SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-----
File No. 2-99222
Pre-Effective Amendment No. ____
Post-Effective Amendment No._33_ X
-----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
-----
File No. 811-4363
Amendment No._34_
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: (816) 531-5575
Douglas A. Paul
V. P. and Associate General Counsel
1665 Charleston Road, Mountain View, CA 94043
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Immediately, upon effectiveness
(first offered 9/23/85)
It is proposed that this filing become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on August 1, 1997 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a) of Rule 485
_____ on (date) pursuant to paragraph (a) of Rule 485
_____ 75 days after filing pursuant to paragraph (a) (2) of Rule 485
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
- --------------------------------------------------------------------------------
Registrant has elected to register an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. On May 30, 1997, the Registrant filed a Rule
24f-2 Notice on Form 24f-2 with respect to its fiscal year ended March 31, 1997.
<PAGE>
AMERICAN CENTURY GOVERNMENT INCOME TRUST
1933 Act Post-Effective Amendment No. 33
1940 Act Amendment No. 34
FORM N-1A
CROSS-REFERENCE SHEET
PART A: PROSPECTUS
ITEM PROSPECTUS CAPTION
1 Cover Page; Investment Objectives of the Funds
2 Transaction and Operating Expense Table
3 Financial Highlights; Performance Advertising
4 Management; Further Information About American Century; Investment
Objectives of the Funds; Investment Policies of the Funds; Risk
Factors and Investment Techniques; Other Investment Practices, Their
Characteristics and Risks
5 Management
5A Not Applicable
6 Further Information About American Century; How to Redeem Shares;
Cover Page; Distributions; Taxes
7 Cover Page; Distribution of Fund Shares; How to Open an Account; Share
Price; Transfer and Administrative Services
8 How to Redeem Shares; Transfer and Administrative Services
9 Not Applicable
PART B: STATEMENT OF ADDITIONAL INFORMATION
ITEM STATEMENT OF ADDITIONAL INFORMATION CAPTION
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Policies and Techniques; Investment Restrictions; Portfolio
Transactions
14 Trustee and Officers
15 Additional Purchase and Redemption Information; Trustees and Officers
16 Management; Transfer and Administrative Services; About the Trust
17 Portfolio Transactions
18 About the Trust
19 Additional Purchase and Redemption Information; Valuation of Portfolio
Securities
20 Taxes
21 Additional Purchase and Redemption Information
22 Performance
23 Cover Page
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
AUGUST 1, 1997
BENHAM
GROUP(R)
Capital Preservation
Capital Preservation II
Government Agency
Short-Term Treasury
Intermediate-Term Treasury
Long-Term Treasury
ARM Fund
GNMA Fund
Inflation-Adjusted Treasury
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
Benham Group American Century Group Twentieth Century(R) Group
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Capital Preservation
Capital Preservation II
Government Agency
Short-Term Treasury
Intermediate-Term Treasury
Long-Term Treasury
ARM Fund
GNMA Fund
Inflation-Adjusted Treasury
PROSPECTUS
AUGUST 1, 1997
Capital Preservation o Capital Preservation II o
Government Agency o Short-Term Treasury o
Intermediate-Term Treasury o Long-Term Treasury o
ARM Fund o GNMA Fund o
Inflation-Adjusted Treasury
AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.
AMERICAN CENTURY CAPITAL PRESERVATION FUND II, INC.
AMERICAN CENTURY GOVERNMENT INCOME TRUST
American Century Capital Preservation Fund, Inc., American Century Capital
Preservation Fund II, Inc., and American Century Government Income Trust are a
part of American Century Investments, a family of funds that includes nearly 70
no-load mutual funds covering a variety of investment opportunities. Nine of the
funds from our Benham Group that invest in U.S. government securities (the
"Funds") are described in this Prospectus. Their investment objectives are
listed on pages 2 and 3 of this Prospectus. The other funds are described in
separate prospectuses.
American Century offers investors a full line of no-load funds, investments
that have no sales charges or commissions.
This Prospectus gives you information about the Funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated August 1, 1997 and filed with the Securities and Exchange
Commission ("SEC"). It is incorporated into this Prospectus by reference. To
obtain a copy without charge, call or write:
American Century Investments
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-444-3485
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statements of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
Investments in the Funds are not insured or guaranteed by the U.S.
government or any other agency. There is no assurance that the Money Market
Funds will be able to maintain a $1.00 share price.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY--BENHAM CAPITAL
PRESERVATION FUND
Capital Preservation is a money market fund which seeks maximum safety and
liquidity. Its secondary objective is to seek to pay shareholders the highest
rate of return on their investment in the Fund consistent with safety and
liquidity. The Fund intends to pursue its investment objectives by investing
exclusively in short-term U.S. Treasury securities guaranteed by the direct full
faith and credit pledge of the U.S. government and maintaining a dollar-weighted
average portfolio maturity of not more than 90 days. On August 30, 1997, the
Fund will reorganize as "American Century-Benham Capital Preservation Fund," a
series of American Century Government Income Trust. See "Agreement and Plan of
Reorganization," page 36.
AMERICAN CENTURY--BENHAM CAPITAL
PRESERVATION FUND II
Capital Preservation II is a money market fund which seeks maximum safety
and liquidity. Its secondary objective is to seek to pay its shareholders the
highest rate of return on their investment in the Fund consistent with safety
and liquidity. The Fund intends to pursue its investment objectives by investing
primarily in repurchase agreements collateralized by securities that are backed
by the full faith and credit of the U.S. government. Such collateral may include
U.S. Treasury bills, notes, and bonds or mortgage-backed Ginnie Mae
certificates. On August 30, 1997, the Fund will reorganize as "American
Century-Benham Capital Preservation Fund," a series of American Century
Government Income Trust. See "Agreement and Plan of Reorganization," page 36.
AMERICAN CENTURY--BENHAM GOVERNMENT AGENCY
MONEY MARKET FUND
Government Agency is a money market fund which seeks to provide the highest
rate of current return on its investments, consistent with safety of principal
and maintenance of liquidity, by investing exclusively in short-term obligations
of the U.S. government and its agencies and instrumentalities, the income from
which is exempt from state taxes.
AMERICAN CENTURY--BENHAM SHORT-TERM
TREASURY FUND
Short-Term Treasury seeks to earn and distribute the highest level of
current income exempt from state income taxes as is consistent with preservation
of capital. The Fund intends to pursue its investment objectives by investing
primarily in securities issued or guaranteed by the U.S. Treasury and
maintaining a weighted average portfolio maturity ranging from 13 months to 3
years.
AMERICAN CENTURY--BENHAM INTERMEDIATE-TERM
TREASURY FUND
Intermediate-Term Treasury seeks to earn and distribute the highest level
of current income consistent with the conservation of assets and the safety
provided by U.S. Treasury bills, notes, and bonds. The Fund intends to pursue
its investment objectives by investing primarily in U.S. Treasury notes, which
carry the direct full faith and credit pledge of the U.S. government and
maintaining a weighted average portfolio maturity which ranges from 3 to 10
years.
There is no assurance that the Funds will achieve their respective investment
objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
AMERICAN CENTURY--BENHAM LONG-TERM
TREASURY FUND
Long-Term Treasury seeks to provide a consistent and high level of current
income exempt from state taxes. The Fund intends to pursue its investment
objective by investing primarily in securities issued or guaranteed by the U.S.
Treasury and maintaining a weighted average portfolio maturity ranging from 20
to 30 years.
AMERICAN CENTURY--BENHAM ADJUSTABLE RATE
GOVERNMENT SECURITIES FUND
The ARM Fund seeks to provide investors with a high level of current
income, consistent with stability of principal. The Fund intends to pursue its
investment objective by investing at least 65% of the Fund's total assets in
adjustable rate mortgage securities (ARMs) and other securities collateralized
by or representing interests in mortgages (collectively, "mortgage-backed
securities").
On August 25, 1997, the ARM Fund will begin to pursue its investment
objective by investing in securities of the U.S. government and its agencies and
maintaining a weighted average duration of three years of less. Its name will
also change to "American Century--Benham Short-Term Government Fund," to reflect
this change.
AMERICAN CENTURY--BENHAM GNMA FUND
The GNMA Fund seeks to provide a high level of current income consistent
with safety of principal and maintenance of liquidity by investing primarily in
mortgage-backed Ginnie Mae certificates.
AMERICAN CENTURY -- BENHAM INFLATION-ADJUSTED
TREASURY FUND
Inflation-Adjusted Treasury seeks to provide a total return consistent with
investment in U.S. Treasury inflation-adjusted securities.
There is no assurance that the Funds will achieve their respective investment
objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
Prospectus Investment Objectives 3
TABLE OF CONTENTS
Investment Objectives of the Funds..........................................2
Transaction and Operating Expense Table.....................................5
Financial Highlights........................................................6
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds...........................................15
The Money Market Funds.....................................................15
Capital Preservation....................................................15
Capital Preservation II.................................................15
Government Agency ......................................................15
The U.S. Treasury Funds....................................................16
Short-Term Treasury.....................................................16
Intermediate-Term Treasury..............................................16
Long-Term Treasury......................................................16
Inflation-Adjusted Treasury.............................................16
The Mortgage Securities Funds..............................................17
ARM Fund................................................................17
GNMA Fund ..............................................................18
Risk Factors and Investment Techniques.....................................18
U.S. Government Securities..............................................18
Mortgage-Backed Securities..............................................19
Adjustable-Rate Mortgage Securities.....................................19
Collateralized Mortgage Obligations.....................................20
Stripped Mortgage-Backed Securities.....................................20
Treasury Inflation-Adjusted Securities..................................20
Development of Inflation-Adjusted
Securities Market..................................................21
Share Price Volatility................................................22
Repurchase Agreements...................................................22
Other Investment Practices, Their Characteristics
and Risks...............................................................22
Portfolio Turnover......................................................22
When-Issued and Forward Commitment
Agreements...........................................................23
Cash Management.........................................................23
Other Techniques........................................................23
Performance Advertising....................................................23
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments...............................................25
Investing in American Century..............................................25
How to Open an Account.....................................................25
By Mail...............................................................25
By Wire...............................................................25
By Exchange...........................................................25
In Person.............................................................26
Subsequent Investments..................................................26
By Mail...............................................................26
By Telephone..........................................................26
By Online Access......................................................26
By Wire...............................................................26
In Person.............................................................26
Automatic Investment Plan...............................................26
How to Exchange from One Account to Another ...............................26
By Mail ..............................................................26
By Telephone..........................................................27
By Online Access......................................................27
How to Redeem Shares.......................................................27
By Mail...............................................................27
By Telephone..........................................................27
By Check-A-Month......................................................27
Other Automatic Redemptions...........................................27
Redemption Proceeds.....................................................27
By Check..............................................................27
By Wire and ACH.......................................................27
Redemption of Shares in Low-Balance Accounts............................27
Signature Guarantee........................................................28
Special Shareholder Services...............................................28
Automated Information Line............................................28
Online Account Access.................................................28
CheckWriting..........................................................28
Open Order Service....................................................29
Tax-Qualified Retirement Plans........................................29
Important Policies Regarding Your Investments..............................29
Reports to Shareholders....................................................30
Employer-Sponsored Retirement Plans and
Institutional Accounts..................................................30
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price................................................................31
When Share Price Is Determined..........................................31
How Share Price Is Determined...........................................31
Where to Find Information About Share Price.............................32
Distributions..............................................................32
Taxes 32
Tax-Deferred Accounts...................................................32
Taxable Accounts........................................................33
Management.................................................................34
Investment Management...................................................34
Code of Ethics..........................................................35
Transfer and Administrative Services....................................35
Special Meeting of Shareholders.........................................36
Agreement and Plan of Reorganization....................................36
Distribution of Fund Shares................................................36
Expenses...................................................................37
Further Information About American Century.................................37
4 Table of Contents American Century Investments
<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE TABLE
Short-
Term
Treasury,
Intermediate-
Term
Treasury,
Inflation- Long-
Capital Capital Government Adjusted Term ARM Fund,
Preservation Preservation II Agency Treasury Treasury GNMA Fund
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases.......... none none none none none none
Maximum Sales Load Imposed on
Reinvested Dividends.......................... none none none none none none
Deferred Sales Load.............................. none none none none none none
Redemption Fee(1)................................ none none none none none none
Exchange Fee..................................... none none none none none none
ANNUAL FUND OPERATING EXPENSES:(2)
(as a percentage of net assets)
Management Fees(3).............................. 0.27% 0.43% 0.48% 0.48% 0.52% 0.60%
12b-1 Fees....................................... none none none none none none
Other Expenses(4)............................... 0.24% 0.30% 0.00% 0.02% 0.00% 0.00%
Total Fund Operating Expenses................... 0.51% 0.73% 0.48% 0.50% 0.52% 0.60%
EXAMPLE:
You would pay the following
expenses on a $1,000 investment, 1 year $ 5 $ 7 $ 5 $ 6 $ 5 $ 6
assuming a 5% annual return 3 years 16 23 15 16 17 19
and redemption at the end 5 years 29 41 27 28 29 33
of each time period: 10 years 64 91 60 63 65 75
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) Benham Management Corporation (with respect to Capital Preservation and
Capital Preservation II, the "Manager") has agreed to limit Capital
Preservation's and Capital Preservation II's total operating expenses to
specified percentages of each Fund's average daily net assets. The
agreement provides that the Manager may recover amounts absorbed on behalf
of each of Capital Preservation and Capital Preservation II during the
preceding 11 months if, and to the extent that, for any given month, total
expenses of either were less than the expense limit in effect at that time.
