As filed with the Securities and Exchange Commission on April 25, 1997
Registration Nos. 2-99222 - 811-4363
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. ____ [ ]
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AMERICAN CENTURY GOVERNMENT INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
4500 Main Street,
P.O. Box 419200
Kansas City, MO 64141-6200
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 415-965-8300
Douglas A. Paul
Vice President and Associate General Counsel
1665 Charleston Road, Mountain View, CA 94043
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on May 26, 1997 pursuant
to Rule 488 under the Securities Act of 1933.
Calculation of Registration Fee under the Securities Act of 1933: No filing fee
is required because an indefinite number of shares have previously been
registered on Form N-1A pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Registrant is filing as an exhibit to this Registration Statement
an opinion related to the legality of shares being issued in connection with
this Registration Statement. Pursuant to Rule 429, this Registration Statement
relates to the aforesaid Registration Statement on Form N-1A. The Registrant
filed a Rule 24f-2 Notice on Form 24f-2 with respect to its fiscal year ended
March 31, 1996.
<PAGE>
FORM N-14
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
<TABLE>
Part A Item No. Prospectus/Proxy
and Caption Statement Caption
<S> <C> <C>
1. Beginning of Registration Statement and Outside Cover Page
Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Page of Prospectus Table of Contents
3. Fee Table, Synopsis Information and Risk Factors Important Information You Should Consider;
Comparison of Certain Information Regarding the
Funds; Risk Factors; Transaction and Operating
Expense Information; Information About the Funds
4. Information About the Transaction Important Information You Should Consider; Risk
Factors; Additional Information Relating to the
Proposed Transaction; Information About the Funds;
Appendix I
5. Information About the Registrant Important Information You Should Consider;
Comparison of Certain Information Regarding the
Funds; Risk Factors; Information About the Funds;
Additional Information
6. Information About the Companies Being Acquired Important Information You Should Consider;
Comparison of Certain Information Regarding the
Funds; Risk Factors; Information About the Funds;
Additional Information
7. Voting Information Important Information You Should Consider;
Information Relating to Voting Matters
8. Interest of Certain Persons and Experts Information Relating To Voting Matters
9. Additional Information Required for Reoffering by Not applicable
Persons Deemed to be Underwriters
Part B
10. Cover Page Statement of Additional Information Cover Page
11. Table of Contents Table of Contents
12. Additional Information About the Registrant Statement of Additional Information of the
New Capital Preservation Fund.
13. Additional Information About the Company Being Statements of Additional Information of the
Acquired Capital Preservation Fund and Capital Preservation
Fund II.
14. Financial Statements Pro Forma Financial Statements
Part C
Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C of this
Registration Statement.
</TABLE>
<PAGE>
_____, 1997
Dear Capital Preservation Fund or Capital Preservation Fund II Shareholder:
I am writing to ask for your support of an important proposal affecting
your fund. The proposal will be voted on at an upcoming Special Meeting of
shareholders to be held on July 30, 1997. Please take a few minutes to read the
enclosed materials, complete and sign the proxy voting card and mail it back to
us.
You are being asked to approve the combination of the Capital
Preservation Fund and Capital Preservation Fund II into a new American Century
fund also called the Capital Preservation Fund. The reason for the combination
is that they are very similar funds, as you will see by reading the enclosed
materials. Obviously, it will be more efficient to have our talented portfolio
management team focus on a single, larger portfolio of assets than to continue
managing two very similar, smaller portfolios. Moreover, the Capital
Preservation Fund II was established in 1980 to protect investors from volatile
interest rate swings and an unstable economy. Subsequent changes in the economy
have diminished Capital Preservation Fund II's viability. Today's interest rates
are low, strong and stable. The reorganization will allow American Century to
focus its attention on an economically viable fund with a much lower expense
ratio than that previously able to be offered to Capital Preservation Fund II
shareholders.
The Board of Directors of your fund has unanimously voted in favor of
this reorganization and believes the combination is in your fund's and your best
interests. We encourage you to vote "FOR" the reorganization. The enclosed
materials give more detailed information about the proposed reorganization and
the reasons why we recommend you vote for it.
If you lead a busy life, as I do, you're probably tempted to put these
materials aside, having the best intentions to return to them at another time.
Please don't do that. If shareholders don't return their proxies, additional
expenses must be incurred to pay for follow-up mailings and phone calls. Please
take a few minutes to review the enclosed materials and sign and return your
proxy card today.
To more efficiently handle this proxy solicitation, we have hired D. F.
King and Co., Inc. to act as our proxy solicitor. If you have any questions or
need any help in voting your shares, please call them at 1-800-755-3107. Any
question they cannot respond to will be forwarded to us immediately.
Thank you for your time in considering this important proposal. We
believe the reorganization will enable us to better serve your needs. Thank you
for investing with American Century and for your continued support.
Sincerely,
James M. Benham
President and Chairman of the Board
<PAGE>
AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.
AMERICAN CENTURY CAPITAL PRESERVATION FUND II, INC.
American Century Investments
4500 Main Street
P. O. Box 419200
Kansas City, Missouri 64141-6200
(800) 345-2021
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on July 30, 1997
To Capital Preservation Fund and Capital Preservation Fund II Shareholders:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the shareholders of
the American Century - Benham Capital Preservation Fund, a portfolio of American
Century Capital Preservation Fund, Inc. and American Century - Benham Capital
Preservation Fund II, a portfolio of American Century Capital Preservation Fund
II, Inc., will be held at the offices of American Century Tower I, 4500 Main
Street, Kansas City, Missouri on July 30, 1997 at 10:00 a.m. (Central time) for
the following purposes:
ITEM 1 To consider and act upon a proposal to approve an Agreement and Plan
of Reorganization and the transactions contemplated thereby, including:
(a) the transfer of substantially all of the assets and liabilities
of the Capital Preservation Fund and Capital Preservation Fund II
to a corresponding portfolio of the American Century Government
Income Trust (the "New Capital Preservation Fund") in exchange
for shares of that Fund;
(b) the distribution of such New Capital Preservation Fund shares to
the shareholders of the Capital Preservation Fund and Capital
Preservation Fund II according to their respective interests; and
(c) the termination under state law and the Investment Company Act of
1940, as amended, of the American Century Capital Preservation
Fund, Inc. and American Century Capital Preservation Fund II,
Inc.
ITEM 2 To transact such other business as may properly come before the
Special Meeting or any adjournment(s) thereof.
The proposed reorganization and related matters are described in the
attached Combined Prospectus/Proxy Statement. Appendix I to the Combined
Prospectus/Proxy Statement is a copy of the Agreement and Plan of
Reorganization.
Shareholders of record as of the close of business on June 2, 1997, are
entitled to notice of, and to vote at, the Special Meeting or any adjournment(s)
thereof.
PLEASE EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE EACH ACCOMPANYING
PROXY CARD WHICH IS BEING SOLICITED BY THE AMERICAN CENTURY CAPITAL PRESERVATION
FUND INC.'S AND AMERICAN CENTURY CAPITAL PRESERVATION FUND II, INC.'S BOARDS OF
DIRECTORS. PLEASE RETURN YOUR PROXY CARD EVEN IF YOU ARE PLANNING TO ATTEND THE
MEETING. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE SPECIAL MEETING. PROXIES
MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING A WRITTEN
NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE
SPECIAL MEETING AND VOTING IN PERSON.
-------------------
William M. Lyons
Executive Vice President
__________, 1997
<PAGE>
COMBINED PROSPECTUS/PROXY STATEMENT
of
AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.
AMERICAN CENTURY CAPITAL PRESERVATION FUND II, INC.
and
AMERICAN CENTURY GOVERNMENT INCOME TRUST
June __, 1997
This Combined Prospectus/Proxy Statement is furnished in connection
with the solicitation of votes by the Board of Directors of the Capital
Preservation Fund and Capital Preservation Fund II in connection with a Special
Meeting of Shareholders to be held on Wednesday, July 30, 1997 at 10:00 a.m.
(Central time) at American Century Tower I, 4500 Main Street, Kansas City,
Missouri.
At the Special Meeting, shareholders of the Capital Preservation Fund
and Capital Preservation Fund II are being asked to approve the combination of
their funds into a new American Century fund (the "New Capital Preservation
Fund"). A copy of the proposed Agreement and Plan of Reorganization is attached
as Appendix I. Each fund involved in the reorganization is a similarly managed
diversified, open-end money market mutual fund that seeks maximum safety and
liquidity. The purpose of the reorganization is to achieve management and
operational efficiencies by combining these similar funds. Each fund has shares
registered with the Securities Exchange Commission.
This Combined Prospectus/Proxy Statement constitutes the Proxy
Statement of your fund for the Special Meeting of Shareholders and a prospectus
for the shares of the New Capital Preservation Fund that are to be issued in
connection with the reorganization. It is intended to give you the information
you need to consider and vote on the proposed reorganization. You should retain
this document for future reference. A Statement of Additional Information, dated
_______________, 1997, about your fund and the New Capital Preservation Fund has
been filed with the Commission and is incorporated into this document by
reference. A copy of the Statement of Additional Information may be obtained
without charge upon request by calling or writing to us at the address or
telephone number set forth below.
The principal executive offices of your fund and the New Capital
Preservation Fund are located at American Century Investments, 4500 Main Street,
P. O. Box 419200, Kansas City, Missouri 64141-6200. The funds' telephone number
is 1-800-345-2021.
A copy of the New Capital Preservation Fund prospectus accompanies this
document and is incorporated into it by reference.
The information contained in this Combined Prospectus/Proxy Statement
is required by rules of the Securities and Exchange Commission; some of it is
highly technical. If you have any questions about these materials or how to vote
your shares, please call our proxy solicitor, D. F. King and Co., Inc.,
toll-free at 1-800-755-3107.
LIKE ALL MUTUAL FUND SHARES, THE SECURITIES OF AMERICAN CENTURY'S NEW
CAPITAL PRESERVATION FUND HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON
THE ADEQUACY OR ACCURACY OF THIS COMBINED PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representations other than those contained in this Combined Prospectus/Proxy
Statement and in the materials expressly incorporated herein by reference. If
given or made, such other information or representations must not be relied upon
as having been authorized by your fund, American Century's New Capital
Preservation Fund or anyone affiliated with American Century Investments.
PLEASE NOTE THAT THE SPECIAL MEETING OF SHAREHOLDERS IS NOT A SHAREHOLDER
SEMINAR.
TABLE OF CONTENTS
IMPORTANT INFORMATION YOU SHOULD CONSIDER......................................2
COMPARISON OF CERTAIN INFORMATION..............................................6
REGARDING THE FUNDS............................................................6
RISK FACTORS...................................................................8
TRANSACTION AND OPERATING EXPENSE INFORMATION..................................9
ADDITIONAL INFORMATION ABOUT THE
PROPOSED TRANSACTION..........................................................10
SUMMARY OF PLAN OF REORGANIZATION..........................................10
DESCRIPTION OF NEW CAPITAL PRESERVATION FUND SECURITIES....................11
REASONS SUPPORTING THE REORGANIZATION......................................11
FEDERAL INCOME TAX CONSEQUENCES............................................11
CAPITALIZATION.............................................................12
INFORMATION ABOUT THE FUNDS...................................................12
FUNDAMENTAL INVESTMENT RESTRICTIONS........................................14
INFORMATION RELATING TO VOTING MATTERS........................................14
GENERAL INFORMATION........................................................14
VOTING AND REVOCATION OF PROXIES...........................................15
RECORD DATE................................................................15
QUORUM.....................................................................15
SHAREHOLDER VOTE REQUIRED..................................................15
COST OF PROXY SOLICITATION.................................................15
CERTAIN SHAREHOLDERS.......................................................16
APPRAISAL RIGHTS...........................................................17
ANNUAL MEETINGS............................................................17
ADDITIONAL INFORMATION........................................................17
LITIGATION....................................................................18
FINANCIAL STATEMENTS..........................................................18
OTHER BUSINESS................................................................18
SHAREHOLDER INQUIRIES.........................................................18
APPENDIX I: AGREEMENT AND PLAN OF REORGANIZATION..............................
APPENDIX II: MANAGEMENT DISCUSSION AND ANALYSIS...............................
APPENDIX III: STANDARDIZED FUNDAMENTAL RESTRICTIONS...........................
APPENDIX IV: CURRENT FUNDAMENTAL RESTRICTIONS................................
IMPORTANT INFORMATION YOU SHOULD CONSIDER
The following Q&A is a brief summary of some of the issues that may be
important to you. As is true with all summaries, however, not all of the
information or topics that you may think are important will be included. As a
result, this Q&A is qualified in its entirety by the more detailed information
contained elsewhere in this document, or incorporated into this document, or
attached as an Appendix. Please read all the enclosed proxy materials before
voting. Please remember to vote your shares as soon as possible. If enough
shareholders return their proxy cards soon, additional costs for follow-up
mailings and phone calls may be avoided.
Q. What is the purpose of the upcoming meeting?
A. Your Board of Directors has recommended reorganizing the
Capital Preservation Fund and Capital Preservation Fund II by
combining them into a new American Century fund. The
combination requires shareholder approval. The meeting will be
held on Wednesday, July 30, 1997 at 10:00 a.m. (Central time)
at American Century Tower I, 4500 Main Street, Kansas City,
Missouri. Shareholders of record as of the close of business
on June 2, 1997 are eligible to vote.
Q. Why is the reorganization being proposed?
A. The reorganization seeks to improve operational and investment
management efficiencies by combining two funds with the same
investment objectives and very similar investment policies
strategies and approaches. Like your fund, the New Capital
Preservation Fund is a money market fund that seeks maximum
safety and liquidity. The funds seek to achieve their
objective by investing in short-term U.S. Treasury securities
(or, in the case of Capital Preservation Fund II, repurchase
agreements collateralized by such securities). The
reorganization is also being proposed to modify the types of
funds offered by American Century. The Capital Preservation
Fund II was established to protect investors from volatile
interest rate swings and an unstable economy. These
considerations no longer are a concern in today's economy.
Q. How will the reorganization be accomplished?
A. Shareholders of the Capital Preservation Fund and Capital
Preservation Fund II are being asked to approve the
combination of their fund into the New Capital Preservation
Fund pursuant to the Agreement and Plan of Reorganization
attached as Appendix I. The reorganization will take the form
of a sale of assets by the Capital Preservation Fund and
Capital Preservation Fund II in exchange for shares of the New
Capital Preservation Fund. The Capital Preservation Fund and
Capital Preservation Fund II Fund each will then make a
liquidating distribution of those shares to its shareholders.
Q. What will shareholders get if the reorganization is approved?
A. As a result of the liquidating distribution, you will receive
shares of the New Capital Preservation Fund in an amount equal
to the value of your shares on the date the combination takes
place (probably August 30th).
Q. Why did the Board of Directors approve the merger?
A. After reviewing many factors, your Board of Directors
unanimously determined that the reorganization was in the best
interests of each fund and its shareholders. Some of the
factors considered include:
o the similarity of the two funds' investment
objectives, policies and strategies
o the possibility of achieving management operational
efficiencies
o the fact that economic changes over the last fifteen
years have resulted in the diminishing viability of
the Capital Preservation Fund II
o the all-inclusive management fee of the New Capital
Preservation Fund is lower than the total expense
ratios of each of the Capital Preservation Fund and
Capital Preservation Fund II
Q. Will the exchange of Capital Preservation Fund and Capital Preservation
Fund II shares for New Capital Preservation Fund shares cause
shareholders to realize income or capital gains for tax purposes?
A. No. The exchange of shares in the reorganization will be
tax-free. We will obtain a legal opinion from Dechert, Price &
Rhoads, a law firm that specializes in this area, confirming
that the reorganization will not be a taxable event for you
for federal income tax purposes. Your tax basis and holding
period for your shares will be unchanged.
Q. How do the fee structure and total expense ratio of the Capital
Preservation Fund and Capital Preservation Fund II compare to the New
Capital Preservation Fund?
A. The funds' fee structures are quite different. The New Capital
Preservation Fund has an all-inclusive management fee. Under
this "all-inclusive" management fee, your fund pays a single
management fee. The all-inclusive fee has been calculated for
the current fiscal year at 0.48% of its average net assets. In
exchange for the all-inclusive fee, the manager is responsible
for paying all of the costs associated with providing or
procuring all of the services of the fund but is not
responsible for taxes, interest, brokerage commissions, the
fees and expenses of outside directors, and extraordinary
items. In contrast, with respect to the Capital Preservation
Fund and Capital Preservation Fund II, the funds (and hence,
their shareholders) pay separate fees for investment advisory,
administrative, custodial and transfer agency services. In
addition, there are other expenses, such as the cost of annual
audits, that are paid for by the funds. The total of all the
fees is currently capped at a 0.53% annual fee for the Capital
Preservation Fund and a 0.73% annual fee for the Capital
Preservation Fund II. For the year ended March 31, 1996, the
Capital Preservation Fund paid total operating expenses of
0.51% and the Capital Preservation Fund II would have paid,
without waivers, total operating expenses of 0.76%.
Q. Is the New Capital Preservation Fund riskier than the Capital
Preservation Fund or the Capital Preservation Fund II?
A. The New Capital Preservation Fund will essentially be the same
fund as the Capital Preservation Fund. It will continue to
seek maximum safety and liquidity for shareholders by
investing exclusively in short-term U.S. Treasury securities
guaranteed by the direct full faith and credit of the U.S.
government. While the risks associated with investing in
short-term U.S Treasury securities are very low, investment in
the fund is not risk free. Capital Preservation Fund II
shareholders will have a slightly higher interest rate risk as
shareholders of the New Capital Preservation Fund than the
Capital Preservation Fund II since the Capital Preservation
Fund II restricts its average portfolio maturity to seven days
or less.
