securities and are not subject to Rule 2a-7 under the
Investment Company Act (i.e., are not money market funds). The
Bond Fund Category assets were $5,211,680,134 as of December 31,
1996.
(c) Equity Fund Category. The Equity Fund Category includes the
assets of all mutual funds managed by ACIM which invest
primarily in equity securities. The Equity Fund Category assets
were $41,300,106,724 as of December 31, 1996.
(2) A separate fee schedule applies to each investment catagory. These
Schedules are listed in Exhibit C to the Proposed Management
Agreement. The total assets of the Funds in that Investment
Category determine the first component of a Fund's fee. This fee
rate component is referred to as the "Investment Category Fee".
(3) The second management fee component relates to the assets of the
American Century family of funds as a whole and is calculated
based on the total assets in all three investment categories. This
fee rate component is referred to as the a Fund's "Complex Fee"
and is determined by the schedule which appears as Exhibit D to
the Proposed Management Agreement. The complex assets were
$53,493,471,566 as of December 31, 1996.
(4) The Management Fee for a Fund is the total of its Investment
Category Fee and the Complex Fee.
On the first business day of each month, the required fee to be paid to
ACIM is calculated and paid for the previous month. The fee for the previous
month will be calculated by multiplying the Management Fee for a Fund by the
aggregate average daily net assets of the Fund during the previous month, and
then multiplying that product by a fraction, the numerator of which is the
number of days in the previous month, and the denominator of which is the number
of days in the current year.
FEE AND EXPENSE COMPARISON
The following tables set forth for each Fund the total fees and
expenses as of the year ended December 31, 1996, under the Current Advisory and
Administrative Agreements and the total fees and expenses had the Proposed
Management Agreement been in effect during that period, and the difference
between the two.
<TABLE>
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Aggregate
Aggregate Fees and Change from Change from
Fees and Expenses Current Current
Expenses Under Advisory Advisory
Under Current Proposed Agreements Agreements (%
Advisory Management (% total of avg. net
Fund Agreements Agreements expenses) assets)
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
American Century Equity Growth Fund $1,782,244 $1,968,428 10.4% 0.07%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
American Century Global Gold Fund $2,432,124 $2,753,624 13.2% 0.08%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
American Century Global Natural Resources Fund $505,564 $471,271 (6.8)% (0.05)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
American Century Income & Growth Fund $4,592,877 $5,179,037 12.8% 0.08%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
American Century Utilities Fund $1,031,990 $993,790 (3.7)% (0.07)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Adjustable Rate Government Securities Fund $1,431,162 $1,467,442 2.5% 0.02%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Arizona Intermediate-Term Municipal Fund $141,971 $142,539 0.4% 0.00%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham California High-Yield Municipal Fund $807,488 $869,236 7.6% 0.04%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham California Insured Tax-Free Fund $935,386 $986,441 5.5% 0.03%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham California Intermediate-Term Tax-Free Fund $2,089,228 $2,258,066 8.1% 0.04%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham California Limited-Term Tax-Free Fund $537,416 $557,091 3.7% 0.02%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham California Long-Term Tax-Free Fund $1,413,725 $1,525,741 7.9% 0.15%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham California Municipal Money Market Fund $1,002,847 $964,762 (3.8)% (0.02)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham California Tax-Free Money Market Fund $2,129,571 $2,166,867 1.8% 0.01%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham European Government Bond Fund $2,037,830 $2,075,718 1.9% 0.02%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Florida Intermediate-Term Municipal Fund $78,845 $60,847 (22.8)% (0.15)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Florida Municipal Money Market Fund $1,119,002 $912,560 (18.4)% (0.11)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham GNMA Fund $6,291,424 $6,751,197 7.3% 0.04%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Government Agency Money Market Fund $2,723,442 $2,337,901 (14.2)% (0.12)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Inflation-Adjusted Treasury Fund
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Intermediate-Term Tax-Free Fund $425,106 $328,069 (22.8)% (0.15)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Intermediate-Term Treasury Fund $1,803,710 $1,802,181 (0.1)% (0.00)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Long-Term Tax-Free Fund $364,157 $281,032 (22.8)% (0.15)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Long-Term Treasury Fund $709,912 $611,780 (13.8)% (0.08)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Prime Money Market Fund $7,429,445 $7,398,020 (0.4)% (0.00)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Short-Term Treasury Fund $216,289 $186,391 (13.8)% (0.08)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Target Maturities Trust: 2000 $1,494,958 $1,590,771 6.4% 0.04%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Target Maturities Trust: 2005 $1,411,273 $1,423,339 0.9% 0.01%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Target Maturities Trust: 2010 $652,960 $628,802 (3.7)% (0.02)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Target Maturities Trust: 2015 $695,402 $669,674 (3.7)% (0.02)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Target Maturities Trust: 2020 $5,050,153 $5,055,753 0.1% 0.00%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Target Maturities Trust: 2025 $291,075 $280,306 (3.7)% (0.02)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
- --------------------------------------------------- --------------- --------------- --------------- ----------------
Benham Tax-Free Money Market Fund $579,194 $430,041 (25.8)% (0.17)%
- --------------------------------------------------- --------------- --------------- --------------- ----------------
o Without BMC's voluntary fee waiver and/or expense reimbursement, which
resulted in actual net fees and expenses of $______ for __________ Fund.
Upon approval of the Proposed Management Agreement for these Funds, ACIM
intends to continue its voluntarily waiver of fees in excess of .50% of
Benham Prime Money Market Fund's average daily net assets through May 31,
1998.
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
Total Fund
Management Other Operating
Fee Rule 12b-1 Fee Expenses* Expenses
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Cur- Pro- Cur- Pro- Cur- Pro- Cur- Pro-
Fund rent posed rent posed rent posed rent posed
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
American Century Equity Growth Fund 0.30% 0.70% 0.00% 0.00% 0.34% 0.00% 0.63% 0.70%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
American Century Global Gold Fund 0.30% 0.70% 0.00% 0.00% 0.32% 0.00% 0.62% 0.70%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
American Century Global Natural Resources Fund
0.30% 0.70% 0.00% 0.00% 0.45% 0.00% 0.75% 0.70%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
American Century Income & Growth Fund 0.30% 0.70% 0.00% 0.00% 0.32% 0.00% 0.62% 0.70%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
American Century Utilities Fund 0.30% 0.70% 0.00% 0.00% 0.43% 0.00% 0.73% 0.70%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Adjustable Rate Government Securities Fund
0.28% 0.60% 0.00% 0.00% 0.30% 0.00% 0.58% 0.60%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Arizona Intermediate-Term Municipal Fund
0.42% 0.52% 0.00% 0.00% 0.10% 0.00% 0.52% 0.52%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California High-Yield Municipal Fund 0.29% 0.55% 0.00% 0.00% 0.22% 0.00% 0.51% 0.55%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Insured Tax-Free Fund 0.29% 0.52% 0.00% 0.00% 0.20% 0.00% 0.49% 0.52%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Intermediate-Term Tax-Free Fund
0.29% 0.52% 0.00% 0.00% 0.19% 0.00% 0.48% 0.52%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Limited-Term Tax-Free Fund
0.29% 0.52% 0.00% 0.00% 0.21% 0.00% 0.50% 0.52%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Long-Term Tax-Free Fund 0.29% 0.52% 0.00% 0.00% 0.19% 0.00% 0.67% 0.52%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Municipal Money Market Fund
0.29% 0.50% 0.00% 0.00% 0.23% 0.00% 0.52% 0.50%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Tax-Free Money Market Fund
0.29% 0.50% 0.00% 0.00% 0.20% 0.00% 0.49% 0.50%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham European Government Bond Fund 0.44% 0.85% 0.00% 0.00% 0.39% 0.00% 0.83% 0.85%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Florida Intermediate-Term Municipal Fund
0.42% 0.52% 0.00% 0.00% 0.25% 0.00% 0.67% 0.52%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Florida Municipal Money Market Fund
0.42% 0.50% 0.00% 0.00% 0.19% 0.00% 0.61% 0.50%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham GNMA Fund 0.28% 0.60% 0.00% 0.00% 0.28% 0.00% 0.56% 0.60%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Government Agency Money Market Fund
0.28% 0.48% 0.00% 0.00% 0.28% 0.00% 0.56% 0.48%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Inflation-Adjusted Treasury Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Intermediate-Term Tax-Free Fund 0.42% 0.52% 0.00% 0.00% 0.25% 0.00% 0.67% 0.52%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Intermediate-Term Treasury Fund 0.28% 0.52% 0.00% 0.00% 0.24% 0.00% 0.52% 0.52%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Long-Term Tax-Free Fund 0.42% 0.52% 0.00% 0.00% 0.25% 0.00% 0.67% 0.52%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Long-Term Treasury Fund 0.28% 0.52% 0.00% 0.00% 0.32% 0.00% 0.60% 0.52%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Prime Money Market Fund 0.31% 0.60% 0.00% 0.00% 0.29% 0.00% 0.60% 0.60%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Short-Term Treasury Fund 0.28% 0.52% 0.00% 0.00% 0.32% 0.00% 0.60% 0.52%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2000 0.30% 0.60% 0.00% 0.00% 0.27% 0.00% 0.56% 0.60%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2005 0.30% 0.60% 0.00% 0.00% 0.30% 0.00% 0.59% 0.60%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2010 0.30% 0.60% 0.00% 0.00% 0.32% 0.00% 0.62% 0.60%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2015 0.30% 0.60% 0.00% 0.00% 0.32% 0.00% 0.62% 0.60%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2020 0.30% 0.60% 0.00% 0.00% 0.30% 0.00% 0.60% 0.60%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2025 0.30% 0.60% 0.00% 0.00% 0.32% 0.00% 0.62% 0.60%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Tax-Free Money Market Fund 0.42% 0.50% 0.00% 0.00% 0.25% 0.00% 0.67% 0.50%
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
</TABLE>
The Annual Expenses for ______________ Funds are expressed without
including BMC's voluntary fee waiver and/or expense reimbursement. After such
waiver and/or reimbursement, the Total Fund Operating Expenses for each Fund
would be ___________, respectively.
The following table show the transaction expenses paid by a shareholder
of the Funds under the Current Advisory and Administrative Agreements and under
the Proposed Management Agreement
<TABLE>
<CAPTION>
Shareholder Transaction Expenses-All Funds
- --------------------------------------------------------------- -------------------------- --------------------------
Under Under Proposed
Current Advisory Management
Agreements Agreements
- --------------------------------------------------------------- -------------------------- --------------------------
- --------------------------------------------------------------- -------------------------- --------------------------
<S> <C> <C>
Sales Load Imposed on Purchases None None
- --------------------------------------------------------------- -------------------------- --------------------------
- --------------------------------------------------------------- -------------------------- --------------------------
Sales Load Imposed on Reinvested Dividends None None
- --------------------------------------------------------------- -------------------------- --------------------------
- --------------------------------------------------------------- -------------------------- --------------------------
Deferred Sales Load None None
- --------------------------------------------------------------- -------------------------- --------------------------
- --------------------------------------------------------------- -------------------------- --------------------------
Redemption Fees* None None
- --------------------------------------------------------------- -------------------------- --------------------------
- --------------------------------------------------------------- -------------------------- --------------------------
Exchange Fees None None
- --------------------------------------------------------------- -------------------------- --------------------------
* Under both agreements, redemption proceeds sent by wire transfer are
subject to a $10 processing fee
</TABLE>
The following example illustrates a hypothetical shareholder's total
expenses on a $1,000 investment in a Fund, assuming a five percent annual return
and redemption at the end of each period, under both the Current Advisory
Agreements (without voluntary fee waivers) and the Proposed Management
Agreements. The example should not be considered a representation of past or
future expenses; actual expenses may be greater or less than those shown.
<TABLE>
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
1 Year 3 Year 5 Year 10 Year
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cur- Pro- Cur- Pro- Cur- Pro- Cur- Pro-
Fund rent posed rent posed rent posed rent posed
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
American Century Equity Growth Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
American Century Global Gold Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
American Century Global Natural Resources Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
American Century Income & Growth Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
American Century Utilities Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Adjustable Rate Government Securities Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Arizona Intermediate-Term Municipal Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California High-Yield Municipal Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Insured Tax-Free Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Intermediate-Term Tax-Free Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Limited-Term Tax-Free Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Long-Term Tax-Free Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Municipal Money Market Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham California Tax-Free Money Market Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham European Government Bond Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Florida Intermediate-Term Municipal Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Florida Municipal Money Market Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham GNMA Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Government Agency Money Market Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Inflation-Adjusted Treasury Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Intermediate-Term Tax-Free Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Intermediate-Term Treasury Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Long-Term Tax-Free Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Long-Term Treasury Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Prime Money Market Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Short-Term Treasury Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2000
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2005
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2010
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2015
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2020
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Target Maturities Trust: 2025
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
Benham Tax-Free Money Market Fund
- -------------------------------------------------- ------- -------- ------- ------- -------- ------- -------- -------
</TABLE>
FACTORS CONSIDERED BY THE DIRECTORS.
The Directors have considered various matters in determining the
reasonableness and fairness of the fees payable by each of the Funds under the
Proposed Management Agreement. The Directors' legal counsel advised the
Directors on the matters to be considered and the standards to be used by the
Directors in reaching their decision.
In reaching their decision, the Directors examined and weighed many
factors, including: (1) the benefits to shareholders of the unified fee payable
under the Proposed Management Agreement over the benefits payable under the
Current Advisory Agreements and Administration Agreements; (2) the logical total
expense ratio relationships which result under the Proposed Management
Agreements; (3) the overall financial impact to shareholders of the Funds as a
group; (4) the nature and quality of the services rendered and the results
achieved by BMC in the areas of investment management (including investment
performance comparisons with the Funds' established benchmark indices) and
administrative services; (5) changes in the mutual fund industry that have
affected the Funds; (6) the payments received by BMC and its affiliates,
including ACIM, from the Funds; (7) extensive financial, personnel and
structural information as to ACIM's organization, including the costs borne by
ACIM and its affiliates in providing services of all types to the Funds; (8) the
organizational capabilities and financial condition of ACIM; (9) an analysis of
the proposed fee rate changes; (10) information concerning each of the Funds'
expense ratios on both an existing and pro forma basis; (11) competitive
industry fee structures and expense ratios including, specifically, the
relationship of the total expense ratios under the Proposed Management Agreement
for each Fund and those of similar funds; and (12) a comparison of the overall
profitability of ACIM to the profitability of certain other investment advisers;
and (13) any other benefits which ACIM and its affiliates (including BMC) may
receive from the current relationship to the Funds.
Certain of the factors addressed by the Directors in reaching its
determination are discussed in more detail below.
BENEFITS OF THE UNIFIED FEE
One characteristic of the Proposed Management Agreement's unified fee
considered by the Directors is that it results in a single management fee for
the Funds. As described above, each Fund currently pays a a number of separate
fees: an investment advisory fee, administrative services fee, and transfer
agency fees in the form of an account fee and transaction fees. Each Fund also
pays all of its other expenses. All of these separate fees and expenses comprise
the total expense ratio under the current structure. As discussed previously,
total expenses of each Fund are "capped" at the limits set forth in the Current
Advisory Agreements, but certain expenses in excess of the cap can be recovered
in certain instances. The Directors, BMC and ACIM have concluded that this
structure is unnecessarily complicated and should be replaced by a simpler
structure in which ACIM provides, or arranges for the provision of, investment
advisory, administrative, shareholder and other miscellaneous services in
exchange for one unified fee.
Another characteristic of the proposed unified fee considered by the
Directors is the operation of its scheduled fee reductions as assets in a Fund's
Investment Category and in the American Century complex of funds increase. In
this way, the Funds can benefit from economies of scale that should become
available to ACIM as assets under its management grow. Many mutual funds,
including the Funds, feature fee schedules which decrease the effective fee as
assets grow in size. However, because the many of the fee schedules examined by
ACIM and the Directors impact only one relatively small component of total
expenses--the investment advisory fee--the benefits of asset growth are often
not reflected in total expense ratios of these mutual funds due to increases in
other expenses paid by such mutual funds. Because nearly all of these expenses
are paid by ACIM under the proposed unified management fee, Fund shareholders
will benefit directly as assets in the Funds increase over time. Shareholders
will enjoy lower expenses as assets in the American Century family grow
regardless of increases in the costs of providing services to the Funds.
RATIONALIZED FUND TOTAL EXPENSE RATIOS
The Directors also considered the whether the total expense ratios of
the Funds under the Proposed Management Agreement would represent the rational
differences in the cost of managing different types of Funds. The Directors
examined both the initial determination of the resulting total expense ratios
(i.e., the Management Fee) and the ability to maintain the Fund's rational total
expense ratios over time.
Determination of Appropriate Fund Total Expense Ratios. The Directors
examined the fees paid under the Current Advisory Agreements and the resulting
total expense ratios of the Funds. This total expense ratio represents the sum
of the Fund expense paid for by mutual fund shareholders. A mutual fund's
shareholders cannot "buy" a fund's investment advisory services alone without
"buying" a mutual fund's "other" expenses. As a result, the Directors concluded
that the relevant cost to a shareholder is a mutual fund's total expense ratio.
The Directors then examined the expectations for the total expense
ratios of funds by investment type. The Directors determined that the total
expense ratios of mutual funds appear to be influenced, among other factors, by
two components: (1) the complexity of managing the type of securities in which a
fund invests and (2) the risk associated with investments in which a fund
invests. The risk component can take many forms, such as credit, market,
reinvestment, structure, currency and interest rate risks. The Directors
concluded that, in general, a fund whose investments are less complex and
feature lower risk than those of another fund should feature a lower total
expense ratio, in part because the lower complexity/lower risk fund is less
costly to manage.
The following example illustrates the Directors' assessment of rational
total expense ratios of mutual funds. Compare a money market fund which invests
only in U.S. Treasury securities with a bond fund which invests in corporate
high yield securities. The money market fund is less complicated and will
require less risk management on the part of the fund's investment manager
relative to the bond fund. Consequently, the Directors concluded that the money
market fund should feature a lower total expense ratio than the bond fund.
Thus, a goal of the Directors was to establish management fees which
would correspond more closely to a rational total expense ratio for each Fund
relative to the other Funds. The Directors believe that the unified fee featured
in the proposed Management Agreement is particularly appropriate for this
purpose, since the management fee represents, with limited exceptions, a Fund's
total expense ratio.
Maintaining Relative Total Expense Ratios. The unified fee designed by
the Directors and ACIM seeks to maintain the relative total expense relationship
between the Funds even as assets grow at differing rates. First, because the
unified fee is essentially all-inclusive, the impact of "other" expenses which
differ among the Funds is borne almost entirely by ACIM. Second, as described
previously, each Fund's investment management fee is determined based on the
assets of all American Century funds in its basic investment category (money
market, bond or equity). This ensures that the rationalized total expense ratio
of these Funds will be maintained as assets grow, even at differing rates. Thus,
the rationalized total expense ratios of the Funds can be better maintained.
ACTUAL AND PRO FORMA MANAGEMENT FEES AND EXPENSES
The Directors considered the effect of the Proposed Management
Agreement on the Funds' fee rates and annual total expense ratios. These fees
are reflected in the table set forth above on page __, which provides
comparative data for the year ended December 31, 1996, assuming that the
proposed fee increase had been in effect throughout the year.
COSTS OF PROVIDING SERVICE
The Directors reviewed information concerning the profitability of
BMC/ACIM's investment management and investment company activities and its
financial condition based on results for the years ended December 31, 1995 and
1996. The information considered by the Directors included operating profit
margin information for BMC/ACIM's investment company business alone (i.e.,
excluding the results of its affiliates) and on a consolidated basis both before
and after BMC/ACIM's net expenditures for marketing the Funds. The Directors
also reviewed profitability data for the year ended December 31, 1996 for each
of the Companies on a Fund-by-Fund basis.