The current expense limit for Capital Preservation is 0.53%. The current
expense limit for Capital Preservation II is 0.73%. American Century
Investment Management, Inc. (with respect to all Funds except Capital
Preservation and Capital Preservation II, the "Manager") has agreed to
waive the expenses of Inflation-Adjusted Treasury, until May 31, 1998, to
0.50% of its net assets. If this waiver was not in effect, the Management
Fees, Other Expenses and Total Fund Operating Expenses would be 0.52%,
0.02% and 0.54%, respectively.
(3) A portion of the management fee may be paid by American Century Investment
Management, Inc. to unaffiliated third parties who provide recordkeeping
and administrative services that would otherwise be performed by an
affiliate of the Manager. See "Management - Transfer and Administrative
Services," page 35.
(4) With respect to all Funds except Capital Preservation and Capital
Preservation II, Other Expenses, which includes the fees and expenses
(including legal counsel fees) of those Trustees who are not interested
persons' as defined in the Investment Company Act of 1940, are expected to
be less than 0.01 of 1% of average net assets for the current fiscal year.
For Capital Preservation and Capital Preservation II, Other Expenses
include administrative and transfer agent fees paid to American Century
Services Corporation.
</TABLE>
The purpose of the above table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the Funds offered by
this Prospectus. 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 ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Investor Class shares and have no
up-front or deferred sales charges, commissions, or 12b-1 fees. The Investor
Class is currently the only class of shares offered by the Funds.
Prospectus Transaction and Operating Expense Table 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CAPITAL PRESERVATION
The Financial Highlights for each of the periods presented have been
audited by KPMG Peat Marwick LLP, independent auditors whose report thereon
appears in the Fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The semiannual and annual reports contain
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended March 31, except as noted.
1997 1996 1995 1994 1993(1) 1992 1991 1990 1989 1988
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period..................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income From Investment Operations
Net Investment Income .............. 0.05 0.05 0.04 0.03 0.01 0.04 0.06 0.08 0.08 0.06
Distributions
From Net Investment Income.......... (0.05) (0.05) (0.04) (0.03) (0.01) (0.04) (0.06) (0.08) (0.08) (0.06)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period.......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return(2)..................... 4.82% 5.21% 4.31% 2.63% 1.35% 3.88% 6.27% 7.77% 8.27% 6.30%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(3)............ 0.49% 0.51% 0.50% 0.51% 0.50%(4) 0.51% 0.52% 0.56% 0.57% 0.59%
Ratio of Net Investment Income
to Average Net Assets(3)............ 4.66% 5.07% 4.24% 2.59% 2.68%(4) 3.82% 6.03% 7.50% 8.00% 6.08%
Net Assets, End
of Period (in millions)............. $2,978 $3,078 $2,883 $2,787 $2,943 $3,046 $3,376 $3,099 $2,737 $2,187
(1) The Fund's fiscal year-end was changed from September 30 to March 31
beginning with the period ended March 31, 1993, resulting in a six-month
period in 1993.
(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.
(3) The ratios for periods subsequent to March 31, 1995 include expenses paid
through expense offset arrangements.
(4) Annualized.
</TABLE>
6 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CAPITAL PRESERVATION II
The Financial Highlights for each of the periods presented have been
audited by KPMG Peat Marwick LLP, independent auditors whose report thereon
appears in the Fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The semiannual and annual reports contain
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended March 31, except as noted.
1997 1996 1995 1994 1993(1) 1992 1991 1990 1989 1988
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period...................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income From Investment Operations
Net Investment Income ............... 0.05 0.05 0.04 0.02 0.01 0.03 0.06 0.08 0.08 0.06
Distributions
From Net Investment Income........... (0.05) (0.05) (0.04) (0.02) (0.01) (0.03) (0.06) (0.08) (0.08) (0.06)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return(2)...................... 4.69% 5.15% 4.17% 2.40% 1.21% 3.42% 6.07% 7.91% 8.64% 6.46%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(3)............. 0.74% 0.76% 0.75% 0.75% 0.75%(4) 0.74% 0.70% 0.69% 0.71% 0.73%
Ratio of Net Investment Income
to Average Net Assets(3)............. 4.56% 5.03% 4.06% 2.37% 2.40%(4) 3.41% 5.91% 7.64% 8.34% 6.26%
Net Assets, End
of Period (in millions).............. $226 $246 $262 $283 $314 $340 $475 $618 $708 $538
(1) The Fund's fiscal year-end was changed from September 30 to March 31
beginning with the period ended March 31, 1993, resulting in a six-month
period in 1993.
(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.
(3) The ratios for periods subsequent to March 31, 1995 include expenses paid
through expense offset arrangements.
(4) Annualized.
</TABLE>
Prospectus Financial Highlights 7
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
GOVERNMENT AGENCY
The Financial Highlights for each of the periods presented have been
audited by KPMG Peat Marwick LLP, independent auditors whose report thereon
appears in the Fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The semiannual and annual reports contain
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended March 31, except as noted.
1997 1996 1995 1994 1993 1992 1991 1990(1)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period.............................$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income From Investment Operations
Net Investment Income ........................0.05 0.05 0.04 0.03 0.03 0.05 0.07 0.03
Distributions
From Net Investment Income.................. (0.05) (0.05) (0.04) (0.03) (0.03) (0.05) (0.07) (0.03)
----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period..................$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== =====
Total Return(2)..............................4.89% 5.35% 4.47% 2.69% 3.07% 5.29% 7.97% 2.65%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(3).....................0.57% 0.51% 0.50% 0.50% 0.50% 0.30% -- --
Ratio of Net Investment Income
to Average Net Assets(3).....................4.76% 5.20% 4.35% 2.65% 3.04% 5.17% 7.42% 8.25%(4)
Net Assets, End
of Period (in millions).......................$471 $503 $462 $562 $646 $906 $1,074 $62
(1) From December 5, 1989 (commencement of operations) through March 31, 1990.
(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.
(3) The ratios for periods subsequent to March 31, 1995 include expenses paid
through expense offset arrangements.
(4) Annualized.
</TABLE>
8 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SHORT-TERM TREASURY
The Financial Highlights for each of the periods presented have been
audited by KPMG Peat Marwick LLP, independent auditors whose report thereon
appears in the Fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The semiannual and annual reports contain
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended March 31, except as noted.
1997 1996 1995 1994 1993(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $9.84 $9.73 $9.86 $10.04 $10.00
Income From Investment Operations
Net Investment Income ......................... 0.52 0.53 0.50 0.36 0.25
Net Realized and Unrealized Gains
(Losses) on Investment Transactions............ (0.07) 0.11 (0.13) (0.14) 0.04
----- ---- ----- ----- ----
Total From Investment Operations............... 0.45 0.64 0.37 0.22 0.29
---- ---- ---- ---- ----
Distributions
From Net Investment Income..................... (0.52) (0.53) (0.50) (0.36) (0.25)
From Net Realized Gains
on Investment Transactions..................... (0.09) -- -- (0.03) --
In Excess of Net Realized Gains
on Investment Transactions..................... -- -- -- (0.01) --
----- ---- ----- ----- ----
Total Distributions............................ (0.61) (0.53) (0.50) (0.40) (0.25)
----- ----- ----- ----- -----
Net Asset Value, End of Period.................... $9.68 $9.84 $9.73 $9.86 $10.04
===== ===== ===== ===== ======
Total Return(2)................................ 4.62% 6.71% 3.85% 2.16% 2.79%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(3)....................... 0.61% 0.67% 0.67% 0.58% 0%
Ratio of Net Investment Income
to Average Net Assets(3)....................... 5.26% 5.39% 5.22% 3.53% 4.50%(4)
Portfolio Turnover Rate........................ 234% 224% 141% 262% 158%
Net Assets, End
of Period (in millions)........................ $36 $36 $56 $25 $15
(1) From September 8, 1992 (commencement of operations) through March 31,
1993.
(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.
(3) The ratios for the periods subsequent to March 31, 1995 include expenses
paid through expense offset arrangements.
(4) Annualized.
</TABLE>
Prospectus Financial Highlights 9
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INTERMEDIATE-TERM TREASURY
The Financial Highlights for each of the periods presented have been
audited by KPMG Peat Marwick LLP, independent auditors whose report thereon
appears in the Fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The semiannual and annual reports contain
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended March 31, except as noted.
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period........................ $10.24 $9.99 $10.18 $10.73 $10.52 $10.23 $9.87 $9.63 $10.11 $10.91
Income From Investment Operations
Net Investment Income .................. 0.58 0.58 0.53 0.48 0.56 0.69 0.75 0.77 0.76 0.75
Net Realized and Unrealized
Gains (Losses) on
Investment Transactions ................ (0.18) 0.25 (0.19) (0.27) 0.69 0.29 0.36 0.24 (0.49) (0.60)
----- ---- ----- ----- ---- ---- ---- ---- ----- -----
Total From Investment Operations........ 0.40 0.83 0.34 0.21 1.25 0.98 1.11 1.01 0.27 0.15
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Distributions
From Net Investment Income.............. (0.58) (0.58) (0.53) (0.48) (0.56) (0.69) (0.75) (0.77) (0.75) (0.92)
From Net Realized Gains
on Investment Transactions.............. -- -- -- (0.06) (0.48) -- -- -- -- (0.03)
In Excess of Net Realized Gains
on Investment Transactions.............. -- -- -- (0.22) -- -- -- -- -- --
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Distributions..................... (0.58) (0.58) (0.53) (0.76) (1.04) (0.69) (0.75) (0.77) (0.75) (0.95)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period............. $10.06 $10.24 $9.99 $10.18 $10.73 $10.52 $10.23 $9.87 $9.63 $10.11
====== ====== ===== ====== ====== ====== ====== ===== ===== ======
Total Return(1)......................... 4.05% 8.42% 3.54% 1.85% 12.36% 9.92% 11.59% 10.61% 2.78% 1.60%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(2)................ 0.51% 0.53% 0.53% 0.51% 0.53% 0.59% 0.73% 0.75% 0.75% 0.75%
Ratio of Net Investment Income
to Average Net Assets(2)................ 5.72% 5.65% 5.35% 4.50% 5.18% 6.55% 7.49% 7.66% 7.67% 7.36%
Portfolio Turnover Rate................. 110% 168% 92% 213% 299% 149% 70% 217% 386% 465%
Net Assets, End
of Period (in millions)................. $329 $311 $305 $351 $392 $303 $159 $97 $72 $54
(1) Total return assumes reinvestment of dividends and capital gain
distributions, if any.