Q. If shareholders send their proxies in now as requested, can they change
their vote later?
A. Yes! A proxy can be revoked at any time by writing to us, or
by sending us another proxy, or by showing up at the meeting
and voting in person. Even if you plan to show up at the
meeting to vote in person, we ask that you return the enclosed
proxy. Doing so will help us achieve a quorum for the meeting.
Q. How do shareholders vote their shares?
A. You can vote by mail or in person at the Special Meeting. The
fastest and most convenient way 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 the Board of Directors and vote
it "FOR" the reorganization. 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 and Co., Inc. at 1-800-755-3107.
Q. When and how will the combination take place?
A. Subject to receiving shareholder approval, the reorganization
is anticipated to take place on August 30, 1997. After both
funds have calculated the value of their assets and
liabilities on August 29th, the Capital Preservation Fund and
Capital Preservation Fund II will transfer their assets and
liabilities to the New Capital Preservation Fund in exchange
for its shares. The Capital Preservation Fund and Capital
Preservation Fund II will then make a liquidating distribution
of those shares to their shareholders. THE VALUE OF YOUR
ACCOUNT WILL NOT CHANGE AS A RESULT OF THIS REORGANIZATION.
Q. How will the reorganization affect the management team of your fund?
A. Amy O'Donnell, the lead portfolio manager for the Capital
Preservation Fund, will serve as lead manager for the New
Capital Preservation Fund and oversee the work of the
portfolio management team. Denise Tabacco, the lead portfolio
manager for the Capital Preservation Fund II, will also serve
on the portfolio management team of the New Capital
Preservation Fund.
Q. How will the distribution, purchase and redemption procedures and
exchange rights change as a result of the reorganization?
A. They won't. The New Capital Preservation Fund has the same
distribution, purchase and exchange policies and procedures as
the Capital Preservation Fund and Capital Preservation Fund
II. Please refer to page __ of the accompanying Prospectus for
a detailed discussion of these policies and procedures.
Q. Where can shareholders get more information about both funds?
A. Each fund is registered with the Securities and Exchange
Commission. As a result, each has a prospectus and statement
of additional information with even more detailed information
than is contained in this document. A copy of the New Capital
Preservation Fund's prospectus accompanies this proxy
statement. In addition, the Manager's Discussion and Analysis
of Fund performance portion of the Capital Preservation Fund's
most recent Semiannual Report to Shareholders is included in
this document as Appendix II. If you would like a copy of the
Capital Preservation Fund or Capital Preservation Fund II's
prospectus, statement of additional information, most recent
annual report or semiannual report, please call D. F. King and
Co., Inc. at 1-800-755-3107.
COMPARISON OF CERTAIN INFORMATION
REGARDING THE FUNDS
The following chart is provided to show a comparison of certain key
attributes of your fund with the New Capital Preservation Fund. The Total
Expenses Ratios for the Capital Preservation Fund and Capital Preservation Fund
II are stated as of their most recent fiscal year ended March 31, 1996, while
the Total Expense Ratio shown for the New Capital Preservation Fund is the fee
that will be in place at the time of the reorganization.
<TABLE>
Capital Preservation Capital Preservation New Capital Preservation
Fund Fund II Fund
---- ------- ----
<S> <C> <C> <C>
Type of Fund Money Market Money Market Money Market
Investment Objective Seeks maximum safety and Seeks maximum safety and Seeks maximum safety and
liquidity. Secondarily, the liquidity. Secondarily, the liquidity. Secondarily, the
fund seeks to pay its fund seeks to pay its fund seeks to pay its
shareholders the highest rate shareholders the highest rate of shareholders the highest rate of
of return on their investment return on their investment return on their investment
consistent with safety and consistent with safety and consistent with safety and
liquidity. liquidity. liquidity.
Invests Short-term U.S. Treasury Repurchase agreements Short-term U.S. Treasury
Exclusively In securities guaranteed by the collateralized by securities securities guaranteed by the
direct full faith and credit that are backed by the full direct full faith and credit
pledge of the U.S. government. faith and credit of the U.S. pledge of the U.S. government.
government.
Limitation on Not to exceed 90 days. Not to exceed 7 days. Not to exceed 90 days.
Dollar-Weighted Average
Portfolio Maturity
Total Expense Ratio 0.51% 0.73% (after waivers) 0.48%
(at 03/31/96) 0.76% (without waivers)
Distribution Policy Declared and Credited Daily. Declared and Credited Daily. Declared and Credited Daily.
Distributed Monthly. Distributed Monthly. Distributed Monthly.
Purchases and Exchanges Same as New Capital Same as New Capital Preservation See pages _ of accompanying
Preservation Fund Fund prospectus
Redemption Policies Same as New Capital Same as New Capital Preservation See pages _ of accompanying
Preservation Fund Fund prospectus
Investment Advisor Benham Management Corporation1 BMC American Century Investment
("BMC") Management, Inc.1("ACIM")
Transfer Agent American Century Services American Century Services American Century Services
Corporation Corporation Corporation
Distributor American Century Investment American Century Investment American Century Investment
Services, Inc. Services, Inc. Services, Inc.
Custodians Chase Manhattan Bank Chase Manhattan Bank Chase Manhattan Bank
Independent Auditors KPMG Peat Marwick LLP KPMG Peat Marwick LLP Coopers & Lybrand
- ----------------------------
(1) BMC and ACIM are both wholly-owned subsidiaries of American Century
Companies, Inc. Through this and many other proposals being submitted
to shareholders, American Century is seeking to consolidate all of its
investment advisory activities in ACIM.
</TABLE>
RISK FACTORS
Because the funds have the same investment objective and share
substantially similar investment policies, approaches and procedures, your Board
of Directors does not believe that the reorganization exposes shareholders of
the New Capital Preservation Fund to any new or different risks than they are
exposed to as shareholders of the Capital Preservation Fund or Capital
Preservation Fund II. As noted above, the New Capital Preservation Fund will
have a slightly higher interest rate risk than Capital Preservation Fund II
since Capital Preservation Fund II restricts its average portfolio maturity to
seven days or less. For a discussion of the various investment policies,
approaches and procedures of the New Capital Preservation Fund, and the risks
associated therewith, please see the accompanying prospectus beginning at page
__.
<PAGE>
<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE INFORMATION
The table below compares shareholder transaction expenses and annual
fund operating expenses of the Capital Preservation Fund, Capital Preservation
Fund II and pro forma expenses of the New Capital Preservation Fund.
Pro Forma:
Capital Capital New Capital
Preservation Preservation Preservation
Fund Fund II Fund
---- --------- ----
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases................................ None None None
Maximum Sales Load Imposed on Reinvested Dividends..................... None None None
Deferred Sales Load.................................................... None None None
Redemption Fee......................................................... None(1) None(1) None(1)
Exchange Fee........................................................... None None None
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets)
Management Fees........................................................ 0.27% 0.43%(2) 0.48%
12b-1 Fees............................................................. None None None
Other Expenses......................................................... 0.24% 0.30%(2) 0.00%(3)
----- -------- --------
Total Fund Operating Expenses.......................................... 0.51%(2) 0.73%(2) 0.48%
----- ----- -----
EXAMPLE:
You would pay the following expenses 1 year.............. $ 5 $ 7 $ 5
on a $1,000 investment, assuming a 5% 3 years............. 16 23 15
annual return and redemption at the 5 years............. 29 41 27
end of each time period. 10 years............ 64 91 60
The purpose of the table is to help you compare the various costs and
expenses that shareholders bear, directly or indirectly, as a result of owning
shares of the funds. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
- --------------------------------------------------------------------------------
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) Benham Management Corporation, the fund's investment advisor, has agreed to
limit the fund's total operating expenses to specified percentages of the
fund's average daily net assets. The agreement provides that the advisor
may recover amounts absorbed on behalf of the fund during the preceding 11
months if, and to the extent that, for any given month fund expenses were
less than the expense limit in effect at that time. The current expense
limit for the Capital Preservation Fund and Capital Preservation Fund II is
0.53% and 0.73% respectively. This expense limit is subject to annual
renewal in June. Amounts which are paid by unaffiliated third parties do
not apply to these limitation. If the expense limit was not in effect, the
Management Fee, Other Expenses and Total Operating Expenses for the Capital
Preservation Fund II would have been 0.46%, 0.30% and 0.76%, respectively.
(3) The manager expects Other Expenses to be less than 0.005% of 1% of average
net assets for the combined funds' next fiscal year end.
</TABLE>
ADDITIONAL INFORMATION ABOUT THE
PROPOSED TRANSACTION
Summary of Plan of Reorganization
Subject to receipt of shareholder approval, the reorganization will be
carried out pursuant to the terms of the Agreement and Plan of Reorganization
provided as Appendix I. The following is a brief summary of some of the
important terms of that Agreement.
Effective Time of the Reorganization. The Agreement requires that the
exchange of assets for stock take place after the close of business on one
business day but before (or as of) the opening of business on the next business
day (the "Effective Time"). It is currently anticipated that the reorganization
will take place after the close of business on August 29, 1997, but before (or
as of) the opening of business on September 2, 1997. However, the Agreement
gives the officers of the funds the flexibility to choose another date. See
Section 8 of the Agreement.
Exchange of Assets. After the close of business on August 29th, each
fund will determine the value of their assets and liabilities in the same manner
as described on page __ of the accompanying Prospectus. The assets and
liabilities of the Capital Preservation Fund and Capital Preservation Fund II
will then be transferred to the New Capital Preservation Fund in exchange for
that number of full and fractional shares (rounded to the third decimal place)
of shares that have the same aggregate net asset value as the value of the net
assets received in the exchange. The Capital Preservation Fund and Capital
Preservation Fund II will retain enough cash to pay any unpaid dividends and
distributions payable by the funds. See Sections 1.1 through 1.5 of the
Agreement.
Liquidating Distributions and Termination of the Capital Preservation
Fund and Capital Preservation Fund II Immediately after the exchange of their
assets for New Capital Preservation Fund shares, the Capital Preservation Fund
and Capital Preservation Fund II will distribute pro rata all of the shares they
receive in the exchange to their shareholders of record at the Effective Time
All of the outstanding shares of the Capital Preservation Fund and Capital
Preservation Fund II will be redeemed and canceled and their stock books closed.
As a result, such shareholders will become shareholders of the New Capital
Preservation Fund. The investment advisor for Capital Preservation Fund and
Capital Preservation Fund II will then take steps to withdraw each investment
company's registration under applicable federal securities laws and dissolve
them under applicable state law. See Section 2 of the Agreement.
Shareholder Approval. Consummation of the reorganization requires
approval of the Capital Preservation Fund and Capital Preservation Fund II
shareholders. See Sections 6.1 and 6.2 of the Agreement.
Representations and Warranties. The Agreement contains representations
and warranties made by each fund to the others concerning the fund's formation
and existence under applicable state law, its power to consummate the
reorganization, its qualification as a "regulated investment company" under
applicable tax law, the registration of its shares under federal law and other
matters that are customary in a reorganization of this type. The representations
and warranties terminate at the Effective Time. See Sections 4, 5 and 13 of the
Agreement.
Conditions to Closing. The Agreement contains conditions to closing the
proposed reorganization for the benefit of each fund. The conditions to closing
require approval of the reorganization by Capital Preservation Fund and Capital
Preservation Fund II shareholders, that all representations of the other funds
be true in all material respects, receipt of the legal opinion described on
[page ___] below under the caption "Federal Income Tax Consequences," and other
matters that are customary in a reorganization of this type. See Sections 9 and
10 of the Agreement.
Termination of Agreement. The Agreement may be terminated by a fund as
a result of a failure by the other funds to meet one of its conditions to
closing, or by mutual consent. See Sections 14.1 and 14.2 of the Agreement.
Governing Law. The Agreement states that it is to be interpreted under
Massachusetts law, the state of organization of the New Capital Preservation
Fund. See Section 16 of the Agreement.
Description of New Capital Preservation Fund Securities
The New Capital Preservation Fund is one of several series of shares
offered by American Century Government Income Trust. Each series is commonly
referred to as a mutual fund. The assets belonging to each series of shares are
held separately by the custodian.
American Century is currently authorized to issue one class of New
Capital Preservation Fund shares, although more classes might be offered in the
future.
Your Board of Directors believes there are no material differences
between the rights of a Capital Preservation Fund or Capital Preservation Fund
II shareholder and the rights of a shareholder of the New Capital Preservation
Fund. Each share, irrespective of series, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except for
those matters that must be voted on separately by the fund affected. Matters
affecting only one fund are voted upon only by that fund.
Shares have non-cumulative voting rights, which means that the holders
of more than 50% of the votes cast in an election of directors can elect all of
the directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act of 1940, it is not
necessary for the fund to hold annual meetings of shareholders. As a result,
shareholders may not vote each year on the election of directors or the
appointment of auditors. However, pursuant to the fund's bylaws, the holders of
at least 10% of the votes entitled to be cast may request the fund to hold a
special meeting of shareholders.
Reasons Supporting the Reorganization
The reasons supporting the combination of these funds are described
fully in the second question of the Q&A at the front of this document. After
years of operating funds that have the same investment objective and
substantially similar investment policies, approaches and procedures, American
Century believes that combining the funds will create operational and management
efficiencies. Moreover, economic changes have gradually diminished the Capital
Preservation Fund II's viability as the fund was originally established to
protect its investors from volitale interest rate swings and an unstable
economy. These factors are no longer a concern in today's economy. In addition,
the combination will help eliminate customer confusion regarding which money
market fund to choose.
Federal Income Tax Consequences.
Consummation of the reorganization is subject to the condition that we
receive a legal opinion from Dechert, Price & Rhoads to the effect that for
federal income tax purposes (i) no gain or loss will be recognized by you, the
Capital Preservation Fund, Capital Preservation Fund II or New Capital
Preservation Fund, (ii) your basis in the New Capital Preservation Fund shares
that you receive will be the same as your basis in the Capital Preservation Fund
and Capital Preservation Fund II shares held by you immediately prior to the
reorganization, and (iii) your holding period for the New Capital Preservation
Fund shares will include your holding period for your Capital Preservation Fund
and Capital Preservation Fund II shares.
We have not sought a tax ruling from the Internal Revenue Service, but
are relying upon the opinion of counsel referred to above. That opinion is not
binding on the IRS and does not preclude them from taking a contrary position.
You should consult your own advisers concerning the potential tax consequences.
Capitalization.
The following set forth as of March 31, 1997 (i) the capitalization of
the Capital Preservation Fund, Capital Preservation Fund II and (ii) the pro
forma capitalization of the New Capital Preservation Fund as adjusted to give
effect to the reorganization. If the reorganization is consummated, the
capitalization of the New Capital Preservation Fund is likely to be different at
the effective time of the reorganization as a result of market fluctuations of
the fund's portfolio securities and purchase and redemption activity in the
funds.
- -------------------------------------------------------------------------------
Pro Forma:
Capital Preservation Capital Preservation New Capital Preservation
Fund Fund II Fund
- -------------------------------------------------------------------------------
$2,977,972,397 $226,472,861 $3,204,445,257
- -------------------------------------------------------------------------------
INFORMATION ABOUT THE FUNDS
A complete description of all material information you need in order to
make an investment decision regarding the New Capital Preservation Fund and
American Century Government Income Trust is contained in the Prospectus
accompanying this proxy statement. Complete information about the Capital
Preservation Fund and Capital Preservation Fund II is contained in their
prospectus, which are available to you by calling us at 1-800-345-2021. The
content of each prospectus is incorporated into this document by reference. The
chart below lists various types of information about the funds and the Trust
that can be found in the prospectuses and a cross reference to where that
information can be found.
<TABLE>
INFORMATION ABOUT THE CAN BE FOUND IN THE
FOLLOWING ITEMS FOLLOWING PLACES
--------------- ----------------
In the Capital Preservation
In the New Capital Preservation Fund and Capital Preservation
Fund Prospectus Fund II Prospectus
--------------- ------------------
<S> <C> <C>
o Condensed financial information about the funds.
See Financial Highlights..................... Page __ Pages 5-6
o Organization and proposed operation of the funds,
including a description of the investment objectives
and policies, and how the funds seek to achieve such
objectives.
See Further Information About American
Century............................ Page __ Page 31
Investment Policies of the Funds... Page __ Pages 13-15
Risk Factors and Investment
Techniques ........................ Page __ Page 15-18
Other Investment Practices, Their
Characteristics and Risks.......... Page __ Page 18
o A description of the individuals who will be managing
the funds, the services the investment manager will
provide, and its fees.
See Management -
Investment Management.............. Page __ Pages 28-30
o The funds' policies with respect to dividends and
distributions and tax consequences of investments
in the funds.
See Distributions............................ Page __ Page 27
Taxes.................................. Page __ Pages 27-28
o An explanation of "net asset value" of your
shares.
See When Share Price is Determined......... Page __ Pages 26-27
o Information about the transaction and operating
expenses of the funds.
See Transaction and Operating
Expense Table........................ Page __ Page 4
o Information about distribution of the funds' shares,
such as the name of the funds' transfer agent and
dividend paying agent, distributor of fund shares,
and charges that may be imposed by broker-dealers.
See Distribution of Fund Shares............ Page __ Page 30
Transfer and Administrative
Services............................. Page __ Page 30
o The funds' minimum initial and subsequent investments.
See How to Open An Account................ Page __ Page 20-21
o Discussion regarding each fund's voting rights
and restrictions of shareholders.
See Further Information About American
Century.............................. Page __ Page 31
o Procedures for redeeming shares, refusals to honor
redemption requests and involuntary redemption of shares.