In evaluating the costs of providing service, the Directors paid
particular attention to those Funds whose total expense ratios would have been
higher in 1996 had the Proposed Management Agreement been in effect. The
Directors considered that the competitive nature of these Funds investment
subcategories and more complex investment management emphasized the need to
employ highly qualified personnel and advanced technology in managing these
Funds.
o American Century Quantitative Equity Funds. The equity category of
mutual funds are at one of their most competitive periods in history.
As the number of equity funds has grown, competition for the personnel
required to run these funds successfully has increased tremendously,
increasing costs to investment advisers who wish to attract and retain
such personnel.
o American Century California Tax-Free and Municipal Funds. The
importance of credit analysis and research has significantly increased
for California municipal securities. This is, in part, because the
higher credit quality securities in the market are becoming more
difficult to identify and smaller in quantity. Quality credit analysts
and portfolio management personnel are critical for these Funds to
identify high-quality investment options in this environment and
conversely to avoid bad credit risks.
o Benham GNMA Fund. The GNMA fund category is one of the most complex
government bond funds to manage. Unlike other government bond funds,
GNMA funds require an extensive risk evaluation, since pools of
securities are subject to prepayment risk. Evaluation of this risk is
unlike the credit risk evaluation performed for other government bond
funds. Additionally, transactions in GNMA securities settle less
frequently than in other government bonds and therefore increase the
complexity of managing the Fund. As a result, special skills are
required for managing funds similar to the Benham GNMA Fund and
competition for the personnel required to manage this type of fund is
higher than with other government bond funds.
o American Century Target Maturities Trust. The Funds of the American
Century Target Maturities Trust are a unique investment alternative
with few peers. Management of the Funds, while similar to that of
general Treasury funds, requires that each Fund reach a targeted net
asset value per share in the year of its "maturity". This special
feature entails additional risk for the management company (e.g., the
risk that the anticipated net asset value at maturity cannot be
attained), calls for specialized portfolio skills and necessarily
reduces the pool of experienced personnel.
The Directors considered the fact that the proposed management fees on
these Funds would enhance ACIM's ability to attract and retain highly qualified
investment and administrative professionals in a competitive investment
management environment. The Directors also considered the fact that ACIM had
increased the quantity and quality of the resources committed to managing these
Funds' investment portfolios.
Finally, the Directors considered the fact that the proposed management
fees on these Funds would, in every case, be the same or lower than the maximum
total expense ratio currently in place for each Fund under the Current Advisory
Agreements. Thus, the Funds' total expense ratios under the Current Advisory
Agreements could, at any given time, be as high as those which would have
resulted had the Proposed Management Agreement been in effect.
COMPARISONS WITH OTHER FUNDS
The Directors compared the proposed total expense ratios the Funds over
a certain historical period with the total expense ratios of other investment
companies with similar investment objectives for the same period. Despite the
fact that the Proposed Management Agreement would increase total expense ratios
of some of the Funds, the Directors believe that the resulting total expense
ratios are fair and reasonable when compared to funds with similar investment
objectives. The total expense ratios of all of the Funds place them
substantially below the median fee levels of investment companies with a similar
broad investment objective, based on independent industry research figures.
PORTFOLIO PERFORMANCE
The Directors considered the performance of the Funds as compared to
the performance of their established benchmark indices. The nature and quality
of the investment advice rendered by BMC as well as the backgrounds of the
portfolio managers and other executive personnel of BMC and ACIM were also
considered.
CHANGE IN AGGREGATE TOTAL EXPENSE RATIOS OF THE FUNDS
The Directors also considered the Proposed Management Agreement's
effect on the overall profitability of ACIM. The Directors considered the fact
that the aggregate total expense ratios paid by the Funds would have been lower
if the Proposed Management Agreement had been in effect during the year ended
December 31, 1996. The Directors also relied on the fact that the unified
management fees for each Fund would, in every case, be the same or lower than
the maximum total expense ratios for the Funds under the Current Advisory
Agreements.
VOTING INFORMATION
Approval of the Proposed Management Agreements requires the affirmative
vote of holders of a majority of the outstanding shares of each Fund. For this
purpose, the term "majority of the outstanding shares" means the vote of (i) 67%
or more of the shares of a Fund present at the meeting, so long as the holders
of more than 50% of a Fund's outstanding shares are present or represented by
proxy; or (ii) more than 50% of the outstanding voting securities of a Fund,
whichever is less.
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE PROPOSED MANAGEMENT AGREEMENT.
SUPPLEMENTAL INFORMATION REGARDING ACIM
ACIM is a wholly-owned subsidiary of American Century Companies, Inc.
("ACC"), a financial services firm headquartered in Kansas City, Missouri. ACC's
principal offices are located at 4500 Main Street, Kansas City, Missouri 64111.
James E. Stowers, Jr., Chairman of the Board of ACC and certain other investment
companies managed by ACIM, controls ACC by virtue of his ownership of a majority
of its voting stock.
Set forth below is a list of each officer or Director of the Companies
who is also an officer, employee or director of ACIM or ACC. No employee of
JPMIM is an officer or Director of any Funds.
James M. Benham, 62,. Chairman. Mr. Benham is also Vice Chairman of
ACC.
James E. Stowers III, 38, Director. President, Chief Executive Officer
and Director, ACC, ACSC and ACIM.
William M. Lyons, 41, Executive Vice President. Mr. Lyons is also
Executive Vice President, Chief Operating Officer, and General Counsel of ACIM,
ACSC, and ACC.
Douglas A. Paul, 50, Vice President, Secretary and General Counsel.
Vice President and Associate General Counsel, ACSC.
Maryanne Roepke CPA, 41, Vice President, Treasurer, and Chief Financial
Officer. Ms. Roepke is also Vice President of ACSC.
SUPPLEMENTAL INFORMATION REGARDING THE FUNDS
The actual amount of the investment advisory fee paid to BMC, as well
as administrative and transfer agency service fees paid to ACSC by each Fund for
the twelve months ended December 31, 1996 is set forth below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------- ------------------------- --------------------------
<S> <C> <C>
Administrative Services
Fund Advisory Fee and Transfer Agency Fees
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
American Century Equity Growth Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
American Century Global Gold Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
American Century Global Natural Resources Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
American Century Income & Growth Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
American Century Utilities Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Adjustable Rate Government Securities Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Arizona Intermediate-Term Municipal Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham California High-Yield Municipal Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham California Insured Tax-Free Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham California Intermediate-Term Tax-Free Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham California Limited-Term Tax-Free Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham California Long-Term Tax-Free Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham California Municipal Money Market Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham California Tax-Free Money Market Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham European Government Bond Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Florida Intermediate-Term Municipal Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Florida Municipal Money Market Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham GNMA Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Government Agency Money Market Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Inflation-Adjusted Treasury Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Intermediate-Term Tax-Free Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Intermediate-Term Treasury Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Long-Term Tax-Free Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Long-Term Treasury Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Prime Money Market Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Short-Term Treasury Fund
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Target Maturities Trust: 2000
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Target Maturities Trust: 2005
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Target Maturities Trust: 2010
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Target Maturities Trust: 2015
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Target Maturities Trust: 2020
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Target Maturities Trust: 2025
- --------------------------------------------------------------- ------------------------- --------------------------
- --------------------------------------------------------------- ------------------------- --------------------------
Benham Tax-Free Money Market Fund
- --------------------------------------------------------------- ------------------------- --------------------------
</TABLE>
PROPOSAL 3: ADOPTION OF STANDARDIZED FUNDAMENTAL INVESTMENT LIMITATIONS
BENEFITS OF ADOPTING STANDARDIZED INVESTMENT LIMITATIONS
The primary purpose of this Proposal is to revise the Funds' investment
limitations to conform to limitations which are or are expected to become
standards for similar types of funds managed by ACIM. The Directors have
concurred with ACIM's efforts to analyze the fundamental and non-fundamental
investment limitations of the various funds offered by the American Century
family of mutual funds and, where practical and appropriate to a Fund's
investment objective and policies, propose to shareholders adoption of standard
fundamental limitations and elimination of certain other fundamental
limitations. In many cases, when fundamental limitations are eliminated, a
similar non-fundamental limitation will replace them. It should be noted that,
when these limitations are non-fundamental, ACIM cannot simply change the policy
when it so desires. Rather, the Board of Directors must approve any amendment to
the limitations. The Board of Directors may approve an amendment, for example,
to respond to developments in the marketplace, or changes in federal or state
law.
It is NOT anticipated that any of the sub-proposals will substantially
affect the way the Funds are currently managed. ACIM is presenting them to
shareholders for approval because ACIM believes that increased standardization
will help to promote operational efficiencies and facilitate monitoring of
compliance with both fundamental and non-fundamental investment limitations.
Although adoption of a particular new or revised limitation is not likely to
have a significant impact on the current investment techniques employed by the
Funds, it will contribute to the overall objectives of standardization which are
summarized above. Set forth below, is a detailed description of each of the
proposed changes. You will be given the option to approve all, some, or none of
the proposed changes on the proxy card enclosed with your proxy statement.
A listing of the proposed standard fundamental investment limitations
to be adopted by each Company are set forth in Appendix 2. A listing of the
current fundamental investment limitations of the Funds are set forth in
Appendix 3.
CHANGE #1 TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
DIVERSIFICATION OF INVESTMENTS
(Equity Growth, Income & Growth, Utilities, Inflation-Adjusted
Treasury, Intermediate-Term Tax-Free, Long-Term Tax-Free, Long-Term
Treasury, Prime Money Market, Short-Term Treasury, Tax-Free Money
Market and American Century Target Maturities Trust only)
Equity Growth, Income & Growth, Utilities, Inflation-Adjusted Treasury,
Intermediate-Term Tax-Free, Long-Term Tax-Free, Long-Term Treasury, Prime Money
Market, Short-Term Treasury and Tax-Free Money Market each feature a fundamental
investment objective regarding diversification which states that each may not:
With respect to 75% of its total assets, purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities) if, as a result, more
than 5% of its total assets would be invested in securities of that
issuer. Purchase the securities of any one issuer if immediately after
such purchase the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
Similarly, Target 2000, Target 2005, Target 2010, Target 2015, Target
2020 and Target 2025 each feature a fundamental investment limitation which
states that each may not:
Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities)
if, as a result (a) more than 5% of its total assets would be invested
in the securities of that issuer, or (b) the Fund would hold more than
10% of the outstanding voting securities of that issuer.
It is proposed that shareholders approve eliminating this fundamental
investment limitation.
The American Century Global Gold, American Century Global Natural
Resources, Benham Arizona Intermediate-Term, Benham California Municipal Money
Market, Benham European Government Bond, Benham Florida Intermediate-Term
Municipal and Benham Florida Municipal Money Market Funds are "nondiversified
open-end management companies" under the Investment Company Act and therefore
are not subject to a diversification requirement. The Funds listed above have
elected to be "diversified open-end management investment companies" under the
Investment Company Act, which requires the limitations contained in the current
fundamental limitation to apply to 75% of the total assets of the Funds.
The current policy of the Funds in the American Century Target
Maturities Trust is more restrictive, applying the limitations on ownership to
100% of the Funds' portfolio, while the other Funds listed above apply the
Investment Company Act standard. The primary purpose of the proposed change with
respect to those Funds applying the more restrictive standard is to allow the
Funds to invest in accordance with the limits contained in the Investment
Company Act. This would allow large Funds the flexibility to purchase larger
amounts of issuers' securities when ACIM deems an opportunity attractive. The
new policy would allow the investment policies of the Funds to conform with the
definition of "diversified" as it appears in the Investment Company Act. With
respect to those Funds currently applying the Investment Company Act standard,
the elimination of the fundamental policy will allow the Funds to respond more
quickly if that standard is changed in the future, as well as other legal,
regulatory, and market developments, without the delay or expense of a future
shareholder vote. However, none of the Funds could change their election
regarding their diversification without a future shareholder vote. The
elimination of the fundamental policy would also conform the limitations of the
Funds with the limitation which is expected to become standard for all
diversified funds managed by ACIM. Adoption of this change is not expected to
immediately affect the operation of the Funds.
CHANGE #2 TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING THE
ISSUANCE OF SENIOR SECURITIES
(all Funds except Global Gold, Global Natural Resources, Utilities,
Arizona Intermediate-Term Municipal, European Government Bond,
Florida Intermediate-Term Municipal and Florida Municipal Money
Market)
Target 2000, Target 2005, Target 2010, Target 2015, Target 2020 and
Target 2025 each feature a fundamental investment limitation which states that
each may not:
Issue or sell any class of senior security as defined in the Investment
Company Act of 1940.
Similarly, the fundamental investment limitation for Equity Growth,
Income & Growth, Adjustable Rate Government Securities, California Municipal
Money Market, California Tax-Free Money Market, GNMA, Government Agency Money
Market, Short-Term Treasury, Long-Term Treasury, Prime Money Market and Tax-Free
Money Market requires that each may not:
Issue or sell any class of senior security as defined in the Investment
Company Act of 1940 except for notes or other evidences of indebtedness
permitted under the Fund's borrowing policies and except to the extent
that notes evidencing temporary borrowings or the purchase of
securities on a when-issued or delayed delivery basis might be deemed
such.
Intermediate-Term Treasury features a fundamental investment limitation
which states that the Fund may not:
Issue or sell any class of senior security, except to the extent that
notes evidencing temporary borrowings might be deemed such. The Fund
may not purchase any security for which it may be liable for further
payment or liability.
The fundamental investment limitation for California High Yield
Municipal, California Insured Tax-Free, California Intermediate-Term Tax-Free,
California Limited-Term Tax-Free, California Long-Term Tax-Free,
Intermediate-Term Tax-Free and Long-Term Tax-Free requires that each may not:
Issue or sell any class of senior security as defined in the Investment
Company Act of 1940 except to the extent that transactions in options,
futures, options on futures, other interest rate hedging instruments,
notes evidencing temporary borrowings, or the purchase of securities on
a when-issued or delayed-delivery basis might be deemed such.
It is proposed that shareholders approve replacing the Funds' current
fundamental investment limitation with the following fundamental investment
limitation governing the issuance of senior securities:
"The Fund shall not issue senior securities, except as permitted
under the Investment Company Act of 1940."
The primary purpose of this proposed change is to revise the Fund's
fundamental senior securities limitation to conform to a limitation that is
expected to become the standard for all funds managed by ACIM. If the proposal
is approved, the new fundamental senior securities limitation will also require
shareholder approval to modify.
The proposed limitation clarifies that the Funds may issue senior
securities to the full extent permitted under the Investment Company Act.
Although the definition of a "senior security" involves complex statutory and
regulatory concepts, a senior security is generally thought of as an obligation
of a fund which has a claim to the fund's assets or earnings that takes
precedence over the claims of the fund's shareholders. The Investment Company
Act generally prohibits mutual funds from issuing senior securities; however,
mutual funds are permitted to engage in certain types of transactions that might
be considered "senior securities" as long as certain conditions are satisfied.
For example, a transaction which obligates a fund to pay money at a future date
(e.g., the purchase of securities to be settled on a date that is farther away
than the normal settlement period) may be considered a "senior security." A
mutual fund is permitted to enter into this type of transaction if it maintains
a segregated account containing liquid securities in an amount to its obligation
to pay cash for the securities at a future date. Funds would utilize
transactions that may be considered "senior securities" only in accordance with
applicable regulatory requirements under the Investment Company Act.
Adoption of the proposed limitation on senior securities is not
expected to affect the way in which each fund is managed, the investment
performance of the fund, or the securities or instruments in which the fund
invests. However, adoption of a standardized fundamental investment limitation
will facilitate ACIM's investment compliance efforts and will allow the Fund to
respond to developments in the mutual fund industry and the Investment Company
Act which may make the use of permissible senior securities advantageous.
CHANGE #3 TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING BORROWING
(ALL FUNDS)
The fundamental investment limitation concerning borrowing for Global
Gold, Inflation-Adjusted Treasury and Utilities states that each may not:
Borrow money, except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33-1/3% of the Fund's total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33-1/3% limitation.
Long-Term Treasury and Short-Term Treasury each may not:
Borrow money, except for temporary or emergency purposes, and then only
from a bank. Such borrowings may not exceed 33 1/3% of the Fund's total
assets.
Target 2000, Target 2005, Target 2010, Target 2015, Target 2020 and
Target 2025 each may not:
Borrow money in excess of 33 1/3% of the market value of its total
assets, and then only from a bank and as a temporary measure to satisfy
redemption requests or for extraordinary or emergency purposes, and
provided that immediately after any such borrowing there is an asset
coverage of at least 300 per centum for all such borrowings. To secure
any such borrowing, a Portfolio may not mortgage, pledge, or
hypothecate in excess of 33 1/3% of the value of its total assets. A
Portfolio will not purchase any security while borrowings representing
more than 5% of its total assets are outstanding. A Portfolio will not
borrow in order to increase income (leverage), but only to facilitate
redemption requests that might require untimely disposition of
portfolio securities.
Prime Money Market may not:
Borrow money, except that the Fund may (i) borrow money for temporary
or emergency purposes (not for leveraging or investment) and (ii)
engage in reverse repurchase agreements and forward commitment
transactions for any purpose, provided that (i) and (ii) in combination
do not exceed 33-1/3% of the Fund's total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the
33-1/3% limitation.
The remaining Funds each may not:
Borrow money in excess of 33 1/3% of the market value of its total
assets, and then only from a bank and as a temporary measure to satisfy
redemption requests or for extraordinary or emergency purposes, and
provided that immediately after any such borrowing there is an asset
coverage of at least 300 per centum for all such borrowings. To secure
any such borrowing, the Fund may pledge or hypothecate not in excess of
33 1/3% of the value of its total assets. The Fund will not purchase
any security while borrowings representing more than 5% of its total
assets are outstanding.
It is proposed that shareholders approve replacing the Fund's current
fundamental investment limitation with the following fundamental investment
limitation governing borrowing:
"The Fund shall not borrow money, except that the Fund may borrow money
for temporary or emergency purposes (not for leveraging or investment)
in an amount not exceeding 33-1/3% of the Fund's total assets
(including the amount borrowed) less liabilities (other than
borrowings)."
The primary purpose of the proposed change to the fundamental
investment limitation concerning borrowing is to conform it to a limitation that
is expected to become standard for all funds managed by ACIM. If the proposal is
approved, the amended fundamental borrowing limitation cannot be changed without
a future vote of shareholders.
Adoption of the proposed limitation is not currently expected to affect
the way the Funds are managed, the investment performance of the Funds, or the
securities or instruments in which the Funds invest. However, the funds' current
limitation restricts borrowing to 5% of total assets, rather than the 33 1/3% in
the proposed limitation. The proposed limitation therefore would allow a Fund to
purchase a security while borrowings representing more than 5% of total assets
are outstanding. While the funds have no current intention to purchase
securities while borrowings equal to 5% of its total assets are outstanding, the
flexibility to do so may be beneficial to the Fund at a future date.
The proposed change will therefore have no current impact on the Fund.
However, adoption of a standardized fundamental investment limitation will
facilitate ACIM's investment compliance efforts and will enable the Fund to
respond more promptly if circumstances suggest such a change in the future.
CHANGE #4 TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING LENDING
(all Funds except Global Gold and Inflation-Adjusted Treasury)
Equity Growth and Income & Growth each may not:
Make loans to others, except for the lending of portfolio securities
pursuant to guidelines established by the board of directors or in
connection with purchase of debt securities in accordance with the
Fund's investment objective and policies. The Fund may also lend money
to other funds or portfolios for which BMC is the investment advisor,
as permitted under its investment limitations.
Utilities and Prime Money Market each may not:
Lend any security or make any other loan if, as a result, more than
33-1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to
repurchase agreements.