(2) The ratios for the periods subsequent to March 31, 1995 include expenses
paid through expense offset arrangements.
</TABLE>
10 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
LONG-TERM TREASURY
The Financial Highlights for each of the periods presented have been
audited by KPMG Peat Marwick LLP, independent auditors whose report thereon
appears in the Fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The semiannual and annual reports contain
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended March 31, except as noted.
1997 1996 1995 1994 1993(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $9.67 $9.05 $9.38 $10.24 $10.00
Income From Investment Operations
Net Investment Income.............................. 0.60 0.60 0.60 0.63 0.39
Net Realized and Unrealized Gains
(Losses) on Investment Transactions................ (0.35) 0.62 (0.33) (0.27) 0.24
----- ---- ----- ----- ----
Total From Investment Operations................... 0.25 1.22 0.27 0.36 0.63
---- ---- ---- ---- ----
Distributions
From Net Investment Income......................... (0.60) (0.60) (0.60) (0.63) (0.39)
From Net Realized Gains
on Investment Transactions......................... -- -- -- (0.45) --
In Excess of Net Realized Gains
on Investment Transactions......................... -- -- -- (0.14) --
----- ---- ----- ----- ----
Total Distributions................................ (0.60) (0.60) (0.60) (1.22) (0.39)
----- ----- ----- ----- -----
Net Asset Value, End of Period......................... $9.32 $9.67 $9.05 $9.38 $10.24
===== ===== ===== ===== ======
Total Return(2).................................... 2.65% 13.46% 3.25% 2.87% 6.48%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(3)........................... 0.60% 0.67% 0.67% 0.57% --
Ratio of Net Investment Income
to Average Net Assets(3)........................... 6.28% 5.93% 6.84% 5.89% 7.18%(4)
Portfolio Turnover Rate............................ 40% 112% 147% 200% 57%
Net Assets, End of Period (in millions)............ $127 $111 $35 $18 $21
(1) From September 8, 1992 (commencement of operations) through March 31,
1993.
(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.
(3) The ratios for the periods subsequent to March 31, 1995 include expenses
paid through expense offset arrangements.
(4) Annualized.
</TABLE>
Prospectus Financial Highlights 11
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARM FUND
The Financial Highlights for each of the periods presented have been
audited by KPMG Peat Marwick LLP, independent auditors whose report thereon
appears in the Fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The semiannual and annual reports contain
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended March 31, except as noted.
1997 1996 1995 1994 1993 1992(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................ $9.47 $9.42 $9.75 $9.97 $10.04 $10.00
Income From Investment Operations
Net Investment Income ........................... 0.53 0.54 0.49 0.54 0.57 0.40
Net Realized and Unrealized Gains
(Losses) on Investment Transactions.............. 0.04 0.05 (0.33) (0.22) (0.07) 0.04
---- ---- ----- ----- ----- ----
Total From Investment Operations................. 0.57 0.59 0.16 0.32 0.50 0.44
---- ---- ---- ---- ---- ----
Distributions
From Net Investment Income....................... (0.53) (0.54) (0.49) (0.54) (0.57) (0.40)
----- ----- ----- ----- ----- -----
Total Distributions.............................. (0.53) (0.54) (0.49) (0.54) (0.57) (0.40)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Period...................... $9.51 $9.47 $9.42 $9.75 $9.97 $10.04
===== ===== ===== ===== ===== ======
Total Return(2).................................. 6.17% 6.42% 1.75% 3.27% 5.13% 4.55%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(3)......................... 0.59% 0.60% 0.57% 0.51% 0.45% 0%
Ratio of Net Investment Income
to Average Net Assets(3)......................... 5.59% 5.70% 4.98% 5.47% 5.66% 7.02%(4)
Portfolio Turnover Rate.......................... 193% 221% 60% 92% 83% 82%
Net Assets, End of Period (in millions).......... $236 $299 $397 $937 $1,495 $886
(1) From September 3, 1991 (commencement of operations) through March 31,
1992.
(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.
(3) The ratios for the periods subsequent to March 31, 1995 include expenses
paid through expense offset arrangements.
(4) Annualized.
</TABLE>
12 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
GNMA FUND
The Financial Highlights for each of the periods presented have been
audited by KPMG Peat Marwick LLP, independent auditors whose report thereon
appears in the Fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The semiannual and annual reports contain
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended March 31, except as noted.
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period......................... $10.45 $10.18 $10.35 $10.88 $10.52 $10.21 $9.85 $9.56 $9.96 $10.42
Income From Investment Operations
Net Investment Income ................... 0.71 0.74 0.72 0.66 0.79 0.86 0.88 0.90 0.89 0.89
Net Realized and Unrealized Gains
(Losses) on Investment Transactions...... (0.12) 0.27 (0.18) (0.52) 0.36 0.31 0.36 0.29 (0.40) (0.40)
----- ---- ----- ----- ---- ---- ---- ---- ----- -----
Total From Investment Operations......... 0.59 1.01 0.54 0.14 1.15 1.17 1.24 1.19 0.49 0.49
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Distributions
From Net Investment Income............... (0.71) (0.74) (0.71) (0.66) (0.79) (0.86) (0.88) (0.90) (0.89) (0.95)
From Net Realized Gains
on Investment Transactions............... -- -- -- (0.01) -- -- -- -- -- --
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Distributions...................... (0.71) (0.74) (0.71) (0.67) (0.79) (0.86) (0.88) (0.90) (0.89) (0.95)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period.............. $10.33 $10.45 $10.18 $10.35 $10.88 $10.52 $10.21 $9.85 $9.56 $9.96
====== ====== ====== ====== ====== ====== ====== ===== ===== =====
Total Return(1).......................... 5.84% 10.08% 5.53% 1.30% 11.28% 11.85% 13.16% 12.73% 5.07% 5.23%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(2)................. 0.55% 0.58% 0.58% 0.54% 0.56% 0 .62% 0.72% 0.75% 0.75% 0.73%
Ratio of Net Investment Income
to Average Net Assets(2)................. 6.84% 6.98% 7.08% 6.12% 7.31% 8.18% 8.85% 9.04% 9.11% 8.94%
Portfolio Turnover Rate.................. 105% 64% 120% 49% 71% 97% 207% 433% 497% 497 %
Net Assets, End
of Period (in millions).................. $1,119 $1,120 $980 $1,129 $1,160 $ 724 $409 $290 $253 $259
(1) Total return assumes reinvestment of dividends and capital gain
distributions, if any.
(2) The ratios for the periods subsequent to March 31, 1995 include expenses
paid through expense offset arrangements.
</TABLE>
Prospectus Financial Highlights 13
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INFLATION-ADJUSTED TREASURY
The Financial Highlights for the period ended March 31, 1997, have been
audited by KPMG Peat Marwick LLP, independent auditors (except as noted) whose
report thereon appears in the Fund's annual report, which is incorporated by
reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the period ended March 31, except as noted.
June 30, March 31,
1997(1) 1997(2)
PER-SHARE DATA
<S> <C> <C>
Net Asset Value, Beginning of Period.................... $9.74 $10.00
----- ------
Income From Investment Operations
Net Investment Income .............................. 0.13 0.06
Net Unrealized
(Loss) on Investment Transactions................... (0.05) (0.26)
----- -----
Total From Investment Operations.................... 0.08 (0.20)
---- -----
Distributions
From Net Investment Income.......................... (0.13) (0.06)
----- -----
Net Asset Value, End of Period.......................... $9.69 $9.74
===== =====
Total Return(3)..................................... 0.85% (1.98)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(4)............................ 0.50% 0.50%
Ratio of Net Investment Income
to Average Net Assets(4)............................ 5.30% 5.03%
Portfolio Turnover Rate............................. 32% --
Net Assets, End of Period (in thousands)............ $4,312 $2,277
(1) Three months ended June 30, 1997 (unaudited).
(2) February 10, 1997 (inception) through March 31, 1997.
(3) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.
(4) Annualized.
</TABLE>
14 Financial Highlights American Century Investments
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS
The Funds have adopted certain investment restrictions that are set forth
in the Statement of Additional Information. Those restrictions, as well as the
investment objectives of the Funds identified on pages 2 and 3 of this
Prospectus and any other investment policies which are designated as
"fundamental" in this Prospectus or in the Statement of Additional Information,
cannot be changed without shareholder approval. The Funds have implemented
additional investment policies and practices to guide their activities in the
pursuit of their respective investment objectives. These policies and practices,
which are described throughout this Prospectus, are not designated as
fundamental policies and may be changed without shareholder approval.
Each Fund (except Capital Preservation II, ARM Fund and GNMA Fund) seeks
income exempt from state taxes by investing exclusively in U.S. government
securities whose interest payments are state tax-exempt. As a result, these
Funds' dividend distributions are expected to be exempt from state income tax.
See page 32 for more information on tax treatment of the Funds' distributions.
THE MONEY MARKET FUNDS
Each of the Money Market Funds seeks to maintain a $1.00 share price,
although there is no guarantee they will be able to do so. Shares of the Money
Market Funds are neither insured nor guaranteed by the U.S. government.
CAPITAL PRESERVATION
Capital Preservation seeks maximum safety and liquidity. Its secondary
objective is to seek to pay its shareholders the highest rate of return on their
investment in Capital Preservation consistent with safety and liquidity. Capital
Preservation pursues its investment objectives by investing exclusively in
short-term U.S. Treasury securities guaranteed by the direct full faith and
credit pledge of the U.S. government. Capital Preservation's dollar-weighted
average portfolio maturity will not exceed 90 days.
While the risks associated with investing in short-term U.S. Treasury
securities are very low, an investment in Capital Preservation is not risk-free.
CAPITAL PRESERVATION II
Capital Preservation II seeks maximum safety and liquidity. Its secondary
objective is to seek to pay its shareholders the highest rate of return on their
investment in the Fund consistent with safety and liquidity. Capital
Preservation II pursues its investment objectives by investing primarily in
repurchase agreements collateralized by securities that are backed by the full
faith and credit of the U.S. government. Such collateral may include U.S.
Treasury bills, notes, and bonds or mortgage-backed Ginnie Mae certificates.
Ginnie Mae certificates are guaranteed by the Government National Mortgage
Association (GNMA) and backed by the full faith and credit of the U.S.
government. Repurchase agreements held by the Fund normally have maturities of
seven days or less. The Fund may invest directly in U.S. Treasury securities
from time to time.
Capital Preservation II restricts its average portfolio maturity to seven
days or less. Because of this restriction, its yield responds more quickly to
interest rate increases or decreases than do yields on most other money market
funds and enhances portfolio liquidity. See page 22 for a discussion of the
market and credit risks associated with investing in repurchase agreements.
GOVERNMENT AGENCY
Government Agency seeks to provide the highest rate of current return on
its investments, consistent with safety of principal and maintenance of
liquidity, by investing exclusively in short-term obligations of the U.S.
government and its agencies and instrumentalities, the income from which is
exempt from state taxes. Under normal conditions, at least 65% of the Fund's
total assets are invested in securities issued by agencies and instrumentalities
of the U.S. government.
Prospectus Information Regarding the Fund 15
Assets not invested in these securities are invested in U.S. Treasury
securities. For temporary defensive purposes, the Fund may invest up to 100% of
its assets in U.S. Treasury securities. The Fund's weighted average portfolio
maturity will not exceed 90 days.
The U.S. government provides varying levels of financial support to its
agencies and instrumentalities.
THE U.S. TREASURY FUNDS
Short-Term Treasury, Intermediate-Term Treasury and Long-Term Treasury are
quite similar to one another but can be differentiated by their dollar-weighted
average maturities. Among these Funds, the longer its dollar-weighted average
maturity, the more its share price will fluctuate when interest rates change.