See How to Redeem Shares................... Page __ Page 22
Redemption of Shares in Low-Balance
Accounts............................. Page __ Page 22
</TABLE>
Fundamental Investment Restrictions
Neither the Capital Preservation Fund, Capital Preservation Fund II nor
the New Capital Preservation Fund may change its investment objective or any of
its investment policies or restrictions designated as "fundamental" in its
prospectus or statement of additional information without shareholder approval.
The New Capital Preservation Fund has adopted investment restrictions
which are consistent with the other funds within the American Century family of
funds. If you would like to review those policies as proposed, they are set
forth in Appendix III. You should be aware that if the reorganization proposed
by this proxy is not approved, it is anticipated that the manager will propose
that the Board of Directors approve the submission to a vote of shareholders of
substantially similar policies for your fund in order to make its investment
restrictions consistent with the other funds within the American Century family
of funds. If you would like to review the Capital Preservation Fund and Capital
Preservation Fund II's current investment limitations, they are set forth in
Appendix IV.
A complete discussion of all material information about the your fund
is contained in its current prospectus, which is incorporated into this document
by reference.
INFORMATION RELATING TO VOTING MATTERS
General Information
This Combined Prospectus/Proxy Statement is being furnished in
connection with the solicitation of proxies by the Board of Directors of your
fund. To more efficiently handle the proxy solicitation, American Century
Investment Management, Inc. has hired D. F. King and Co., Inc. to act as proxy
solicitor. Proxies may also be solicited by officers and employees of the
investment advisors of the funds, their affiliates and employees. It is
anticipated that the solicitation of proxies will be primarily by mail,
telephone, facsimile or personal interview. Authorizations to execute proxies
may be obtained by telephonic or electronically transmitted instructions in
accordance with procedures designed to authenticate the shareholder's identity
and to confirm that the shareholder has received the Combined Prospectus/Proxy
Statement and proxy card. If you have any questions regarding voting your shares
or the proxy, you should call D. F. King and Co., Inc. at 1-800-755-3107.
You should be aware that in the event that shareholders of one but not
both of the Capital Preservation Fund and Capital Preservation Fund II approve
the reorganization, then American Century may elect either to reorganize the
fund whose shareholders approved the transaction, or continue operating both
funds as they are currently being operated.
Voting and Revocation of Proxies
The fastest and most convenient way to vote your shares is to complete,
sign and mail the enclosed proxy voting card to us in the enclosed envelope.
This will help us obtain a quorum for the meeting and avoid the cost of
additional proxy solicitation efforts. If you return your proxy to us, we will
vote it 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 "FOR" the
reorganization.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by submitting a written notice of revocation, or a subsequently
executed proxy, or by attending the meeting and voting in person.
Record Date
Only shareholders of record at the close of business on June 2, 1997
will be entitled to vote at the meeting. On that date there were _________
outstanding shares of the Capital Preservation Fund and ________ outstanding
shares of the Capital Preservation Fund II entitled to be voted at the meeting
or any adjournment of the meeting.
Quorum
A quorum is the number of shareholders legally required to be at a
meeting in order to conduct business. The quorum for the Special Meeting is 50%
of the outstanding shares of each fund entitled to vote at the meeting. Shares
may be represented in person or by proxy. Proxies properly executed and marked
with a negative vote or an abstention will be considered to be present at the
meeting for the purposes of determining the existence of a quorum for the
transaction of business. If a quorum is not present at the meeting, or if a
quorum is present at the meeting but sufficient votes are not received to
approve the Agreement and Plan of Reorganization, the persons named as proxies
may propose one or more adjournments of the meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares affected by the adjournment that are represented
at the meeting in person or by proxy. If a quorum is not present, the persons
named as proxies will vote those proxies for which they are required to vote FOR
the Agreement and Plan of Reorganization in favor of such adjournments, and will
vote those proxies for which they are required to vote AGAINST such proposals at
any adjournment.
Shareholder Vote Required
The Agreement and Plan of Reorganization must be approved by the
holders of a majority of the outstanding shares of the Capital Preservation Fund
and Capital Preservation II in accordance with the provisions of their
respective Articles of Incorporation and the requirements of the Investment
Company Act of 1940. The term "majority of the outstanding shares" means more
than 50% of its outstanding shares.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a proposal
because instructions have not been received from the beneficial owners) will be
counted for purposes of determining whether or not a quorum is present for
purposes of convening the meeting. Abstentions and broker non-votes will,
however, be considered to be a vote against the Agreement and Plan of
Reorganization.
Cost of Proxy Solicitation
The cost of the proxy solicitation and shareholder meeting will be
borne by American Century Investment Management, Inc. and not by the
shareholders of either fund.
Certain Shareholders
The following tables list, as of __________, the names, addresses and
percentage of ownership of each person who owned of record or is known by either
fund to own beneficially 5% or more of the Capital Preservation Fund and Capital
Preservation Fund II. The percentage of shares to be owned after consummation of
the reorganization is based upon their holdings and the outstanding shares of
both funds on ________. Beneficial ownership information is not required to be
disclosed to the funds, so to the extent that information is provided below, it
is done so using the best information that the funds have been provided.
Capital Preservation Fund
- --------------------------------------------------------------------------------
Shareholder Number of % of % Owned After
Name Address Shares Ownership Reorganization
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Shares owned of record
(2) Shares beneficially owned
(3) Shares owned both beneficially and of record
Capital Preservation Fund II
- --------------------------------------------------------------------------------
Shareholder Number of % of % Owned After
Name Address Shares Ownership Reorganization
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Shares owned of record
(2) Shares beneficially owned
(3) Shares owned both beneficially and of record
At __________, the Directors and officers of the issuer of the Capital
Preservation Fund and Capital Preservation Fund II, as a group, owned less than
1% of the outstanding shares of each fund.
Appraisal Rights
Shareholders of the Capital Preservation Fund and Capital Preservation
Fund II are not entitled to any rights of share appraisal under the fund's
Articles of Incorporation, or under the laws of the State of California.
Shareholders have, however, the right to redeem their fund shares until
the reorganization, and thereafter shareholders may redeem from American Century
Government Income Trust their New Capital Preservation Fund shares acquired in
the reorganization at net asset value.
Annual Meetings
American Century Government Income Trust does not intend to hold annual
meetings of shareholders unless and until such time as less than a majority of
the trustees holding office have been elected by the shareholders, at which time
the trustees then in office will call a shareholders' meeting for the election
directors. Pursuant to the fund's bylaws, the shareholders of New Capital
Preservation Fund have the right to call a special meeting of shareholders and
such meeting will be called when requested in writing by the holders of record
of 10% or more of the fund's votes entitled to be cast at the meeting. To the
extent required by law, American Century Government Income Trust will assist in
shareholder communications on such matters.
The Capital Preservation Fund and Capital Preservation Fund II do not
intend to hold an annual meeting of shareholders this year for the election of
directors or the ratification of the appointment of auditors.
ADDITIONAL INFORMATION
Information about the Capital Preservation Fund and Capital
Preservation Fund II is incorporated into this document by reference from its
prospectus and statement of additional information, each dated January 1, 1997
and information about the New Capital Preservation Fund is incorporated herein
by reference from its Prospectus and Statement of Additional Information, each
dated __________, copies of each of which may be obtained without charge by
writing or calling D. F. King and Co., Inc. at 1-800-755-3107. Copies may also
be obtained by calling one of our Investor Services Representatives at
1-800-345-2021.
Reports and other information filed by American Century Government
Income Trust, American Century Capital Preservation Fund, Inc. and American
Century Capital Preservation Fund II, Inc. may be inspected and copied at the
Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, DC 20549, and copies of such materials may be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, DC 20549, at prescribed rates or
by accessing the Web site maintained by the SEC (www.sec.gov).
LITIGATION
Neither American Century Government Income Trust, American Century
Capital Preservation Fund, Inc. nor American Century Capital Preservation Fund
II, Inc. is involved in any litigation or proceeding.
FINANCIAL STATEMENTS
The financial highlights and financial statements for the Capital
Preservation Fund for the year ended March 31, 1996 and six month period ended
September 30, 1996 are contained in its Annual Report and Semiannual Report to
Shareholders, and in its prospectus and statement of additional information,
each dated January 1, 1997, each of which is incorporated by reference into this
Combined Prospectus/Proxy Statement. The financial highlights and the financial
statements for the Capital Preservation Fund II for the fiscal year ended March
31, 1996 and six month period ended September 30, 1996 are contained in its
Annual Report and Semiannual Report to Shareholders, and in its prospectus and
statement of additional information, each dated January 1, 1997, each of which
are incorporated by reference in this Combined Prospectus/Proxy Statement.
The audited financial statements of the Capital Preservation Fund and
Capital Preservation Fund II for the fiscal year ended March 31, 1996 contained
in its Annual Reports and incorporated herein in reliance on the reports of KPMG
Peat Marwick LLP, independent auditors, given upon the authority of such firm as
experts in accounting and auditing.
OTHER BUSINESS
The Board of Directors is not aware of any other business to be brought
before the meeting. However, if any other matters come before the meeting, it is
the intention that proxies that 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.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be directed to D. F. King & Co., Inc. at
1-800-755-3107.
-- -- --
SHAREHOLDERS ARE REQUESTED TO DATE AND SIGN EACH ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. PLEASE RETURN YOUR PROXY CARD EVEN IF YOU
ARE PLANNING TO ATTEND THE MEETING. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
<PAGE>
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.,
AMERICAN CENTURY CAPITAL PRESERVATION FUND II, INC.
and
AMERICAN CENTURY GOVERNMENT INCOME TRUST
DATED __________________, 1997
TABLE OF CONTENTS
1. Transfer of Assets of the Acquired Funds....................................3
2. Liquidating Distributions and Termination of the
Acquired Funds............................................................5
3. Valuation Times.............................................................6
4. Certain Representations, Warranties and Agreements
of the Acquired Companies.................................................6
5. Certain Representations, Warranties and Agreements
of the Acquiring Company..................................................4
6. Shareholder Action on Behalf of the Acquired Funds..........................6
7. Registration Statement and Proxy Solicitation Materials.....................6
8. Effective Times of the Reorganization.......................................6
9. The Acquiring Company's Conditions..........................................7
10. The Acquired Companies' Conditions.........................................9
11. Tax Documents.............................................................10
12. Further Assurances........................................................10
13. Termination of Representations and Warranties.............................10
14. Termination of Agreement..................................................10
15. Amendment and Waiver......................................................11
16. Governing Law.............................................................11
17. Successors and Assigns....................................................11
18. Beneficiaries.............................................................11
19. Acquired Company Liability................................................11
20. Acquiring Company Liability...............................................12
21. Notices...................................................................12
22. Expenses..................................................................13
23. Entire Agreement..........................................................13
24. Counterparts..............................................................13
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION made as of ________________, 1997 by and
among American Century Government Income Trust, a Massachusetts business trust
(the "Acquiring Company"), and American Century Capital Preservation Fund, Inc.
and American Century Capital Preservation Fund II, Inc., each a California
corporation ( the "Acquired Companies").
WHEREAS, the parties desire that substantially all of the assets and liabilities
of the Acquired Companies be transferred to, and be acquired and assumed by, an
Acquiring Company portfolio in exchange for shares of the Acquiring Company's
portfolio which shall thereafter be distributed by the Acquired Companies to the
holders of shares of its portfolios, all as described in this Agreement (the
"Reorganization");
WHEREAS, the parties intend that the American Century-Benham Capital
Preservation Fund, a portfolio of American Century Government Income Trust (the
"Acquiring Fund"), will have nominal assets and liabilities before the
Reorganization and will continue the investment operations of the American
Century-Benham Capital Preservation Fund, a portfolio of American Century
Capital Preservation Fund, Inc. and American Century-Benham Capital Preservation
Fund II, a portfolio of American Century Capital Preservation Fund II, Inc.,
(collectively the "Acquired Funds"), after the Reorganization;
WHEREAS, the parties intend that the transfers of assets, assumptions of
liabilities and distributions of shares in the Acquired Funds (as defined in
Section 1.2) be treated as a tax-free reorganization under Section 368(a)(1)(C),
368(a)(1)(D) or 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, the parties intend that in connection with the Reorganization the
Acquired Funds, as defined below, shall be terminated under state law and
de-registered as described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and subject to the terms and conditions hereof, and
intending to be legally bound hereby, the Acquiring Company and the Acquired
Companies agree as follows:
1. Transfer of Assets of the Acquired Funds.
1.1. At the Effective Time of the Reorganization (as defined in Section 8)
with respect to the Acquired Funds, as set forth in Section 1.2, all
property of every description, and all interests, rights, privileges
and powers of the Acquired Funds other than cash in an amount
necessary to pay any unpaid dividends and distributions as provided in
Section 4.7 (such assets, the "Acquired Fund Assets") shall be
transferred and conveyed by the Acquired Funds to the Acquiring
Company on behalf of the Acquiring Fund and shall be accepted by the
Acquiring Company on behalf of such Acquiring Fund, and the Acquiring
Company, on behalf of such Acquiring Fund, shall assume all known
liabilities whether accrued, absolute, contingent or otherwise, of the
Acquired Funds reflected in the calculation of such Acquired Funds'
net asset value (the "Acquired Fund Liabilities"), so that at and
after the Effective Time of the Reorganization with respect to the
Acquired Funds: (i) all assets of the Acquired Funds shall become and
be the assets of its Acquiring Fund; and (ii) all known liabilities of
the Acquired Funds reflected as such in the calculation of each
Acquired Funds' net asset values shall attach to the Acquiring Fund as
aforesaid and may thenceforth be enforced against the Acquiring Fund
to the extent as if the same had been incurred by it. Without limiting
the generality of the foregoing, the Acquired Fund Assets shall
include all property and assets of any nature whatsoever, including,
without limitation, all cash, cash equivalents, securities, other
investments, claims and receivables (including dividend and interest
receivables) owned by the Acquired Funds, and any deferred or prepaid
expenses shown as an asset on the Acquired Funds' books, at the
Effective Time of the Reorganization of the Acquired Funds, and all
good will, all other intangible property and all books and records
belonging to the Acquired Funds. Recourse by any person for the
Acquired Fund Liabilities assumed by the Acquiring Fund shall, at and
after the Effective Time of the Reorganization of the Acquired Funds,
be limited to the Acquiring Fund.
1.2. The assets of the Acquired Funds shall be acquired by the Acquiring
Fund identified below:
ACQUIRING FUND ACQUIRED FUNDS
-------------- --------------
American Century Government American Century Capital Preservation
Income Trust Fund, Inc.
Capital Preservation Fund Capital Preservation Fund
American Century Captial Preservation
Fund, Inc.
Capital Preservation Fund II
1.3. In exchange for the transfer of the Acquired Fund Assets and the
assumption of the Acquired Fund Liabilities, the Acquiring Company
shall simultaneously issue at the applicable Effective Time of the
Reorganization to the Acquired Funds a number of full and fractional
shares to the third decimal place, of the Acquiring Fund specified in
Section 1.2 all determined and adjusted as provided in this Agreement.
The number of shares of the Acquiring Fund so issued will have an
aggregate net asset value equal to the value of the Acquired Fund
Assets that are represented by shares of the corresponding Acquired
Funds, the holders of which shall receive shares of the Acquiring
Fund, as specified in Section 1.2, all determined and adjusted as
provided in this Agreement.
1.4. The net asset value of such class of shares of the Acquiring Fund and
the net asset value of the Acquired Funds shall be determined as of
the applicable Valuation Time specified in Section 3.
1.5. The net asset value of shares of the Acquiring Fund shall be computed
in the manner set forth in the Acquiring Fund's then current
prospectus under the Securities Act of 1933, as amended (the "1933
Act"). The net asset value of the Acquired Fund Assets to be
transferred by the Acquired Companies shall be computed by the
Acquired Company and shall be subject to adjustment by the amount, if
any, agreed to by the Acquiring Company and the Acquired Companies. In
determining the value of the securities transferred by the Acquired
Funds to the Acquiring Fund, each security shall be priced in
accordance with the policies and procedures of the Acquiring Company
as described in its then current prospectus and statement of
additional information and adopted by the Acquiring Company's Board of
Trustees, which are and shall be consistent with the policies now in
effect for the Acquired Companies. Price quotations and the security
characteristics relating to establishing such quotations shall be
determined by the Acquiring Company, provided that such determination
shall be subject to the approval of the Acquired Companies.
1.6. The value of the Acquired Fund Assets of the Acquired Funds and the
value of the shares of the Acquiring Fund shall be based on the
amortized cost valuation procedures that have been adopted by the
Board of Trustees of the Acquiring Company and the Boards of Directors
of the Acquired Companies, respectively. Any provision in this
Agreement to the contrary notwithstanding, if the difference between
the per share net asset values of an Acquired Fund and the Acquiring
Fund equals or exceeds $.0025 at the applicable Valuation Time, as
computed by using such market values in accordance with the policies
and procedures established by the Acquiring Company (or as otherwise
mutually determined by the Board of Trustees of the Acquiring Company
and the Boards of Directors of the Acquired Companies), either of the
Boards shall have the right to postpone the applicable Valuation Time
and the applicable Effective Time of the Reorganization with respect
to both such Acquired Funds until such time as the per share
difference is less than $.0025.