Long-Term Treasury and Short-Term Treasury each may not:
Make loans, other than loans of portfolio securities pursuant to
guidelines established by the board of trustees, provided that this
limitation will not prohibit the Fund from purchasing debt securities
in accordance with its investment objectives and policies. Loans, in
the aggregate, will be limited to 33 1/3% of the Fund's total assets.
Intermediate-Term Treasury may not:
Lend money other than through the purchase of debt securities in
accordance with its investment policy (this restriction does not apply
to repurchase agreements).
Global Natural Resources, Adjustable Rate Government Securities,
European Government Bond, GNMA, Government Agency Money Market, Target 2000,
Target 2005, Target 2010, Target 2015, Target 2020 and Target 2025 each may not:
Make loans to others, except for the lending of portfolio securities
pursuant to guidelines established by the board of trustees or for the
purchase of debt securities in accordance with its investment
objectives and policies.
The remaining Funds may not:
Make loans to others, except in accordance with the Fund's investment
objective and policies.
It is proposed that shareholders approve the replacement of the
foregoing investment limitations with the following amended fundamental
limitation concerning lending (which, if approved, could not be changed without
a future vote of shareholders):
The Fund may not lend any security or make any other loan if, as a
result, more than 33-1/3% of the Fund's total assets would be lent to
other parties, except, (i) through the purchase of debt securities in
accordance with its investment objective, policies and limitations, or
(ii) by engaging in repurchase agreements with respect to portfolio
securities.
The proposal is not expected to significantly affect the way in which
any of the Funds is managed, the investment performance of the Funds, or the
securities or instruments in which the funds invest. However, the proposed
limitation would clarify the Funds' ability to invest in direct debt instruments
such as loans and loan participations, which are interests in amounts owed to
another party by a company, government or other borrower. These types of
securities may have additional risks beyond conventional debt securities because
they may provide less legal protection for the Fund, or there may be a
requirement that the Fund supply additional cash to a borrower on demand.
Finally, the adoption of standardized investment limitations proposed
will advance the goals of investment limitation standardization.
CHANGE #5 TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
CONCENTRATION OF INVESTMENTS IN A PARTICULAR INDUSTRY
(Global Natural Resources, Equity Growth, Income & Growth,
Intermediate-Term Tax-Free, Long-Term Tax-Free, Long-Term Treasury,
Short-Term Treasury, American Century California Tax-Free and
Municipal Funds and American Century Target Maturities Trust only)
The fundamental investment limitation concerning concentration of
investments in a particular industry for Global Natural Resources requires that
it may not:
Purchase any security if, as a result, 25% or more of the Fund's total
assets will be invested in the securities of issuers having their
principal business in the same industry, except that the Fund will
invest more than 25% of its assets in securities of issuers in the
natural resources industry. This limitation does not apply to
securities issued by the U.S. government or any of its agencies or
instrumentalities.
The remaining Funds may not:
Purchase any security if, as a result, 25% or more of the value of the
Fund's total assets would be invested in the securities of issuers
having their principal business activity in the same industry. However,
this limitation does not apply to securities issued or guaranteed by
the U.S. government or any of its agencies or instrumentalities, or to
municipal securities of any type.
Shareholders are being asked to approve amendment of the above
investment limitation. As proposed, the Funds' current fundamental investment
limitation will be replaced by the following fundamental investment limitation
which will govern concentration of investments for all Funds except Global
Natural Resources:
The Fund shall not concentrate its investments in securities of issuers
in a particular industry (other than securities issued or guaranteed by
the U.S. government or any of its agencies or instrumentalities).
The Global Natural Resources Fund's limitation regarding concentration will be
replaced with the following:
The Fund shall not deviate from its policy of concentrating its
investments in securities of issuers engaged in the natural resources
industries.
The primary purpose of the proposed amendment is to adopt a
concentration limitation that is expected to become the standard for all funds
managed by ACIM. If the proposal is approved, the new fundamental concentration
limitation may not be changed without a future vote of shareholders.
While the proposed change will have no current impact on the Fund,
adoption of the proposed standardized fundamental investment limitation will
advance the goals of standardization.
CHANGE #6 TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION REGARDING
INVESTMENTS IN ILLIQUID SECURITIES
(Equity Growth, GNMA, Government Agency Money Market, Income &
Growth, Intermediate-Term Tax-Free, Long-Term Tax-Free, Adjustable
Rate Government Securities, Tax-Free Money Market, American Century
California Tax-Free and Municipal Funds and American Century Target
Maturities Trust only)
Equity Growth and Income & Growth both feature a fundamental investment
limitation which states that each may not:
Invest in securities that are not readily marketable or the disposition
of which is restricted under federal securities laws (collectively
"illiquid securities") if, as a result, more than 5% of the Fund's net
assets would be invested in illiquid securities.
The fundamental investment limitation for the remaining Funds requires
that each may not:
Invest in securities that are not readily marketable or the disposition
of which is restricted under federal securities laws (collectively,
illiquid securities) if, as a result, more than 10% of the Fund's net
assets would be invested in illiquid securities.
It is proposed that shareholders approve replacing this fundamental
limitation with the following non-fundamental limitation that could be changed
by vote of the Directors in response to regulatory, market, legal, or other
developments without further approval by shareholders.
As an operating policy, The Fund may not purchase any security or enter
into a repurchase agreement if, as a result, more than 15% of its net
assets (10% for money market funds) would be invested in repurchase
agreements not entitling the holder to payment of principal and
interest within seven days and in securities that are illiquid by
virtue of legal or contractual restrictions on resale or the absence of
a readily available market.
Under the rules established by the Securities and Exchange Commission,
mutual funds are required to price their shares daily and to offer daily
redemptions with payment to follow within seven days of the redemption request.
In order to ensure that funds can satisfy these requirements, the SEC requires
mutual funds to limit their holdings in illiquid securities to 15% of their net
assets because illiquid securities may be difficult to value daily and difficult
to sell promptly at an acceptable price. The percentage limitation restricting
the amount the Fund may invest in illiquid securities has been changed by the
SEC over time. For example, prior to 1993, the percentage limit on a fund's
investment in illiquid securities was 10%.
In order to be able to take advantage of regulatory and market
developments, we are asking that shareholders approve the proposal and thereby
eliminate this fundamental investment limitation and replace it with a
non-fundamental limitation on illiquid securities. While non-fundamental
investment limitations can be changed without shareholder approval, such changes
still require the approval of your Board of Directors. Making the Funds'
limitation non-fundamental will allow the Funds to respond more quickly to
legal, regulatory, and market developments without the expense of a future
shareholder vote.
If this proposal is approved by shareholders, the specific types of
securities that may be deemed illiquid will be determined by ACIM, utilizing the
guidelines that it currently uses.
The types of securities that may be considered illiquid by ACIM will
vary over time based on changing market and regulatory conditions. In
determining the liquidity of each Fund's investments, ACIM may consider various
factors, including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer undertakings
to make a market, (4) the nature of the security (including any demand or tender
features), or (5) the nature of the marketplace for trades (including the
ability to assign or offset the Fund's rights and obligations relating to the
investment). Currently, ACIM anticipates treating repurchase agreements maturing
in more than seven days, over-the-counter options, non-government stripped
fixed-rate mortgage backed securities, and some government stripped, fixed-rate
mortgage backed securities, loans and other direct debt instruments, and swap
agreements as illiquid securities.
The proposed change will have no significant impact on the Funds.
However, adoption of a standardized non-fundamental investment limitation will
facilitate ACIM's investment compliance efforts and will enable the Funds to
respond more promptly if circumstances suggest such a change in the future.
CHANGE #7 TO ELIMINATE THE FUNDAMENTAL LIMITATION CONCERNING INVESTMENT IN
OTHER INVESTMENT COMPANIES
(Adjustable Rate Government Securities, Equity Growth, GNMA, Income
& Growth, Intermediate-Term Tax-Free, Intermediate-Term Treasury,
Long-Term Tax-Free, Tax-Free Money Market, American Century
California Tax-Free and Municipal Funds and American Century Target
Maturities Trust only)
The fundamental investment limitation concerning investment in other
investment companies for Equity Growth and Income & Growth states that each may
not:
Except in connection with a merger, consolidation, acquisition, or
reorganization, invest in the securities of other investment companies,
including investment companies advised by BMC, if, immediately after
such purchase or acquisition, more than 10% of the value of the Fund's
total assets would be invested in such securities in the aggregate or
more than 5% in any one such security.
Similarly, the fundamental limitation of California Municipal Money
Market, California Tax-Free Money Market, GNMA and Tax-Free Money Market
requires that each may not:
Acquire or retain the securities of any other investment company,
except in connection with a merger, consolidation, acquisition, or
reorganization.
Intermediate-Term Tax-Free and Long-Term Tax-Free each may not:
Acquire or retain the securities of any other investment company,
except that the Fund may, for temporary purposes, purchase shares of
the Money Market Fund, subject to such restrictions as may be imposed
by (i) the Investment Company Act of 1940 and rules thereunder or (ii)
any state in which shares of the Fund are registered, and may acquire
shares of any investment company in connection with a merger,
consolidation, acquisition, or reorganization.
California High Yield Municipal, California Insured Tax-Free,
California Intermediate-Term Tax-Free, California Limited-Term Tax-Free and
California Long-Term Tax-Free each may not:
Acquire or retain the securities of any other investment company except
that the Fund may, for temporary purposes, purchase shares of a money
market mutual fund, subject to such restrictions as may be imposed by
(i) the Investment Company Act of 1940 and rules thereunder, or (ii)
any State in which shares of the Fund are registered, and may acquire
shares of any investment company in connection with a merger,
consolidation, acquisition, or reorganization.
The remaining Funds feature a fundamental investment limitation which
requires that each may not:
Acquire or retain the securities of any other investment company if, as
a result, more than 3% of such investment company's outstanding shares
would be held by the Fund, more than 5% of the value of the Fund's
assets would be invested in shares of such investment company, or more
than 10% of the value of the Fund's assets would be invested in shares
of investment companies in the aggregate, or except in connection with
a merger, consolidation, acquisition, or reorganization.
Shareholders of the Funds listed above are being asked to approve the
elimination of these limitations.
The ability of mutual funds to invest in other investment companies is
restricted by rules under the Investment Company Act. These restrictions will
remain applicable to the Funds whether or not they are recited in a fundamental
limitation. As a result, elimination of the above fundamental limitation is not
expected to have any impact on the Funds' investment practices, except to the
extent that regulatory requirements may change in the future.
CHANGE #8 TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
INVESTMENTS IN REAL ESTATE
(Equity Growth, Income & Growth, Intermediate-Term Tax-Free,
Intermediate-Term Treasury, Long-Term Tax-Free, Tax-Free Money
Market, American Century California Tax-Free and Municipal Funds and
American Century Target Maturities Trust only)
The real estate fundamental investment limitation of Equity Growth and
Income & Growth states that each may not:
Purchase real estate, real estate mortgage loans, interests in real
estate limited partnerships, provided that this limitation shall not
prohibit (i) the purchase of U.S. Government securities and other debt
securities secured by real estate or interests therein; or (ii) the
purchase of marketable securities issued by companies or investment
trusts that deal in real estate or interests therein.
Intermediate-Term Treasury, Target 2000, Target 2005, Target 2010,
Target 2015, Target 2020 and Target 2025 each feature a fundamental limitation
which states the each may not:
Purchase or sell real estate.
Under slightly different fundamental investment limitation, California
High Yield Municipal, California Insured Tax-Free, California Intermediate-Term
Tax-Free, California Limited-Term Tax-Free, California Long-Term Tax-Free,
Intermediate-Term Tax-Free and Long-Term Tax-Free are not permitted to:
Purchase, sell, or invest in real estate, provided that this limitation
shall not prohibit the purchase of municipal securities and other debt
securities secured by real estate or interests therein.
Likewise, California Municipal Money Market, California Tax-Free Money
Market and Tax-Free Money Market may not:
Purchase, sell, or invest in real estate, provided that this limitation
shall not prohibit the purchase of municipal securities and other debt
securities secured by real estate or interests therein.
Shareholders are being asked to approve amendment of the above
investment limitation. As proposed, the Funds' current fundamental investment
limitation will be replaced by the following fundamental investment limitation
which will govern future purchases and sales of real estate:
The Fund may not purchase or sell real estate unless acquired as a
result of ownership of securities or other instruments. This policy
shall not prevent the Fund from investment in securities or other
instruments backed by real estate or securities of companies that deal
in real estate or are engaged in the real estate business.
The primary purpose of the proposed amendment is to clarify the types
of securities in which the Fund is authorized to invest and to conform the
Fund's fundamental real estate limitation to a limitation that is expected to
become the standard for all funds managed by ACIM. If the proposal is approved,
the new fundamental real estate limitation may not be changed without a future
vote of shareholders.
The proposed limitation would make it explicit that each of the Funds
may acquire a security or other instrument whose payments of interest and
principal may be secured by a mortgage or other right to foreclose on real
estate, in the event of default. Any investments in these securities are, of
course, subject to the Fund's investment objective and policies and to other
limitations regarding diversification and concentration. The proposed limitation
also specifically permits the Fund to sell real estate acquired as a result of
ownership of securities or other instruments. However, in light of the types of
securities in which the Funds regularly invest, ACIM considers this to be a
remote possibility.
To the extent that a Fund buys securities and instruments of companies
in the real estate business, the fund's performance will be affected by the
condition of the real estate market. This industry is sensitive to factors such
as changes in real estate values and property taxes, overbuilding, variations in
rental income, and interest rates. Performance could also be affected by the
structure, cash flow, and arrangement skill of real estate companies.
While the proposed change will have no current impact on the Funds,
adoption of the proposed standardized fundamental investment limitation will
advance the goals of standardization.
CHANGE #9 TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
UNDERWRITING
(Adjustable Rate Government Securities, Equity Growth, GNMA, Income
& Growth, Florida Intermediate-Term Municipal, Florida Municipal
Money Market, Intermediate-Term Tax-Free, Intermediate-Term
Treasury, Long-Term Tax-Free, Tax-Free Money Market, American
Century California Tax-Free and Municipal Funds and American Century
Target Maturities Trust only)
Equity Growth, Income & Growth, Adjustable Rate Government Securities,
GNMA and Government Agency Money Market each have a fundamental investment
limitation which states the each may not "act as an underwriter of securities
issued by others." Similarly, Target 2000, Target 2005, Target 2010, Target
2015, Target 2020, Target 2025 each may not "act as an underwriter of securities
issued by others, except to the extent that the purchase of portfolio securities
may be deemed to be an underwriting."
The remaining Funds have a fundamental investment limitation which
requires that each may not:
Act as an underwriter of securities issued by others, except to the
extent that the purchase of municipal securities or other permitted
investments directly from the issuer thereof or from an underwriter for
an issuer, and the later disposition of such securities in accordance
with the Fund's investment policies and techniques, may be deemed to be
an underwriting.
It is proposed that shareholders approve replacing the current
limitations with the following amended fundamental investment limitation
concerning underwriting:
The Fund shall not act as an underwriter of securities issued by
others, except to the extent that the Fund may be considered an
underwriter within the meaning of the Securities Act of 1933 in the
disposition of restricted securities.
The primary purpose of the proposed amendment is to clarify that the
Fund is not prohibited from selling restricted securities if, as a result of the
sale, the Fund would be considered an underwriter under federal securities laws.
It is also intended to revise the Fund's fundamental limitation on underwriting
so that it conforms to a limitation which is expected to become standard for all
funds managed by ACIM. While the proposed change will have no current impact on
the Fund, adoption of the proposed standardized fundamental investment
limitation will advance the goals of standardization.
CHANGE #10 TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
COMMODITIES
(all Funds except Equity Growth, Global Gold, Income & Growth and
Utilities)
The fundamental investment limitation concerning commodities for
Long-Term Treasury, Short-Term Treasury and Utilities states that each may not:
Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, provided that this
limitation will not prohibit the Fund from purchasing and selling
options and futures contracts or from investing in securities or other
instruments backed by physical commodities.
Prime Money Market's fundamental investment limitation states that it
may not:
Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments.
The remaining Funds are each subject to a fundamental limitation which
states that each may not:
Purchase or sell physical commodities or contracts relating to physical
commodities or buy and sell foreign exchange*.
*European Government Bond deletes the language relating to foreign exchange.
It is proposed that shareholders approve replacing the current
limitations with the following amended fundamental investment limitation
concerning commodities:
The Fund may not purchase or sell physical commodities unless acquired
as a result of ownership of securities or other instruments; provided
that this policy shall not prohibit the Fund from purchasing or selling
options and futures contracts or from investing in securities or other
instruments backed by physical commodities.
The proposed amendment is intended to allow appropriate Funds to have
the flexibility to invest in futures contracts and related options, including
financial futures such as interest rate and stock index futures (S&P 500, etc.).
ACIM recognizes that investment in futures contracts and related options may not
be appropriate for all funds. If the proposed amendment is approved, ACIM and
the Board of Directors will determine the appropriateness of investment in
futures contracts (including financial futures) and related options on a
fund-by-fund basis. ACIM would propose that the Board of Directors adopt a
non-fundamental limitation allowing investment in certain types of futures
contracts and related options for those Funds for which the Directors and
American Century determine such investment is appropriate. The adoption of such
a non-fundamental limitation by the Board of Directors of a Fund will be
accompanied by appropriate disclosure of such policy in the Prospectus and/or
Statement of Additional Information of such Fund.
The proposed amendment to revise the Fund's fundamental limitation on
commodities will also serve the purpose of conforming the limitation with the
limitation which is expected to become standard for all funds managed by
American Century. While the proposed change will have no significant impact on
the Funds, adoption of the proposed standardized fundamental investment
limitation will advance the goals of standardization.
CHANGE #11 TO ELIMINATE THE FUNDAMENTAL LIMITATION CONCERNING INVESTMENTS IN
ISSUERS WITH LESS THAN THREE YEARS OF CONTINUOUS OPERATIONS
(Equity Growth, Income & Growth and Target Maturities Trust only)
Equity Growth and Income & Growth each feature a fundamental investment
limitation which requires that each may not:
Invest in securities of an issuer that, together with any predecessor,
has been in operation for less than three years if, as a result, more
than 5% of the total assets of the Fund would then be invested in such
securities.
Likewise, the Target 2000, Target 2005, Target 2010, Target 2015,
Target 2020 and Target 2025 each may not:
Purchase the securities of any issuer (other than obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities)
if, as a result, more than 5% of the value of its total assets would be
invested in the securities (taken at cost) of issuers which, at the
time of purchase, had been in operation less than three years,
including predecessors and unconditional guarantors.
We are asking shareholders to approve the elimination of the above
fundamental investment limitation.
Certain states, when they had the authority to regulate mutual funds,
required that funds limit their investments in companies which have less than
three years of continuous operation. These states no longer have the authority
to regulate the Funds. Neither the SEC or the Investment Company Act have this
restriction. ACIM does not believe that a blanket prohibition against these
types of investments is in the best interests of the Funds, especially for those
funds that tend to invest in smaller companies. Accordingly, it is recommending
the change. Additionally, the elimination of the fundamental limitation will
advance the goals of standardization.
ACIM recognizes that the investment in securities of companies with
less than three years of continuous operating history may not be appropriate for
all of the Funds. If the proposed amendment is approved, ACIM and the Board of
Directors of the Funds will determine the appropriateness of such investments on
a fund-by-fund basis. ACIM would propose that the Board of Directors adopt a
non-fundamental limitation allowing investment in securities of issuers with
less than three years continuous operating history for those Funds for which the
Directors and ACIM determine such investment is appropriate. The adoption of
such a non-fundamental limitation by the Board of Directors of a Fund will be
accompanied by appropriate disclosure of such policy in the Prospectus and/or
Statement of Additional Information of such Fund.