This pattern is due, in part, to the time value of money. A bond's worth is
determined in part by the present value of its future cash flows. Consequently,
changing interest rates have a greater effect on the present value of a
long-term bond than a short-term bond. Because of this interplay between market
interest rates and share price, investors are encouraged to evaluate Fund
performance on the basis of total return.
SHORT-TERM TREASURY
Short-Term Treasury seeks to earn and distribute the highest level of
current income exempt from state income taxes as is consistent with preservation
of capital. Short-Term Treasury pursues this objective by investing primarily in
securities issued or guaranteed by the U.S. Treasury.
Within this framework, Short-Term Treasury invests primarily in securities
with remaining maturities of 3 years or less, and, under normal conditions,
maintains a weighted average portfolio maturity ranging from 13 months to 3
years. Short-Term Treasury's portfolio may consist of any combination of these
securities consistent with investment strategies employed by the Manager.
Short-Term Treasury may be appropriate for investors who are seeking higher
current yields than those available from money market funds and who can tolerate
some share price volatility.
INTERMEDIATE-TERM TREASURY
Intermediate-Term Treasury seeks to earn and distribute the highest level
of current income consistent with the conservation of assets and the safety
provided by U.S. Treasury bills, notes, and bonds. Intermediate-Term Treasury
pursues this objective by investing primarily in U.S. Treasury notes, which
carry the direct full faith and credit pledge of the U.S. government.
Intermediate-Term Treasury may also invest in U.S. Treasury bills, bonds, and
zero-coupon securities, all of which are also backed by the direct full faith
and credit pledge of the U.S. government. Intermediate-Term Treasury's weighted
average portfolio maturity ranges from 3 to 10 years, under normal market
conditions.
The Manager seeks a current yield for Intermediate-Term Treasury higher
than that of Short-Term Treasury, with correspondingly greater share price
volatility.
LONG-TERM TREASURY
Long-Term Treasury seeks to provide a consistent and high level of current
income exempt from state taxes. Long-Term Treasury pursues this objective by
investing primarily in securities issued or guaranteed by the U.S. Treasury and
agencies or instrumentalities of the U.S. government. Long-Term Treasury's
portfolio may consist of any combination of these securities consistent with
investment strategies employed by the Manager. Within this framework, the Fund
invests primarily in securities with maturities of 10 or more years and, under
normal conditions, maintains a weighted average portfolio maturity ranging from
20 to 30 years.
By maintaining an average portfolio maturity of 20 to 30 years, Long-Term
Treasury offers investors the potential to earn higher current yields than those
typically available from bond funds (such as Short-Term Treasury and
Intermediate-Term Treasury) that maintain shorter average maturities. Long-Term
Treasury may also offer greater potential for capital appreciation. However,
maintaining a relatively long average maturity also means that the Fund's share
price generally will be more volatile than those of funds that maintain shorter
average maturities (such as Short-Term Treasury and Intermediate-Term Treasury).
INFLATION-ADJUSTED TREASURY
Inflation-Adjusted Treasury pursues its investment objective by investing,
under normal market conditions, at least 65% of its total assets in Treasury
Inflation-Adjusted Securities that are backed by the
16 Information Regarding the Funds American Century Investments
full faith and credit of the U.S. government and indexed or otherwise structured
by the U.S. Treasury to provide protection against inflation. Treasury
Inflation-Adjusted Securities may be issued by the U.S. Treasury in the form of
notes or bonds. Up to 35% of the Fund's total assets may be invested in
Inflation-Adjusted Securities issued by U.S. government agencies and
government-sponsored organizations, when such securities become available.
Inflation-Adjusted Treasury may also invest in U.S. Treasury securities which
are not indexed to inflation for liquidity and total return, or if at any time
the Manager believes there is an inadequate supply of appropriate
Inflation-Adjusted Securities in which to invest or when such investments are
required as a temporary defensive measure. Inflation-Adjusted Treasury's
portfolio may consist of any combination of these securities consistent with
investment strategies employed by the Manager. While Inflation-Adjusted Treasury
seeks to provide a measure of inflation protection to its investors, there is no
assurance that the Fund will provide less risk than a fund investing in
conventional fixed principal Treasury securities.
There are no maturity or duration restrictions for the securities in which
Inflation-Adjusted Treasury may invest. The U.S. Treasury initially issued
Treasury Inflation-Adjusted Securities with a 10-year term to maturity. It has
announced its intention (although there is no guarantee it will do so) to issue
additional securities with a term to maturity as long as 30 years and as short
as five years. When these securities of differing maturity are issued, the
Manager will buy from among the available issues those securities that will
provide the maximum relative value to the Fund.
Inflation-Adjusted Treasury may be appropriate for investors who are
seeking to protect all or a part of their investment portfolio from the effects
of inflation. Traditional U.S. Treasury fixed-principal notes and bonds pay a
stated return or rate of interest in dollars and are redeemed at their par
amount. Inflation during the period the securities are outstanding will diminish
the future purchasing power of these dollars. Inflation-Adjusted Treasury is
designed to serve as a vehicle to protect against this diminishing effect.
Inflation-Adjusted Treasury is designed to provide total return consistent
with an investment in Treasury Inflation-Adjusted Securities. Inflation-Adjusted
Treasury's income yield will reflect both the inflation-adjusted interest income
and the inflation adjustment to principal which are features of
Inflation-Adjusted Securities. Inflation-Adjusted Treasury's yield will likely
reflect "real rates" of interest (that is, the then-prevailing current interest
rates minus the then-prevailing expectations for inflation) available in the
Treasury market. As a result, the current income generated by the Fund is
expected to be substantially below that of more traditional government
securities funds, such as Treasury bond funds or government-agency bond funds.
Inflation-Adjusted Securities in which the Fund may invest are relatively
new securities. There are special investment risks, particularly share price
volatility and potential adverse tax consequences, associated with investment in
Inflation-Adjusted Securities. These risks are described in the following
section. You should read that section carefully to make sure you understand the
nature of Inflation-Adjusted Treasury before you invest in it.
THE MORTGAGE SECURITIES FUNDS
ARM FUND
The ARM Fund seeks to provide investors with a high level of current
income, consistent with stability of principal. The ARM Fund pursues this
objective by investing primarily in adjustable rate securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities. Under
normal conditions, the Manager invests at least 65% of the ARM Fund's total
assets in adjustable rate mortgage securities (ARMs) and other securities
collateralized by or representing interests in mortgages (collectively,
"mortgage-backed securities"). These securities have interest rates that are
reset periodically and that are issued or guaranteed by the U.S. government or
its agencies or instrumentalities.
On August 25, 1997, the ARM Fund will begin to pursue its investment
objective by investing in securities of the U.S. government and its agencies and
maintaining a weighted average duration of three years or less. The Fund will
therefore no longer be subject to the requirement that it invest 65% of its
total assets in ARMs, although it may continue to invest in these securities.
Prospectus Information Regarding the Funds 17
ARMs are pass-through certificates representing ownership interests in
pools of adjustable rate mortgages and in the cash flows from those mortgages.
The ARMs in which the Fund may invest are issued or guaranteed by GNMA, FNMA or
FHLMC.
The Fund may also invest in collateralized mortgage obligations (CMOs),
including CMO floaters and inverse floaters; stripped mortgage-backed
securities, including interest-only (IO) and principal-only (PO) securities and
IO inverse floaters; and fixed-rate mortgage securities issued or guaranteed by
GNMA, FNMA or FHLMC. All CMOs purchased by the Fund are either issued by a U.S.
government agency or rated AAA by a nationally recognized statistical rating
organization commonly referred to as a rating agency.
Assets not invested in adjustable rate or mortgage-backed securities may be
invested in U.S. Treasury bills, notes, and bonds and in other securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities. For
temporary defensive purposes, the Fund may invest up to 100% of its assets in
these securities.
By investing primarily in mortgage-backed securities that have variable
interest rates, the ARM Fund seeks to maintain a more stable net asset value
than is characteristic of funds that invest in mortgage securities paying a
fixed rate of interest (such as the GNMA Fund). ARM prices generally fluctuate
less than fixed-rate mortgage securities prices because their interest rates are
reset periodically to reflect current interest rates. There is always a lag
between market interest rate changes and ARM rate resets, however, and resets
may be limited by caps on the rates that can be charged to borrowers.
GNMA FUND
The GNMA Fund seeks to provide a high level of current income consistent
with safety of principal and maintenance of liquidity by investing primarily in
mortgage-backed Ginnie Mae certificates.
Ginnie Mae certificates represent interests in pools of mortgage loans and
in the cash flows from those loans. These certificates are guaranteed by GNMA
and backed by the full faith and credit of the U.S. government as to the timely
payment of interest and repayment of principal, which means that the Fund
receives its share of interest and principal payments owed on the underlying
pool of mortgage loans, regardless of whether borrowers make their scheduled
mortgage payments.
Assets not invested in Ginnie Mae certificates, directly or indirectly, are
invested in other U.S. government securities, such as U.S. Treasury bills,
notes, and bonds, or repurchase agreements collateralized by U.S. government
securities. For temporary defensive purposes, the Fund may invest 100% of its
assets in these securities.
A unique feature of mortgage-backed securities, such as Ginnie Mae
certificates, is that their principal is scheduled to be paid back gradually for
the duration of the loan rather than in one lump sum at maturity. Investors
(such as the GNMA Fund) receive scheduled monthly payments of principal and
interest, but they may also receive unscheduled prepayments of principal on the
underlying mortgages. See "Mortgage-Backed Securities" on page 19 for a
discussion of prepayment risk.
RISK FACTORS AND INVESTMENT TECHNIQUES
The obligations in which the Funds may invest differ from one another in
their interest rates, maturities, dates of issuance and interest payment
schedules. The pertinent features of the types of obligations in which the Funds
may invest are described in this section.
U.S. GOVERNMENT SECURITIES
U.S. Treasury bills, notes, zero-coupon bonds, and other bonds are direct
obligations of the U.S. Treasury, which has never failed to pay interest and
repay principal when due. Treasury bills have initial maturities of one year or
less, Treasury notes from two to ten years, and Treasury bonds more than 10
years. Although U.S. Treasury securities carry little principal risk if held to
maturity, the prices of these securities (like all debt securities) change
between issuance and maturity in response to fluctuating market interest rates.
A number of U.S. government agencies and government-sponsored organizations
issue debt securities. These agencies generally are created by Congress to
fulfill a specific need, such as providing credit to home buyers or farmers.
Among these agencies are the Federal Home Loan Banks, the Federal Farm Credit
Banks, the Student Loan Marketing Association and the Resolution Funding
Corporation.
18 Information Regarding the Funds American Century Investments
Some agency securities are backed by the full faith and credit of the U.S.
government, and some are guaranteed only by the issuing agency. Agency
securities typically offer somewhat higher yields than U.S. Treasury securities
with similar maturities. However, these securities may involve greater risk of
default than securities backed by the U.S. Treasury.
Interest rates on agency securities may be fixed for the term of the
investment (fixed-rate agency securities) or tied to prevailing interest rates
(floating-rate agency securities). Interest rate resets on floating-rate agency
securities generally occur at intervals of one year or less, based on changes in
a predetermined interest rate index.
Floating-rate agency securities frequently have caps limiting the extent to
which coupon rates can be raised. The price of a floating-rate agency security
may decline if its capped coupon rate is lower than prevailing market interest
rates. Fixed- and floating-rate agency securities may be issued with a call date
(which permits redemption before the maturity date). The exercise of a call may
reduce an obligation's yield to maturity. Capital Preservation and Capital
Preservation II may not invest in floating-rate agency securities.
MORTGAGE-BACKED SECURITIES
The ARM and GNMA Funds may purchase mortgage pass-through securities. These
represent interests in "pools" of mortgages in which payments of both interest
and principal on the securities are generally made monthly. These monthly
mortgage payments are, in effect "passed-through" to the security holder, (minus
fees paid to the security's issuer or guarantor). Although fixed-rate mortgages
typically have stated maturities of 30 or more years, most mortgage holders pay
off their mortgages before they mature which may make these subject to
prepayment risk.