2. Liquidating Distributions and Termination of the Acquired Funds.
Immediately after the Effective Time of the Reorganization with respect to the
Acquired Funds, such Acquired Funds shall distribute in complete liquidation pro
rata to the record holders of its shares at the applicable Effective Time of the
Reorganization the shares of the Acquiring Fund identified in Section 1.2 to be
received by the record holders of such Acquired Funds. In addition, each
shareholder of record of the Acquired Funds shall have the right to receive any
unpaid dividends or other distributions which were declared before the
applicable Effective Time of the Reorganization with respect to the shares of
the Acquired Funds that are held by the shareholder at the applicable Effective
Time of the Reorganization. In accordance with instructions it receives from the
Acquired Companies, the Acquiring Company shall record on its books the
ownership of shares of the Acquiring Fund by the record holders of shares of the
Acquired Funds identified in Section 1.2. All of the issued and outstanding
shares of the Acquired Funds shall be redeemed and canceled on the books of the
Acquired Companies at the Effective Time of the Reorganization of the Acquired
Funds and shall thereafter represent only the right to receive the shares of the
Acquiring Funds identified in Section 1.2, and the Acquired Funds' transfer
books shall be closed permanently. As soon as practicable after the Effective
Time of the Reorganization with respect to the Acquired Fund, the Acquired
Companies shall make fillings and take all other steps as shall be necessary and
proper to effect their complete dissolution, and shall file an application
pursuant to Section 8 (f) of the Investment Company Act of 1940, as amended (the
"1940 Act") for an order declaring that each has ceased to be an investment
company and any and all documents that may be necessary to terminate their
existence under state law. After the Effective Time of the Reorganization with
respect to the Acquired Funds, the Acquired Company shall not conduct any
business except in connection with its liquidation, dissolution, and
deregistration.
3. Valuation Times.
Subject to Section 1.5 hereof, the Valuation Time for the Reorganization with
respect to the Acquired Funds shall be as set forth in the Acquired Funds
prospectus on such date as may be agreed in writing by the duly authorized
officers of both parties hereto.
4. Certain Representations, Warranties and Agreements of the Acquired
Companies.
The Acquired Companies, on behalf of itself and each Acquired Fund, represents
and warrants to, and agrees with, the Acquiring Company as follows:
4.1. The Acquired Companies are California corporations duly created
pursuant to their Articles of Incorporation for the purpose of acting
as management investment companies under the 1940 Act, and are validly
existing under the laws of, and duly authorized to transact business
in, the State of California. The Acquired Funds are registered with
the Securities and Exchange Commission (the "SEC") as open-end
management investment companies under the 1940 Act and such
registration is in full force and effect.
4.2. The Acquired Companies have the power to own all of their properties
and assets and, subject to the approvals of shareholders referred to
herein, to carry out and consummate the transactions contemplated
hereby, and has all necessary federal, state and local authorizations
to carry on its business as now being conducted and to consummate the
transactions contemplated by this Agreement.
4.3. This Agreement has been duly authorized, executed and delivered by the
Acquired Companies, and represents the Acquired Companies' valid and
binding contract, enforceable in accordance with its terms, subject as
to enforcement to bankruptcy, insolvency reorganization, arrangement,
moratorium, and other similar laws of general applicability relating
to or affecting creditors' rights and to general principles of equity.
The execution and delivery of this Agreement does not and will not,
and the consummation of the transactions contemplated by this
Agreement will not, violate the Acquired Companies' Articles of
Incorporation, By-laws, or any agreement or arrangement to which it is
a party or by which it is bound.
4.4. Each Acquired Fund has elected to qualify and has qualified as "a
regulated investment company" under Subtitle A, Chapter 1, Subchapter
M, Part I of the Code, as of and since its first taxable year; has
been such a regulated investment company at all times since the end of
its first taxable year when it so qualified; and qualifies and shall
continue to qualify as a regulated investment company until the
Effective Time of the Reorganization with respect to each Acquired
Fund.
4.5. All federal, state, local and foreign income, profits, franchise,
sales, withholding, customs, transfer and other taxes, including
interest, additions to tax and penalties (collectively, "Taxes")
relating to the Acquired Fund Assets or properly shown to be due on
any return filed by any Acquired Fund with respect to taxable periods
ending on or prior to, and the portion of any interim period up to,
the date hereof have been fully and timely paid or provided for; and
there are no levies, liens, or other encumbrances relating to Taxes
existing, threatened or pending with respect to the Acquired Fund
Assets.
4.6. The financial statements of the Acquired Funds for the fiscal year
ended March 31, 1996, examined by KPMG Peat Marwick LLP, copies of
which have been previously furnished to the Acquiring Company, present
fairly the financial position of the Acquired Funds as of March 31,
1996 and the results of its operations for the year then ending, in
conformity with generally accepted accounting principles.
4.7. Prior to the Valuation Time, each Acquired Fund shall have declared a
dividend or dividends, with a record date and ex-dividend date prior
to such Valuation Time, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income, if any, for the taxable periods or
years ended on or before the Acquired Funds' most recent fiscal year
end, and for the period from said date to and including the Effective
Time of the Reorganization applicable to such Acquired Fund (computed
without regard to any deduction for dividends paid), and all of its
net capital gain, if any, realized in taxable periods or years ended
on or before such Acquired Fund's fiscal year end and for the period
from said date to and including the Effective Time of the
Reorganization applicable to such Acquired Fund.
4.8. At both the Valuation Time and the Effective Time of the
Reorganization with respect to the Acquired Funds, there shall be no
known liabilities of the Acquired Funds, whether accrued, absolute,
contingent or otherwise, not reflected in the net asset values per
share of each Acquired Fund's outstanding shares.
4.9. There are no legal, administrative or other proceedings pending or, to
the Acquired Companies' knowledge threatened, against the Acquired
Companies or the Acquired Funds which could result in liability on the
part of the Acquired Companies or the Acquired Funds.
4.10.Subject to the approvals of shareholders at both the Valuation Time
and the Effective Time of the Reorganization with respect to the
Acquired Funds, the Acquired Funds shall have full right, power and
authority to sell, assign, transfer and deliver the Acquired Fund
Assets of the Acquired Funds and, upon delivery and payment for the
Acquired Fund Assets as contemplated herein, the Acquiring Funds shall
acquire good and marketable title thereto, free and clear of all liens
and encumbrances, and subject to no restrictions on the ownership or
transfer thereof (except as imposed by federal or state securities
laws).
4.11.No consent, approval, authorization or order of any court or mutual
authority is required for the consummation by the Acquired Companies
of the transactions contemplated by this Agreement, except such as may
be required under the 1933 Act, the Securities Exchange Act of 1934,
as amended ("1934 Act"), the 1940 Act, the rules and regulations under
those Acts, and state securities laws.
4.12.Insofar as the following relate to the Acquired Companies, the
registration statement filed by the Acquiring Company on Form N-14
relating to the shares of the Acquiring Fund that will be registered
with the SEC pursuant to this Agreement, which, without limitation,
shall include a proxy statement of the Acquired Companies and the
prospectus of the Acquiring Company with respect to the transactions
contemplated by this Agreement, and any supplement or amendment
thereto or to the documents contained or incorporated therein by
reference (the "N-14 Registration Statement"), on the effective date
of the N-14 Registration Statement, at the time of any shareholders'
meeting referred to herein and at the Effective Time of the
Reorganization: (i) shall comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act, the rules
and regulations thereunder, and state securities laws, and (ii) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to
statements in or omissions from the N-14 Registration Statement made
in reliance upon and in conformity with information furnished by the
Acquired Companies for use in the N-14 Registration Statement.
4.13.All of the issued and outstanding shares of the Acquired Funds have
been duly and validly issued, are fully paid and non-assessable, and
were offered for sale and sold in conformity with all applicable
federal and state securities laws, and no shareholder of the Acquired
Funds has any preemptive right of subscription or purchase in respect
of such shares.
5. Certain Representations, Warranties and Agreements of the Acquiring
Company.
The Acquiring Company, on behalf of itself and the Acquiring Fund, represents
and warrants to, and agrees with, the Acquired Companies as follows:
5.1. It is a Massachusetts business trust duly created pursuant to a
Declaration of Trust for the purpose of acting as a management
investment company under the 1940 Act and is validly existing under
the laws of, and duly authorized to the Commonwealth of Massachusetts.
The Acquiring Fund is registered with the SEC as an open-end
management investment company under the 1940 Act and such registration
is in full force and effect.
5.2. It has the power to own all of its property and assets and to carry
out and consummate the transactions contemplated herein, and has all
necessary federal, state and local authorizations to carry on its
business as now being conducted and to consummate the transactions
contemplated by this Agreement.
5.3. This Agreement has been duly authorized, executed and delivered by the
Acquiring Company, and represents the Acquiring Company's valid and
binding contract, enforceable in accordance with its terms, subject as
to enforcement to bankruptcy, insolvency, reorganization, arrangement,
moratorium, and other similar laws of general applicability relating
to or affecting creditors' rights and to general principles of equity.
The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated by this Agreement will
not, violate the Acquiring Company's Declaration of Trust or By-laws
or any agreement or arrangement to which it is a party or by which it
is bound.
5.4. The Acquiring Fund will elect to qualify as a "regulated investment
company" under Subtitle A, Chapter 1, Subchapter M, Part I of the
Code, and intends to continue to qualify as a regulated investment
company.
5.5. At both the Valuation Time and the Effective Time of the
Reorganization with respect to the Acquiring Fund, there shall be no
known liabilities of the Acquiring Fund, whether accrued, absolute,
contingent or otherwise, not reflected in the net asset values per
share of its outstanding shares to be issued pursuant to this
Agreement.
5.6. There are no legal, administrative or other proceedings pending or, to
its knowledge, threatened against the Acquiring Company or the
Acquiring Fund which could result in liability on the part of the
Acquiring Company or the Acquiring Fund.
5.7. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Company of the transactions contemplated by this Agreement,
except such as may be required under the 1933 Act, the 1934 Act, the
1940 Act, the rules and regulations under those Acts, and state
securities laws.
5.8. Insofar as the following relate to the Acquiring Company, the N-14
Registration Statement on its effective date, at the time of any
shareholders' meetings referred to herein and at the Effective Time of
the Reorganization: (i) shall comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act, the rules
and regulations thereunder, and state securities laws, and (ii) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to
statements in or omissions from the N-14 Registration Statement made
in reliance upon and in conformity with information furnished by the
Acquiring Company for use in the N-14 Registration Statement.
5.9. The shares of the Acquiring Fund to be issued and delivered to the
Acquired Funds for the account of record holders of shares of the
Acquired Funds pursuant to the terms hereof shall have been duly
authorized as of the Effective Time of the Reorganization applying to
the Acquiring Fund and, when so issued and delivered, shall be
registered under the 1933 Act and under applicable state securities
laws, duly and validly issued, fully paid and non-assessable, and no
shareholder of the Acquiring Company shall have any preemptive right
of subscription or purchase in respect thereto.
6. Shareholder Action on Behalf of the Acquired Funds.
6.1. As soon as practicable after the effective date of the N-14
Registration Statement, but in any event prior to the Effective Time
of the Reorganization applicable to the Acquired Funds and as a
condition to the Reorganization, the Boards of Directors of the
Acquired Companies shall call, and the Acquired Companies shall hold,
a meeting of the shareholders of the Acquired Funds for the purpose of
considering and voting upon:
6.1.1. Approval of this Agreement and the transactions contemplated
hereby, including, without limitation:
6.1.1.1. The transfer of the Acquired Fund Assets belonging to
each Acquired Fund to the Acquiring Fund, and the assumption
by the Acquiring Fund of the Acquired Fund Liabilities of
such Acquired Funds, in exchange for shares of the Acquiring
Fund, as set forth in Section 1.2;
6.1.1.2. The liquidation of the Acquired Funds through the
distribution to its record holders of shares of the
Acquiring Fund as described in this Agreement; and
6.1.2. Such other matters as may be determined by the Boards of
Directors or authorized officers of the parties.
6.2. Approval of this Reorganization Agreement by the shareholders of the
Acquired Funds shall constitute the waiver of the application of any
fundamental policy of the Acquired Funds that might be deemed to
prevent them from taking the actions necessary to effectuate the
Reorganization as described, and such policies, if any, shall be
deemed to have been amended accordingly.
7. Registration Statement and Proxy Solicitation Materials.
The Acquiring Company shall file the N-14 Registration Statement under the 1933
Act, and the Acquired Companies shall file the combined prospectus/proxy
statement contained therein under the 1934 Act and 1940 Act proxy rules, with
the SEC as promptly as practicable. The Acquiring Company and the Acquired
Companies have cooperated and shall continue to cooperate with the other, and
has furnished and shall continue to furnish the other with the information
relating to itself that is required by the 1933 Act, the 1934 Act, the 1940 Act,
the rules and regulations under each of those Acts and state securities laws, to
be included in the N-14 Registration Statement.
8. Effective Times of the Reorganization.
Delivery of the Acquired Fund Assets of the Acquired Funds and shares of the
Acquiring Fund to be issued pursuant to Section 1 and the liquidation of the
Acquired Funds pursuant to Section 2 shall occur at the opening of business on
the next business day following the Valuation Time applicable to the Acquired
Funds, or on such other date, and at such place and time and date, as may be
determined by the President or any Vice President of each party hereto. The
respective date and time at which such actions are taken with respect to the
Acquired Funds are referred to herein as the "Effective Time of the
Reorganization." To the extent any Acquired Fund Assets are, for any reason, not
transferred at the applicable Effective Time of the Reorganization, the Acquired
Companies shall cause such Acquired Fund Assets to be transferred in accordance
with this Agreement at the earliest practicable date thereafter.
9. The Acquiring Company's Conditions.
The obligations of the Acquiring Company hereunder with respect to the Acquiring
Fund shall be subject to the following conditions precedent:
9.1. This Agreement and the transactions contemplated by this Agreement
shall have been approved by the shareholders of the Acquired Funds, in
the manner required by law.
9.2. The Acquired Company shall have duly executed and delivered to the
Acquiring Company such bills of sale, assignments, certificates and
other instruments of transfer ("Transfer Documents") as may be
necessary or desirable to transfer all right, title and interest of
the Acquired Companies and the Acquired Funds in and to the Acquired
Fund Assets of the Acquired Funds. The Acquired Fund Assets shall be
accompanied by all necessary state stock transfer stamps or cash for
the appropriate purchase price therefor.
9.3. All representations and warranties made in this Agreement shall be
true and correct in all material respects as if made at and as of each
Valuation Time and each Effective Time of the Reorganization. As of
the Valuation Time and the Effective Time of the Reorganization
applicable to the Acquired Funds, there shall have been no material
adverse change in the financial position of the Acquired Funds since
March 31, 1996, other than those changes incurred in the ordinary
course of business as an investment company. No action, suit or other
proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or prohibit, or
obtain damages or other relief in connection with, this Agreement or
the transactions contemplated herein.
9.4. The Acquiring Company shall have received an opinion of Dechert Price
& Rhoads addressed to the Acquiring Company and the Acquired Companies
in a form reasonably satisfactory to them and dated the Effective Time
of the Reorganization applicable to the Acquired Funds, substantially
to the effect that for federal income tax purposes: (i) the transfers
of all of the Acquired Fund Assets hereunder, and the assumption by
the Acquiring Fund of Acquired Fund Liabilities, in exchange for
shares of the Acquiring Fund, and the distribution of said shares to
the shareholders of the Acquired Funds, as provided in this Agreement,
will each constitute a reorganization within the meaning of Section
368(a)(1)(C), 368(a)(1)(D) or 368(a)(1)(F) of the Code and with
respect to each reorganization, the Acquired Funds and the Acquiring
Fund will each be considered "a party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) in accordance with
Sections 361(a), 361(c)(1) and 357(a) of the Code, no gain or loss
will be recognized by the Acquired Funds as a result of such
transactions; (iii) in accordance with Section 1032(a) of the Code, no
gain or loss will be recognized by the Acquiring Fund as a result of
such transactions; (iv) in accordance with Section 354(a)(1) of the
Code, no gain or loss will be recognized by the shareholders of the
Acquired Funds on the distribution to them by the Acquired Funds of
shares of the Acquiring Fund in exchange for their shares of the
Acquired Funds; (v) in accordance with Section 358(a)(1) of the Code,
the aggregate basis of Acquiring Fund shares received by each
shareholder of the Acquired Funds will be the same as the aggregate
basis of the shareholder's Acquired Fund shares immediately prior to
the transactions; (vi) in accordance with Section 362(b) of the Code,
the basis of the Acquired Fund Assets to the Acquiring Fund will be
the same as the basis of the Acquired Fund Assets in the hands of the
Acquired Funds immediately prior to the exchange; (vii) in accordance
with Section 1223(1) of the Code, a shareholder's holding period for
Acquiring Fund shares will be determined by including the period for
which the shareholder held the shares of the Acquired Funds exchanged
therefor, provided that the shareholder held such shares of the
Acquired Funds as a capital asset; and (viii) in accordance with
Section 1223(2) of the Code, the holding period of the Acquiring Fund
with respect to the Acquired Fund Assets will include the period for
which the Acquired Fund Assets were held by the Acquired Funds.
9.5. The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to
enjoin consummation of the transactions contemplated by this Agreement
under Section 25(c) of the 1940 Act.
9.6. The N-14 Registration Statement shall have become effective under the
1933 Act and no stop order suspending such effectiveness shall have
been instituted or, to the knowledge of the Acquiring Company,
contemplated by the SEC and the parties shall have received all
permits and other authorizations necessary under state securities laws
to consummate the transactions contemplated by this Agreement.
9.7. The President or a Vice President of the Acquired Companies shall have
certified that the Acquired Companies have performed and complied in
all material respects with each of its agreements and covenants
required by this Agreement to be performed or complied with by it
prior to or at each Valuation Time and each Effective Time of the
Reorganization.
10. The Acquired Companies' Conditions.
The obligations of the Acquired Companies hereunder with respect to the Acquired
Funds shall be subject to the following conditions precedent:
10.1.This Agreement and the transactions contemplated by this Agreement
shall have been approved by the shareholders of the Acquired Funds, in
the manner required by law.