CHANGE #12 TO ELIMINATE THE FUNDAMENTAL LIMITATION CONCERNING SHORT SALES
(Adjustable Rate Government Securities, Equity Growth, GNMA,
Government Agency Money Market, Income & Growth, Intermediate-Term
Tax-Free, Intermediate-Term Treasury, Long-Term Tax-Free, Tax-Free
Money Market, American Century California Tax-Free and Municipal
Funds and American Century Target Maturities Trust only)
Under their current fundamental investment limitations, Equity Growth
and Income & Growth each may not:
Engage in any short-selling operations (except by selling futures
contracts).
California High Yield Municipal, California Insured Tax-Free,
California Intermediate-Term Tax-Free, California Limited-Term Tax-Free,
California Long-Term Tax-Free, Intermediate-Term Tax-Free and Long-Term Tax-Free
each may not:
Engage in any short-selling operations, except that the Fund may
purchase, sell, or enter into short positions in options on securities
or indexes of securities, futures contracts, options on futures
contracts, and any other interest rate hedging instrument as may be
permitted under the federal securities or commodities laws.
The remaining Funds listed in the box above each may not:
Engage in any short-selling operations.
We are asking shareholders to approve the elimination of these
fundamental investment limitation. If the proposal is approved, the current
fundamental limitation will be replaced with a non-fundamental limitation which
could be changed without a vote of shareholders. The proposed non-fundamental
limitation is as follows:
As an operating policy, the Fund shall not sell securities short,
unless it owns or has the right to obtain securities equivalent in kind
and amount to the securities sold short, and provided that transaction
in futures contracts and options are not deemed to constitute selling
securities short.
In a short sale, an investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. In an
investment technique known as a short sale "against the box," an investor sells
short while owning the same securities in the same amount, or having the right
to obtain equivalent securities. The investor could have the right to obtain
equivalent securities, for example, through its ownership of warrants, options,
or convertible bonds.
ACIM recognizes that short sales may not be appropriate for all of the
Funds. If the proposal is approved, ACIM and the Board of Directors of the Funds
will determine the appropriateness of short sales on a fund-by-fund basis.
Appropriate disclosure of this practice will also be included in such Fund's
Prospectus and/or Statement of Additional Information.
Elimination of the Funds' fundamental limitation on short selling is
unlikely to affect the Funds' investment techniques at this time. Fund
management believes that efforts to standardize the Funds' investment
limitations with those of the other Funds in the American Century family of
funds will facilitate ACIM's investment compliance efforts.
CHANGE #13 TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING MARGIN
PURCHASES OF SECURITIES
(Adjustable Rate Government Securities, Equity Growth, GNMA,
Government Agency Money Market, Income & Growth, Intermediate-Term
Tax-Free, Intermediate-Term Treasury, Long-Term Tax-Free, Tax-Free
Money Market, American Century California Tax-Free and Municipal
Funds and American Century Target Maturities Trust only)
Under their respective current fundamental investment limitations,
Equity Growth and Income & Growth each may not:
Purchase securities on margin, except for such short-term credits as
may be necessary for the clearance of transactions, provided that the
Fund may make initial and variation margin payments in connection with
purchases or sales of futures contracts or options on futures
contracts.
Under the current investment advisory structure. Target 2000, Target
2005, Target 2010, Target 2015, Target 2020 and Target 2025 each may not:
Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of purchases of portfolio securities.
The Fund may not engage in transactions involving puts, calls,
straddles or spreads.
Adjustable Rate Government Securities, GNMA, Government Agency Money
Market and Intermediate-Term Treasury each may not:
Engage in margin transactions or in transactions involving puts, calls,
straddles, or spreads.
California Municipal Money Market, California Tax-Free Money Market and
Tax-Free Money Market each may not:
Engage in margin transactions or in transactions involving puts, calls,
straddles, or spreads, except that it may purchase and hold securities
with rights to put securities to the seller or "standby commitments" in
accordance with its investment techniques.
Intermediate-Term Tax-Free and Long-Term Tax-Free each may not:
Engage in margin transactions, except that it may purchase, sell, or
enter into positions in options on securities or indexes of securities,
futures contracts, options on futures contracts, and other interest
rate hedging instruments, and may make margin deposits in connection
therewith, and may purchase and hold securities with rights to put
securities to the seller (standby commitments) in accordance with its
investment techniques.
The remaining Funds listed in the box above each may not:
Engage in margin transactions, except that it may purchase, sell, or
enter into positions in options on securities or indexes of securities,
futures contracts, options on futures contracts, and other interest
rate hedging instruments, and may make margin deposits in connection
therewith, and may purchase and hold securities with rights to put
securities to the seller (standby commitments) in accordance with its
investment policies.
It is proposed that shareholders of the Fund approve the elimination of
these fundamental investment limitation. If the proposal is approved, the
Directors intend to replace the current fundamental limitation with a
non-fundamental limitation which could be changed without a vote of
shareholders. The proposed non-fundamental limitation is as follows:
As an operating policy, the Fund shall not purchase securities on
margin, except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
Margin purchases involve the purchase of securities with money borrowed
from a broker. "Margin" is the cash or eligible securities that the borrower
places with a broker as collateral against the loan. The current fundamental
limitation prohibits a Fund from purchasing securities on margin, except to
obtain such short-term credits as may be necessary for the clearance of
transactions. Policies of the SEC also allow mutual funds to purchase securities
on margin for initial and variation margin payments made in connection with the
purchase and sale of futures contracts and options on futures contracts. With
these exceptions, mutual funds are prohibited from entering into most types of
margin purchases by applicable SEC policies. The proposed non-fundamental
limitation would parallel the SEC's policies.
Although elimination of the Funds' fundamental limitation on margin
purchases is unlikely to affect any Fund's investment techniques at this time,
in the event of a change in federal regulatory requirements, the Funds may alter
its investment practices in the future. We believe that efforts to standardize
investment limitations will facilitate American Century's investment compliance
efforts.
CHANGE #14 TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
WARRANTS
(Adjustable Rate Government Securities, Equity Growth, GNMA,
Government Agency Money Market, Income & Growth, Intermediate-Term
Tax-Free, Long-Term Tax-Free, Tax-Free Money Market, American
Century California Tax-Free and Municipal Funds and American Century
Target Maturities Trust only)
Equity Growth and Income & Growth both feature a fundamental investment
limitation concerning warrants which requires that each may not:
Purchase warrants, valued at the lower of cost or market, in excess of
5% of the value of the Fund's net assets. Included within that amount,
but not to exceed 2% of the value of the Fund's net assets, may be
warrants which are not listed on the New York or American Stock
Exchanges. Warrants acquired by the Fund at any time in units or
attached to securities are not subject to this restriction.
The remaining Funds listed in the box above each may not:
Purchase any equity securities in any companies, including warrants or
bonds with warrants attached, or any preferred stocks, convertible
bonds, or convertible debentures.
The Directors are proposing that shareholders vote to eliminate the
above fundamental limitations.
Warrants entitle the holder to buy the issuer's stock at a specific
price for a specific period of time. The price of a warrant tends to be more
volatile than, and does not always track, the price of the underlying stock.
Warrants are issued with expiration dates. Once a warrant expires, it has no
value in the market.
The fundamental investment limitation of Equity Growth and Income &
Growth was designed to track certain state regulations which prohibited mutual
funds from purchasing warrants in excess of 10% of the Fund's net assets. Of
that amount, no more than 2% of the value of the Fund's net assets could be
warrants which are not traded on principal domestic or foreign stock exchanges.
These state regulations are no longer applicable to the Funds. Elimination of
the fundamental limitation with respect to these Funds may offer them greater
investment opportunities in the future.
The proposed amendment is intended to allow appropriate Funds to have
the flexibility to invest in warrants to the extent permitted by law. ACIM
recognizes that investment in futures contracts and related options may not be
appropriate for all Funds. If the proposed amendment is approved, ACIM and the
Board of Directors will determine the appropriateness of investment in warrants
on a Fund-by-Fund basis. ACIM would propose that the Board of Directors adopt a
non-fundamental limitation allowing investment in certain types of warrants for
those Funds for which the Directors and American Century determine such
investment is appropriate. The adoption of such a non-fundamental limitation by
the Board of Directors of a Fund will be accompanied by appropriate disclosure
of such policy in the Prospectus and/or Statement of Additional Information of
such Fund. With respect to the remaining Funds, investments in warrants would
generally not be appropriate in light of their investment objectives. The
fundamental investment limitation is therefore redundant of the limitations
established by these Funds' respective investment objectives.
Elimination of the Fund's fundamental limitation regarding investments
in warrants is unlikely to affect the Funds' investments at this time. The
Directors believe that efforts to standardize the Fund's investment limitations
with those of the other Funds in the American Century family will facilitate
ACIM's investment compliance efforts.
CHANGE #15 TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
INVESTMENTS IN OIL, GAS AND MINERAL EXPLORATION DEVELOPMENT PROGRAMS
(All Funds except Global Gold, Intermediate-Term Treasury, Long-Term
Treasury, Prime Money Market, Short-Term Treasury and Utilities)
Currently, both Equity Growth and Income & Growth are subject to a
fundamental investment limitation which states that each may not:
purchase interests in oil, gas and/or mineral exploration development
programs or leases; provided that this limitation shall not prohibit
the purchase of marketable securities issued by companies or other
entities or investment vehicles that engage in businesses relating to
the development, exploration, mining, processing or distribution of
oil, gas or minerals.
The remaining Funds' fundamental investment limitations state that each
may not:
purchase interests in oil, gas and/or mineral exploration development
programs or leases.
It is proposed that this limitation be eliminated. Investment in oil,
gas or other mineral exploration programs is permitted under federal standards
for mutual funds, but has historically prohibited by some state regulations.
None of the Funds intends to invest in the types of securities which are
prohibited under the current fundamental limitation. The proposed amendment is
intended to allow appropriate Funds to have the flexibility to invest in
appropriate securities to the extent permitted by law and as appropriate to a
Fund's investment objective. ACIM recognizes that investment in oil, gas or
other mineral exploration programs may not be appropriate for all, perhaps any,
Funds. If the proposed amendment is approved, ACIM and the Board of Directors
will determine the appropriateness of any investment in any oil, gas or other
mineral exploration programs on a Fund-by-Fund basis. ACIM would propose that
the Board of Directors adopt a non-fundamental limitation allowing investment in
certain types of warrants for those Funds for which the Directors and ACIM
determine such investment is appropriate. The adoption of such a non-fundamental
limitation by the Board of Directors of a Fund will be accompanied by
appropriate disclosure of such policy in the Prospectus and/or Statement of
Additional Information of such Fund. With respect to the remaining Funds,
investments in oil, gas or other mineral exploration programs would generally
not be appropriate in light of their investment objectives. The fundamental
investment limitation is therefore redundant of the limitations set by these
objectives.
Elimination of the limitation is therefore unlikely to affect the
investments of the Funds. However, the Directors believe that efforts to
standardize the Funds' investment limitations with those of the other Funds in
the American Century family of funds will facilitate ACIM's investment
compliance efforts and advance the goals of standardization.
CHANGE #16 TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
INVESTMENTS IN SECURITIES OWNED BY OFFICERS AND DIRECTORS
(Adjustable Rate Government Securities, Equity Growth, GNMA,
Government Agency Money Market, Income & Growth, Intermediate-Term
Tax-Free, Intermediate-Term Treasury, Long-Term Tax-Free, Tax-Free
Money Market, American Century California Tax-Free and Municipal
Funds and American Century Target Maturities Trust only)
The Funds listed above each are currently subject to a fundamental
investment limitation which states that it may not:
Purchase or retain securities of any issuer if, to the knowledge of the
Fund's management, those officers and trustees of the Trust and of its
investment advisor, who each own beneficially more than 0.5% of the
outstanding securities of such issuer, together own beneficially more
than 5% of such securities. However, such restrictions shall not apply
to holdings of the issuers of industrial development bonds.
This investment limitation was originally adopted in response to state
or "Blue Sky" requirements in connection with the registration of shares of the
Fund for sale. These requirements are no longer applicable to the Funds. As a
result, it is proposed that this fundamental limitation be eliminated with
respect to each Fund.
Elimination of the limitation is unlikely to affect the investments of
the Funds. The Directors and ACIM do not believe that such investments cause any
conflict of interest with the Funds. The elimination of this limitation would
advance the goals of standardization of the Funds' investment limitations with
those of the other Funds in the American Century family of funds.
CHANGE #17 TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
INVESTMENTS IN RESTRICTED SECURITIES
(Intermediate-Term Treasury only)
Currently, Intermediate-Term Treasury is subject to a fundamental
investment limitation which states that it may not:
Invest in portfolio securities that the Fund may not be free to sell to
the public without registration under the Securities Act of 1933 or the
taking of similar actions under other securities laws relating to the
sale of securities.
The investment objective of the Fund precludes investment in restricted
securities by limiting the Fund's investments to securities issued by the U.S.
Treasury. As a result, the limitation is redundant and unnecessary. It is
proposed that this limitation be eliminated. While the change will not impact
the Fund's investments, the elimination of the limitation will advance the goals
of investment limitation standardization within the American Century family of
funds.
It may seem to most shareholders that the 18 proposals to modify
fundamental investment policies are technical and somewhat difficult to
understand. ACIM believes, however, that adopting uniform limitations, as well
as ones that are appropriate to the Funds, are in the best interests of Fund
shareholders. Your Board of Directors supports those efforts. If this Proposal 4
is approved by shareholders, it is expected to become effective on August 1,
1997.
The Board of Directors unanimously recommends that shareholders vote
"FOR" the adoption of standardized fundamental investment limitations.
PROPOSAL 4: APPROVAL OF SUBADVISORY AGREEMENT WITH J.P.
MORGAN INVESTMENT MANAGEMENT, INC. (Benham European
Government Bond Fund only)
J.P. Morgan Investment Management, Inc. ("JPMIM") serves as the
subadvisor to the Benham European Government Bond Fund, pursuant to a
sub-investment advisory agreement dated June 1, 1995 (the "Current Subadvisory
Agreement"). This agreement is currently between JPMIM and BMC. If the Proposed
Management Agreement with ACIM is approved, the Current Advisory Agreement
between BMC and the Benham European Government Bond Fund will terminate under
the Investment Company Act. To accommodate this change and retain JPMIM as the
Benham European Government Bond Fund's subadvisor, a replacement Subadvisory
Agreement between JPMIM and ACIM is necessary. No other substantive changes will
be made to the Agreement with JPMIM. The Investment Company Act requires the
shareholders of the Fund to approve the Subadvisory Agreement between JPMIM and
ACIM.
The Current Subadvisory Agreement provides that JPMIM assumes the
responsibilities and obligations BMC assumed under its Advisory Agreement with
the Benham European Government Bond Fund. The Sub-Advisory Agreement also
provides that JPMIM will make investment decisions for the Fund in accordance
with the Fund's investment objective, policies, restrictions and whatever
additional written guidelines it may receive from ACIM from time to time and
that in providing those services, JPMIM will supervise the Fund's investments
and conduct a continual program of investment evaluation and, if appropriate,
sale and reinvestment of the Fund's assets. All investments made by JPMIM are
subject to approval or ratification by BMC. For such services, BMC pays JPMIM a
monthly fee on the first business day of each month at an annual rate computed
at 0.20% of the Fund's average daily net assets up to $200 million and 0.15% of
the Fund's average daily net assets over $200 million.
The Current Subadvisory Agreement terminates automatically in the event
of its assignment and may be terminated by the Benham European Government Bond
Fund at any time without payment of any penalty on 60 days' written notice, by
BMC, a majority of the Benham European Government Bond Fund's Directors in
office at the time, or by vote of a majority of the Benham European Government
Bond Fund's outstanding votes. The Current Subadvisory Agreement may be
terminated by JPMIM upon six months' written notice to the Benham European
Government Bond Fund and BMC.
The terms of the proposed Subadvisory Agreement are identical in all
respects to the terms of the Current Subadvisory Agreement. The proposed
Subadvisory Agreement appears as Appendix 4 to this Proxy Statement.
If the proposed Subadvisory Agreement is approved by the Benham
European Government Bond Fund's shareholders, it will become effective on August
1, 1997 and will remain in effect, unless earlier terminated, for an initial
two-year term and will continue from year-to-year thereafter, subject to
approval annually by the Board of Trustees of the Benham European Government
Bond Fund, including a majority of the non-interested Directors, or by
affirmative vote of a majority of the outstanding votes of the Benham European
Government Bond Fund.
Actual fees paid to JPMIM under the Current Subadvisory Agreement for
the last fiscal year are set forth below under "Supplemental Information
Regarding JPMIM". Such fees would have been the same had the proposed
Subadvisory Agreement been in effect. The Current Subadvisory Agreement was last
approved by shareholders of the Benham European Government Bond Fund at a
meeting of shareholders held on May 31, 1995.
Approval of the proposed Subadvisory Agreement requires the affirmative
vote of holders of a majority of the outstanding votes of Benham European
Government Bond Fund. For this purpose, the term "majority of the outstanding
votes" means the vote of (i) 67% or more of the votes of the Fund present at the
meeting, so long as the holders of more than 50% of the Fund's outstanding votes
are present or represented by proxy; or (ii) more than 50% of the outstanding
votes of the Fund, whichever is less.
THE DIRECTORS OF BENHAM EUROPEAN GOVERNMENT BOND FUND UNANIMOUSLY RECOMMEND
THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE SUBADVISORY AGREEMENT.
SUPPLEMENTAL INFORMATION REGARDING JPMIM
JPMIM has served as the subadvisor to European Government Bond Fund
since the Fund's inception on January 7, 1992. It is a wholly-owned subsidiary
of J.P. Morgan & Co. Incorporated and manages accounts for mutual funds, pension
funds, and other private institutional accounts. With offices in London and
Singapore, JPMIM draws from a worldwide resource base to provide comprehensive
service to an international group of clients. Investment management activities
in Japan, Australia, and Germany are carried out by affiliates: Morgan Trust
Bank in Tokyo, J.P. Morgan Investment Management Australia Limited in Melbourne,
and J.P. Morgan Investment GMBH in Frankfurt. JPMIM's principal business address
is 522 Fifth Avenue, New York, New York 10036.
For the period ended __________, 199_, BMC paid $___________ to JPMIM
for its services under the current Subadvisory Agreement.
The directors and principal executive officers of JPMIM and their
principal occupations are listed below.
<TABLE>
<CAPTION>
- ------------------------------------------- -------------------------------------------------------------------------
Name and Address Position with JPMIM and Principal Occupation
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
<S> <C>
C. Nicholas Potter Chairman of the Board, Morgan Guaranty Trust Company of New York;
9 West 57th Street Director, JPMIM.
New York, NY 10019
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
Kenneth W. Anderson Director of Managing Director, JPMIM.*
83 Pall Mall
London SWIY 5ES
United Kingdom
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
Robert A. Anselmi Director, Managing Director and Secretary, JPMIM.*
522 Fifth Avenue
New York, NY 10036
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
David L. Brigham Director, Managing Director, JPMIM.*
522 Fifth Avenue
New York, NY 10036
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
Jean L. Brunel Director, Morgan Guaranty Trust Company of New York; Director, JPMIM.
9 West 57th Street
New York, NY 10036
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
William L. Cobb, Jr. Vice Chairman, Director and Managing Director, JPMIM.*
522 Fifth Avenue
New York, NY 10019
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
Michael R. Granito Director and Managing Director, JPMIM.*
522 Fifth Avenue
New York, NY 10036
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
Thomas M. Luddy Director and Managing Director, JPMIM.*
522 Fifth Avenue
New York, NY 10036
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
Michael E. Patterson Director, J.P. Morgan & Co. Incorporated; Director, JPMIM
60 Wall Street
New York, NY 10260
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
Keith M. Schappert President, Director and Managing Director, JPMIM.*
522 Fifth Avenue
New York, NY 10036
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
M. Steven Soltis President, Director and Managing Director, JPMIM.*
522 Fifth Avenue
New York, NY 10036
- ------------------------------------------- -------------------------------------------------------------------------
- ------------------------------------------- -------------------------------------------------------------------------
John R. Thomas Director, J.P. Morgan Trust Bank Ltd.; Director JPMIM.