Also, mortgage-backed securities, like other fixed income securities,
generally decrease in value as a result of increases in interest rates, but
benefit less than other fixed-income securities from declining interest rates
because of the risk of prepayment resulting from homeowners' refinancing their
mortgages to take advantage of lower interest rates. On average, securities
backed by 30-year mortgages return principal within 7 to 10 years. As a result,
these securities have historically exhibited behavior comparable to 7- to
10-year Treasury notes, while offering higher yields.
The primary issuers of mortgage securities are FNMA, FHLMC and GNMA.
Payments of principal and interest on GNMA securities are guaranteed by GNMA and
backed by the full faith and credit of the U.S. government. FNMA and FHLMC have
a close relationship with the U.S. government so even though their securities
are not backed by the full faith and credit of the U.S. government, the Manager
considers them to be high-quality securities with minimal credit risks.
ADJUSTABLE-RATE MORTGAGE SECURITIES
Adjustable-rate mortgage securities (ARMs) are pass-through securities
collateralized by mortgages with adjustable, rather than fixed, interest rates.
The interest rate payments and amortization of principal on the underlying
adjustable rate mortgages are tied to changes in predetermined interest rate
indexes. ARM rates are readjusted at intervals of one year or less, subject to
maximums (caps) and minimums (floors) on the rates that can be charged to
mortgage holders during a given period and during the life of a mortgage. These
periodic rate adjustments allow the ARM Fund to participate in market interest
rate increases (to produce higher yields with less share price volatility) but
only to the extent that the current rate on the underlying mortgages remain at
or below their specified caps.
ARM interest rate resets should cause the ARM Fund's share price to
fluctuate less dramatically than it would if the Fund were substantially
invested in securities backed by long-term, fixed-rate mortgages. This means
that share price declines should be less than for funds investing in fixed-rate
mortgages when interest rates rise. This characteristic of ARMs should also
cause the potential for share price appreciation when interest rates decline to
be less than for funds investing in fixed-rate mortgages.
If ARMs are purchased at a premium, mortgage foreclosures and unscheduled
principal prepayments may result in a decline in share price. On the other hand,
if ARMs are purchased at a discount, both scheduled and unscheduled payments of
principal may accelerate the recognition of income and thereby increase the
Fund's yield and total return.
Prospectus Information Regarding the Funds 19
The mortgages that collateralize ARMs issued by GNMA are fully guaranteed
by the Federal Housing Administration or the Department of Veterans Affairs,
which are divisions of the U.S. government. The mortgages that collateralize
ARMs issued by FNMA or FHLMC typically are conventional residential mortgages
that conform to standards prescribed by FNMA or FHLMC and are guaranteed by
those instrumentalities.
COLLATERALIZED MORTGAGE OBLIGATIONS
Collateralized mortgage obligations (CMOs) are mortgage-backed securities
issued by government agencies; single-purpose, stand-alone financial
subsidiaries; trusts established by financial institutions; or similar
institutions. The ARM Fund may buy CMOs, provided that they:
o Are collateralized by pools of mortgages in which payment of principal and
interest of each mortgage is guaranteed by an agency or instrumentality of
the U.S. government;
o Are collateralized by pools of mortgages in which payment of principal and
interest are guaranteed by the issuer, and the guarantee is collateralized
by U.S. government securities; or
o Are securities in which the proceeds of the issue are invested in mortgage
securities and payments of principal and interest is supported by the
credit of an agency or instrumentality of the U.S. government.
The GNMA Fund may buy CMOs only if they are Ginnie-Mae-backed.
STRIPPED MORTGAGE-BACKED SECURITIES
Stripped mortgage-backed securities (which are permitted investments for
the ARM Fund only) are usually structured with two classes. One class will
receive all of the interest (the interest-only class, or "IO"), whereas the
other class will receive all of the principal (the principal-only class, or
"PO"). Stripped mortgage securities are likely to experience greater price
volatility than other types of mortgage securities in which the ARM Fund
invests. The yield to maturity on the IO class is extremely sensitive, not only
to changes in prevailing interest rates but also to the rate of principal
payments (including prepayments) on the underlying mortgage assets. If
prepayments accelerate, the ARM Fund may not fully recover its initial
investment in these securities.
The ARM Fund's investments in stripped mortgage securities together with
investments in illiquid securities may not exceed 15% of net assets.
TREASURY INFLATION-ADJUSTED SECURITIES
Treasury Inflation-Adjusted Securities are Treasury securities with a final
value and interest payment stream linked to the inflation rate. Treasury
Inflation-Adjusted Securities may be issued in either note or bond form.
Treasury inflation-adjusted notes have maturities of at least one year, but not
more than 10 years. Treasury inflation-adjusted bonds have maturities of more
than 10 years.
Treasury Inflation-Adjusted Securities may be attractive to investors
seeking an investment backed by the full faith and credit of the U.S. government
that provides a return in excess of the rate of inflation. According to the U.S.
Treasury, Treasury Inflation-Adjusted Securities are modeled after the "Real
Return Bonds" currently issued by the government of Canada. These securities are
new to the U.S. market, having first been sold in January 1997. There is
uncertainty as to how these securities will be treated by the marketplace. See
"Development of Inflation-Adjusted Securities Market" on page 21. Treasury
Inflation-Adjusted Securities will be auctioned and issued on a quarterly basis.
STRUCTURE AND INFLATION INDEX
The principal value of Treasury Inflation-Adjusted Securities will be
adjusted to reflect changes in the level of inflation. The index for measuring
the inflation rate for Treasury Inflation-Adjusted Securities is the
non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All
Urban Con-sumers published monthly by the U.S. Department of Labor's Bureau of
Labor Statistics.
Semiannual coupon interest payments are made at a fixed percentage of the
inflation-adjusted principal value. The coupon rate or "real yield" for the
semiannual interest payment of each issuance of securities will be determined at
the time the securities are sold to the public. While a reduction in inflation
will cause a reduction in the interest payment made on the securities, the
repayment of principal at the maturity
20 Information Regarding the Fund American Century Investments
of the security is guaranteed by the Treasury to be not less than the original
face or par amount of the security at issuance.
INDEXING METHODOLOGY
The principal value of Treasury Inflation-Adjusted Securities will be
indexed, or adjusted, to account for changes in the Consumer Price Index.
Semiannual coupon interest payment amounts will be determined by multiplying the
inflation-adjusted principal amount by one-half the stated rate of interest on
each interest payment date.
TAXATION
Taxation applicable to Treasury Inflation-Adjusted Securities is similar to
conventional bonds. Both interest payments and the difference between original
principal and the inflation-adjusted principal will be treated as interest
income subject to taxation. Interest payments are taxable when received or
accrued. The inflation adjustment to the principal is subject to tax in the year
adjustment is made, not at maturity of the security when the cash from the
repayment of principal is received. If an upward adjustment has been made (which
typically should happen), investors in non-tax deferred accounts will pay taxes
on this amount currently. Decreases in the indexed principal can only be
deducted from current or previous interest payments reported as income.
Treasury Inflation-Adjusted Securities therefore have a potential cash flow
mismatch to an investor, since investors must pay taxes on the
inflation-adjusted principal before the repayment of principal is received. It
is possible that, particularly for high income tax bracket investors, Treasury
Inflation-Adjusted Securities would not generate enough income in a given year
to cover the tax liability it could create. This is similar to the current tax
treatment for zero coupon bonds and other discount securities. If a Treasury
Inflation-Adjusted Security is sold prior to maturity, capital losses or gains
are realized in the same manner as traditional bonds.
Inflation-Adjusted Treasury, however, distributes all income on a monthly
basis. Investors in Inflation-Adjusted Treasury will receive dividends which
represent both the interest payments and the principal adjustments of the
Inflation-Adjusted Securities held in its portfolio. An investment in
Inflation-Adjusted Treasury may therefore be a means to avoid the cash flow
mismatch associated with a direct investment in Inflation-Adjusted Securities.
For more information about taxes and their effect on you as an investor in the
Fund, see "Taxes," on page 32.
U.S GOVERNMENT AGENCIES
A number of U.S. government agencies and government-sponsored organizations
may issue Inflation-Adjusted Securities. As of the date on which this Prospectus
was drafted, the plans of the various U.S. government agencies to issue
Inflation-Adjusted Securities were not known. It is expected that at least some
U.S. government agencies will issue Inflation-Adjusted Securities whose design
mirrors that of the Treasury Inflation-Adjusted Securities described on the
previous page.
DEVELOPMENT OF INFLATION-ADJUSTED SECURITIES MARKET
The Treasury securities market is the largest and most liquid securities
market in the world. The marketability of Treasury Inflation-Adjusted Securities
and Inflation-Adjusted Securities generally may be enhanced over time as the
Treasury issues additional Treasury Inflation-Adjusted Securities and more
investors participate in the market.
Inflation-Adjusted Treasury will purchase Inflation- Adjusted Securities at
auction or in the secondary market as the Manager deems appropriate. The
secondary market for Inflation-Adjusted Securities may not be as active as the
secondary market for Treasury and U.S. government agency fixed-principal notes
and bonds. In addition, Inflation-Adjusted Securities may not be as widely
traded or as well understood as Treasury fixed-principal securities, nor is it
known at this time exactly how the secondary market for Inflation-Adjusted
Securities will develop.
If the number of Inflation-Adjusted Securities market participants is
limited, it may result in larger spreads between bid and asked prices for
Inflation-Adjusted Securities than the bid-asked spreads for fixed-principal
notes and bonds with similar terms to maturity. Such larger bid-ask spreads
normally result in higher transactions costs and/or lower returns. If the market
does not develop sufficient liquidity, large buyers or sellers of these
securities may disproportionately negatively impact the value of the securities
and, hence, Inflation-Adjusted Treasury's net asset value.
Prospectus Information Regarding the Funds 21
The Manager currently believes that the market for Inflation-Adjusted
Securities will be sufficient to permit Inflation-Adjusted Treasury to pursue
its investment objective. However, should the market for Inflation-Adjusted
Securities prove less active than anticipated by the Manager, the Manager is
authorized to treat such an environment as an abnormal market condition. During
such a period, Inflation-Adjusted Treasury will not be fully pursuing its
investment objective.
SHARE PRICE VOLATILITY
Inflation-Adjusted Securities are designed to offer a return linked to
inflation, thereby protecting future purchasing power of the money invested in
them. Inflation-Adjusted Securities provide this "protected" return only if held
to maturity, however. In addition, Inflation-Adjusted Securities may not trade
at par value. "Real" interest rates (the market rate of interest less the
anticipated rate of inflation) change over time, as a result of many factors,
such as what investors are demanding as a true value for money. When real rates
do change, Inflation-Adjusted Securities prices will be more sensitive to these
changes than conventional bonds, since these securities were sold originally
based upon a "real" interest rate that is no longer prevailing. Should market
expectations for real interest rates rise, the price of Inflation-Adjusted
Securities and the share price of Inflation-Adjusted Treasury will fall.
Investors in the Fund should be prepared to accept not only this share price
volatility but also the possible adverse tax consequences it may cause.
An investment in securities featuring inflation-adjusted principal and/or
interest involves factors not associated with more traditional fixed principal
securities. Such factors include the possibility that the inflation index may be
subject to significant changes in interest rates, that changes in the index may
or may not correlate to changes in interest rates generally or changes in other
indices, that the resulting interest may be greater or less than that payable on
other securities of similar maturities. In the event of sustained deflation, it
is possible that the amount of semiannual interest payments, the
inflation-adjusted principal of the security and the value of the stripped
components, will decrease. If any of these possibilities are realized,
Inflation-Adjusted Treasury's net asset value could be negatively affected.
REPURCHASE AGREEMENTS
Each Fund, with the exception of Capital Preservation and Government
Agency, may invest in repurchase agreements when such transactions present an
attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of that Fund.