10.2.All representations and warranties of the Acquiring Company made in
this Agreement shall be true and correct in all material respects as
if made at and as of each Valuation Time and each Effective Time of
the Reorganization. As of the Valuation Time and the Effective Time of
the Reorganization applicable to the Acquired Funds, there shall have
been no material adverse change in the financial condition of the
Acquiring Fund since the date herein other than those changes incurred
in the ordinary course of business as an investment company. No
action, suit or other proceeding shall be threatened or pending before
any court or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
10.3.The Acquired Companies shall have received an opinion of Dechert
Price & Rhoads, addressed to the Acquiring Company and the Acquired
Companies in a form reasonably satisfactory to them and dated the
Effective Time of the Reorganization applicable to the Acquired Funds,
with respect to the matters specified in Section 9.4.
10.4.The N-14 Registration Statement shall have become effective under the
1933 Act and no stop order suspending such effectiveness shall have
been instituted, or to the knowledge of the Acquiring Company,
contemplated by the SEC and the parties shall have received all
permits and other authorizations necessary under state securities laws
to consummate the transactions contemplated by this Agreement.
10.5.The Acquired Companies shall not sell or otherwise dispose of any
shares of the Acquiring Fund to be received in the transactions
contemplated herein, except in distribution to its shareholders as
contemplated herein.
10.6.The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to
enjoin consummation of the transactions contemplated by this Agreement
under Section 25(c) of the 1940 Act.
10.7.The President or a Vice President of the Acquiring Company shall have
certified that the Acquiring Company has performed and complied in all
material respects with each of its agreements and covenants required
by this Agreement to be performed or complied with by it prior to or
at each Valuation Time and each Effective Time of the Reorganization.
11. Tax Documents.
The Acquired Companies shall deliver to the Acquiring Company at the Effective
Time of the Reorganization confirmations or other adequate evidence as to the
adjusted tax basis of the Acquired Fund Assets then delivered to the Acquiring
Fund in accordance with the terms of this Agreement.
12. Further Assurances.
Subject to the terms and conditions herein provided, each of the parties hereto
shall use its best efforts to take, or cause to be taken, such action, to
execute and deliver, or cause to be executed and delivered, such additional
documents and instruments, and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and under applicable
law to consummate and make effective the transactions contemplated by this
Agreement.
13. Termination of Representations and Warranties.
The representations and warranties of the parties set forth in this Agreement
shall terminate at the Effective Time of the Reorganization.
14. Termination of Agreement.
14.1.This Agreement may be terminated by a party at any time at or prior to
the Effective Time of the Reorganization by the Board of Trustees of
the Acquiring Company or the Boards of Directors of either of the
Acquired Companies, as provided below:
14.1.1. By the Acquiring Company with respect to its Acquiring Fund if
the conditions set forth in Section 9 are not satisfied as
specified in said Section;
14.1.2. By either of the Acquired Companies if the conditions set
forth in Section 10 are not satisfied as specified in said
Section;
14.1.3. By the mutual consent of the parties.
14.2.If a party terminates this Agreement because one or more of its
conditions precedent have not been fulfilled, or if this Agreement is
terminated by mutual consent, this Agreement will become null and void
without any liability of either party or any of their investment
portfolios to the other; provided, however, that if such termination
is by the Acquiring Company pursuant to Section 14.1.1 as a result of
a breach by the Acquired Companies of any of their representations,
warranties or covenants in this Agreement, or such termination is by
either Acquired Company pursuant to Section 14.1.2 as a result of a
breach by the Acquiring Company of any of its representations,
warranties or covenants in this Agreement, nothing herein shall affect
the non-breaching party's right to damages on account of such other
party's breach.
15. Amendment and Waiver.
At any time prior to or (to the fullest extent permitted by law) after approval
of this Agreement by the shareholders of the Acquired Companies, (a) the parties
hereto may, by written agreement authorized by their respective Boards of
Trustees or Directors, as the case may be, or their respective Presidents or any
Vice Presidents, and with or without the approval of their shareholders, amend
any of the provisions of this Agreement, and (b) either party may waive any
breach by the other party or the failure to satisfy any of the conditions to its
obligations (such waiver to be in writing and executed by the President or Vice
President of the waiving party with or without the approval of such party's
shareholders).
16. Governing Law.
This Agreement and the transactions contemplated hereby shall be governed,
construed and enforced in accordance with the laws of Massachusetts, without
giving effect to the conflicts of law principles otherwise applicable therein.
17. Successors and Assigns.
This Agreement shall be binding upon the respective successors and permitted
assigns of the parties hereto. This Agreement and the rights, obligations and
liabilities hereunder may not be assigned by either party without the consent of
the other party.
18. Beneficiaries.
Nothing contained in this Agreement shall be deemed to create rights in persons
not parties hereto, other than the successors and permitted assigns of the
parties.
19. Acquired Company Liability.
19.1.Both parties specifically acknowledge and agree that any liability of
the Acquired Companies under this Agreement with respect to any
Acquired Fund, or in connection with the transactions contemplated
herein with respect to an Acquired Fund, shall be discharged only out
of the assets of that particular Acquired Fund and that no other
portfolio shall be liable with respect thereto.
20. Acquiring Company Liability.
20.1.The names "American Century Government Income Trust" and "Trustees of
American Century Government Income Trust" refer respectively to the
trusts created and the trustees, as trustees but not individually or
personally, acting from time to time under a Declaration of Trust
dated May 1, 1984, which is hereby referred to and copies of which are
on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Acquiring Company.
The obligations of the Acquiring Company entered into in the name or
on behalf thereof by any of the trustees, representatives or agents
are made not individually, but in such capacities, and are not binding
upon any of the trustees, shareholders or representatives of the
Acquiring Company personally, but bind only the trust property, and
all persons dealing with any portfolio of the Acquiring Company must
look solely to the trust property belonging to such portfolio for the
enforcement of any claims against the Acquiring Company.
20.2.Both parties specifically acknowledge and agree that any liability of
the Acquiring Company under this Agreement with respect to the
Acquiring Fund, or in connection with the transactions contemplated
herein with respect to the Acquiring Fund, shall be discharged only
out of the assets of such Acquiring Fund and that no other portfolio
of the Acquiring Company shall be liable with respect thereto.
21. Notices.
All notices required or permitted herein shall be in writing and shall be deemed
to be properly given when delivered personally or by telecopier to the party
entitled to receive the notice or when sent by certified or registered mail,
postage prepaid, or delivered to a nationally recognized overnight courier
service, in each case properly addressed to the party entitled to receive such
notice at the address or telecopier number stated below or to such other address
or telecopier number as may hereafter be furnished in writing by notice
similarly given by one party to the other party hereto:
If to American Century Government Income Trust,
American Century Capital Preservation Fund, Inc. or
American Century Capital Preservation Fund II, Inc.
Pat Looby
4500 Main Street
Kansas City, Missouri 64111-6200
22. Expenses.
Each party represents to the other that its expenses incurred in connection with
the Reorganization will be borne by American Century Investment, Inc. or one or
more of its affiliates.
23. Entire Agreement.
This Agreement embodies the entire agreement and understanding of the parties
hereto and supersedes any and all prior agreements, arrangements and
understandings relating to matters provided for herein.
24. Counterparts.
This Agreement may be executed in any number of counterparts, each of which,
when executed and delivered shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers designated below as of the date first
written above.
AMERICAN CENTURY GOVERNMENT INCOME TRUST
ATTEST:
- --------------------------------------- By:--------------------------------
AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.
ATTEST:
- --------------------------------------- By:--------------------------------
AMERICAN CENTURY CAPITAL PRESERVATION FUND II, INC.
ATTEST:
- --------------------------------------- By:--------------------------------
<PAGE>
APPENDIX II: MANAGEMENT DISCUSSION AND ANALYSIS
U.S. ECONOMIC REVIEW
JAMES M. BENHAM [photo of
Chairman, Benham Funds James M. Benham]
The U.S. economy grew at a healthy pace for the first three quarters of 1996,
confounding market analysts who predicted a significant slowdown. During 1995,
economic weakness prompted the Federal Reserve (the Fed) to make a series of
short-term interest rate cuts, culminating in a quarter-of-a-percent cut in
January 1996. This expansionary monetary policy helped speed the pace of U.S.
economic growth from an anemic 0.3% annual rate in the fourth quarter of 1995 to
2.0% in the first quarter of 1996. Growth expanded further to an impressive 4.7%
in the second quarter of the year (see the graph below).
[bar graph - data listed below]
Stronger-than-expected corporate earnings fueled increased corporate expansion
and job growth. Nearly two million new jobs were created in the first nine
months of the year, sending the U.S. unemployment rate to a six-year low.
Healthy employment numbers and a strong performance by U.S. stocks led to fears
of inflationary pressure and expectations of an interest rate hike by the Fed.
As a result, U.S. bonds overall gave a lackluster performance.
But the expected surge in inflation failed to materialize. For the first nine
months of the year, inflation, as measured by the consumer price index (CPI),
grew at an annualized rate of 3.2%, compared to the 2.5% inflation rate for all
of 1995 (the lowest annual rate since 1986). Because of this apparent lack of
inflationary pressure, the Fed held interest rates steady through September.
But the economic picture remains uncertain. The economy grew at a 2.2% annual
rate in the third quarter, and recent economic data seem to suggest that the
economy may be slowing. Market participants are no longer sure that the Fed will
raise interest rates this year, and some even contend that the Fed's next move
may be toward lower rates. On the other hand, signs of wage inflation have
surfaced in recent employment reports. In spite of higher interest rates for
most of this year, the housing market has remained robust, and consumer
confidence is high, indicating that the U.S. consumer may still have some
spending power. Given the present state of economic uncertainty, it is likely
that shifting expectations of Fed interest rate policy may have more of an
impact on U.S. financial markets in the coming months than any actual move by
the Fed.
[graph data]
GDP (Annualized)
vs. Inflation (Consumer Price Index)
July 1994 - September 1996
GDP CPI
Jan-94 2.52%
Feb-94 2.51
Mar-94 2.50% 2.51
Apr-94 2.36
May-94 2.29
Jun-94 4.90 2.56
Jul-94 2.70
Aug-94 2.90
Sep-94 3.50 3.03
Oct-94 2.68
Nov-94 2.60
Dec-94 3.00 2.60
Jan-95 2.87
Feb-95 2.79
Mar-95 0.40 2.86
Apr-95 2.98
May-95 3.12
Jun-95 0.70 3.04
Jul-95 2.83
Aug-95 2.62
Sep-95 3.80 2.54
Oct-95 2.74
Nov-95 2.67
Dec-95 0.30 2.67
Jan-96 2.72
Feb-96 2.72
Mar-96 2.00 2.84
Apr-96 2.90
May-96 2.96
Jun-96 4.70 2.75
Jul-96 2.95
Aug-96 2.88
Sep-96 2.20 3.00
Source: Bloomberg Financial Markets
1
MARKET SUMMARY
GOVERNMENT MONEY MARKET SECURITIES
During the six-month period ended September 30, 1996, the Federal Reserve held
short-term interest rates steady. However, the combination of
stronger-than-expected economic growth and low inflation (discussed on page 1)
caused uncertainty in U.S. financial markets about the Fed's interest rate
intentions. Money market yields fluctuated throughout the period in response to
each change in market expectations.
The graph below illustrates this reactive volatility in money market rates. The
federal funds rate target (the lending rate targeted by the Fed for large
overnight loans between commercial banks) remained steady after the Fed's last
rate hike in January. But the three-month Treasury bill yield, which tends to
reflect the financial market's current expectations of interest rate policy,
fluctuated significantly. Some of the sharpest movements in the three-month
T-bill yield occurred at the beginning of each month, when the government
released its monthly employment report. The markets monitor this report closely,
viewing it as a key gauge of economic strength.
The general trend in money market rates during the six-month period reflected
the market's expectations of Fed interest rate policy. After falling in early
April, the three-month T-bill yield rose by more than 30 basis points (a basis
point equals 0.01%) between April and July, reflecting the market's belief that
the Fed would raise rates during the second half of the year. Late in the
period, however, the market became less certain about a Fed rate hike, and the
three-month T-bill yield reversed its course, ending up 10 basis points lower
than it was at the start of the period. Demand from foreign central banks also
contributed to lower T-bill yields.
Although the three-month T-bill yield fell during the period, government money
market fund yields rose slightly. According to IBC Financial Data, the seven-day
current yield of the average U.S. government money market fund rose from 4.63%
to 4.69% during the six-month period.
[line graph - data below]
Fed Funds Rate Target vs. Three-Month T-Bill Yield
3-month T-Bill Yield Fed Funds Rate Target
4/1/96 5.16% 5.25%
4/2/96 5.16 5.25
4/3/96 5.15 5.25
4/4/96 5.11 5.25
4/5/96 5.13 5.25
4/8/96 5.15 5.25
4/9/96 5.08 5.25
4/10/96 5.08 5.25
4/11/96 5.09 5.25
4/12/96 5.07 5.25
4/15/96 5.00 5.25
4/16/96 4.96 5.25
4/17/96 4.95 5.25
4/18/96 4.99 5.25
4/19/96 5.02 5.25
4/22/96 4.99 5.25
4/23/96 5.10 5.25
4/24/96 5.13 5.25
4/25/96 5.10 5.25
4/26/96 5.12 5.25
4/29/96 5.14 5.25
4/30/96 5.16 5.25
5/1/96 5.11 5.25
5/2/96 5.12 5.25
5/3/96 5.14 5.25
5/6/96 5.12 5.25
5/7/96 5.15 5.25
5/8/96 5.12 5.25
5/9/96 5.13 5.25
5/10/96 5.13 5.25
5/13/96 5.16 5.25
5/14/96 5.14 5.25
5/15/96 5.14 5.25
5/16/96 5.16 5.25
5/17/96 5.16 5.25
5/20/96 5.16 5.25
5/21/96 5.19 5.25
5/22/96 5.19 5.25
5/23/96 5.19 5.25
5/24/96 5.18 5.25
5/27/96 5.18 5.25
5/28/96 5.18 5.25
5/29/96 5.18 5.25
5/30/96 5.19 5.25
5/31/96 5.18 5.25
6/3/96 5.22 5.25
6/4/96 5.23 5.25
6/5/96 5.22 5.25
6/6/96 5.20 5.25
6/7/96 5.26 5.25
6/10/96 5.29 5.25
6/11/96 5.27 5.25
6/12/96 5.26 5.25
6/13/96 5.24 5.25
6/14/96 5.20 5.25
6/17/96 5.18 5.25
6/18/96 5.22 5.25
6/19/96 5.24 5.25
6/20/96 5.27 5.25
6/21/96 5.27 5.25
6/24/96 5.28 5.25
6/25/96 5.25 5.25
6/26/96 5.24 5.25
6/27/96 5.20 5.25
6/28/96 5.17 5.25
7/1/96 5.22 5.25
7/2/96 5.32 5.25
7/3/96 5.23 5.25
7/4/96 5.22 5.25
7/5/96 5.30 5.25
7/8/96 5.30 5.25
7/9/96 5.35 5.25
7/10/96 5.28 5.25
7/11/96 5.26 5.25
7/12/96 5.30 5.25
7/15/96 5.29 5.25
7/16/96 5.26 5.25
7/17/96 5.26 5.25
7/18/96 5.25 5.25
7/19/96 5.29 5.25
7/22/96 5.31 5.25
7/23/96 5.31 5.25
7/24/96 5.31 5.25
7/25/96 5.29 5.25
7/26/96 5.29 5.25
7/29/96 5.36 5.25
7/30/96 5.35 5.25
7/31/96 5.32 5.25
8/1/96 5.26 5.25
8/2/96 5.20 5.25
8/5/96 5.18 5.25
8/6/96 5.19 5.25
8/7/96 5.17 5.25
8/8/96 5.15 5.25
8/9/96 5.15 5.25
8/12/96 5.14 5.25
8/13/96 5.18 5.25
8/14/96 5.17 5.25
8/15/96 5.20 5.25
8/16/96 5.18 5.25
8/19/96 5.19 5.25
8/20/96 5.17 5.25
8/21/96 5.14 5.25
8/22/96 5.13 5.25
8/23/96 5.17 5.25
8/26/96 5.19 5.25
8/27/96 5.19 5.25
8/28/96 5.20 5.25
8/29/96 5.23 5.25
8/30/96 5.29 5.25
9/2/96 5.29 5.25
9/3/96 5.31 5.25
9/4/96 5.32 5.25
9/5/96 5.36 5.25
9/6/96 5.33 5.25
9/9/96 5.28 5.25
9/10/96 5.29 5.25
9/11/96 5.30 5.25
9/12/96 5.28 5.25
9/13/96 5.20 5.25
9/16/96 5.17 5.25
9/17/96 5.32 5.25
9/18/96 5.26 5.25
9/19/96 5.23 5.25
9/20/96 5.29 5.25
9/23/96 5.30 5.25
9/24/96 5.11 5.25
9/25/96 5.06 5.25
9/26/96 5.01 5.25
9/27/96 5.03 5.25
9/30/96 5.04 5.25
Source: Bloomberg Financial Markets
2
CAPITAL PRESERVATION FUND
YIELD AND TOTAL RETURN SUMMARY
For Periods Ended September 30, 1996
Net Asset 7-Day 7-Day Average Annual Total Returns
Value Current Effective
- --------------------------------------------------------------------------------
(4/1/96-9/30/96) Yield Yield 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$1.00 4.73% 4.85% 4.92% 4.41% 3.95% 5.35%
The Fund commenced operations on October 13, 1972.
PLEASE NOTE: Yields and total returns are based on historical Fund performance
and do not guarantee future results. The Fund's yields and total returns will
vary. The U.S. government neither insures nor guarantees investments in the
Fund. The Fund is managed to maintain a stable $1.00 share price, but, as with
all money market funds, there is no assurance that the Fund will be able to do
so.