Alaska Park Building
2-20, Alaska 5-chome
Minato-ku, Tokyo, Japan
- ------------------------------------------- -------------------------------------------------------------------------
* Managing Director is an officer's title, and those who hold it are not
necessarily directors of JPMIM.
</TABLE>
PROPOSAL 5: APPROVAL OF AMENDMENT OF GENERAL
INVESTMENT POLICY FOR BENHAM ADJUSTABLE RATE
GOVERNMENT SECURITIES FUND
SUMMARY
The Directors of the Benham Adjustable Rate Government Securities Fund
are recommending that the shareholders of the Fund approve an amendment to the
Fund's general investment policy which dictates that it invest at least 65% of
the Fund's total assets in adjustable rate mortgage securities (ARMs). This
amendment would change the Fund's focus to that of a short-term government bond
fund. This amendment is motivated by changes which have made focusing on
adjustable-rate government securities less desirable. If the change is approved,
the name of the Fund would be changed to the "Benham Short-Term Government
Fund". While the changes contemplated by the Directors' recommendation do not
strictly require shareholder approval, the Directors have concluded that the
change is significant enough to warrant seeking shareholder approval.
PROPOSED CHANGE TO GENERAL INVESTMENT POLICY
The fundamental investment objective of the Fund states that the Fund
"seeks to provide investors with a high level of current income, consistent with
stability of principal." This investment objective has been in effect since the
Fund's inception in January 1992. The Fund currently pursues this objective by
investing at least 65% of the Fund's total assets in ARMs and other securities
collateralized by or representing interests in mortgages (collectively,
"mortgage-backed securities").
The Directors are proposing that the Fund change its general investment
policy so that the Fund pursues its investment objective by investing in
securities of the U.S. government and its agencies and maintaining a weighted
average duration of three years or less.
REASONS FOR PROPOSED CHANGE
The Fund's original design was intended to provide an alternative
short-term government securities investment vehicle. At the time of its
inception, many investors, including BMC (the Fund's current investment
advisor), believed that funds that focused on ARMs and similar short-term
mortgage-backed securities could feature higher yield potential than short-term
U.S. government bond funds with lower share price volatility than more general
mortgage securities funds. During some periods of the Fund's existence, the Fund
was able to realize this intended goal. Generally, however, the market for ARMs
has not developed as the Fund and the investment industry as a whole had
anticipated. First, the activity in the market for ARMs has not risen to the
level of markets for other similar-duration government securities. Second,
despite the lower than expected activity in the ARM market, premiums required to
invest in many securities continue to be higher than for government securities
generally. Both of these factors have impacted the Fund's performance.
Other mutual funds have also been impacted by these developments.
However, these funds have been able to minimize the impact of the ARM market
difficulties by shifting investment to other short-term U.S. government
securities. This option was largely unavailable to the Fund because of its
policy to invest at least 65% of its assets in ARMs and similar mortgage-backed
securities.
The Directors and ACIM believe that the Fund's investment objective
will be better pursued by changing the its general investment policy to allow
investment in other short-term government securities, such as Treasury
securities and securities issued by U.S. government agencies. As a result of the
change, the Fund's potential investment opportunities will be expanded to
include a wider array of short-term government securities. The market for many
of these securities, particularly Treasury securities, is substantially more
active, making the securities more liquid. In addition, premiums required to
purchase short-term Treasury securities and other non-mortgage-backed government
securities are generally smaller, with a greater percentage trading at a
discount to their face value.
The Fund could and expects to continue to invest in ARMs and
mortgage-backed securities. However, it will no longer be required to primarily
rely on these securities to pursue its investment objective. This will allow the
Fund to forego investment in mortgage-backed securities altogether when market
conditions for other types of short-term government securities appear more
favorable. In this sense, the Directors and ACIM, believe that the Fund's
ability to pursue its investment objective will be enhanced.
RISK FACTORS
Short-Term Duration. Duration is a calculation that seeks to measure
the price sensitivity of a bond or bond fund to changes in interest rates. It
measures bond price sensitivity to interest rate changes more accurately than
maturity because it takes into account the time value of cash flows generated
over the bond's life. Future interest and principal payments are discounted to
reflect their present value and then are multiplied by the number of years they
will be received to produce a value that is expressed in years. This value is
referred to as the "duration".
If the proposed change is approved, the Fund's "short-term" designation
means that the Fund will limit the dollar-weighted average duration of its
portfolio to three years or less. This means that the Fund's share price will
generally be less sensitive to changes in interest rates than longer-term
government bond funds.
U.S. Government Securities. If the proposed investment policy change is
approved, the Fund may invest in the following securities (1) direct obligations
of the United States, such as Treasury bills, notes and bonds, which are
supported by the full faith and credit of the United States, and (2) obligations
(including mortgage-related securities) issued or guaranteed by agencies and
instrumentalities of the U.S. government that are established under an act of
Congress.
The securities of some of these agencies and instrumentalities, such as
the Government National Mortgage Association, are guaranteed as to principal and
interest by the U.S. Treasury, and other securities are supported by the right
of the issuer, such as the Federal Home Loan Banks, to borrow from the Treasury.
Other obligations, including those issued by the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation, are sup-ported only
by the credit of the instrumentality.
VOTING REQUIREMENTS
To deem the amendment as approved, the Directors are seeking the
affirmative vote of holders of a majority of the outstanding votes of Benham
Adjustable Rate Government Securities Fund. For this purpose, the term "majority
of the outstanding shares" means the vote of (i) 67% or more of the shares of
the Fund present at the meeting, so long as the holders of more than 50% of the
Fund's outstanding shares are present or represented by proxy; or (ii) more than
50% of the outstanding votes of the Fund, whichever is less. If the proposed
amendment is approved, the Fund's name will be changed to "Benham Short-Term
Government Fund" upon implementation of the amended investment objective.
The Directors of Benham Adjustable Rate Government Securities Fund
unanimously recommend that shareholders of the Fund vote "FOR" the approval of
the Amendments to the Fund's general investment policy.
PROPOSAL 6: APPROVAL OF AMENDMENT OF INVESTMENT
OBJECTIVE FOR BENHAM EUROPEAN GOVERNMENT BOND FUND
SUMMARY
On May 2, 1997, the Directors of the Benham European Government Bond
Fund unanimously approved the amendment of the Fund's fundamental investment
objective. This amendment would change the Fund's investment objective by
allowing the Fund to change its investment universe from European government
bonds to a portfolio of international fixed income securities. This amendment is
motivated by significant changes, most notably the prospect of currency
unification, which are affecting the security markets of Europe. If the
amendment is approved, the name of the Fund would be changed to the "Benham
International Bond Fund". The Directors unanimously recommend that shareholders
vote to approve the Proposal.
CURRENT INVESTMENT OBJECTIVE
The current fundamental investment objective of the Fund states that
the Fund "seeks over the long-term as high a level of total return as is
consistent with investment in the highest quality European government debt
securities." This investment objective has been in effect since the Fund's
inception in January 1992.
PROPOSED INVESTMENT OBJECTIVE
The Directors propose that the fundamental investment objective of the
Fund be amended (the "Proposed Amendment") to state that the Fund
seeks to provide high current income and capital appreciation by
investing in high-quality, nondollar-denominated government and
corporate debt securities outside the U.S.
If the proposal is approved, the Fund will continue its subadvisory
relationship with JPMIM. The subadvisor bases its investment decisions on
fundamental market factors, currency trends, and credit quality. The Fund will
generally invest in countries where the combination of fixed income returns and
currency exchange rates appears attractive, or, if the currency trend is
unfavorable, where the currency risk can be minimized through hedging.
The Fund will normally have at least 65% of its assets in bonds issued
or guaranteed by foreign governments or their agencies and by foreign
authorities, provinces, and municipalities. The Fund may also invest up to 35%
of total assets in high-quality foreign corporate debt.
The Fund's investments may include but shall not be limited to: (1)
Debt obligations issued or guaranteed by (a) a foreign sovereign government or
one of its agencies, authorities, instrumentalities or political subdivisions
including a foreign state, province or municipality, and (b) supranational
organizations such as the World Bank, Asian Development Bank, European
Investment Bank, and European Economic Community; (2) Debt obligations (a) of
foreign banks and bank holding companies, and (b) of domestic banks and
corporations issued in foreign currencies; and (3) Foreign corporate debt
securities and commercial paper.
Such securities may take a variety of forms including those issued in
the local currency of the issuer, Euro bonds, and bonds denominated in the
European currencies or ECUs. ECUs are a composite currency consisting of fixed
amounts of currency of European Economic Community member countries. Normally,
the Fund will only purchase bonds denominated in foreign currencies.
As is currently the case, when JPMIM considers the U.S. dollar to be
attractive relative to European currencies, as much as 25% of the Fund's total
assets may be hedged into dollars. For temporary defensive purposes and under
extraordinary circumstances (such as significant political events), more than
25% of the Fund's total assets may be hedged in this manner.
REASONS FOR THE PROPOSED AMENDMENT
The European Government Bond Fund was designed to provide an investment
vehicle for investors who want to diversify beyond U.S. dollar denominated
securities and who want to protect their income against a decline in the
purchasing power of the U.S. dollar. The prospect for profound economic and
political change upon the adoption of the European Monetary Union (EMU) has
prompted BMC, the subadvisor and the Directors to study and evaluate the benefit
to shareholders of continuing the Fund's focus on only European sovereign debt
securities as the investment strategy for achieving its goals.
The Board of Directors has concluded that it will be increasingly
difficult to maintain a portfolio of diversified European sovereign debt
securities if currency unification is achieved. As a consequence, the Board
recommends that the investment objective of the Fund be changed to permit the
Fund to seek to provide high current income and capital appreciation by
investing in high-quality, nondollar-denominated government and foreign
corporate debt securities. The scope of the Fund will be expanded from European
sovereign debt to worldwide government and corporate debt rated "A" or higher,
as described below. This expanded scope will enable the Fund to take advantage
of investment opportunities throughout the globe but particularly in the
developed economies of Japan, Canada, Sweden and Australia.
As the European Monetary Union unfolds, BMC and ACIM expect the Fund to
incrementally shift from being predominantly invested in European sovereign
debt, to a mix of foreign government and corporate debt, consistent with its
original purpose to provide investors with a vehicle for diversifying beyond
U.S. dollar denominated securities and consistent with its amended investment
objective.
MATURITY AND CREDIT QUALITY
The Proposed Amendment to the Fund's fundamental investment objective
would change certain of the characteristics of the Fund, most notably, the
maturity and credit quality of its investments.
Maturity. To reduce the effect of interest rate changes on the Fund's
share price while seeking higher yields, the weighted average maturity of the
portfolio is likely to average approximately seven years, although the Fund may
adopt longer or shorter maturities in anticipation of falling or rising interest
rates. The Fund may also hold individual securities with maturities longer or
shorter than seven years.
Credit Quality. To limit credit risk, the Fund will invest exclusively
in high quality instruments of the types listed above. "High quality" debt
securities are those rated in the top three ratings categories of Moody's
Investor Service, Inc. ("Moody's"), Standard & Poor's Ratings Services ("S&P")
or Fitch Investors Service, Inc. ("Fitch") or, if not rated, determined to be of
comparable quality by JPMIM. This necessarily means that the Fund will not be
able to invest in securities issued by many countries (including those of
corporations based in these countries) whose credit ratings do not satisfy these
requirements. Currently, the Fund is required to purchase debt securities which
are rated in the highest ratings categories of Moody's or S&P. The table below
provides more information about the securities ratings.
<TABLE>
<CAPTION>
MOODY'S S&P FITCH DEFINITION
------- --- ----- ----------
<S> <C> <C> <C> <C>
Long-Term Aaa AAA AAA Highest quality
Aa AA AA High quality
A A A Upper medium grade
Baa BBB BBB Medium grade
Ba BB BB Speculative
B B B Highly speculative
Caa CCC, CC CCC, CC Vulnerable to default
Ca C C Default is imminent
C D DDD, DD, D Probably in default
MOODY'S S&P FITCH
------- --- -----
Commercial Paper P-1 Superior quality A-1+ Extremely strong F-1+ Exceptionally strong
quality quality
A-1 Strong quality F-1 Very strong quality
P-2 Strong quality A-2 Satisfactory quality F-2 Good credit quality
P-3 Acceptable quality A-3 Adequate quality F-3 Fair credit quality
B Speculative quality F-3 Weak credit quality
C Doubtful quality
</TABLE>
RISK FACTORS AND INVESTMENT TECHNIQUES
Broad international investing involves additional risks which can
increase the potential for losses in the Fund when compared to the Fund's
current investments in European government securities. The currency risk
associated with international investing may be more difficult to eliminate
entirely and the likelihood that hedging will work may be reduced. In addition,
it may not be possible to effectively hedge the currencies of certain
non-European countries. Furthermore, hedging costs may be higher than under the
Fund's Current Investment Objective, and these costs are paid out of a Fund's
capital and reflected in the net asset value. Although expanding the universe of
potential Fund investments to include countries outside Europe may increase
these risks, the high quality credit standards adopted by the Directors should
help to minimize the magnitude of the risks.
Costs. Some foreign markets may be more expensive for U.S. investors to
trade in than those in Europe. As a consequence, the Fund could incur higher
transaction costs for its investments in these markets..
Political and economic factors. The economies, markets, and political
structures of a number of the countries in which the Fund can invest may not
compare favorably with those of the European countries in which the Fund can
currently invest in terms of wealth and stability. Therefore, investments in
these countries will be riskier and more subject to erratic and abrupt price
movements. While this is particularly true for emerging markets of the type in
which the Fund cannot invest, even investments in countries with highly
developed economies are subject to risk.
Location of Company. In determining the domicile or nationality of a
company, the Fund would primarily consider the following factors: (1) whether
the securities of the company are primarily traded in a particular country; (2)
whether the company has its principal place of business or principal office in
or is organized under the laws of a particular country; and (3) regardless of
where a company's securities are traded, whether it derives a significant
proportion (at least 50%) of its revenues or profits from goods produced or
sold, investments made, or services performed in the country or has at least 50%
of its assets situated in that country.
Concentration in the Banking Industry. When the Fund's position in
issues maturing in one year or less equals 35% or more of the Fund's total
assets, the Fund will normally have 25% or more of its assets concentrated in
securities in the banking industry. This is due to the fact that a large
percentage of the international short-term securities are issued by foreign
banks. Investments in the banking industry may be affected by general economic
conditions, exposure to credit losses arising from possible financial
difficulties of borrowers, and the profitability of the banking industry is
largely dependent on the availability and cost of funds for the purpose of
financing lending operations under prevailing money market conditions.
Other Investment Techniques. As is the case under the current
Investment Objective, the Fund may from time to time purchase securities on a
when-issued basis, invest in repurchase agreements, buy or sell interest rate
futures contracts, write or buy options relating to futures contracts and
purchase bonds which are convertible into equities.
VOTING REQUIREMENTS
Approval of the amendment requires the affirmative vote of holders of a
majority of the outstanding votes of Benham European Government Bond Fund. For
this purpose, the term "majority of the outstanding votes" means the vote of (i)
67% or more of the votes of the Fund present at the meeting, so long as the
holders of more than 50% of the Fund's outstanding votes are present or
represented by proxy; or (ii) more than 50% of the outstanding votes of the
Fund, whichever is less.
THE DIRECTORS OF BENHAM EUROPEAN GOVERNMENT BOND FUND UNANIMOUSLY
RECOMMEND THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE PROPOSED AMENDMENT.
OTHER MATTERS
The Board of Directors knows of no other business to be brought before
the meeting. However, if any other matters are properly brought before the
meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
The Funds do not hold annual shareholder meetings. Shareholders wishing
to submit proposals for inclusion in a proxy statement for a subsequent
shareholder meeting should send their written proposals to William M. Lyons,
Executive Vice President, American Century Investments, P.O. Box 419200, Kansas
City, Missouri 64141-6200.
NOTICE TO BANKS, BROKER-DEALERS, AND VOTING
TRUSTEES AND THEIR NOMINEES
Please advise the applicable Fund(s), in care of American Century.,
P.O. Box 419200, Kansas City, Missouri 64141-6200, whether other persons are
beneficial owners of shares for which proxies are being solicited and, if so,
the number of copies of the Proxy Statement you wish to receive in order to
supply copies to the beneficial owners of the respective shares.
Dated: June ___, 1997 William M. Lyons
Executive Vice President
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
Number of Outstanding Votes as of April 30, 1997
Registered Investment Company Number of Votes as of,
Investment Portfolio April 30,1997
- --------------------------------- ------------------------------------------------------- ----------------------------
<S> <C> <C>
American Century Quantitative
Equity Funds American Century Equity Growth Fund
....................................................... ............................
American Century Global Gold Fund
....................................................... ............................
....................................................... ............................
American Century Global Natural Resources Fund
....................................................... ............................
....................................................... ............................
American Century Income & Growth Fund
....................................................... ............................
....................................................... ............................
American Century Utilities Fund
....................................................... ............................
TOTAL FOR
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
- --------------------------------- ------------------------------------------------------- ----------------------------
American Century Government Benham Adjustable Rate Government Securities Fund
Income Trust
....................................................... ............................
Benham GNMA Fund
....................................................... ............................
....................................................... ............................
Benham Government Agency Money Market Fund
....................................................... ............................
....................................................... ............................
Benham Inflation-Adjusted Treasury Fund
....................................................... ............................
....................................................... ............................
Benham Intermediate-Term Treasury Fund
....................................................... ............................
....................................................... ............................
Benham Long-Term Treasury Fund
....................................................... ............................
....................................................... ............................
Benham Short-Term Treasury Fund
....................................................... ............................
TOTAL FOR
AMERICAN CENTURY GOVERNMENT INCOME TRUST
- --------------------------------- ------------------------------------------------------- ----------------------------
American Century Municipal Trust
Benham Arizona Intermediate-Term Municipal Fund
....................................................... ............................
Benham Florida Intermediate-Term Municipal Fund
....................................................... ............................
....................................................... ............................
Benham Florida Municipal Money Market Fund
....................................................... ............................
....................................................... ............................
Benham Intermediate-Term Tax-Free Fund
....................................................... ............................
....................................................... ............................
Benham Long-Term Tax-Free Fund
....................................................... ............................
....................................................... ............................
Benham Tax-Free Money Market Fund
....................................................... ............................
TOTAL FOR AMERICAN CENTURY MUNICIPAL TRUST
- --------------------------------- ------------------------------------------------------- ----------------------------
American Century California
Tax-Free and Municipal Funds
Benham California High-Yield Municipal Fund
....................................................... ............................
Benham California Insured Tax-Free Fund
....................................................... ............................
....................................................... ............................
Benham California Intermediate-Term Tax-Free Fund
....................................................... ............................
....................................................... ............................
Benham California Limited-Term Tax-Free Fund
....................................................... ............................
....................................................... ............................
Benham California Long-Term Tax-Free Fund
....................................................... ............................
....................................................... ............................
Benham California Municipal Money Market Fund
....................................................... ............................
....................................................... ............................
Benham California Tax-Free Money Market Fund
....................................................... ............................
TOTAL FOR
AMERICAN CENTURY CALIFORNIA TAX-FREE AND MUNICIPAL
FUNDS
- --------------------------------- ------------------------------------------------------- ----------------------------
American Century International
Bond Funds Benham European Government Bond Fund
....................................................... ............................
TOTAL FOR
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
- --------------------------------- ------------------------------------------------------- ----------------------------
American Century Investment
Trust Benham Prime Money Market Fund
....................................................... ............................