A repurchase agreement occurs when, at the time the Fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the Fund's money is
invested in the security.
Since the security purchase constitutes collateral for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The Fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
Fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the Fund could experience a loss.
Each of the Funds, with the exception of Capital Preservation and
Government Agency, may invest in repurchase agreements with respect to any
security in which that Fund is authorized to invest, even if the remaining
maturity of the underlying security would make that security ineligible for
purchase by such Fund.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information regarding the investment practices of any of the
Funds, see the Statement of Additional Information.
PORTFOLIO TURNOVER
The portfolio turnover rates of the U.S. Treasury Funds and the Mortgage
Securities Funds are shown in the Financial Highlights tables on pages 6-14 of
this Prospectus.
22 Information Regarding the Funds American Century Investments
Investment decisions to purchase and sell secu-rities are based on the
anticipated contribution of the security in question to a particular Fund's
objectives. The Manager believes that the rate of portfolio turnover is
irrelevant when it determines a change is in order to achieve those objectives
and, accordingly, the annual portfolio turnover rate cannot be accurately
anticipated.
The portfolio turnover of each Fund may be higher than other mutual funds
with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the Funds
pay directly. Portfolio turnover may also affect the character of capital gains,
if any, realized and distributed by a Fund since short-term capital gains are
taxable as ordinary income.
WHEN-ISSUED AND FORWARD COMMITMENT
AGREEMENTS
Each of the Funds may purchase new issues of securities on a when-issued or
forward commitment basis when, in the opinion of the Manager, such purchases
will further the investment objectives of the Fund. The price of when-issued
securities is established at the time the commitment to purchase is made.
Delivery of and payment for these securities typically occurs 15 to 45 days
after the commitment to purchase. Market rates of interest on debt securities at
the time of delivery may be higher or lower than those contracted for on the
security. Accordingly, the value of each security may decline prior to delivery,
which could result in a loss to the Fund.
CASH MANAGEMENT
For cash management purposes, each of the Funds (except the Money Market
Funds) may invest in any money market fund advised by the Manager, provided that
the investment is consistent with the Fund's investment policies and
restrictions.
Up to 5% of the Funds' total assets may be invested in this manner.
OTHER TECHNIQUES
The Manager may buy other types of securities or employ other portfolio
management techniques on behalf of the Funds. When SEC guidelines require it to
do so, a Fund will set aside cash or appropriate liquid assets in a segregated
account to cover the Fund's obligations.
PERFORMANCE ADVERTISING
From time to time, the Funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return, yield,
effective yield and tax-equivalent yield (for tax-exempt funds).
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period
expressed as a percentage of the fund's share price. In the case of the Money
Market Funds, yield is calculated by measuring the income generated by an
investment in the Fund over a seven-day period (net of Fund expenses). This
income is then annualized, that is, the amount of income generated by the
investment over the seven-day period is assumed to be generated over each
similar period each week throughout a full year and is shown as a percentage of
the investment. The effective yield is calculated in a similar manner but, when
annualized, the income earned by the investment is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect on the assumed reinvestment.
With respect to the U.S. Treasury Funds and the Mortgage Securities Funds,
yield is calculated by adding over a 30-day (or one-month) period all interest
and dividend income (net of fund expenses) calculated on each day's market
values, dividing this sum by the average number of fund shares outstanding
during the period, and expressing the result as a percentage of the fund's share
price on the last day of the 30-day (or one month) period. The percentage is
then annualized. Capital gains and losses are not included in the calculation.
The effective yield is calculated in a
Prospectus Information Regarding the Funds 23
similar manner but, when annualized, the income earned by the investment is
assumed to be reinvested. The effective yield will be slightly higher than the
yield because of the compounding effect on the assumed reinvestment.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules. Because yield accounting methods differ from the
methods used for other accounting purposes, a Fund's yield may not equal the
income paid on its shares or the income reported in the Fund's financial
statements.
A tax-equivalent yield demonstrates the taxable yield necessary to produce
after-tax yield equivalent to that of a mutual fund which invests in exempt
obligations. Each Fund (with the exception of Capital Preservation II, the ARM
Fund and the GNMA Fund) may quote tax-equivalent yield, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yield. As a prospective investor in these Funds, you should determine whether
your tax-equivalent yield is likely to be higher with a taxable or with a
tax-exempt fund. To determine this, you may use the formulas depicted below.
You can calculate your tax-equivalent yield for a Fund (taking into account
only federal income taxes and not any applicable state taxes) using the
following equation:
Fund's State Tax-Free Yield Your Tax-
--------------------------- = -----------------
100% - State Tax Rate Equivalent Yield
The Funds may also include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services or IBC's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, Fund performance may be compared to well-known indices of market
performance including the IBC's Money Fund Average and Bank Rate Monitor
National Index of 21/2-year CD rates. Fund performance may also be compared, on
a relative basis, to the other funds in our fund family. This relative
comparison, which may be based upon historical or expected fund performance,
volatility or other fund characteristics, may be presented numerically,
graphically or in text. Fund performance may also be combined or blended with
other funds in our fund family, and that combined or blended performance may be
compared to the same indices to which individual funds may be compared.
All performance information advertised by the Funds is historical in nature
and is not intended to represent or guarantee future results. The value of Fund
shares when redeemed may be more or less than their original cost.
24 Prospectus Information Regarding the Funds
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The Funds offered by this Prospectus are a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-2021 for a brochure or prospectuses for the other funds in the
American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing Fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 30.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You must also certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.
The minimum investment is $2,500 ($1,000 for IRA accounts).
The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on our retirement plans, which are available for individual
investors or for those investing through their employers.
Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants) you must provide us with specific authorization on your
application in order for us to accept written or telephone instructions from a
single owner. Otherwise, all owners will have to agree to any transactions that
involve the account (whether the transaction request is in writing or over the
telephone).
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see "Bank to Bank Information" below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION
(BBI or Free Form Text):
o Taxpayer identification or Social Security number
o If more than one account, account numbers and amount to be invested in
each account.
o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA, SARSEP-IRA, SIMPLE Employer or SIMPLE
Employee.
BY EXCHANGE
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information
on opening an account by exchanging from another American Century account.
Prospectus How to Invest with American Century Investments 25
See page 26 for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of
our Investor Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
4917 Town Center Drive
Leawood, Kansas 66211
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan" on this page) or by
any of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the investment slip portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.
BY MAIL
When making subsequent investments, enclose your check with the investment
slip portion of the confirmation of a previous statement or confirmation. If the
investment slip is not available, indicate your name, address and account number
on your check or a separate piece of paper. (Please be aware that the investment
minimum for subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw on
your bank account. You may call an Investor Services Representative or use our
Automated Information Line.
BY ONLINE ACCESS
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 25 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investor
Centers. The locations of our four Investor Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
HOW TO EXCHANGE FROM ONE
ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange
your Fund shares to our other funds up to six times per year per account. An
exchange request will be processed the same day it is received if it is received
before the funds' net asset values are calculated, which is one hour prior to
the close of the New York Stock Exchange for the funds issued by American
Century Target Maturities Trust, and at the close of the Exchange for all of our
other funds. See "When Share Price is Determined," page 31.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
26 How to Invest with American Century Investments American Century Investments
BY TELEPHONE
You can make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line--see page 28) if you have
authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to get the appropriate form.
BY ONLINE ACCESS
You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-2021 to get the
appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received.
Please note that a request to redeem shares in an IRA or 403(b) plan must
be accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a
redemption form, which we will send to you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 28.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Investor Services Representative.
BY CHECK-A-MONTH
If you have at least a $10,000 balance in your U.S. Treasury Fund or
Mortgage Securities Fund account, or if you have a Money Market Fund account,
you may redeem shares by Check-A-Month. A Check-A-Month plan automatically
redeems enough shares each month to provide you with a check in an amount you
choose (minimum $50). To set up a Check-A-Month plan, please call and request
our Check-A-Month brochure.
OTHER AUTOMATIC REDEMPTIONS
If you have at least a $10,000 balance in your U.S. Treasury Fund or
Mortgage Securities Fund account, or if you have a Money Market Fund account,
you may elect to make redemptions automatically by authorizing us to send funds
directly to you or to your account at a bank or other financial institution. To
set up automatic redemptions, call one of our Investor Services Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank wire charges, which is
deducted from redemption proceeds. Once the funds are transmitted, the time of
receipt and the funds' availability are not under our control.
REDEMPTION OF SHARES IN
LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity to bring
the value of the shares held in the account up to the minimum. If action is not
taken within 90 days of the letter's date,
Prospectus How to Invest with American Century Investments 27
the shares held in the account will be redeemed and proceeds from the redemption
will be sent by check to your address of record. We reserve the right to
increase the investment minimums.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee will
depend on which service options you elect when you open your account. For
example, if you choose "In Writing Only," a signature guarantee will be required
when:
o redeeming more than $25,000; or
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You may obtain a signature guarantee from a bank or trust company, credit
union, broker-dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction,
or to change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these options
and elect the ones that are appropriate for you. Be aware that the "Full
Services" option offers you the most flexibility. You will find more information
about each of these service options in our Investor Services Guide.
Our special investor services include:
AUTOMATED INFORMATION LINE
We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. If you have authorized us to accept telephone instructions, you
also may exchange shares from one fund to another via the Automated Information
Line. Redemption instructions cannot be given via the Automated Information
Line.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week at
www.americancentury.com to access your funds' daily share prices, receive
updates on major market indexes and view historical performance of your funds.
If you select "Full Services" on your application, you can use your personal
access code and Social Security number to view your account balances and account
activity, make subsequent investments from your bank account or exchange shares
from one fund to another.
CHECKWRITING
We offer CheckWriting as a service option for your account in any of the
Money Market or Mortgage Securities Funds. CheckWriting allows you to redeem
shares in your account by writing a draft ("check") against your account
balance. (Shares held in certificate form may not be redeemed by check.) There
is no limit on the number of checks you can write, but each one must be for at
least $100.
When you write a check, you will continue to receive dividends on all
shares until your check is presented for payment to our clearing bank. If you
redeem all shares in your account by check, any accrued distributions on the
redeemed shares will be paid to you in cash on the next monthly distribution
date.
If you want to add CheckWriting to an existing account that offers
CheckWriting, contact us by telephone or mail for an appropriate form. For a new
account, you may elect CheckWriting on your purchase application by choosing the
"Full Services" option. CheckWriting is not available for any account held in an
IRA or 403(b) plan.
CheckWriting redemptions may only be made on checks provided by us.
Currently, there is no charge for checks or for the CheckWriting service.
We will return checks drawn on insufficient funds or on funds from
investments made by means other than by wire within the previous 15 days.
Neither the company nor our clearing bank will be liable for any
28 How to Invest with American Century Investments American Century Investments
loss or expenses associated with returned checks. Your account may be assessed a
$15 service charge for checks drawn on insufficient funds.
A stop payment may be ordered on a check written against your account. We
will use reasonable efforts to stop a payment, but we cannot guarantee that we
will be able to do so. If we are successful in fulfilling a stop-payment order,
your account may be assessed a $15 fee.
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.
If the fund you have selected deducts a distribution from its share price,
your order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are
accepted only by telephone or in person. These transactions are subject to
exchange limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
TAX-QUALIFIED RETIREMENT PLANS
Each Fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:
o Individual Retirement Accounts ("IRA"s);
o 403(b) plans for employees of public school systems and non-profit
organizations; or
o Profit sharing plans and pension plans for corporations and other
employers.
If your IRA and 403(b) accounts do not total $10,000, each account is
subject to an annual $10 fee, up to a total of $30 per year.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares for
a period of time, or to reject any specific purchase order (including
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the Manager, they are of a size that would disrupt the
management of the Fund.