PERFORMANCE DEFINITIONS
The 7-Day Current Yield is calculated based on the income generated by an
investment in the Fund over a seven-day period and is expressed as an annual
percentage rate. The 7-Day Effective Yield is calculated similarly, although
this figure is slightly higher than the Fund's 7-Day Current Yield because of
the effects of compounding. The 7-Day Effective Yield assumes that income earned
from the Fund's investments is reinvested and generating additional income.
Total Return figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Fund and assume that all of the Fund's
distributions are reinvested. Average Annual Total Returns illustrate the
annually compounded returns that would have produced the Fund's cumulative total
returns if the Fund's performance had been constant over the entire period.
Average annual total returns smooth out variations in a fund's return; they are
not the same as year-by-year results. For fiscal year-by-year total returns,
please refer to the Fund's "Financial Highlights" on page 14.
LIPPER PERFORMANCE COMPARISON
Lipper Analytical Services (Lipper) is an independent mutual fund ranking
service located in Summit, NJ. Rankings are based on average annual total
returns for the periods ended 9/30/96 for the funds in Lipper's "U.S. Treasury
Money Market Funds" category.
1 Year 3 Years 5 Years 10 Years
The Fund: 4.92% 4.41% 3.95% 5.35%
Category Average: 4.82% 4.33% 3.89% 5.34%
The Fund`s Ranking: 25 out of 92 23 out of 73 14 out of 47 6 out of 15
Total returns are based on historical performance and do not guarantee future
results.
3
CAPITAL PRESERVATION FUND
KEY PORTFOLIO STATISTICS
9/30/96 3/31/96
Portfolio Value: $2,975,728,537 $2,884,311,605
Number of Issues: 19 24
Average Maturity: 46 days 47 days
For definitions of these terms, see page 13.
PORTFOLIO COMPOSITION BY SECURITY TYPE
[pie charts]
9/30/96 3/31/96
Treasury Bills: 53.8% Treasury Bills: 71.3%
Treasury Notes: 42.2% Treasury Notes: 28.7%
STRIPS: 4.0%
For definitions of these security types, see page 12.
PORTFOLIO COMPOSITION BY MATURITY
[pie charts]
9/30/96 3/31/96
1-30 days: 52.6% 1-30 days: 38.1%
31-60 days: 34.6% 31-60 days: 28.2%
61-90 days: 7.5% 61-90 days: 17.3%
91-180 days: 5.3% 91-180 days: 13.3%
181-397 days: 3.1%
The Fund's dollar-weighted average maturity will not exceed 60 days. The Fund
generally maintains an average maturity between 30 and 60 days, with 45 days
considered a "neutral" position.
4
CAPITAL PRESERVATION FUND
MANAGEMENT DISCUSSION
with Brian Howell, Portfolio Manager
NOTE: The terms marked with an asterisk (*) are defined in the Investment
Fundamentals section (pages 11-13).
Q: How did the Fund perform?
A: The Fund continued to perform above average compared to its peers. For
the six-month period ended September 30, 1996, the Fund's total return
was 2.39%, compared to the 2.32% average total return for the 97 funds
in Lipper's "U.S. Treasury Money Market Funds" category over the same
period. The Fund also outperformed its peer group average over longer
time periods (see the Lipper Performance Comparison on page 3 for
comparisons of the Fund's one-year, three-year, five-year and ten-year
returns).
Q: How was the Fund positioned during the six-month period?
A: The Fund's average maturity* was slightly longer than neutral (45-50
days) in April and May. We shortened the Fund's maturity to around 40
days in June, when strong employment growth and hints of wage pressures
increased the likelihood of an interest rate increase by the Federal
Reserve. But the potential inflation increase never materialized, so we
extended back out to about 50 days toward the end of the period.
Q: Treasury notes* made up nearly half of the Fund's portfolio at the end
of the period, up from about 25% six months before. What's the
attraction?
A: We typically use Treasury notes and STRIPS* to enhance Fund performance
without incurring any additional risk. For much of the period, Treasury
notes were offering yields 10-15 basis points* higher than Treasury
bills with comparable maturities. T-bill yields were depressed by
strong demand from foreign central banks, as well as from stock and
bond investors concerned about a market correction. We took advantage
of these wide spreads to boost the Fund's yield.
Q: Looking ahead, what are your plans for the Fund over the next six
months?
A: We believe that the Fed has dug its heels in and won't raise interest
rates unless it sees a string of strong economic reports. Accordingly,
we plan to keep the Fund's average maturity longer than neutral, in a
range of 45-55 days. As shifting supply and demand factors cause
temporary yield increases, we will look to extend the Fund's average
maturity out to the upper end of this range.
5
CAPITAL PRESERVATION FUND II
YIELD AND TOTAL RETURN SUMMARY
For Periods Ended September 30, 1996
Net Asset 7-Day 7-Day Average Annual Total Returns
Value Current Effective
- --------------------------------------------------------------------------------
(4/1/96-9/30/96) Yield Yield 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$1.00 4.59% 4.69% 4.82% 4.28% 3.73% 5.30%
The Fund commenced operations on May 16, 1980.
PLEASE NOTE: Yields and total returns are based on historical Fund performance
and do not guarantee future results. The Fund's yields and total returns will
vary. The U.S. government neither insures nor guarantees investments in the
Fund. The Fund is managed to maintain a stable $1.00 share price, but, as with
all money market funds, there is no assurance that the Fund will be able to do
so.
PERFORMANCE DEFINITIONS
The 7-Day Current Yield is calculated based on the income generated by an
investment in the Fund over a seven-day period and is expressed as an annual
percentage rate. The 7-Day Effective Yield is calculated similarly, although
this figure is slightly higher than the Fund's 7-Day Current Yield because of
the effects of compounding. The 7-Day Effective Yield assumes that income earned
from the Fund's investments is reinvested and generating additional income.
Total Return figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Fund and assume that all of the Fund's
distributions are reinvested. Average Annual Total Returns illustrate the
annually compounded returns that would have produced the Fund's cumulative total
returns if the Fund's performance had been constant over the entire period.
Average annual total returns smooth out variations in a fund's return; they are
not the same as year-by-year results. For fiscal year-by-year total returns,
please refer to the Fund's "Financial Highlights" on page 15.
LIPPER PERFORMANCE COMPARISON
Lipper Analytical Services (Lipper) is an independent mutual fund ranking
service located in Summit, NJ. Rankings are based on average annual total
returns for the periods ended 9/30/96 for the funds in Lipper's "U.S. Treasury
Money Market Funds" category.
1 Year 3 Years 5 Years 10 Years
The Fund: 4.82% 4.28% 3.73% 5.30%
Category Average: 4.82% 4.33% 3.89% 5.34%
The Fund`s Ranking: 45 out of 92 46 out of 73 39 out of 47 8 out of 15
Total returns are based on historical performance and do not guarantee future
results.
6
CAPITAL PRESERVATION FUND II
MANAGEMENT DISCUSSION
with Denise Tabacco, Associate Portfolio Manager
Q: How did the Fund perform?
A: For the six-month period ended September 30, 1996, the Fund's total
return was 2.33%, compared to the 2.32% average total return for the 97
funds in Lipper's "U.S. Treasury Money Market Funds" category over the
same period (see the Lipper Performance Comparison on page 6 for
additional comparative performance figures).
Q: How was the Fund positioned during the six-month period?
A: There was little change to the Fund's investment strategy. For the most
part, the Fund maintained a one-day average maturity by investing
primarily in overnight repurchase agreements (repos) collateralized by
U.S. Treasury securities.
Q: There was some unusual activity in the repo market in late July and
early August. Can you explain?
A: At specific times during the year, repo rates tend to rise temporarily
in response to increased demand for cash in the repo market. Demand
increases at month-end, quarter-end and year-end, when businesses use
their cash for balance sheet purposes. In addition, bank reserve
settlements occur every other Wednesday--on these days, member banks
typically need cash to meet their reserve requirements.
All of these factors came together on July 31. In addition to month-end
business demands for cash, the 31st was the settlement date for
Treasury auctions of two-year and five-year notes, as well as a
Wednesday bank reserve settlement date. The huge demand for cash caused
the overnight repo rate to surge from 5.33% to 6.35% in a single day.
It took nearly a week before the rate stabilized around 5.25%.
Q: Looking ahead, what are your plans for the Fund in the next six months?
A: We will continue to invest in overnight repos. In general, repo rates
tend to closely track the federal funds rate, the Fed's short-term
interest rate target. We believe the Fed will be on hold for the
remainder of 1996, so we expect fairly steady repo rates over the next
few months.
KEY PORTFOLIO STATISTICS
9/30/96 3/31/96
Portfolio Value: $240,000,000 $244,000,000
Number of Issues: 12 13
Average Maturity: 1 day 3 days
For definitions of these terms, see page 13.
7
GOVERNMENT AGENCY FUND
YIELD AND TOTAL RETURN SUMMARY
For Periods Ended September 30, 1996
Net Asset 7-Day 7-Day Average Annual Total Returns
Value Current Effective
- --------------------------------------------------------------------------------
(4/1/96-9/30/96) Yield Yield 1 Year 3 Years 5 Years Life of Fund
- --------------------------------------------------------------------------------
$1.00 4.78% 4.89% 5.01% 4.54% 4.05% 4.96%
The Fund commenced operations on December 5, 1989.
PLEASE NOTE: Yields and total returns are based on historical Fund performance
and do not guarantee future results. The Fund's yields and total returns will
vary. The U.S. government neither insures nor guarantees investments in the
Fund. The Fund is managed to maintain a stable $1.00 share price, but, as with
all money market funds, there is no assurance that the Fund will be able to do
so.
PERFORMANCE DEFINITIONS
The 7-Day Current Yield is calculated based on the income generated by an
investment in the Fund over a seven-day period and is expressed as an annual
percentage rate. The 7-Day Effective Yield is calculated similarly, although
this figure is slightly higher than the Fund's 7-Day Current Yield because of
the effects of compounding. The 7-Day Effective Yield assumes that income earned
from the Fund's investments is reinvested and generating additional income.
Total Return figures show the overall dollar or percentage change in the value
of a hypothetical investment in the Fund and assume that all of the Fund's
distributions are reinvested. Average Annual Total Returns illustrate the
annually compounded returns that would have produced the Fund's cumulative total
returns if the Fund's performance had been constant over the entire period.
Average annual total returns smooth out variations in a fund's return; they are
not the same as year-by-year results. For fiscal year-by-year total returns,
please refer to the Fund's "Financial Highlights" on page 16.
LIPPER PERFORMANCE COMPARISON
Lipper Analytical Services (Lipper) is an independent mutual fund ranking
service located in Summit, NJ. Rankings are based on average annual total
returns for the periods ended 9/30/96 for the funds in Lipper's "U.S. Government
Money Market Funds" category.
1 Year 3 Years 5 Years Life of Fund+
The Fund: 5.01% 4.54% 4.05% 4.95%
Category Average: 4.84% 4.36% 3.90% 4.64%
The Fund`s Ranking: 29 out of 113 20 out of 92 16 out of 72 4 out of 56
+ from December 31, 1989, through September 30, 1996
Total returns are based on historical performance and do not guarantee future
results.
8
GOVERNMENT AGENCY FUND
KEY PORTFOLIO STATISTICS
9/30/96 3/31/96
Portfolio Value: $479,110,026 $499,687,813
Number of Issues: 40 49
Average Maturity: 49 days 44 days
For definitions of these terms, see page 13.
PORTFOLIO COMPOSITION BY SECURITY TYPE
[pie charts]
9/30/96
Government Agency Discount Notes: 70.2%
Floating-Rate Agency Notes: 22.7%
Government Agency Notes: 7.1%
3/31/96
Government Agency Discount Notes: 78.6%
Floating-Rate Agency Notes: 13.9%
Government Agency Notes: 6.6%
Treasury Securities: 0.9%
For definitions of these security types, see pages 11-12.
PORTFOLIO COMPOSITION BY MATURITY
[pie charts]
9/30/96 3/31/96
1-30 days: 38.9% 1-30 days: 56.1%
31-60 days: 27.3% 31-60 days: 15.2%
61-90 days: 15.0% 61-90 days: 12.7%
91-180 days: 17.0% 91-180 days: 12.7%
181-397 days: 1.8% 181-397 days: 3.3%
The Fund's dollar-weighted average maturity will not exceed 60 days. The Fund
generally maintains an average maturity between 30 and 60 days, with 45 days
considered a "neutral" position.
9
GOVERNMENT AGENCY FUND
MANAGEMENT DISCUSSION
with Brian Howell, Portfolio Manager
NOTE: The terms marked with an asterisk (*) are defined in the Investment
Fundamentals section (pages 11-13).
Q: How did the Fund perform?
A: The Fund continued to perform well compared to its peers. For the
six-month period ended September 30, 1996, the Fund's total return was
2.43%, compared to the 2.34% average total return for the 116 funds in
Lipper's "U.S. Government Money Market Funds" category over the same
period. The Fund also outperformed its peer group average over longer
time periods (see the Lipper Performance Comparison on page 8 for
comparisons of the Fund's one-year, three-year, five-year and
life-of-fund returns).
Q: How was the Fund positioned during the six-month period?
A: We kept the Fund's average maturity* shorter than neutral (35-45 days)
for most of the period, primarily because of our expectations for a Fed
interest rate increase. But supply factors also contributed to this
positioning--most of the short-term securities issued by government
agencies tend to have maturities of 30-60 days, and this heavy supply
results in higher yields. By the end of the period, a rate hike by the
Fed became less likely, so we extended the Fund's maturity back out to
a neutral position (around 45 days).
Q: You increased the Fund's holdings of floating-rate agency notes* during
the period. Why?
A: "Floaters" typically have short maturities because of their frequent
interest rate resets--most of the Fund's floaters reset their rates
weekly--and this characteristic was useful when we were keeping the
Fund's maturity relatively short. Floaters also tend to perform best
when the Fed raises short-term interest rates. At one point, we had as
much as 25% of the Fund's portfolio invested in floaters, but we cut
back to about 20% when we extended the Fund's maturity back to neutral.
Q: Looking ahead, what are your plans for the Fund over the next six
months?
A: We believe that the Fed has dug its heels in and won't raise interest
rates unless it sees a string of strong economic reports. Accordingly,
we plan to keep the Fund's average maturity around neutral, in a range
of 45-50 days. As shifting supply and demand factors cause temporary
yield increases, we will look to extend the Fund's average maturity out
to the upper end of this range.
10
INVESTMENT FUNDAMENTALS
MONEY MARKET INSTRUMENTS
The Money Market
The "money market" is a highly liquid, multi-trillion-dollar worldwide financial
market that matches supply from corporations, banks and governments that have
short-term cash or borrowing needs with demand from investors who want to buy
short-term, low-risk, interest-bearing instruments.
On the supply side, corporate, financial and fiscal entities sometimes have more
current obligations to meet than cash on hand. They are therefore willing to
sell short-term IOUs to investors in exchange for cash. For example,
corporations issue short-term securities called commercial paper to raise cash
to cover current expenses that are incurred before anticipated revenues.
On the demand side, investors want a place to park their money in the short term
where it can earn interest, retain value and be readily available for other
opportunities or expense payments. Finance officers at corporations, banks,
government offices and securities firms saw how they could satisfy both sides by
issuing certain types of debt securities.
Most money market securities are issued at a discount and pay full value at
maturity (13 months or less). The difference between the purchase value and the
maturity value is the imputed interest.
Common U.S. Government Money Market Securities
Floating-Rate Agency Notes (Floaters)--debt securities issued by U.S. government
agencies with interest rates that change when a designated base rate changes.
The base rate is often the federal funds rate, the 90-day Treasury bill rate or
the London Interbank Offered Rate (LIBOR). Floaters are considered derivatives
because they "derive" their interest rates from their designated base rates.
However, floaters are not "risky" derivatives--their behavior is similar to that
of their designated base rates. The SEC has recognized this similarity and does
not consider floaters to be inappropriate investments for money market funds.
Government Agency Discount Notes--short-term debt securities issued by U.S.
government agencies (such as the Federal Farm Credit Bank and the Federal Home
Loan Bank). Some agency discount notes are backed by the full faith and credit
of the U.S. government, while most are guaranteed only by the issuing agency.
These notes are issued at a discount and achieve full value at maturity
(typically one year or less).
11
INVESTMENT FUNDAMENTALS
MONEY MARKET INSTRUMENTS
(Continued from the previous page)
Government Agency Notes--intermediate-term debt securities issued by U.S.
government agencies (such as the Federal Farm Credit Bank and the Federal Home
Loan Bank). Some agency notes are backed by the full faith and credit of the
U.S. government, while most are guaranteed only by the issuing agency. These
notes are issued with maturities ranging from three months to 30 years. Benham
Government Agency Fund typically buys agency notes with remaining terms of 180
days or less.
Repurchase Agreements (Repos)--short-term debt agreements in which a fund buys a
security at one price and simultaneously agrees to sell it back to the seller at
a slightly higher price on a specified date (usually within seven days). Capital
Preservation Fund II typically invests in repos backed by U.S. Treasury
securities.
STRIPS--zero-coupon securities (zeros) issued by the U.S. Treasury and backed by
the direct "full faith and credit" pledge of the U.S. government. Unlike
ordinary Treasury securities, which pay interest periodically, zeros pay no
interest. Instead, these securities are issued at a deep discount and then
redeemed for their full face value at maturity. Capital Preservation Fund
typically buys STRIPS with remaining maturities of 180 days or less.
Treasury Bills (T-bills)--short-term debt securities issued by the U.S. Treasury
and backed by the direct "full faith and credit" pledge of the U.S. government.
T-bills are issued with maturities ranging from three months to one year.