TOTAL FOR AMERICAN CENTURY INVESTMENT TRUST
- --------------------------------- ------------------------------------------------------- ----------------------------
American Century Target
Maturities Trust Benham Target Maturities Trust: 2000
....................................................... ............................
Benham Target Maturities Trust: 2005
....................................................... ............................
....................................................... ............................
Benham Target Maturities Trust: 2010
....................................................... ............................
....................................................... ............................
Benham Target Maturities Trust: 2015
....................................................... ............................
....................................................... ............................
Benham Target Maturities Trust: 2020
....................................................... ............................
....................................................... ............................
Benham Target Maturities Trust: 2025
....................................................... ............................
TOTAL FOR AMERICAN CENTURY TARGET MATURITIES TRUST
- --------------------------------- ------------------------------------------------------- ----------------------------
</TABLE>
<PAGE>
APPENDICES
Appendix Description
- -------- -----------
1 Management Agreement between the Companies and ACIM
2 Subadvisory Agreement between ACIM and JPMIM
3 Proposed Standard Fundamental Investment Limitations
4 Current Fundamental Investment Limitations
<PAGE>
Appendix 1
MANAGEMENT AGREEMENT
Investor Class
THIS AGREEMENT made as of the 1st day of August, 1997, is by and
between the registered investment companies listed on Exhibit A to this
Agreement (the "Companies") and American Century Investment Management, Inc., a
Delaware corporation (hereinafter called the "Investment Manager").
IN CONSIDERATION of the mutual promises and agreements herein
contained, the parties agree as follows:
1. Investment Management Services. The Investment Manager shall supervise
the investments of each series of shares of the Companies contemplated
as of the date hereof, and such subsequent series of shares as the
Companies shall select the Investment Manager to manage. In such
capacity, the Investment Manager shall maintain a continuous investment
program for each such series, determine what securities shall be
purchased or sold by each series, secure and evaluate such information
as it deems proper and take whatever action is necessary or convenient
to perform its functions, including the placing of purchase and sale
orders.
2. Compliance With Laws. All functions undertaken by the Investment
Manager hereunder shall at all times conform to, and be in accordance
with, any requirements imposed by:
(a) the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules and regulations promulgated thereunder;
(b) any other applicable provisions of law;
(c) the Declaration of Trust or Articles of Incorporation
applicable to each of the Companies as amended from time to
time;
(d) the By-Laws of the Companies as amended from time to time; and
(e) the registration statement of the Companies, as amended from
time to time, filed under the Securities Act of 1933 and the
1940 Act.
3. Board Supervision. All of the functions undertaken by the Investment
Manager hereunder shall at all times be subject to the direction of the
Board of Trustees or Board of Directors (collectively, the "Board of
Directors") of the Companies, its executive committee, or any committee
or officers of the Companies acting under the authority of the Board of
Directors.
4. Payment Of Expenses. The Investment Manager will pay all of the
expenses of each series of the Companies' shares that it shall manage,
other than interest, taxes, brokerage commissions, portfolio insurance,
extraordinary expenses and the fees and expenses of those Directors who
are not "interested persons" as defined in 1940 Act (hereinafter
referred to as the "Independent Directors") (including counsel fees).
The Investment Manager will provide the Companies with all physical
facilities and personnel required to carry on the business of each
series that the Investment Manager shall manage, including but not
limited to office space, office furniture, fixtures and equipment,
office supplies, computer hardware and software and salaried and hourly
paid personnel. The Investment Manager may at its expense employ others
to provide all or any part of such facilities and personnel.
5. Account Fees. The Board of Directors may impose fees for various
account services, proceeds of which may be remitted to the appropriate
Fund or the Advisor at the discretion of the Board. At least 60 days'
prior written notice of the intent to impose such fee must be given to
the shareholders of the affected series.
6. Management Fees.
(a) In consideration of the services provided by the Investment
Manager, each series of shares of the Companies managed by the
Investment Manager shall pay to the Investment Manager a per
annum management fee (hereinafter, the "Applicable Fee"). The
calculation of the Applicable Fee for a series is performed as
follows:
(i) Each series is assigned to one of three categories
based on its overall investment objective
("Investment Category"). The Investment Category
assignments appear in Exhibit B to this Agreement.
(ii) Each series is assigned a fee schedule within its
Investment Category in Exhibit C to this Agreement.
The Investment Category assets managed by the
Investment Manager determines the first component of
a series' fee. This fee is referred to as the
"Investment Category Fee". The determination of the
Investment Category assets is as follows:
a) Money Market Fund Category. The assets which
are used to determine the fee for this
Investment Category is the sum of the assets
of all of the open-end investment company
series which invest primarily in debt
securities, are subject to Rule 2a-7 under
the 1940 Act, managed by the Investment
Manager and distributed to the public by
American Century Investment Services, Inc.
b) Bond Fund Category. The assets which are
used to determine the fee for this
Investment Category is the sum the assets of
all of the open-end investment company
series which invest primarily in debt
securities, are not subject to Rule 2a-7
under the 1940 Act, are managed by the
Investment Manager and are distributed to
the public by American Century Investment
Services, Inc.
c) Equity Fund Category. The assets which are
used to determine the fee for this
Investment Category is the sum the assets of
all of the open-end investment company
series which invest primarily in equity
securities, are managed by the Investment
Manager and are distributed to the public by
American Century Investment Services, Inc.
(iii) A fee which is based on the total assets in all of
the Investment Categories is determined by the
schedule which appears in Exhibit D. This fee is
referred to as the series' "Complex Fee".
(iv) The Applicable Fee for a series is the sum of the
Investment Category Fee and the Complex Fee.
(v) The assets which are used to compute the Applicable
Fee shall be the assets of all of the open-end
investment companies managed by the Investment
Manager. Any exceptions to this requirement shall be
approved by the Board of Directors of the Companies.
(b) On the first business day of each month, each series of shares
shall pay the management fee at the rate specified by
subparagraph (a) of this paragraph 6 to the Investment Manager
for the previous month. The fee for the previous month shall
be calculated by multiplying the Applicable Fee for such
series by the aggregate average daily closing value of the
series' net assets during the previous month, and further
multiplying that product by a fraction, the numerator of which
shall be the number of days in the previous month, and the
denominator of which shall be 365 (366 in leap years).
(c) In the event that the Board of Directors of a Company shall
determine to issue any additional series of shares for which
it is proposed that the Investment Manager serve as investment
manager, the Company and the Investment Manager shall enter
into an Addendum to this Agreement setting forth the name of
the series, the Applicable Fee and such other terms and
conditions as are applicable to the management of such series
of shares.
7. Continuation Of Agreement. This Agreement shall continue in effect,
unless sooner terminated as hereinafter provided, for a period of two
years from the execution hereof, and for as long thereafter as its
continuance is specifically approved, as to each series of the
Companies, at least annually (i) by the Board of Directors of the
Companies or by the vote of a majority of the outstanding voting
securities of the Companies, and (ii) by the vote of a majority of the
Directors of the Companies, who are not parties to the agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
8. Termination. This Agreement may be terminated, with respect to any
series, by the Investment Manager at any time without penalty upon
giving the appropriate Company 60 days' written notice, and may be
terminated, with respect to any series, at any time without penalty by
the Board of Directors of a Company or by vote of a majority of the
outstanding voting securities of such series on 60 days' written notice
to the Investment Manager.
9. Effect Of Assignment. This Agreement shall automatically terminate in
the event of assignment by the Investment Manager, the term
"assignment" for this purpose having the meaning defined in Section
2(a)(4) of the 1940 Act.
10. Other Activities. Nothing herein shall be deemed to limit or restrict
the right of the Investment Manager, or the right of any of its
officers, directors or employees (who may also be a trustee, officer or
employee of a Company), to engage in any other business or to devote
time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, firm, individual or
association.
11. Standard Of Care. In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of its obligations or duties
hereunder on the part of the Investment Manager, it, as an inducement
to it to enter into this Agreement, shall not be subject to liability
to the Companies or to any shareholder of the Companies for any act or
omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
12. Separate Agreement. The parties hereto acknowledge that certain
provisions of the 1940 Act, in effect, treat each series of shares of a
registered investment company as a separate investment company.
Accordingly, the parties hereto hereby acknowledge and agree that, to
the extent deemed appropriate and consistent with the 1940 Act, this
Agreement shall be deemed to constitute a separate agreement between
the Investment Manager and each series of shares of the Companies
managed by the Investment Manager.
13. Use of the Names "American Century" and "Benham." The name "American
Century" and all rights to the use of the names "American Century" and
"Benham" are the exclusive property of American Century Services
Corporation ("ACSC"), an affiliate of the Investment Manager. ACSC has
consented to, and granted a non-exclusive license for, the use by the
Companies and their respective series of the names "American Century"
and "Benham" in the name of the Companies and any series of shares
thereof. Such consent and non-exclusive license may be revoked by ACSC
in its discretion if ACSC, the Investment Manager, or a subsidiary or
affiliate of either of them is not employed as the investment manager
of each series of shares of the Corporation. In the event of such
revocation, the Companies and each series of shares thereof using the
name "American Century" or "Benham" shall cease using the name
"American Century" or "Benham", unless otherwise consented to by ACSC
or any successor to its interest in such names.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written.
AMERICAN CENTURY CALIFORNIA
TAX-FREE AND MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME
TRUST
AMERICAN CENTURY INTERNATIONAL
BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE
EQUITY FUNDS
AMERICAN CENTURY TARGET MATURITIES
TRUST
Attest:
/s/ William M. Lyons /s/ James E. Stowers III
William M. Lyons James E. Stowers III
Executive Vice President President
Attest: AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC.
/s/ William M. Lyons /s/ James E. Stowers III
William M. Lyons James E. Stowers III
Secretary President
<PAGE>
<TABLE>
<CAPTION>
Exhibit A
Registered Investment Companies Subject to this Agreement
Registered Investment Company Series
- ----------------------------- ------
<S> <C>
American Century California Tax-Free and
Municipal Funds Benham California High Yield Municipal Fund
Benham California Insured Tax-Free Fund
Benham California Intermediate-Term Tax-Free Fund
Benham California Limited-Term Tax-Free Fund
Benham California Long-Term Tax-Free Fund
Benham California Municipal Money Market Fund
Benham California Tax-Free Money Market Fund
American Century Government Income Trust Benham Adjustable Rate Government Securities Fund
Benham Capital Preservation Fund
Benham GNMA Fund
Benham Government Agency Money Market Fund
Benham Inflation-Adjusted Treasury Fund
Benham Intermediate-Term Treasury Fund
Benham Long-Term Treasury Fund
Benham Short-Term Treasury Fund
American Century International Bond Funds Benham European Government Bond Fund
American Century Investment Trust Benham Prime Money Market Fund
American Century Municipal Trust Benham Arizona Intermediate-Term Municipal Fund
Benham Florida Intermediate-Term Municipal Fund
Benham Florida Municipal Money Market Fund
Benham Intermediate-Term Tax-Free Fund
Benham Limited-Term Tax-Free Fund
Benham Long-Term Tax-Free Fund
Benham Tax-Free Money Market Fund
American Century Quantitative Equity Funds American Century Equity Growth Fund
American Century Global Gold Fund
American Century Global Natural Resources Fund
American Century Income & Growth Fund
American Century Utilities Fund
American Century Target Maturities Trust Benham Target Maturities Trust: 2000
Benham Target Maturities Trust: 2005
Benham Target Maturities Trust: 2010
Benham Target Maturities Trust: 2015
Benham Target Maturities Trust: 2020
Benham Target Maturities Trust: 2025
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit B
Series Investment Categories
Investment Category Series
- ------------------- ------
<S> <C>
Money Market Funds Benham California Municipal Money Market Fund
Benham California Tax-Free Money Market Fund
Benham Capital Preservation Fund
Benham Florida Municipal Money Market Fund
Benham Government Agency Money Market Fund
Benham Prime Money Market Fund
Benham Tax-Free Money Market Fund
Bond Funds Benham Adjustable Rate Government Securities Fund
Benham Arizona Intermediate-Term Municipal Fund
Benham California High Yield Municipal Fund
Benham California Insured Tax-Free Fund
Benham California Intermediate-Term Tax-Free Fund
Benham California Limited-Term Tax-Free Fund
Benham California Long-Term Tax-Free Fund
Benham European Government Bond Fund
Benham Florida Intermediate-Term Municipal Fund
Benham GNMA Fund
Benham Inflation-Adjusted Treasury Fund
Benham Intermediate-Term Tax-Free Fund
Benham Intermediate-Term Treasury Fund
Benham Limited-Term Tax-Free Fund
Benham Long-Term Tax-Free Fund
Benham Long-Term Treasury Fund
Benham Short-Term Treasury Fund
Benham Target Maturities Trust: 2000
Benham Target Maturities Trust: 2005
Benham Target Maturities Trust: 2010
Benham Target Maturities Trust: 2015
Benham Target Maturities Trust: 2020
Benham Target Maturities Trust: 2025
Equity Funds American Century Equity Growth Fund
American Century Global Gold Fund
American Century Global Natural Resources Fund
American Century Income & Growth Fund
American Century Utilities Fund
</TABLE>
<PAGE>
Exhibit C
Investment Category Fee Schedules: Money Market Funds
<TABLE>
Schedule 1
------------------------------------------------------------------
<S> <C> <C>
Category Assets Fee Rate Schedule 1 Funds:
First $1 billion 0.2500% Benham Capital Preservation Fund
Next $1 billion 0.2070% Benham Government Agency Money Market Fund
------------------------------------------------------------------
Next $3 billion 0.1660%
Next $5 billion 0.1490%
Next $15 billion 0.1380%
Next $25 billion 0.1375%
Thereafter 0.1370%
Schedule 2
------------------------------------------------------------------
Category Assets Fee Rate Schedule 2 Funds:
First $1 billion 0.2700% Benham California Tax-Free Money Market Fund
Next $1 billion 0.2270% Benham California Municipal Money Market Fund
Next $3 billion 0.1860% Benham Florida Municipal Money Market Fund
Next $5 billion 0.1690% Benham Tax-Free Money Market Fund
Next $15 billion 0.1580% ------------------------------------------------------------------
Next $25 billion 0.1575%
Thereafter 0.1570%
Schedule 3
------------------------------------------------------------------
Category Assets Fee Rate Schedule 3 Funds:
First $1 billion 0.3700% Benham Prime Money Market Fund
Next $1 billion 0.3270% ------------------------------------------------------------------
Next $3 billion 0.2860%
Next $5 billion 0.1690%
Next $15 billion 0.2580%
Next $25 billion 0.2575%
Thereafter 0.2570%
Category Fee Schedules: Bond Funds
Schedule 1
------------------------------------------------------------------
Category Assets Fee Rate Schedule 1 Funds:
First $1 billion 0.2800% Benham Short-Term Treasury Fund
Next $1 billion 0.2280% Benham Intermediate-Term Treasury Fund
Next $3 billion 0.1980% Benham Long-Term Treasury Fund
Next $5 billion 0.1780% Benham California Limited-Term Municipal Fund
Next $15 billion 0.1650% Benham California Intermediate-Term Municipal Fund
Next $25 billion 0.1630% Benham California Long-Term Municipal Fund
Thereafter 0.1625% Benham California Insured Tax-Free Fund
Benham Arizona Intermediate-Term Municipal Fund
Benham Florida Intermediate-Term Municipal Fund
Benham Limited-Term Tax-Free Fund
Benham Intermediate-Term Tax-Free Fund
Benham Long-Term Tax-Free Fund
Benham Inflation-Adjusted Treasury Fund
------------------------------------------------------------------
Schedule 2
------------------------------------------------------------------
Category Assets Fee Rate Schedule 2 Funds:
First $1 billion 0.3100% Benham California High-Yield Municipal Fund
Next $1 billion 0.2580% ------------------------------------------------------------------
Next $3 billion 0.2280%
Next $5 billion 0.2080%
Next $15 billion 0.1950%
Next $25 billion 0.1930%
Thereafter 0.1925%
Schedule 3
------------------------------------------------------------------
Category Assets Fee Rate Schedule 3 Funds:
First $1 billion 0.3600% Benham Adjustable Rate Government Securities Fund
Next $1 billion 0.3080% Benham GNMA Fund
Next $3 billion 0.2780% Benham Target Maturities Trust: 2000
Next $5 billion 0.2580% Benham Target Maturities Trust: 2005
Next $15 billion 0.2450% Benham Target Maturities Trust: 2010
Next $25 billion 0.2430% Benham Target Maturities Trust: 2015
Thereafter 0.2425% Benham Target Maturities Trust: 2020
Benham Target Maturities Trust: 2025
------------------------------------------------------------------
Schedule 4
------------------------------------------------------------------
Category Assets Fee Rate Schedule 4 Funds:
First $1 billion 0.6100% Benham European Government Bond Fund
Next $1 billion 0.5580% ------------------------------------------------------------------
Next $3 billion 0.5280%
Next $5 billion 0.5080%
Next $15 billion 0.4950%
Next $25 billion 0.4930%
Thereafter 0.4925%
Category Fee Schedules: Equity Funds
Schedule 1
------------------------------------------------------------------
Category Assets Fee Rate Schedule 1 Funds:
First $1 billion 0.5200% American Century Equity Growth Fund
Next $5 billion 0.4600% American Century Global Gold Fund
Next $15 billion 0.4160% American Century Global Natural Resources Fund
Next $25 billion 0.3690% American Century Income & Growth Fund
Next $50 billion 0.3420% American Century Utilities Fund
Next $150 billion 0.3390% ------------------------------------------------------------------
Thereafter 0.3380%
</TABLE>
<PAGE>
Exhibit D
Complex Fee Schedule
Complex Assets Fee Rate
-------------- --------
First $2.5 billion 0.3100%
Next $7.5 billion 0.3000%
Next $15.0 billion 0.2985%
Next $25.0 billion 0.2970%
Next $50.0 billion 0.2960%
Next $100.0 billion 0.2950%
Next $100.0 billion 0.2940%
Next $200.0 billion 0.2930%
Next $250.0 billion 0.2920%
Next $500.0 billion 0.2910%
Thereafter 0.2900%
<PAGE>
Appendix 2
Standardized Fundamental Investment Restrictions
- --------------------------- ----------------------------------------------------
Subject Language
- --------------------------- ----------------------------------------------------
Senior Securities The Fund shall not issue senior
securities, except as permitted under the Investment
Company Act of 1940.
Borrowing The Fund shall not borrow money, except that the
Fund may borrow money for temporary or emergency
purposes (not for leveraging or investment) in an
amount not exceeding 33-1/3% of the Fund's total
assets (including the amount borrowed) less
liabilities (other than borrowings).
Lending The Fund shall not lend any security or make any
other loan if, as a result, more than 33-1/3% of the
Fund's total assets would be lent to other parties,
except, (i) through the purchase of debt securities
in accordance with its investment objective,
policies and limitations, or (ii) by engaging in
repurchase agreements with respect to portfolio
securities.
Real Estate The Fund shall not purchase or sell real
estate unless acquired as a result of ownership of
securities or other instruments. This policy shall
not prevent the Fund from investment in securities
or other instruments backed by real estate or
securities of companies that deal in real estate or
are engaged in the real estate business.
Concentration The Fund shall not concentrate its investments in
(all but Global Gold, securities of issuers in a particular industry
Global Natural Resources, (other than securities issued or guaranteed by the
Prime Money Market and U.S. government or any ofits agencies or
Utilities) instrumentalities).
Concentration (Global The Fund shall not deviate from its policy of
Gold, Global Natural concentrating its investments in securities of
Resources and Utilities issuers [Global Gold: engaged in mining,
only) fabricating, processing ordealing in gold or other
precious metals, such as silver, platinum and
palladium]/[Utilities: engaged in the utilities
industry]/[Global Natural Resources: engaged in the
natural resources industries].