(2) We reserve the right to make changes to any stated investment
requirements, including those that relate to purchases, transfers and
redemptions. In addition, we may also alter, add to or terminate any
investor services and privileges. Any changes may affect all shareholders
or only certain series or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open orders,
will be refused. Once you have mailed or otherwise transmitted your
transaction instructions to us, they may not be modified or canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These
procedures are designed to protect share-holders from unauthorized or
fraudulent instructions. If we do not employ reasonable procedures to con-
Prospectus How to Invest with American Century Invetments 29
firm the genuineness of instructions, then we may be liable for losses due
to unauthorized or fraudulent instructions. The company, its transfer
agent and investment advisor will not be responsible for any loss due to
instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an increase
in the number of shareholder telephone calls. If you experience difficulty
in reaching us during such periods, you may send your transaction
instructions by mail, express mail or courier service, or you may visit
one of our Investor Centers. You may also use our Automated Information
Line if you have requested and received an access code and are not
attempting to redeem shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may request a statement of your account activity
at any time.
With the exception of most automatic transactions and transactions by
CheckWriting, each time you invest, redeem, transfer or exchange shares, we will
send you a confirmation of the transactions. Transactions initiated by
CheckWriting will be confirmed on a monthly basis. See the Investor Services
Guide for more detail.
Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.
No later than January 31st of each year, we will send you reports that you
may use in completing your U.S. income tax return. See the Investor Services
Guide for more information.
Each year, we will send you an annual and a semiannual report relating to
your fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.
EMPLOYER-SPONSORED RETIREMENT PLANS AND
INSTITUTIONAL ACCOUNTS
Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.
If you own or are considering purchasing Fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the
Funds, exchange them for shares of other American Century funds, and redeem them
will depend on the terms of your plan.
If you own or are considering purchasing Fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.
30 How to Invest with American Century Investments American Century Investments
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a Fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds except funds issued by American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. Net asset values for Target Maturities funds are determined
one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after receipt by us of the investment or redemption
or exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the time as of which
the net asset value of the fund is determined, are effective on, and will
receive the price determined, that day. Investment, redemption and exchange
requests received thereafter are effective on, and receive the price determined
as of the close of the Exchange on the next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which the net asset value of
the funds is determined.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value is determined will
receive that day's price. Investments and instructions received after that time
will receive the price determined on the next business day.
If you invest in Fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the Funds' transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the Funds' procedures or any contractual arrangement with the
Funds or the Funds' distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
Portfolio securities of each Fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. Depending on local convention
or regulation, securities traded over-the-counter are priced at the mean of the
latest bid and asked prices, or at the last sale price. When market quotations
are not readily available, securities and other assets are valued at fair value
as determined in accordance with procedures adopted by the Board of
Directors/Trustees.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors/Trustees.
Pursuant to a determination by the Money Market Funds' Board of
Directors/Trustees and Rule 2a-7 under the Investment Company Act of 1940 (the
"Invest-ment Company Act"), portfolio securities of the Funds are valued at
amortized cost. When a security is valued at amortized cost, it is valued at its
cost when purchased, and thereafter by assuming a constant amortization to
maturity of any discount or pre-
Prospectus Additional Information You Sould Know 31
mium, regardless of the impact of fluctuating interest rates on the market value
of the instrument.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the Funds are published in leading newspapers
daily. The yields of the Money Market Funds are published weekly in leading
financial publications and daily in many local newspapers. The net asset values,
as well as yield information on the Funds and the other funds in the American
Century family of funds, may also be obtained by calling us or by accessing our
Web site at www.americancentury.com.
DISTRIBUTIONS
At the close of each day including Saturdays, Sundays and holidays, net
income of the U.S. Treasury Funds and the Mortgage Securities Funds is
determined and declared as a distribution. The distribution will be paid monthly
on the last Friday of each month, except for year-end distributions which will
be made on the last business day of the year. For the Money Market Funds,
dividends are declared and credited (i.e., available for redemption) daily and
distributed monthly on the last Friday of each month.
You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price is Determined," page 31. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed (other than by CheckWriting), the
distribution on the redeemed shares will be included with your redemption
proceeds.
Distributions from net realized capital gains in the Variable Price Funds,
if any, generally are declared and paid once a year, but the Funds may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code, in all events in a manner consistent
with the provisions of the Investment Company Act. The Money Market Funds do not
expect to realize any long-term capital gains and, accordingly, do not expect to
make any capital gains distributions.
Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.
A distribution from shares of a U.S. Treasury or Mortgage Securities Fund
does not increase the value of your shares or your total return. At any given
time the value of your shares includes the undistributed net gains, if any,
realized by the Fund on the sale of portfolio securities, and undistributed
dividends and interest received, less Fund expenses.
Because such gains and dividends are included in the value of your shares,
when they are distributed the value of your shares is reduced by the amount of
the distribution. If you buy your shares through a taxable account just before
the distribution, you will pay the full price for your shares, and then receive
a portion of the purchase price back as a taxable distribution.
TAXES
Each Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code, which means that to the extent its
income is distributed to shareholders, it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If Fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the Funds will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
32 Additional Information You Should Know American Century Investments
TAXABLE ACCOUNTS
If Fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income of the
Funds do not qualify for the 70% dividends-received deduction for corporations
since they are derived from interest income. Dividends representing income
derived from tax-exempt bonds generally retain the bonds' tax-exempt character
in a shareholder's hands. Distributions from net long-term capital gains are
taxable as long-term capital gains regardless of the length of time you have
held the shares on which such distributions are paid. However, you should note
that any loss realized upon the sale or redemption of shares held for six months
or less will be treated as a long-term capital loss to the extent of any
distribution of long-term capital gain to you with respect to such shares.
Inflation-Adjusted Securities purchased by Inflation-Adjusted Treasury
accrue additional interest for federal income tax purposes in addition to the
current interest paid. This additional interest is commonly referred to as
"imputed income." Inflation-Adjusted Treasury must distribute this imputed
income to shareholders as ordinary income dividends, which are subject to
federal taxes but generally exempt from state taxes. In periods of high
inflation, it is possible that the imputed income earned by Inflation-Adjusted
Treasury will exceed current interest earned.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a capital gain distribution, you must pay income
taxes on the distribution, even though the value of your investment (plus cash
received, if any) will not have increased. In addition, the share price at the
time you purchase shares may include unrealized gains in the securities held in
the investment portfolio of the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a distribution of capital gains and
will be taxable to you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distribution are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to Fund shareholders when a Fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code, we are required by federal law to withhold and remit to the IRS 31% of
reportable payments (which may include dividends, capital gains distributions
and redemptions). Those regulations require you to certify that the Social
Security number or tax identification number you provide is correct and that you
are not subject to 31% withholding for previous under-reporting to the IRS. You
will be asked to make the appropriate certification on your application.
Payments reported by us that omit your Social Security number or tax
identification number will subject us to a penalty of $50, which will be charged
against your account if you fail to provide the certification by the time the
report is filed, and is not refundable.
Redemption of shares of a Fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize a gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of Fund shares, the reinvestment in additional Fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Internal Revenue Code, resulting in a postponement of the recognition of
such loss for federal income tax purposes.
Prospectus Additional Information You Should Know 33
MANAGEMENT
INVESTMENT MANAGEMENT
All of the Funds except Capital Preservation and Capital Preservation II
are series of the American Century Government Income Trust (the "Trust"). Under
the laws of the Commonwealth of Massachusetts, the Board of Trustees is
responsible for managing the business and affairs of the Trust. Acting pursuant
to an investment management agreement entered into with the Funds, American
Century Investment Management, Inc. (ACIM) serves as the investment manager of
each of the Funds except Capital Preservation and Capital Preservation II. Its
principal place of business American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. American Century Investment Management, Inc. has been
providing investment advisory services to investment companies and institutional
clients since it was founded in 1958.
American Century Capital Preservation Fund, Inc. and American Century
Capital Preservation Fund II, Inc. are the assumed names of Capital Preservation
Fund, Inc. and Capital Preservation Fund II, Inc., respectively (the
"Companies") and are both California corporations. Capital Preservation is the
sole series of American Century Capital Preservation Fund, Inc., and Capital
Preservation II is the sole series of American Century Capital Preservation Fund
II, Inc. Under the laws of the State of California, the Board of Directors is
responsible for managing the business and affairs of the Companies. The Board of
Directors of the Companies is identical in composition to the Board of Trustees
of the Trust.
Acting pursuant to an investment advisory agreement entered into with
Capital Preservation and Capital Preservation II, Benham Management Corporation
serves as the investment advisor of Capital Preservation and Capital
Preservation II. Its principal place of business is 1665 Charleston Road,
Mountain View, California 94043. Benham Management Corporation has been
providing investment advisory services to investment companies and other clients
since it was founded in 1971 as is wholly-owned by American Century Companies,
Inc., the parent company of American Century Investment Management, Inc.
The Manager supervises and manages the investment portfolio of each Fund
and directs the purchase and sale of their investment securities. It utilizes a
team of portfolio managers, assistant portfolio managers and analysts acting
together to manage the assets of the Funds. The team meets regularly to review
portfolio holdings and to discuss purchase and sale activity. The team adjusts
holdings in the Funds' portfolios as it deems appropriate in pursuit of the
Funds' investment objectives. Individual portfolio manager members of the team
may also adjust portfolio holdings of the Funds or of sectors of the Funds as
necessary between team meetings.
The portfolio manager members of the teams managing the Funds described in
this Prospectus and their work experience for the last five years are listed as
follows:
ROBERT V. GAHAGAN has been primarily responsible for the day-to-day
operations of Short-Term Treasury since March, 1996. He is a Vice President and
Portfolio Manager. Mr. Gahagan has a B.A. and M.B.A. from the University of
Missouri in Kansas City and has over 12 years of investment experience. He
joined American Century in 1983.
BRIAN HOWELL has been primarily responsible for the management of Capital
Preservation and Government Agency since May, 1995. Mr. Howell joined the
Manager in 1987 as a research analyst and was promoted to his current position
in January 1994.
DENISE TABACCO has been primarily responsible for the day-to-day operations
of Capital Preservation II since June, 1995, and has co-managed both Capital
Preservation and Government Agency since January, 1996. Ms. Tabacco joined the
Manager in 1988, the Portfolio Department in 1991 and was promoted to her
current position in 1995.
DAVID SCHROEDER joined the Manager in 1990 and has been primarily
responsible for the day-to-day operations of Intermediate-Term Treasury since
January, 1992, and Long-Term Treasury since September, 1992. Mr. Schroeder has
co-managed the GNMA Fund since January, 1996.
CASEY COLTON has co-managed the GNMA Fund since January, 1994, and
Intermediate-Term Treasury, and Long-Term Treasury since January, 1996. Mr.
Colton joined the Manager in 1990 as a Municipal Analyst and was promoted to his
current position in
34 Additional Information You Should Know American Century Investments
1995. Mr. Colton is a Chartered Financial Analyst (CFA).
NEWLIN RANKIN has been primarily responsible for the day-to-day operations
of the ARM Fund since January, 1995, and has co-managed Short-Term Treasury
since March, 1996. Mr. Rankin joined the Manager in 1994 and prior to that was
Assistant Vice-President at Wells Fargo Bank from 1991 to 1993.
The activities of American Century Investment Management, Inc. are subject
only to directions of the Trust's Board of Trustees. The activities of Benham
Management Corporation are subject only to directions of the Company's Board of
Directors. American Century Investment Management, Inc. pays all the expenses of
the Trust's Funds except brokerage, taxes, portfolio insurance, interest, fees
and expense of the non-interested person directors (including counsel fees) and
extraordinary expenses. See "Expenses" for information about the expenses paid
by Capital Preservation and Capital Preservation II.
For the services provided to each Fund of the Trust, American Century
Investment Management, Inc. receives a monthly fee based on a percentage of the
average net assets of the Fund. The annual rate at which this fee is assessed is
determined monthly in a two-step process: First, a fee rate schedule is applied
to the assets of all of the funds of its investment category managed by the
Manager (the "Investment Category Fee"). For example, when calculating the fee
for a Money Market Fund, all of the assets of the money market funds managed by
the Manager are aggregated. The three investment categories are: Money Market
Funds, Bond Funds and Equity Funds. Second, a separate fee rate schedule is
applied to the assets of all of the funds managed by the Manager (the "Complex
Fee"). The Investment Category Fee and the Complex Fee are then added to
determine the unified management fee payable by the Fund to the Manager.