Capital Preservation Fund typically buys T-bills with remaining maturities of 90
days or less.
Treasury Notes (T-notes)--intermediate-term debt securities issued by the U.S.
Treasury and backed by the direct "full faith and credit" pledge of the U.S.
government. T-notes are issued with maturities ranging from 2 to 30 years.
Capital Preservation Fund typically buys T-notes with remaining maturities of
180 days or less.
12
INVESTMENT FUNDAMENTALS
OTHER DEFINITIONS
Investment Terms
Basis Points--a basis point equals one one-hundredth of a percentage point (or
0.01%). Therefore, 100 basis points equals one percentage point (or 1%).
Yield Curve--a graphic representation of the relationship between maturity and
yield for fixed-income securities. Yield curve graphs plot lengthening
maturities along the horizontal axis and rising yields along the vertical axis.
Most "normal" yield curves start in the lower left corner of the graph and rise
to the upper right corner, indicating that yields rise as maturities lengthen.
This upward sloping yield curve illustrates a normal risk/return
relationship--more return (yield) for more risk (a longer maturity). Conversely,
a "flat" yield curve (one that shows short-term securities having almost the
same yields as long-term securities) or an "inverted" yield curve (one that
shows short-term securities having higher yields than long-term securities)
provide little or no extra return for taking on more risk.
Portfolio Statistics
Portfolio Value--the amortized cost of a money market fund's investments on a
given date.
Number of Issues--the number of different securities issuances held by a fund on
a given date.
Average Maturity--a weighted average of all maturities in a fund's portfolio
(see also below).
Average Maturity
Average maturity measures the interest rate sensitivity and interest rate
exposure of a money market portfolio. It reflects the average amount of time
that will pass until the securities in the portfolio mature. The longer a
portfolio's average maturity, the more interest rate exposure and interest rate
sensitivity it has. For example, a portfolio with a 90-day average maturity will
take much longer to reinvest its maturing securities than a portfolio with a
30-day average maturity. Portfolios with longer average maturities generally pay
higher yields to compensate for the greater interest rate exposure. To help
ensure the share price stability of money market funds, the SEC mandates that a
money market fund's average maturity cannot exceed 90 days.
Average maturity is also an important strategic tool. Reducing a fund's average
maturity as interest rates rise allows the portfolio manager to more quickly
reinvest matured assets in higher-yielding securities. Conversely, lengthening a
fund's average maturity as interest rates fall allows the portfolio manager to
"lock in" higher yields.
13
<PAGE>
Appendix III
STANDARDIZED FUNDAMENTAL INVESTMENT RESTRICTIONS
The New Capital Preservation Fund has adopted the fundamental
investment restrictions set forth in the following table. These limitations are
consistent with the other funds within the American Century family of funds.
These fundamental investment restrictions cannot be changed without the approval
of the fund's shareholders.
STANDARDIZED FUNDAMENTAL INVESTMENT RESTRICTIONS
- -------------------------- -----------------------------------------------------
Category Standard Limitation
- -------------------------- -----------------------------------------------------
- -------------------------- -----------------------------------------------------
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 a 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 its
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
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).
- -------------------------- -----------------------------------------------------
- -------------------------- -----------------------------------------------------
Underwriting The fund shall not act as an underwriter of
securities issued by others, except to the extent
that a 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
commodities unless acquired as a result of ownership
of securities or other instruments.
- -------------------------- -----------------------------------------------------
- -------------------------- -----------------------------------------------------
Investing for Control The fund shall not invest for purposes of exercising
control over management.
- -------------------------- -----------------------------------------------------
<PAGE>
Appendix IV
Current Fundamental Investment Restrictions
The existing fundamental investment restrictions for the Capital
Preservation Fund and Capital Preservation Fund and Capital Preservation Fund II
is set forth in the table below.
Current Fundamental Investment Restrictions
- ---------------------- ---------------------------------------------------------
Category Current Limitations
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Senior Securities The funds may not issue or sell any class of
senior security, except to the extent that notes
evidencing temporary borrowing might be deemed such.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Borrowing The Capital Preservation Fund may not borrow amounts in
excess of 33 l/3 of the cost or 5% of the market value of
its total assets, whichever is less, and then only from a
bank and as a temporary measure for extraordinary or
emergency purposes. To secure any such borrowing, the
fund may pledge or hypothecate not in excess of 33 l/3%
of the value of its total assets.
The Capital Preservation Fund II may not borrow amounts
in excess of 33 l/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 l/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.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Lending The funds may not lend money other than through the
purchase of debt securities in accordance with its
investment policies (management considers that this
restriction precludes purchase of other than publicly
held debt securities).
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Underwriting The funds may not act as an underwriter of securities
issued by others.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Real Estate/ The funds may not purchase or sell real estate,
Commodities commodities, or commodity contracts, or buy or sell
foreign exchange.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Equity Securities The funds 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.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Investment Companies The funds may not acquire or retain the securities of any
other investment company.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Debt Securities The funds may not purchase any debt securities that are
not rated AA or AAA, or the equivalent thereof,
by either of the major statistical rating services
(Moody's or Standard and Poor's) or that, in the Fund's
opinion, are the equivalent thereof.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Further Liability The funds may not purchase securities for which a Fund
might be liable for further payment or liability.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Short Selling The funds may not engage in any short-selling operations.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Concentration The funds may not invest more than 25% of its total
assets in any one industry (this restriction does
not apply to securities of the U. S. government or its
instrumentalities or agencies or to certificates
of deposit or bankers' acceptances of U. S. commercial
banks having assets over $10 billion).
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Diversification The funds 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 of (a) more than 5% of its
total assets would be invested in the securities of that
issuer, or (b) a fund would hold more than 10% of the
outstanding voting securities of that issuer.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Margin Transactions The funds may not engage in margin
transactions or in transactions involving puts, calls,
straddles, or spreads.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Restricted Securities The funds may not invest in portfolio securities that the
Fund may not be free to sell to the public
without registering under the Securities Act of 1933 or
taking similar action under other securities laws.
- ---------------------- ---------------------------------------------------------
- ---------------------- ---------------------------------------------------------
Investing for Control The funds may not purchase securities of companies
in which directors or management personnel of a fund or
its advisor have a substantial interest. (A fund
may not purchase or retain securities of any company in
which an officer or Director of the fund or its advisor
is an officer, Director or security holder if such
officers and Directors who individually own beneficially
more than one-half of one percent (0.5%) of the shares or
securities of such company together own beneficially more
than 5% of the shares or securities of such company.
Portfolio securities of a fund may not be purchased from
or sold to the fund's advisor or its Directors, officers,
or employees.)
- ---------------------- ---------------------------------------------------------
<PAGE>
PART B
AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.
AMERICAN CENTURY CAPITAL PRESERVATION FUNDS II, INC.
American Century Investments
4500 Main Street
P. O. Box 419200
Kansas City, MO 64141-6200
AMERICAN CENTURY GOVERNMENT INCOME TRUST
American Century Investment
4500 Main Street
P. O. Box 419200
Kansas City, MO 64141-6200
Statement of Additional Information
1997 Special Meeting of Shareholders of American Century Capital
Preservation Fund, Inc. and American Century Capital Preservation Fund II, Inc.
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement/Prospectus dated
__________, 1997 for the Special Meeting of Shareholders to be held on July 30,
1997. Copies of the Combined Proxy Statement/Prospectus may be obtained at no
charge by calling American Century Investments at (800) 345-2021.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement/Prospectus.
Further information about the New Capital Preservation Fund is
contained in and incorporated by reference to its Statement of Additional
Information dated _________, 1997, copies of which are included herewith.
Further information about the Capital Preservation Fund and Capital
Preservation Fund II are contained in and incorporated by reference to their
Statements of Additional Information each dated January 1., 1997. The audited
financial statements and related independent accountant's reports for the
Capital Preservation Fund and Capital Preservation Fund II are contained in the
Annual Report dated March 31, 1996, are incorporated herein by reference. No
other parts of the Annual Report are incorporated by reference herein.
The date of this Statement of Additional Information is _______, 1997.
TABLE OF CONTENTS
General Information..........................................................B-3
Pro Forma Financial Statements.............................................PFS-1
GENERAL INFORMATION
The shareholders of the Capital Preservation Fund and Capital
Preservation Fund II are being asked to approve or disapprove an Agreement and
Plan of Reorganization (the "Reorganization Agreement") dated as of _______,
1997 between the American Century Government Income Trust, American Century
Capital Preservation Fund, Inc. and American Century Capital Preservation Fund
II, Inc. and the transaction contemplated thereby. The Reorganization Agreement
contemplates the transfer of substantially all of the assets and liabilities of
the Capital Preservation Fund and Capital Preservation Fund II to the New
Capital Preservation Fund in exchange for full and fractional shares
representing interests in such fund. The shares issued by the New Capital
Preservation Fund will have an aggregate net asset value equal to the aggregate
net asset value of the shares of each of the Capital Preservation Fund and
Capital Preservation Fund II that are outstanding immediately before the
effective time of the reorganization.
Following the exchange, the Capital Preservation Fund and Capital
Preservation Fund II will each make a liquidating distribution of New Capital
Preservation Fund shares to their shareholders. Each shareholder owning shares
of the Capital Preservation Fund and Capital Preservation Fund II at the
effective time of the reorganization will receive shares of the New Capital
Preservation of equal value, plus the right to receive any unpaid dividends and
distributions that were declared before the effective time of the reorganization
by the Capital Preservation Fund and Capital Preservation Fund II shares. Upon
completion by he reorganization, the American Century Capital Preservation Fund,
Inc. and American Century Capital Preservation Fund II, Inc. will be terminated
under state law and deregistered under the Investment Company Act of 1940.
The Special Meeting will be held at 10:00 a.m., Central time on July
30, 1997 at the offices of American Century Tower I, 4500 Main Street, Kansas
City, Missouri. For further information about the transaction, see the Combined
Proxy Statement/Prospectus.
PRO FORMA FINANCIAL STATEMENTS
In accordance with Item 14(a)(2) of Form N-14, pro forma financial statements
were not prepared for the proposed combination of the American Century - Benham
Capital Preservation Fund and the American Century - Benham Capital Preservation
Fund II, since the net asset value of the American Century - Benham Capital
Preservation Fund II (non-surviving fund) did not exceed ten percent of the net
asset value of the American Century - Benham Capital Preservation Fund
(surviving fund) on March 10, 1997.
<PAGE>
Part C Other Information
Item 15 Indemnification
As stated in Article VII, Section 3 of the Declaration of
Trust, incorporated herein by reference to Exhibit 1 to the
Registration Statement, "The Trustees shall be entitled and empowered
to the fullest extent permitted by law to purchase insurance for and to
provide by resolution or in the Bylaws for indemnification out of Trust
assets for liability and for all expenses reasonably incurred or paid
or expected to be paid by a Trustee of officer in connection with any
claim, action, suit, or proceeding in which he or she becomes involved
by virtue of his or her capacity or former capacity with the Trust. The
provisions, including any exceptions and limitations concerning
indemnification, may be set forth in detail in the Bylaws or in a
resolution adopted by the Board of Trustees."
As stated in Section 4 of the Distribution Agreement,
incorporated herein by reference to Exhibit 6 to Post-Effective
Amendment No. 30, "Each of the parties to this Agreement shall defend,
indemnify and hold the other harmless from and against any and all
claims, demands, suits, actions, losses, damages and other liabilities
arising from, or as a result of, the acts or omissions or acts and
omissions of such party made or omitted in the course of performing
this Agreement."
Registrant hereby incorporates by reference, as though set
forth fully herein, Article VI of the Registrant's Bylaws, amended on
May 17, 1995, appearing as Exhibit 2 to Post-Effective Amendment No. 28
filed on May 29, 1996 (accession #773674-96-000004).
Item 16 Exhibits
(1) (a) Agreement and Declaration of Trust dated May 31, 1995, is
incorporated herein by reference to Exhibit 1 of Post-Effective
Amendment No. 28 filed on May 29, 1996 (accession
#773674-96-000002).
(b) Amendment to the Declaration of Trust dated October 21, 1996,
is incorporated herein by reference to Exhibit 1b of
Post-Effective Amendment No. 31 filed on February 7, 1997
(accession #773674-97-000002).
(c)Amendment to the Declaration of Trust dated January 20, 1997,
with respect to the American Century - Benham Inflation-Adjusted
Treasury Fund, is incorporated herein by reference to Exhibit 1c
of Post-Effective Amendment No. 31 filed on February 7, 1997
(accession #773674-97-000002).
(2) Amended and Restated Bylaws, dated May 17, 1995, are incorporated
herein by reference to Exhibit 2 of Post-Effective Amendment No.
28 filed on May 29, 1996 (accession #773674-96-000004).
(3) Not Applicable.
(4) Agreement and Plan of Reorganization filed herewith as Appendix I
to Part A to the Form N-14.
(5) Not Applicable.
(6) (a) Investment Advisory Agreement between American Century
Government Income Trust and Benham Management Corporation dated
June 1, 1995, is incorporated herein by reference to Exhibit 5
Post-Effective Amendment No. 28 filed on May 29, 1996 (accession
#773674-96-000004).
(b) Form of Investment Advisory Agreement between American
Century Government Income Trust and American Century Investment
Management, Inc. is incorporated herein by reference to Exhibit 6
of the Initial Registration Statement filed on Form N-14 by
American Century Government Income Trust on April 21, 1997
(accession #0000773674-97-000005).
(7) Distribution Agreement between American Century Government Income
Trust and American Century Investment Services, Inc. dated as of
September 3, 1996, is incorporated herein by reference to Exhibit
6 to Post-Effective Amendment No. 30 filed on November 25, 1996
(accession #773674-96-000009).
(8) Not Applicable
(9) Custodian Agreement between American Century Government Income
Trust and The Chase Manhattan Bank, dated August 9, 1996, is
incorporated herein by reference to Exhibit 8 of Post-Effective
Amendment No. 31 filed on February 7, 1997 (accession
#773674-97-000002).
(10) Not Applicable
(11) Opinion and Consent of Counsel as to the legality of the
securities being registered is filed herein.
(12) Opinion and Consent of Counsel as to the tax matters and
consequences to shareholders is filed herein.
(13) Form of Transfer Agency Agreement between American Century
Government Income Trust and American Century Services Corporation
is is incorporated herein by reference to Exhibit 6 of the
Initial Registration Statement filed on Form N-14 by American
Century Government Income Trust on April 21, 1997 (accession
#0000773674-97-000005).
(14) Consent of KPMG Peat Marwick LLP is included herein.
(15) Not Applicable.
(16) Power of Attorney dated February 28, 1997, is incorporated herein
by reference to Exhibit 16 of the initial Registration Statement
filed on Form N-14 by American Century Government Income Trust on
April 21, 1996 (accession #0000773674-97-000005).
(17) (a) Form of Proxy.
(b)Prospectus dated September 3, 1996, revised January 1, 1997,
for American Century Capital Preservation Fund, Inc., filed
pursuant to Rule 497(e) on January 16, 1997 (accession
#17271-97-000001), is incorporated herein by reference.
(c)Statement of Additional Information dated September 3, 1996,
revised January 1, 1997, for American Century Capital
Preservation Fund, Inc., filed pursuant to Rule 497(e) on January
16, 1997 (accession #17271-97-000001), is incorporated herein by
reference.
(d)Prospectus dated September 3, 1996, revised January 1, 1997,
for American Century Capital Preservation Fund II, Inc., filed
pursuant to Rule 497(e) on January 16, 1997 (accession
#315961-97-000001), is incorporated herein by reference.
(e)Statement of Additional Information dated September 3, 1996,
revised January 1, 1997, for American Century Capital
Preservation Fund II, Inc., filed pursuant to Rule 497(e) on
January 16, 1997 (accession #315961-97-000001), is incorporated
herein by reference.
(f)Statement of Additional Information 1997, for American Century
Government Income Trust, filed on March 10, 1997 (accession
#773674-97-000004), is incorporated herein by reference.
(g)Annual Report dated March 31, 1996, for Capital Preservation
Fund, Inc., filed on May 24, 1996 (accession #17271-96-000004),
is incorporated herein by reference.
(h)Semiannual Report dated September 30, 1996, for Capital
Preservation Fund, Inc., filed on November 20, 1996 (accession
#17271-96-000020), is incorporated herein by reference.
(i)Annual Report dated March 31, 1996, for Capital Preservation
Fund II, Inc., filed on May 24, 1996 (accession
#17271-96-000004), is incorporated herein by reference.
(j)Semiannual Report dated September 30, 1996, for Capital
Preservation Fund II, Inc., filed on November 20, 1996 (accession
#17271-96-000020), is incorporated herein by reference.
Item 17 Undertakings
(a)The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the meaning
of Rule 145(c ) of the Securities Act of 1933, as amended, the
reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(b)The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used until the
amendment is effective, and that, in determining any liability under
the 1933 Act, each post-effective amendment shall be deemed to be a
new registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering of them.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed on behalf of the Registrant, in the City
of Mountain View, State of California, on the 25th day of April, 1997.