Concentration Purchase the securities of any issuer (other than
(Prime Money Market only) securities issued or guaranteed by the U.S.
government or any of its agencies or
instrumentalities) if, as a result, more
than 25% of the Fund's total assets would be
invested in the securities of companies whose
principal business activities are in the same
industry, except that the Fund will invest more than
25% of its total assets in the financial services
industry.
Underwriting The Fund shall not act as an underwriter of
securities issued by others, except to the extent
that the Fund may be considered an underwriter
within the meaning of the Securities Act of 1933 in
the disposition of restricted securities.
Commodities The Fund shall not purchase or sell physical
(all non-money commodities unless acquired as a result of
market ownership of securities or other instruments;
funds except Gold) provided that this limitation shall not prohibit
the Fund from purchasing or selling options and
futures contracts or from investing in securities or
other instruments backed by physical commodities.
Commodities The Fund shall not purchase or sell physical
(money market funds) commodities unless acquired as a result of ownership
of securities or other instruments.
Commodities The Fund shall not purchase gold bullion, gold
(Gold Fund only) coins, or gold represented by certificates of
ownership interest or gold futures contracts whose
underlying commodity value would cause the Fund's
aggregate investment in such commodities to exceed
10% of the Fund's net assets.
Investing for Control The Fund shall not invest for purposes of exercising
control over management.
- --------------------------- ----------------------------------------------------
<PAGE>
Appendix 3
Current Fundamental Investment Restrictions
<TABLE>
<CAPTION>
Diversification
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
<S> <C>
Equity Growth With respect to 75% of its total assets, purchase the
Income & Growth securities of any issuer (other than securities issued or
Utilities guaranteed by the U.S. government or its agencies or
Inflation-Adjusted Treasury instrumentalities) if, as a result, more than 5% of its
Intermediate-Term Tax-Free total assets would be invested in securities of that
Long-Term Tax-Free issuer. Purchase the securities of any one issuer if
Long-Term Treasury immediately after such purchase the Fund would hold more
Prime Money Market than 10% of the outstanding voting securities of that
Short-Term Treasury issuer.
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Target 2000 Purchase the securities of any issuer (other than
Target 2005 securities issued or guaranteed by the U.S. government, its
Target 2010 agencies or instrumentalities) if, as a result (a) more
Target 2015 than 5% of its total assets would be invested in the
Target 2020 securities of that issuer, or (b) the Fund would hold more
Target 2025 than 10% of the outstanding voting securities of that
issuer.
- ------------------------------------------------------ -------------------------------------------------------------
Senior Securities
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Global Gold Issue senior securities, except as permitted under the
Global Natural Resources Investment Company Act of 1940.
Inflation-Adjusted Treasury
Utilities
Arizona Intermediate-Term Municipal
European Government Bond
Florida Intermediate-Term Municipal
Florida Municipal Money Market
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Target 2000 Issue or sell any class of senior security as defined in
Target 2005 the Investment Company Act of 1940.
Target 2010
Target 2015
Target 2020
Target 2025
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Issue or sell any class of senior security as defined in
Income & Growth the Investment Company Act of 1940 except for notes or
Adjustable Rate Government Securities other evidences of indebtedness permitted under the Fund's
California Municipal Money Market borrowing policies and except to the extent that notes
California Tax-Free Money Market evidencing temporary borrowings or the purchase of
GNMA securities on a when-issued or delayed delivery basis might
Government Agency Money Market be deemed such.
Short-Term Treasury
Long-Term Treasury
Prime Money Market
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Intermediate-Term Treasury Issue or sell any class of senior security, except to the
extent that notes evidencing temporary borrowings might be
deemed such. Purchase securities for which the Fund might be
liable for further payment or liability.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
California High Yield Municipal Issue or sell any class of senior security as defined in
California Insured Tax-Free the Investment Company Act of 1940 except to the extent
California Intermediate-Term Tax-Free that transactions in options, futures, options on futures,
California Limited-Term Tax-Free other interest rate hedging instruments, notes evidencing
California Long-Term Tax-Free temporary borrowings, or the purchase of securities on a
Intermediate-Term Tax-Free when-issued or delayed-delivery basis might be deemed such.
Long-Term Tax-Free
- ------------------------------------------------------ -------------------------------------------------------------
Borrowing
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Global Gold Borrow money, except that the Fund may borrow money for
Inflation-Adjusted Treasury temporary or emergency purposes (not for leveraging or
Utilities investment) in an amount not exceeding 33-1/3% of the
Fund's total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come
to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to
comply with the 33-1/3% limitation.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Borrow money in excess of 33 1/3% of the market value of
Income & Growth its total assets, and then only from a bank and as a
Global Natural Resources temporary measure to satisfy redemption requests or for
Adjustable Rate Government Securities extraordinary or emergency purposes, and provided that
Arizona Intermediate-Term Municipal immediately after any such borrowing there is an asset
California High Yield Municipal coverage of at least 300 per centum for all such
California Insured Tax-Free borrowings. To secure any such borrowing, the Fund may
California Intermediate-Term Tax-Free pledge or hypothecate not in excess of 33 1/3% of the value
California Limited-Term Tax-Free of its total assets. The Fund will not purchase any
California Long-Term Tax-Free security while borrowings representing more than 5% of its
California Municipal Money Market total assets are outstanding.
California Tax-Free Money Market
European Government Bond
Florida Intermediate-Term Municipal
Florida Municipal Money Market
GNMA
Government Agency Money Market
Intermediate-Term Tax-Free
Intermediate-Term Treasury
Long-Term Tax-Free
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Long-Term Treasury Borrow money, except for temporary or emergency purposes,
Short-Term Treasury and then only from a bank. Such borrowings may not exceed
33 1/3% of the Fund's total assets.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Target 2000 Borrow money in excess of 33 1/3% of the market value of
Target 2005 its total assets, and then only from a bank and as a
Target 2010 temporary measure to satisfy redemption requests or for
Target 2015 extraordinary or emergency purposes, and provided that
Target 2020 immediately after any such borrowing there is an asset
Target 2025 coverage of at least 300 per centum for all such
borrowings. To secure any such borrowing, a Portfolio may not
mortgage, pledge, or hypothecate in excess of 33 1/3% of the
value of its total assets. A Portfolio will not purchase any
security while borrowings representing more than 5% of its
total assets are outstanding. A Portfolio will not borrow in
order to increase income(leverage), but only to facilitate
redemption requests that might require untimely disposition
of portfolio securities.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Prime Money Market Borrow money, except that the Fund may (i) borrow money for
temporary or emergency purposes (not for leveraging or
investment) and (ii) engage in reverse repurchase
agreements and forward commitment transactions for any
purpose, provided that (i) and (ii) in combination do not
exceed 33-1/3% of the Fund's total assets (including the
amount borrowed) less liabilities (other than borrowings).
Any borrowings that exceed this amount will be reduced
within three days (not including Sundays and holidays) to
the extent necessary to comply with the 33-1/3% limitation.
- ------------------------------------------------------ -------------------------------------------------------------
Lending
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Make loans to others, except for the lending of portfolio
Income & Growth securities pursuant to guidelines established by the board
of directors or in connection with purchase of debt securities
in accordance with the Fund's investment objective and
policies. The Fund may also lend money to other funds or
portfolios for which BMC is the investment advisor, as
permitted under its investment restrictions.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Utilities Lend any security or make any other loan if, as a result,
Prime Money Market more than 33-1/3% of its total assets would be lent to
other parties, but this limitation does not apply to purchases
of debt securities or to repurchase agreements.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Long-Term Treasury Make loans, other than loans of portfolio securities
Short-Term Treasury pursuant to guidelines established by the board of
trustees, provided that this restriction will not prohibit
the Fund from purchasing debt securities in accordance with
its investment objectives and policies. Loans, in the
aggregate, will be limited to 33 1/3% of the Fund's total
assets.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Intermediate-Term Treasury Lend money other than through the purchase of debt securities
in accordance with its investment policy (this restriction
does not apply to repurchase agreements).
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Arizona Intermediate-Term Municipal Make loans to others, except in accordance with the Fund's
California High Yield Municipal investment objective and policies.
California Insured Tax-Free
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
California Municipal Money Market
California Tax-Free Money Market
Florida Intermediate-Term Municipal
Florida Municipal Money Market
Intermediate-Term Tax-Free
Long-Term Tax-Free
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Global Natural Resources Make loans to others, except for the lending of portfolio
Adjustable Rate Government Securities securities pursuant to guidelines established by the board
European Government Bond of trustees or for the purchase of debt securities in
GNMA accordance with its investment objectives and policies.
Government Agency Money Market
Target 2000
Target 2005
Target 2010
Target 2015
Target 2020
Target 2025
- ------------------------------------------------------ -------------------------------------------------------------
Real Estate
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Purchase real estate, real estate mortgage loans, interests
Income & Growth in real estate limited partnerships, provided that this
limitation shall not prohibit (i) the purchase of U.S.
Government securities and other debt securities secured by
real estate or interests therein; or (ii) the purchase of
marketable securities issued by companies or investment trusts
that deal in real estate or interests therein.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Intermediate-Term Treasury Purchase or sell real estate.
Target 2000
Target 2005
Target 2010
Target 2015
Target 2020
Target 2025
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
California High Yield Municipal Purchase, sell, or invest in real estate, provided that
California Insured Tax-Free this limitation shall not prohibit the purchase of
California Intermediate-Term Tax-Free municipal securities and other debt securities secured by
California Limited-Term Tax-Free real estate or interests therein.
California Long-Term Tax-Free
Intermediate-Term Tax-Free
Long-Term Tax-Free
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
California Municipal Money Market Purchase, sell, or invest in real estate, provided that
California Tax-Free Money Market this limitation shall not prohibit the purchase of
Tax-Free Money Market municipal securities and other debt securities secured by
real estate or interests therein.
- ------------------------------------------------------ -------------------------------------------------------------
Concentration
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Global Gold Deviate from its policy of concentrating its investments in
securities of issuers engaged in mining, fabricating,
processing or dealing in gold or other precious metals, such
as silver, platinum and palladium.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Global Natural Resources Purchase any security if, as a result, 25% or more of the
Fund's total assets will be invested in the securities of
issuers having their principal business in the same
industry, except that the Fund will invest more than 25% of
its assets in securities of issuers in the natural
resources industry. This limitation does not apply to
securities issued by the U.S. government or any of its
agencies or instrumentalities.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Purchase any security if, as a result, 25% or more of the
Income & Growth value of the Fund's total assets would be invested in the
California High Yield Municipal securities of issuers having their principal business
California Insured Tax-Free activity in the same industry. However, this limitation
California Intermediate-Term Tax-Free does not apply to securities issued or guaranteed by the
California Limited-Term Tax-Free U.S. government or any of its agencies or
California Long-Term Tax-Free instrumentalities, or to municipal securities of any type.
California Municipal Money Market
California Tax-Free Money Market
Inflation-Adjusted Treasury
Intermediate-Term Tax-Free
Long-Term Tax-Free
Long-Term Treasury
Short-Term Treasury
Target 2000
Target 2005
Target 2010
Target 2015
Target 2020
Target 2025
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Prime Money Market Purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or
any of its agencies or instrumentalities) if, as a result,
more than 25% of the Fund's total assets would be invested
in the securities of companies whose principal business
activities are in the same industry, except that the Fund
will invest more than 25% of its total assets in the
financial services industry.
- ------------------------------------------------------ -------------------------------------------------------------
Underwriting
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Act as an underwriter of securities issued by others.
Income & Growth
Adjustable Rate Government Securities
GNMA
Government Agency Money Market
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Global Gold Act as an underwriter of securities issued by others,
Global Natural Resources except to the extent that the Fund may be considered an
Utilities underwriter within the meaning of the Securities Act of
European Government Bond 1933 in the disposition of restricted securities.
Inflation-Adjusted Treasury
Long-Term Treasury
Prime Money Market
Short-Term Treasury
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
California High Yield Municipal Act as an underwriter of securities issued by others,
California Insured Tax-Free except to the extent that the purchase of municipal
California Intermediate-Term Tax-Free securities or other permitted investments directly from the
California Limited-Term Tax-Free issuer thereof or from an underwriter for an issuer, and
California Long-Term Tax-Free the later disposition of such securities in accordance with
California Municipal Money Market the Fund's investment policies and techniques, may be
California Tax-Free Money Market deemed to be an underwriting.
Florida Intermediate-Term Municipal
Florida Municipal Money Market
Intermediate-Term Tax-Free
Long-Term Tax-Free
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Target 2000 Act as an underwriter of securities issued by others,
Target 2005 except to the extent that the purchase of portfolio
Target 2010 securities may be deemed to be an underwriting.
Target 2015
Target 2020
Target 2025
- ------------------------------------------------------ -------------------------------------------------------------
Illiquid Securities
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Invest in securities that are not readily marketable or the
Income & Growth disposition of which is restricted under federal securities
laws (collectively "illiquid securities") if, as a result,
more than 5% of the Fund's net assets would be invested in
illiquid securities.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Adjustable Rate Government Securities Invest in securities that are not readily marketable or the
California High Yield Municipal disposition of which is restricted under federal securities
California Insured Tax-Free laws (collectively, illiquid securities) if, as a result,
California Intermediate-Term Tax-Free more than 10% of the Fund's net assets would be invested in
California Limited-Term Tax-Free illiquid securities.
California Long-Term Tax-Free
California Municipal Money Market
California Tax-Free Money Market
GNMA
Government Agency Money Market
Intermediate-Term Tax-Free
Long-Term Tax-Free
Target 2000
Target 2005
Target 2010
Target 2015
Target 2020
Target 2025
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
Other Investment Companies
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Except in connection with a merger, consolidation,
Income & Growth acquisition, or reorganization, invest in the securities of
other investment companies, including investment companies
advised by BMC, if, immediately after such purchase or
acquisition, more than 10% of the value of the Fund's total
assets would be invested in such securities in the aggregate
or more than 5% in any one such security.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
California Municipal Money Market Acquire or retain the securities of any other investment
California Tax-Free Money Market company, except in connection with a merger, consolidation,
GNMA acquisition, or reorganization.
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Adjustable Rate Government Securities Acquire or retain the securities of any other investment
Intermediate-Term Treasury company if, as a result, more than 3% of such investment
Target 2000 company's outstanding shares would be held by the Fund,
Target 2005 more than 5% of the value of the Fund's assets would be
Target 2010 invested in shares of such investment company, or more than
Target 2015 10% of the value of the Fund's assets would be invested in
Target 2020 shares of investment companies in the aggregate, or except
Target 2025 in connection with a merger, consolidation, acquisition, or
reorganization.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
California High Yield Municipal Acquire or retain the securities of any other investment
California Insured Tax-Free company except that the Fund may, for temporary purposes,
California Intermediate-Term Tax-Free purchase shares of a money market mutual fund, subject to
California Limited-Term Tax-Free such restrictions as may be imposed by (i) the Investment
California Long-Term Tax-Free Company Act of 1940 and rules thereunder, or (ii) any State
in which shares of the Fund are registered, and may acquire
shares of any investment company in connection with a merger,
consolidation, acquisition, or reorganization.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Intermediate-Term Tax-Free Acquire or retain the securities of any other investment
Long-Term Tax-Free company, except that the Fund may, for temporary purposes,
purchase shares of the Money Market Fund, subject to such
restrictions as may be imposed by (i) the Investment Company
Act of 1940 and rules thereunder or (ii) any state in which
shares of the Fund are registered, and may acquire shares of
any investment company in connection with a merger,
consolidation, acquisition, or reorganization.
- ------------------------------------------------------ -------------------------------------------------------------
Commodities
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Utilities Purchase or sell physical commodities unless acquired as a
Long-Term Treasury result of ownership of securities or other instruments,
Short-Term Treasury provided that this limitation will not prohibit the Fund
from purchasing and selling options and futures contracts
or from investing in securities or other instruments backed
by physical commodities.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Prime Money Market Purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Global Natural Resources Purchase or sell physical commodities or contracts relating
Adjustable Rate Government Securities to physical commodities or buy and sell foreign exchange.
Arizona Intermediate-Term Municipal [Euro does not have language relating to foreign exchange.]
California High Yield Municipal
California Insured Tax-Free
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
California Municipal Money Market
California Tax-Free Money Market
European Government Bond
Florida Intermediate-Term Municipal
Florida Municipal Money Market
GNMA
Government Agency Money Market
Intermediate-Term Tax-Free
Intermediate-Term Treasury
Long-Term Tax-Free
Target 2000
Target 2005
Target 2010
Target 2015
Target 2020
Target 2025
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
Unseasoned Issuers
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Invest in securities of an issuer that, together with any
Income & Growth predecessor, has been in operation for less than three
years if, as a result, more than 5% of the total assets of the
Fund would then be invested in such securities.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Target 2000 Purchase the securities of any issuer (other than
Target 2005 obligations issued or guaranteed by the U.S. government,
Target 2010 its agencies or instrumentalities) if, as a result, more
Target 2015 than 5% of the value of its total assets would be invested
Target 2020 in the securities (taken at cost) of issuers which, at the
Target 2025 time of purchase, had been in operation less than three
years, including predecessors and unconditional guarantors.
- ------------------------------------------------------ -------------------------------------------------------------
Warrants
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Purchase warrants, valued at the lower of cost or market,
Income & Growth in excess of 5% of the value of the Fund's net assets.
Included within that amount, but not to exceed 2% of the value
of the Fund's net assets, may be warrants which are not listed
on the New York or American Stock Exchanges. Warrants acquired
by the Fund at any time in units or attached to securities are
not subject to this restriction.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Adjustable Rate Government Securities Purchase any equity securities in any companies, including
California High Yield Municipal warrants or bonds with warrants attached, or any preferred
California Insured Tax-Free stocks, convertible bonds, or convertible debentures.
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
California Municipal Money Market
California Tax-Free Money Market
GNMA
Government Agency Money Market
Intermediate-Term Tax-Free
Long-Term Tax-Free
Target 2000
Target 2005
Target 2010
Target 2015
Target 2020
Target 2025
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
Oil, Gas and/or Mineral Exploration Programs
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Global Natural Resources Purchase interests in oil, gas and/or mineral exploration
Adjustable Rate Government Securities development programs or leases.
Arizona Intermediate-Term Municipal
California High Yield Municipal
California Insured Tax-Free
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
California Municipal Money Market
California Tax-Free Money Market
European Government Bond
Florida Intermediate-Term Municipal
Florida Municipal Money Market
GNMA
Government Agency Money Market
Intermediate-Term Tax-Free
Long-Term Tax-Free
Target 2000
Target 2005
Target 2010
Target 2015
Target 2020
Target 2025
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Purchase interests in oil, gas and/or mineral exploration
Income & Growth development programs or leases; provided that this limitation
shall not prohibit the purchase of marketable securities
issued by companies or other entities or investment vehicles
that engage in businesses relating to the development,
exploration, mining, processing or distribution of oil, gas
or minerals.
- ------------------------------------------------------ -------------------------------------------------------------
Short Sales
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Engage in any short-selling operations (except by selling
Income & Growth futures contracts).
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Adjustable Rate Government Securities Engage in any short-selling operations.
California Municipal Money Market
California Tax-Free Money Market
GNMA
Government Agency Money Market
Intermediate-Term Treasury
Target 2000
Target 2005
Target 2010
Target 2015
Target 2020
Target 2025
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
California High Yield Municipal Engage in any short-selling operations, except that the
California Insured Tax-Free Fund may purchase, sell, or enter into short positions in
California Intermediate-Term Tax-Free options on securities or indexes of securities, futures
California Limited-Term Tax-Free contracts, options on futures contracts, and any other
California Long-Term Tax-Free interest rate hedging instrument as may be permitted under
Intermediate-Term Tax-Free the federal securities or commodities laws.
Long-Term Tax-Free
- ------------------------------------------------------ -------------------------------------------------------------
Margin Purchases
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Purchase securities on margin, except for such short-term
Income & Growth credits as may be necessary for the clearance of transactions,
provided that the Fund may make initial and variation margin
payments in connection with purchases or sales of futures
contracts or options on futures contracts.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Target 2000 Purchase securities on margin, except for such short-term
Target 2005 credits as are necessary for the clearance of purchases of
Target 2010 portfolio securities. The Fund may not engage in
Target 2015 transactions involving puts, calls, straddles or spreads.
Target 2020
Target 2025
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Adjustable Rate Government Securities Engage in margin transactions or in transactions involving
GNMA puts, calls, straddles, or spreads.
Government Agency Money Market
Intermediate-Term Treasury
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
California High Yield Municipal Engage in margin transactions, except that it may purchase,
California Insured Tax-Free sell, or enter into positions in options on securities or
California Intermediate-Term Tax-Free indexes of securities, futures contracts, options on
California Limited-Term Tax-Free futures contracts, and other interest rate hedging
California Long-Term Tax-Free instruments, and may make margin deposits in connection herewith,
and may purchase and hold securities with rights to put securities
to the seller (standby commitments) in accordance with its
investment policies.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
California Municipal Money Market Engage in margin transactions or in transactions involving
California Tax-Free Money Market puts, calls, straddles, or spreads, except that it may
Tax-Free Money Market purchase and hold securities with rights to put securities
to the seller or "standby commitments" in accordance with
its investment techniques.
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Intermediate-Term Tax-Free Engage in margin transactions, except that it may purchase,
Long-Term Tax-Free sell, or enter into positions in options on securities or
indexes of securities, futures contracts, options on futures
contracts, and other interest rate hedging instruments, and
may make margin deposits in connection therewith, and may
purchase and hold securities with rights to put securities to
the seller (standby commitments) in accordance with its
investment techniques.
- ------------------------------------------------------ -------------------------------------------------------------
Trustee and Officer Ownership of Securities
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
Equity Growth Purchase or retain securities of any issuer if, to the
Income & Growth knowledge of the Fund's management, those officers and
Adjustable Rate Government Securities trustees of the Trust and of its investment advisor, who
California High Yield Municipal each own beneficially more than 0.5% of the outstanding
California Insured Tax-Free securities of such issuer, together own beneficially more
California Intermediate-Term Tax-Free than 5% of such securities. However, such restrictions
California Limited-Term Tax-Free shall not apply to holdings of the issuers of industrial
California Long-Term Tax-Free development bonds.
California Municipal Money Market
California Tax-Free Money Market
GNMA
Government Agency Money Market
Intermediate-Term Tax-Free
Long-Term Tax-Free
Target 2000
Target 2005
Target 2010
Target 2015
Target 2020
Target 2025
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
Investing for Control
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------------
California High Yield Municipal Acquire securities for the purpose of exercising control
California Insured Tax-Free over management of the issuer.
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
California Municipal Money Market
California Tax-Free Money Market
Intermediate-Term Tax-Free
Long-Term Tax-Free
Target 2000
Target 2005
Target 2010
Target 2015
Target 2020
Target 2025
Tax-Free Money Market
- ------------------------------------------------------ -------------------------------------------------------------
Restricted Securities
- ------------------------------------------------------ -------------------------------------------------------------
Fund Fundamental Limitation
- ------------------------------------------------------ -------------------------------------------------------------
Intermediate-Term Treasury Invest in portfolio securities that the Fund may not be
free to sell to the public without registration under the
Securities Act of 1933 or the taking of similar actions
under other securities laws relating to the sale of
securities.
- ------------------------------------------------------ -------------------------------------------------------------
</TABLE>
<PAGE>
Appendix 4
INVESTMENT SUB-ADVISORY AGREEMENT
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
American Century - Benham European Government Bond Fund
J. P. Morgan Investment Management Inc.
Agreement effective this ____________, 1997, between AMERICAN CENTURY
INTERNATIONAL BOND FUNDS (the "Trust"), a business trust organized under the
laws of the Commonwealth of Massachusetts, acting on behalf of American Century
- - Benham European Government Bond Fund, a portfolio of the Trust (the "Fund"),
and American Century Investment Management, Inc. ("ACIM") a corporation
organized under the laws of the state of Delaware, with offices located at 4500
Main Street, Kansas City, Missouri, 64141-6200, hereby agree with J. P. MORGAN
INVESTMENT MANAGEMENT INC. (the "Sub-Advisor"), a corporation organized under
the laws of the state of Delaware with offices located at 522 Fifth Avenue, New
York, New York 10036, as follows:
I. INVESTMENT DESCRIPTION - APPOINTMENT The Trust desires to appoint the
Sub-Advisor to provide certain investment advisory services to the Fund
in accordance with the Fund's Prospectus and Statement of Additional
Information as in effect and as amended from time to time, in such
manner and to such extent as may be approved by the Board of Trustees
of the Trust. The Trust agrees to provide the Sub-Advisor copies of all
amendments to the Fund's Prospectus and Statement of Additional
Information on an ongoing basis. In consideration for the compensation
set forth below the Sub-Advisor accepts the appointment and agrees to
furnish the services described herein.
II. SERVICES AS INVESTMENT SUB-ADVISOR Subject to the general supervision
of the Board of Trustees of the Trust and of ACIM, the Fund's
investment advisor, the Sub-Advisor will (i) act in conformity with the
Trust's Prospectus and Statement of Additional Information, the
Investment Company Act of 1940, the Investment Advisers Act of 1940,
the Internal Revenue Code and all other applicable federal and state
laws and regulations, as the same may from time to time be amended,
(ii) make investment decisions for the fund in accordance with the
Fund's investment objective(s) and policies as stated in the Fund's
Prospectus and Statement of Additional Information and with such
written guidelines as ACIM may from time to time provide to the
Sub-Advisor; (iii) place purchase and sale orders on behalf of the
Fund; (iv) maintain books and records with respect to the securities
transactions of the Fund and furnish the Trust's Board of Trustees such
periodic, regular and special reports as the Board may request; and (v)
treat confidentially and as proprietary information of the Trust all
records and other information related to the Trust and its prior,
present or potential shareholders. The Sub-Advisor will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification
to and approval in writing by the Trust, which approval shall not be
unreasonably withheld. Such records may not be withheld when the
Sub-Advisor may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust. In
providing those services, the Sub-Advisor will supervise the Fund's
investments and conduct a continual program of investment, evaluation
and, if appropriate, sale and reinvestment of the Fund's assets. In
addition, the Sub-Advisor will furnish the Trust or ACIM with whatever
information, including statistical data, the Trust or ACIM may
reasonably request with respect to the instruments that the Fund may
hold or contemplate purchasing.
III. BROKERAGE
A. SECURITIES In executing transactions for the Fund and
selecting brokers or dealers, the Sub-Advisor will use its
best efforts to obtain the best net price and execution
available and shall execute or direct the execution of all
such transactions as permitted by law and in a manner that
best suits the interest of the Fund and its shareholders. In
assessing the best net price and execution available for any
Fund transaction, the Sub-Advisor will consider all factors it
deems relevant including, but not limited to, breadth of the
market in the security, the price of the security, the
financial condition and execution capability of the broker or
dealer and the reasonableness of any commission for the
specific transaction and on a continuing basis.. Consistent
with this obligation, when the execution and price offered by
two or more brokers or dealers are comparable, the Sub-Advisor
may, at its discretion, execute transactions with brokers and
dealers who provide the Trust with research advice and other
services, but in all instances best net price and execution
shall control.
On occasions when the Sub-Advisor deems the purchase or sale
of a security to be in the best interest of the Fund as well
as its other clients, the Sub-Advisor may to the extent
permitted by applicable law, but shall not be obligated to,
aggregate the securities to be sold or purchased with those of
its other clients. In such event, allocation of the securities
so purchased or sold will be made by the Sub-Advisor in a
manner it considers to be equitable and consistent with its
fiduciary obligations to the Trust and to such other clients.
Securities so allocated will be delivered in proportion to the
consideration paid. The expenses incurred in the transaction
shall be allocated pro-rata.
B. FOREIGN EXCHANGE TRANSACTIONS The Sub-Advisor is authorized to
effect, on behalf of the Fund, spot and forward foreign
exchange contracts for purposes consistent with the Fund's
investment objectives and policies as described in the Fund's
Prospectus and Statement of Additional Information, as
amended, and with such other operating policies and guidelines
as ACIM may from time to time provide to the Sub-Advisor. The
Sub-Advisor is further authorized to execute such documents as
may be required to effect such transactions. In effecting such
spot and forward foreign exchange contracts and in selecting
counterparties for such contracts, the Sub-Advisor shall use
its best efforts to seek the best overall terms available and
shall execute or direct the execution of all such transactions
as permitted by law and in a manner that best suits the
interests of the Fund and its shareholders.
IV. INFORMATION PROVIDED TO THE TRUST The Sub-Advisor will keep the Trust
and ACIM informed of developments materially affecting the Fund and
will take initiative to furnish the Trust and ACIM on at least a
quarterly basis with whatever information the Sub-Advisor believes is
appropriate for this purpose. Such regular quarterly reports shall
include (i) a discussion of the Fund's performance relative to its
benchmark, (ii) an assessment of investment decisions and analysis of
the components of the Fund's performance (i.e., bond selection and
currency hedging), (iii) the decisions it has made with respect to the
Fund's assets and the purchase and sale of its portfolio securities,
(iv) the reasons for such decisions and related actions, and (v) the
extent to which those decisions have been implemented.
Sub-Advisor will provide the Trust and ACIM with such investment
records, ledgers, accounting and statistical data, and other
information as the Trust or ACIM requires for the preparation of
registration statements, periodic and other reports and other documents
required by federal and state laws and regulations, and particularly as
may be required for the periodic review, renewal, amendment or
termination of this Agreement, and such additional documents and
information as the Trust and ACIM may reasonably request for the
management of their affairs. At least once annually a representative of
the Sub-Advisor shall attend a meeting of the Board of Trustees to make
a presentation on the Fund's performance during the preceding year.
The Sub-Advisor shall furnish to regulatory authorities any information
or reports in connection with such services as may be lawfully
requested. The Sub-Advisor shall also, at the Trust's request, certify
to the Trust's independent auditors that sales or purchases aggregated
with those of other clients of the Sub-Advisor, as described in Section
3(a) above, were equitably allocated.
In compliance with the requirements of the Investment Company Act of
1940, the Sub-Advisor hereby agrees that all records that it maintains
for the Fund are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's
request. Sub-Advisor further agrees to preserve for the periods of time
prescribed by the Investment Company Act of 1940 and the Investment
Advisers Act of 1940 the records required to be maintained thereunder.
V. LIABILITY AND INDEMNIFICATION OF THE SUB-ADVISOR The Sub-Advisor shall
be responsible for the exercise of reasonable care in carrying out its
responsibilities hereunder; provided, however, that no provision of
this Agreement shall be construed to protect any trustee, director,
officer, agent or employee of the Sub-Advisor from liability by reason
of negligence, willful malfeasance, bad faith in the performance of
such person's duties or by reason of reckless disregard of obligations
and duties hereunder.
ACIM shall indemnify and hold harmless the Sub-Advisor from and against
all claims, losses, liabilities or damages (including reasonable
attorneys fees and other related expenses), arising from or in
connection with the performance by the Sub-Advisor of its duties
hereunder and not resulting from the Sub-Advisor's negligence, willful
malfeasance, bad faith in the performance of its duties or by reason of
its reckless disregard of obligations and duties hereunder.
VI. COMPENSATION In consideration of the services rendered pursuant to this
Agreement, ACIM will pay the Sub-Advisor on the first business day of
each month a fee for the previous month at an annual rate computed as
follows:
0.20% of the Fund's average daily net assets up to $200 million; and
0.15% of the Fund's average daily net assets over $200 million.
The Sub-Advisor shall have no right to obtain compensation directly
from the Fund or the Trust for services provided hereunder and agrees
to look solely to ACIM for payment of fees due. Upon termination of
this Agreement before the end of a month, the fee for that month shall
be prorated according to the proportion that such period bears to the
full monthly period and shall be payable upon the date of termination
of this Agreement. For the purpose of determining fees payable to the
Sub-Advisor, the value of the Fund's net assets shall be computed at
the times and in the manner specified in the Fund's Prospectus or
Statement of Additional Information.
VII. EXPENSES The Sub-Advisor will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall
not include brokerage fees or commissions in connection with the
execution of securities transactions.
VIII. SERVICES TO OTHER COMPANIES OR ACCOUNTS The Trust understands that the
Sub-Advisor now acts, will continue to act as investment advisor to one
or more other investment companies or series of investment companies.
The Trust has no objection to the Sub-Advisor so acting, provided that,
as described in Section 3 above, whenever the Fund and one or more
other accounts or investment companies advised by the Sub-Advisor have
funds available for investment, investments suitable and appropriate
for each will be allocated equitably to each entity in accordance with
procedures. Similarly, opportunities to sell securities will be
allocated in an equitable manner. In addition, the Trust understands
that the persons employed by the Sub-Advisor to assist in the
performance of the Sub-Advisor's duties hereunder will not devote their
full time to such service and nothing contained herein shall be deemed
to limit or restrict the right of the Sub-Advisor or any affiliate of
the Sub-Advisor to engage in and devote time and attention to other
business or to render services of whatever kind or nature.
IX. TERM OF AGREEMENT This Agreement shall become effective as of the date
the Fund commences its investment operations and shall continue for a
two-year term and thereafter so long as such continuance is
specifically approved at least annually by (i) the Board of Trustees of
the Trust or (ii) a vote of a "majority" (as defined in the Investment
Company Act of 1940, as amended) of the Fund's outstanding voting
securities, provided that in either event the continuance is also
approved by a majority of the Board of Trustees who are not "interested
persons" (as defined in said Act) of any part to this Agreement, by a
vote cast in person at a meeting called for the purpose of voting on
such approval. This Agreement is terminable, without penalty on 60
days' written notice, by ACIM, the Board of Trustees of the Trust, or
by vote of holders of a majority of the Fund's shares, or upon twelve
months' written notice by the Sub-Advisor, and will terminate
automatically upon any termination of the advisory agreement between
the Trust and ACIM. In addition, this Agreement will also terminate
automatically in the event of its assignment (as defined in said Act).
The Sub-Advisor agrees to notify the Trust of any circumstances that
might result in this Agreement being deemed to be assigned.
X. REPRESENTATIONS OF THE TRUST AND THE SUB-ADVISOR The Trust represents
that (i) a copy of its Agreement and Declaration of Trust, dated August
28, 1991, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Advisor has been duly authorized, and (iii) it
has acted and will continue to act in conformity with the Investment
Company Act of 1940, as amended, and other applicable laws.
The Sub-Advisor represents that it is authorized to perform the
services described herein.
XI. AMENDMENT OF THIS AGREEMENT No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
XII. LIMITATION OF LIABILITY This Agreement has been executed on behalf of
the Trust by the undersigned officer of the Trust solely in his
capacity as an officer of the Trust. No shareholder, trustee, officer,
employee or agent of the Trust shall be subject to claims against or
obligations of the Trust to any extent whatsoever.
XIII. ENTIRE AGREEMENT This Agreement constitutes the entire agreement
between the parties hereto.
XIV. GOVERNING LAW This Agreement shall be governed in accordance with the
laws of the Commonwealth of Massachusetts.
XV. INDEPENDENT CONTRACTOR In the performance of its duties hereunder, the
Sub-Advisor is and shall be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to
act for or represent the Trust or ACIM in any way, or otherwise be
deemed to be an agent of the Trust or ACIM.
XVI. SEVERABILITY If any provision of this agreement shall be held or made
invalid by a court decision, statute, rule or similar authority, the
remainder of this Agreement shall not be affected thereby.
XVII. NOTICES Notices hereunder shall be addressed as follows:
To the Sub-Advisor: J.P. Morgan Investment Management Inc.
Attention: Ms. Nina Mettelman
522 Fifth Avenue
New York, New York 10036
with a copy to:
J.P. Morgan Investment Management Inc.
Attention: Mr. Peter Young
28 King Street
London SWIY 6XA
To the Trust: American Century International Bond Funds
Attention: William M. Lyons
Executive Vice President
4500 Main Street
Kansas City, MO 64141-0274
To ACIM: American Century Investment Management, Inc.
Attention: James Stowers, III
4500 Main Street
Kansas City, MO 64141-0274
XVIII. PROMOTION AND DISTRIBUTION The Sub-Advisor shall have no responsibility
or authority to promote the sale or distribution of the Trust's shares
in any manner.
Executed this ______ day of __________________ 1997 .
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
By:____________________________________
William M. Lyons
Title: Executive Vice President
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
By:____________________________________
James E. Stowers, III
Title: President
J. P. MORGAN INVESTMENT MANAGEMENT INC.
By:____________________________________
Title:_________________________________
<PAGE>
PROXY CARD (BACK)
Please indicate your vote by placing an "X" in the appropriate box below. The
Board of Directors recommends a vote "FOR" each proposal.
<TABLE>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
1. Ratification of the selection of the Company's independent auditors for
its current fiscal year. ___ ___ ___
2. Approval of Management Agreement with American Century Investment
Management, Inc. ___ ___ ___
3. Approval of the proposed changes to the Fund's investment restrictions. ___ ___ ___
_____ To vote against the proposed changes to one or more of the
specific fundamental investment restrictions, but to approve
the others, place an "X" in the box at the left AND indicate
the number(s) (as set forth in the proxy statement) of the
investment restrictions you do not want to change on this
line:___________________________
4. Only for Benham European Government Bond Fund. Approval of Subadvisory
Agreement with J.P. Morgan Investment Management Inc. ___ ___ ___
5. Only for Benham Adjustable Rate Government Securities Fund. Approval of
amendments to its fundamental investment objective. ___ ___ ___
6. Only for Benham European Government Bond Fund. Approval of amendments
to its fundamental investment objective. ___ ___ ___
</TABLE>
PLEASE SIGN AND DATE THE FRONT OF THIS CARD
<PAGE>
PROXY CARD (FRONT)
[NAME OF FUND]
(A series of [NAME OF COMPANY])
PROXY Special Meeting of Shareholders - July 30, 1997 PROXY
- ----- -----
This proxy is solicited on behalf of the Board of Trustees/Directors of the
Company indicated above and relates to proposals which apply to the Company or
to the series of the Company indicated above (the "Fund"). By signing below, I
(we) appoint as proxies William M. Lyons and Patrick A. Looby and each of them
(with power of substitution) to vote for the undersigned all shares of
beneficial interest/common stock I own in the Fund. The authority I am (we are)
granting applies to the above-referenced meeting and any adjournments of that
meeting, with all the power I (we) would have if personally present. The shares
represented by this proxy will be voted as instructed. Unless indicated to the
contrary, this proxy shall be deemed to grant authority to vote "FOR" all
proposals relating to the Company or the Fund.
YOUR VOTE IS IMPORTANT. Please date and sign this proxy below and return it in
the enclosed envelope to: Alamo Direct, 280 Oser Avenue, Hauppauge, NY 11788.
This proxy will not be voted unless it is dated and signed exactly as instructed
on this card.
If shares are held by an individual, sign your name
exactly as it appears on this card. If shares are
held jointly, either party may sign, but the name of
the party signing should conform exactly to the name
shown on this proxy card. If shares are held by a
corporation, partnership or similar account, the name
and the capacity of the individual signing the proxy
card should be indicated - for example: "ABC Corp.,
John Doe, Treasurer."
Sign exactly as name appears on this card.
------------------------------------------
------------------------------------------
Dated ______________________, 1997