AMERICAN CENTURY GOVERNMENT INCOME TRUST
Registrant
/s/ Douglas A. Paul
--------------------------------
Douglas A. Paul
Vice President and Associate General Counsel
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signatures Title Date
- ---------- ----- ----
*/s/James M. Benham Chairman of the Board of Trustees, April 25, 1997
- --------------------------- President, and
James M. Benham Chief Executive Officer
*/s/Albert A. Eisenstat Trustee April 25, 1997
- ---------------------------
Albert A. Eisenstat
*/s/Ronald J. Gilson Trustee April 25, 1997
- ---------------------------
Ronald J. Gilson
*/s/Myron S. Scholes Trustee April 25, 1997
- ---------------------------
Myron S. Scholes
*/s/Kenneth E. Scott Trustee April 25, 1997
- ---------------------------
Kenneth E. Scott
*/s/Isaac Stein Trustee April 25, 1997
- ---------------------------
Isaac Stein
*/s/James E. Stowers, III Trustee April 25, 1997
- ---------------------------
James E. Stowers, III
*/s/Jeanne D. Wohlers Trustee April 25, 1997
- ---------------------------
Jeanne D. Wohlers
*/s/Maryanne Roepke Chief Financial Officer, April 25, 1997
- --------------------------- Treasurer
Maryanne Roepke
</TABLE>
* By /s/Douglas A. Paul
---------------------------
Douglas A. Paul, Attorney in Fact
Pursuant to a Power of Attorney dated February 28, 1997
EXHIBIT DESCRIPTION
EX-99.1a Agreement and Declaration of Trust dated May 31, 1995, is
incorporated herein by reference to Exhibit 1 (EX-99.B1) of
Post-Effective Amendment No. 28 filed on May 29, 1996
(accession #773674-96-000002).
EX-99.1b Amendment to the Declaration of Trust dated October 21, 1996,
is incorporated herein by reference to Exhibit 1b (EX-99.B1b)
of Post-Effective Amendment No. 31 filed on February 7, 1997
(accession #773674-97-000002).
EX-99.1c Amendment to the Declaration of Trust dated January 20, 1997,
with respect to the American Century - Benham
Inflation-Adjusted Treasury Fund, is incorporated herein by
reference to Exhibit 1c (EX-99.B1c) of Post-Effective
Amendment No. 31 filed on February 7, 1997 (accession
#773674-97-000002).
EX-99.2 Amended and Restated Bylaws, dated May 17, 1995, are
incorporated herein by reference to Exhibit 2 (EX-99.B2) of
Post-Effective Amendment No. 28 filed on May 29, 1996
accession #773674-96-000004).
EX-99.4 Agreement and Plan of Reorganization filed herewith as
Appendix I to Part A to the Form N-14.
EX-99.6a Investment Advisory Agreement between American Century
Government Income Trust and Benham Management Corporation,
dated June 1, 1995, is incorporated herein by reference to
Exhibit 5 (EX-99.B5) of Post-Effective Amendment No. 28 filed
on May 29, 1996 (accession #773674-96-000004).
EX-99.6b Form of Investment Advisory Agreement between American Century
Government Income Trust and American Century Investment
Management, Inc. is incorporated herein by reference to
Exhibit 6 of the Initial Registration Statement filed on Form
N-14 by American Century Government Income Trust on April 21,
1997 (accession #0000773674-97-000005).
EX-99.7 Distribution Agreement between American Century Government
Income Trust and American Century Investment Services, Inc.
dated as of September 3, 1996, is incorporated herein by
reference to Exhibit 6 (EX-99.B6) to Post-Effective Amendment
No. 30 filed on November 25, 1996 (accession
#773674-96-000009).
EX-99.9 Custodian Agreement between American Century Government Income
Trust and The Chase Manhattan Bank, dated August 9, 1996, is
incorporated herein by reference to Exhibit 8 (EX-99.B8) of
Post-Effective Amendment No. 31 filed on February 7, 1997
(accession #773674-97-000002).
EX-99.11 Opinion and Consent of Counsel as to the legality of the
securities being registered is filed herein.
EX-99.12 Opinion and Consent of Counsel as to the tax matters and
consequences to shareholders is filed herein.
EX-99.13 Form of Transfer Agency Agreement between American Century
Government Income Trust and American Century Services
Corporation is incorporated herein by reference to Exhibit 13
of the Initial Registration Statement filed on Form N-14 by
American Century Government Income Trust on April 21, 1997
(accession #0000773674-97-000005).
EX-99.14 Consent of KPMG Peat Marwick LLP is included herein.
EX-99.16 Power of Attorney dated February 28, 1997, is incorporated
herein by reference to Exhibit 16 of the initial Registration
Statement filed on Form N-14 by American Century Government
Income Trust on April 21, 1996 (accession
#0000773674-97-000005).
EX-99.17a Forms of Proxy
EX-99.17b Prospectus dated September 3, 1996, revised January 1, 1997,
for American Century Capital Preservation Fund, Inc., filed
pursuant to Rule 497(e) on January 16, 1997 (accession
#17271-97-000001), is incorporated herein by reference.
EX-99.17c Statement of Additional Information dated September 3, 1996,
revised January 1, 1997, for American Century Capital
Preservation Fund, Inc., filed pursuant to Rule 497(e) on
January 16, 1997 (accession #17271-97-000001), is incorporated
herein by reference.
EX-99.17d Prospectus dated September 3, 1996, revised January 1, 1997,
for American Century Capital Preservation Fund II, Inc., filed
pursuant to Rule 497(e) on January 16, 1997 (accession
#315961-97-000001), is incorporated herein by reference.
EX-99.17e Statement of Additional Information dated September 3, 1996,
revised January 1, 1997, for American Century Capital
Preservation Fund II, Inc., filed pursuant to Rule 497(e) on
January 16, 1997 (accession #315961-97-000001), is
incorporated herein by reference.
EX-99.17f Statement of Additional Information dated ________ , 1997, for
American Century Government Income Trust, filed on March 10,
1997 (accession #773674-97-000004), is incorporated herein by
reference.
EX-99.17g Annual Report dated March 31, 1996, for Capital Preservation
Fund, Inc., filed on May 24, 1996 (accession
#17271-96-000004), is incorporated herein by reference.
EX-99.17h Semiannual Report dated September 30, 1996, for Capital
Preservation Fund, Inc., filed on November 20, 1996 (accession
#17271-96-000020), is incorporated herein by reference.
EX-99.17i Annual Report dated March 31, 1996, for Capital Preservation
Fund II, Inc., filed on May 24, 1996 (accession
#17271-96-000004), is incorporated herein by reference.
EX-99.17j Semiannual Report dated September 30, 1996, for Capital
Preservation Fund II, Inc., filed on November 20, 1996
(accession #17271-96-000020), is incorporated herein by
reference.
Patrick A. Looby
Attorney At Law
4500 Main Street
Kansas City, Missouri 64111
Telephone (816) 340-4349
Telecopier (816) 340-4964
April 25, 1997
American Century Government Income Trust
4500 Main Street
Kansas City, Missouri 64111
RE: Opinion Regarding the Legality of Shares of American Century
Government Income Trust (the "Trust") (Registration Nos. 2-99222/811-4363)
Dear Ladies and Gentlemen:
I am counsel to American Century Government Income Trust, and as such, I am
generally familiar with its affairs. Based upon that familiarity, and upon
examination of such documents as I deemed relevant, it is my opinion that the
issuance and sale of shares by the Trust in connection with the transactions
contemplated by the Registration Statement on Form N-14, of which this opinion
is an exhibit, has been duly and validly authorized by all appropriate action
and, upon the delivery thereof and payment therefor in accordance and in
connection with the reorganization, the shares will be legally issued, fully
paid and non assessable by the Trust.
For the record, it should be noted that I am an employee of American Century
Services Corporation, an affiliated corporation of Benham Management
Corporation, the investment adviser of American Century Government Income Trust.
I hereby consent to the inclusion of this opinion with the filing of the
Registration Statement on Form N-14.
Sincerely,
/s/ Patrick A. Looby
Patrick A. Looby
Vice President and
Associate General Counsel
DRAFT
________, 1997
Board of Directors
American Century Capital Preservation Fund, Inc.
4500 Main Street
Kansas City, Missouri 64141-6200
Board of Trustees
American Century Government Income Trust
4500 Main Street
Kansas City, Missouri 64141-6200
Gentlemen:
You have requested our opinion regarding certain Federal income tax
consequences to American Century Capital Preservation Fund, Inc. (the "Fund"),
to Capital Preservation Fund ("Acquiring"), a portfolio of American Century
Government Income Trust, and to the holders of the shares of common stock of the
Fund, in connection with the proposed transfer of substantially all of the
properties of the Fund to Acquiring, in exchange solely for voting shares of
beneficial interest of Acquiring ("Acquiring Shares") and the assumption by
Acquiring of all of the liabilities of the Fund followed by the distribution of
such Acquiring Shares received by the Fund in complete liquidation and
termination of the Fund, all pursuant to the Agreement and Plan of
Reorganization (the "Agreement") to be executed by the Fund and Acquiring and
included as an exhibit to Form N-14.
For purposes of this opinion, we have examined and rely upon (1) the
Agreement, (2) the Form N-14, dated _____, 1997, and filed by Acquiring on said
date with the Securities and Exchange Commission, and (3) letters of
representation furnished to us by Fund and Acquiring, and (4) such other
documents and instruments as we have deemed necessary or appropriate for
purposes of rendering this opinion. We assume that the transaction that is the
subject of this letter will be carried out in accordance with the terms of the
Agreement and as described in the documents we have examined. This opinion is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), United
States Treasury regulations, judicial decisions, and administrative rulings and
pronouncements of the Internal Revenue Service, all as in effect on the date
hereof.
Based upon the foregoing, it is our opinion that, for Federal income
tax purposes:
(1) The acquisition by Acquiring of substantially all of the properties
of the Fund in exchange solely for Acquiring Shares and the assumption by
Acquiring of the liabilities of the Fund followed by the distribution of
Acquiring Shares to the shareholders of the Fund in exchange for their Fund
shares in complete liquidation and termination of the Fund, will constitute a
reorganization within the meaning of Section 368 of the Code. The Fund and
Acquiring will each be "a party to a reorganization" within the meaning of
Section 368(b) of the Code.
(2) The Fund will recognize no gain or loss upon transferring its
properties to Acquiring in exchange solely for Acquiring Shares and the
assumption by Acquiring of certain liabilities of the Fund or upon distributing
to its shareholders the Acquiring Shares received by the Fund in the transaction
pursuant to the Agreement.
(3) Acquiring will recognize no gain or loss upon receiving the
properties of the Fund in exchange for Acquiring Shares and the assumption by
Acquiring of certain liabilities of the Fund.
(4) The aggregate adjusted basis to Acquiring of the properties of the
Fund will be the same as the aggregate adjusted basis of those properties in the
hands of the Fund immediately before the exchange.
(5) Acquiring' holding periods with respect to the properties of the
Fund that Acquiring acquires in the transaction will include the respective
periods for which those properties were held by the Fund (except where
investment activities of Acquiring have the effect of reducing or eliminating a
holding period with respect to an asset).
(6) The shareholders of the Fund will recognize no gain or loss upon
receiving Acquiring Shares solely in exchange for Fund shares.
(7) The aggregate basis of the Acquiring Shares received by a
shareholder of the Fund in the transaction will be the same as the aggregate
basis of the Fund shares surrendered by the shareholder in exchange therefor.
(8) A Fund shareholder's holding period for the Acquiring Shares
received by the shareholder in the transaction will include the holding period
during which the shareholder held the Fund shares surrendered in exchange
therefor, provided that the shareholder held such shares as a capital asset on
the date of Reorganization.
We express no opinion as to the tax consequences of the Reorganization
except as expressly set forth above, or as to any transaction except those
consummated in accordance with the Agreement and the representations to be made
to us.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form N-14 filed by Acquiring with the Securities and
Exchange Commission.
Very truly yours,
DECHERT PRICE & RHOADS
<PAGE>
DRAFT
________, 1997
Board of Directors
American Century Capital Preservation Fund II, Inc.
4500 Main Street
Kansas City, Missouri 64141-6200
Board of Trustees
American Century Government Income Trust
4500 Main Street
Kansas City, Missouri 64141-6200
Gentlemen:
You have requested our opinion regarding certain Federal income tax
consequences to American Century Capital Preservation Fund II, Inc. (the
"Fund"), to Capital Preservation Fund ("Acquiring"), a portfolio of American
Century Government Income Trust, and to the holders of the shares of common
stock of the Fund, in connection with the proposed transfer of substantially all
of the properties of the Fund to Acquiring, in exchange solely for voting shares
of beneficial interest of Acquiring ("Acquiring Shares") and the assumption by
Acquiring of all of the liabilities of the Fund followed by the distribution of
such Acquiring Shares received by the Fund in complete liquidation and
termination of the Fund, all pursuant to the Agreement and Plan of
Reorganization (the "Agreement") to be executed by the Fund and Acquiring and
included as an exhibit to Form N-14.
For purposes of this opinion, we have examined and rely upon (1) the
Agreement, (2) the Form N-14, dated _____, 1997, and filed by Acquiring on said
date with the Securities and Exchange Commission, and (3) letters of
representation furnished to us by Fund and Acquiring, and (4) such other
documents and instruments as we have deemed necessary or appropriate for
purposes of rendering this opinion. We assume that the transaction that is the
subject of this letter will be carried out in accordance with the terms of the
Agreement and as described in the documents we have examined. This opinion is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), United
States Treasury regulations, judicial decisions, and administrative rulings and
pronouncements of the Internal Revenue Service, all as in effect on the date
hereof.
Based upon the foregoing, it is our opinion that, for Federal income
tax purposes:
(1) The acquisition by Acquiring of substantially all of the properties
of the Fund in exchange solely for Acquiring Shares and the assumption by
Acquiring of the liabilities of the Fund followed by the distribution of
Acquiring Shares to the shareholders of the Fund in exchange for their Fund
shares in complete liquidation and termination of the Fund, will constitute a
reorganization within the meaning of Section 368 of the Code. The Fund and
Acquiring will each be "a party to a reorganization" within the meaning of
Section 368(b) of the Code.
(2) The Fund will recognize no gain or loss upon transferring its
properties to Acquiring in exchange solely for Acquiring Shares and the
assumption by Acquiring of certain liabilities of the Fund or upon distributing
to its shareholders the Acquiring Shares received by the Fund in the transaction
pursuant to the Agreement.
(3) Acquiring will recognize no gain or loss upon receiving the
properties of the Fund in exchange for Acquiring Shares and the assumption by
Acquiring of certain liabilities of the Fund.
(4) The aggregate adjusted basis to Acquiring of the properties of the
Fund will be the same as the aggregate adjusted basis of those properties in the
hands of the Fund immediately before the exchange.
(5) Acquiring' holding periods with respect to the properties of the
Fund that Acquiring acquires in the transaction will include the respective
periods for which those properties were held by the Fund (except where
investment activities of Acquiring have the effect of reducing or eliminating a
holding period with respect to an asset).
(6) The shareholders of the Fund will recognize no gain or loss upon
receiving Acquiring Shares solely in exchange for Fund shares.
(7) The aggregate basis of the Acquiring Shares received by a
shareholder of the Fund in the transaction will be the same as the aggregate
basis of the Fund shares surrendered by the shareholder in exchange therefor.
(8) A Fund shareholder's holding period for the Acquiring Shares
received by the shareholder in the transaction will include the holding period
during which the shareholder held the Fund shares surrendered in exchange
therefor, provided that the shareholder held such shares as a capital asset on
the date of Reorganization.
We express no opinion as to the tax consequences of the Reorganization
except as expressly set forth above, or as to any transaction except those
consummated in accordance with the Agreement and the representations to be made
to us.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form N-14 filed by Acquiring with the Securities and
Exchange Commission.
Very truly yours,
DECHERT PRICE & RHOADS
Independent Auditors' Consent
The Boards of Directors
American Century Capital Preservation Fund, Inc.
American Century Capital Preservation Fund II, Inc.
We consent to the use of our reports incorporated herein by reference and the
reference to our Firm under the headings "COMPARISON OF CERTAIN INFORMATION
REGARDING THE FUNDS" and "FINANCIAL STATEMENTS" in the Prospectus contained in
Part A of the combined Prospectus/Proxy Statement on Form N-14.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Kansas City, Missouri
April 25, 1997
Form of Proxy
American Century Capital Preservation Fund, Inc.
American Century Capital Preservation Fund II, Inc.
THIS PROXY IS SOLICITED BY THE BOARDS OF DIRECTORS OF American Century Capital
Preservation Fund, Inc. and American Century Capital Preservation Fund II, Inc.
for use at a meeting of shareholders to be held at 10:00 a.m. (Central time) on
July 30, 1997 at American Century Tower I, 4500 Main Street, Kansas City,
Missouri.
I hereby appoint ______________ and __________, and each of them, with full
power of substitution as my proxy to vote at the meeting and at all adjournments
or postponements thereof, all shares of beneficial interest, evidencing
interests in any one or more of the American Century - Benham Capital
Preservation Fund and American Century Capital Preservation Fund II which I held
of record on June 2, 1997, the record date for the meeting, upon the following
matters and upon any other matter which may come before the meeting, in their
discretion:
1. Proposal to approve an Agreement and Plan of Reorganization and the
transactions contemplated thereby, including:
(a) the transfer of substantially all of the assets and liabilities
of the Capital Preservation Fund and Capital Preservation Fund II
to a corresponding portfolio of American Century Government
Income Trust (the "New Capital Preservation Fund"):
(b) the distribution of the New Capital Preservation Fund shares to
the shareholders of the Capital Preservation Fund and Capital
Preservation Fund II according to their respective interests; and
(c) the termination under state law and the Investment Company Act of
1940, as amended, of the Capital Preservation Fund and Capital
Preservation Fund II.
FOR AGAINST ABSTAIN
/ / / / / /
2. In their discretion, the parties are authorized to vote upon such
other business as may properly come before the meeting.
FOR AGAINST ABSTAIN
/ / / / / /
Every properly signed proxy will be voted in the manner specified hereon and, in
the absence of specification, will be treated as GRANTING authority to vote FOR
Proposals 1 and 2.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney or as executor,
Administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated: ________
X_______________________________
Signature
X_______________________________
Signature, if held jointly