Currently, the Investment Category Fee for each of the Trust's Funds is an
annual rate of the average net assets of the Fund as follows: Government Agency,
0.18%; Short-Term Treasury, Intermediate-Term Treasury and Long-Term Treasury,
0.22%; Inflation-Adjusted Treasury, 0.20%; and ARM Fund and GNMA Fund, 0.30%.
The Complex Fee is currently an annual rate of 0.30% of the average net assets
of each of the Trust's Funds. Further information about the calculation of the
annual management fee is contained in the Statement of Additional Information.
For the services provided to Capital Preservation and Capital Preservation
II by Benham Management Corporation, each pay Benham Management Corporation a
monthly investment advisory fee equal to the dollar amount derived from applying
the Fund's average daily net assets to an investment advisory fee schedule. The
investment advisory fee rate ranges from 0.50% to 0.19% of average daily net
assets dropping as the Funds' respective assets increase.
On the first business day of each month, the Funds pay a management fee
(advisory fee in the case of Capital Preservation and Capital Preservation II)
to its Manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for a Fund by the
aggregate average daily closing value of a Fund's net assets during the previous
month by a fraction, the numerator of which is the number of days in the
previous month and the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The Funds and the Manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the Manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the Funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of the Fund
shareholders come before the interests of the people who manage those Funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend-paying agent for the Funds.
It provides facilities, equipment and personnel to the Funds. For administrative
services, Capital Preservation and Capital Preservation II each pay the transfer
agent a monthly fee equal to its pro rata share of the dollar amount derived
from applying the aver-
Prospectus Additional Information You Should Know 35
age daily net assets of all of the Funds managed by Benham Management
Corporation. The administrative fee rate ranges from 0.11% to 0.08% of average
daily net assets, dropping as assets managed by the Benham Management
Corporation increase. For transfer agent services, Capital Preservation and
Capital Preservation II each pay the transfer agent a monthly fee for each
shareholder account maintained and for each shareholder transaction executed
during that month. With respect to administrative services and transfer agent
services to the Funds of the Trust, American Century Services Corporation is
paid for such services by American Century Investment Management, Inc.
The Funds charge no sales commissions, or "loads," of any kind. However,
investors who do not choose to purchase or sell Fund shares directly from the
transfer agent may purchase or sell Fund shares through registered
broker-dealers and other qualified service providers, who may charge investors
fees for their services. These broker-dealers and service providers generally
provide shareholder, administrative and/or accounting services which would
otherwise be provided by the transfer agent. To accommodate these investors, the
Manager and its affiliates have entered into agreements with some broker-dealers
and service providers to provide these services. Fees for such services are
borne normally by the Funds at the rates normally paid to the transfer agent,
which would otherwise provide the services. Any distribution expenses associated
with these arrangements are borne by the Manager.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the Manager
or its affiliates.
The Manager and the transfer agent are both wholly owned by ACC. James E.
Stowers Jr., Chairman of the Board of Directors of ACC, controls ACC by virtue
of his ownership of a majority of its common stock.
Special Meeting of Shareholders
At a Special Meeting of Shareholders held on July 30, 1997, shareholders of
each of the Funds except Capital Preservation and Capital Preservation II
approved, among other things, a new Management Agreement between the Funds
(except Capital Preservation and Capital Preservation II) with American Century
Investment Management, Inc. This new Management Agreement will become effective
on August 1, 1997 and replaces these Funds' current investment advisory
agreement with Benham Management Corporation, an affiliate of American Century
Investment Management, Inc.
At the meeting, shareholders of the Funds (except Capital Preservation and
Capital Preservation II) also ratified the selection of Coopers & Lybrand LLP as
the independent auditors for each Fund's current fiscal year and approved the
adoption of standardized investment limitations by amending or eliminating
certain of these Funds' fundamental investment limitations. These changes are
reflected in this Prospectus Supplement and in the revised Statement of
Additional Information of the Funds (except Capital Preservation and Capital
Preservation II).
AGREEMENT AND PLAN OF REORGANIZATION
In addition, shareholders of Capital Preservation and Capital Preservation
II approved an Agreement and Plan of Reorganization with American Century-Benham
Capital Preservation Fund, a series of American Century Government Income Trust
(the "new CPF"). The new CPF is identical in investment objective and investment
management technique to Capital Preservation.
The Agreement was approved by shareholders of each of Capital Preservation
and Capital Preservation II at a Special Meeting of Shareholders held on July
30, 1997. The reorganization is expected to occur on August 30, 1997. Following
the reorganization, shareholders of Capital Preservation and Capital
Preservation II will own shares of the new CPF in the same dollar amount as
their Capital Preservation and Capital Preservation II shares at the close of
business on August 30, 1997.
DISTRIBUTION OF FUND SHARES
The Funds' shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
Manager. The Manager pays all expenses for promot-
36 Additional Information You Should Know American Century Investments
ing and distributing the Fund shares offered by this Prospectus. The Funds do
not pay any commissions or other fees to the Distributor or to any other
broker-dealers or financial intermediaries in connection with the distribution
of Fund shares.
EXPENSES
Capital Preservation and Capital Preservation II each pay certain operating
expenses directly, including, but not limited to: custodian, audit and legal
fees; fees of the independent directors; costs of printing and mailing
prospectuses, statements of additional information, proxy statements, notices
and reports to shareholders; insurance expenses; and costs of registering the
funds' shares for sale under federal and state securities laws. See the
Statement of Additional Information for a more detailed discussion of
independent Director compensation.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Capital Preservation, Inc. and American Century Capital
Preservation II, Inc. were organized as California corporations on October 28,
1971 and April 2, 1980, respectively. The American Century Government Income
Trust was organized as a Massachusetts business trust in July 24, 1985. Capital
Preservation, Capital Preservation II and the Trust are diversified, open-end
management investment companies. Their business and affairs are managed by its
officers under the direction of their respective Boards.
The principal office of the Funds is American Century Tower, 4500 Main
Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries made by
mail should be directed to the address and phone numbers on the cover, or by
phone to 1-800-345-2021 (international calls: 816-531-5575).
Capital Preservation and Capital Preservation II issue shares with no par
value. The remaining Funds are individual series of the Trust which also issues
shares with no par value. The assets belonging to each series of shares are held
separately by the custodian and in effect each series is a separate 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, in the
case of the Trust, those matters which must be voted on separately by the series
of shares affected. Matters affecting only one Fund are voted upon only by that
Fund.
Shares of the Trust have non-cumulative voting rights, which means that the
holders of more than 50% of the votes cast in an election of Trustees can elect
all of the Trustees 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 Trustees. Shares of the Companies have cumulative voting rights only to the
extent conferred upon them by California law, which gives shareholders of the
Companies the right to cumulate votes in the election (or removal) of the
Companies' respective directors.
Unless required by the 1940 Act, it will not be necessary for the Trust or
the Companies to hold annual meetings of shareholders. As a result, shareholders
may not vote each year on the election of members of their Boards or the
appointment of auditors. However, pursuant to the Trust's and the Companies'
by-laws, the holders of shares representing at least 10% of the votes entitled
to be cast may request that the Trust or the Company, as the case may be, hold a
special meeting of shareholders. The Trust or the Companies will assist in the
communication with other shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF ITS POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
THIS PROSPECTUS CONSTITUTES AN OFFER TO SELL SECURITIES OF A FUND ONLY IN
THOSE STATES WHERE THE FUND'S SHARES HAVE BEEN REGISTERED OR OTHERWISE QUALIFIED
FOR SALE. A FUND WILL NOT ACCEPT APPLICATIONS FROM PERSONS RESIDING IN STATES
WHERE THE FUND'S SHARES ARE NOT REGISTERED.
Prospectus Additional Information You Should Know 37
P.O. Box 419200
Kansas City, Missouri
64141-6200
Investor Services:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9708 [recycled logo]
SH-BKT-9245 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
August 1, 1997
BENHAM
GROUP(R)
Capital Preservation
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering stocks,
bonds, money markets, specialty investments and blended portfolios. To help you
find the funds that may meet your investment needs, American Century funds have
been divided into three groups based on investment style and objectives. These
groups, which appear below, are designed to help simplify your fund decisions.
AMERICAN CENTURY INVESTMENTS
Benham Group American Century Group Twentieth Century(R) Group
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Capital Preservation
PROSPECTUS
AUGUST 1, 1997
CAPITAL PRESERVATION
AMERICAN CENTURY GOVERNMENT INCOME TRUST
American Century Government Income Trust is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. One of the money market funds
from our Benham Group that invests in U.S. Treasury securities, the Benham
Capital Preservation Fund (the "Fund"), is described in this Prospectus. Its
investment objectives are listed on page 2 of this Prospectus. The other funds
are described in separate prospectuses.
American Century offers investors a full line of no-load funds, investments that
have no sales charges or commissions.
This Prospectus gives you information about the Fund that you should know before
investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated August 1, 1997, and filed with the Securities and Exchange
Commission ("SEC"). It is incorporated into this Prospectus by reference. To
obtain a copy without charge, call or write:
American Century Investments
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-444-3485
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
INVESTMENTS IN THE FUND ARE NOT INSURED, NOR ARE THEY GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER AGENCY. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE
TO MAINTAIN A $1.00 SHARE PRICE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUND
AMERICAN CENTURY--BENHAM CAPITAL
PRESERVATION FUND
Capital Preservation is a money market fund which seeks maximum safety and
liquidity. Its secondary objective is to seek to pay shareholders the highest
rate of return on their investment in the Fund consistent with safety and
liquidity. The Fund intends to pursue its investment objectives by investing
exclusively in short-term U.S. Treasury securities guaranteed by the direct full
faith and credit pledge of the U.S. government and maintaining a dollar-weighted
average portfolio maturity of not more than 90 days.
There is no assurance that the Fund will achieve its
investment objectives.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Investment Objectives of the Fund.....................................2
Transaction and Operating Expense Table...............................4
Financial Highlights..................................................5
INFORMATION REGARDING THE FUND
Investment Policies of the Fund.......................................6
Risk Factors and Investment Techniques................................6
U.S. Treasury Securities..........................................6
Other Investment Practices, Their Characteristics
and Risks.........................................................6
When-Issued and Forward Commitment
Agreements.....................................................6
Other Techniques..................................................7
Performance Advertising...............................................7
American Century Investments..........................................8
Investing in American Century.........................................8
How to Open an Account................................................8
By Mail..........................................................8
By Wire..........................................................8
By Exchange......................................................9
In Person........................................................9
Subsequent Investments............................................9
By Mail..........................................................9
By Telephone.....................................................9
By Online Access.................................................9
By Wire..........................................................9
In Person........................................................9
Automatic Investment Plan.........................................9
How to Exchange from One Account to Another ..........................9
By Mail ........................................................10
By Telephone....................................................10
By Online Access................................................10
How to Redeem Shares.................................................10
By Mail ........................................................10
By Telephone....................................................10
By Check-A-Month................................................10
Other Automatic Redemptions.....................................10
Redemption Proceeds..............................................10
By Check........................................................10
By Wire and ACH.................................................10
Redemption of Shares in Low-Balance Accounts.....................10
Signature Guarantee..................................................11
Special Shareholder Services.........................................11
Automated Information Line......................................11
Online Account Access...........................................11
CheckWriting....................................................11
Tax-Qualified Retirement Plans..................................12
Important Policies Regarding Your Investments........................12
Reports to Shareholders..............................................13
Employer-Sponsored Retirement Plans and
Institutional Accounts...........................................13
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price..........................................................14
When Share Price Is Determined...................................14
How Share Price Is Determined....................................14
Where to Find Yield Information..................................14
Distributions........................................................14
Taxes .............................................................15
Tax-Deferred Accounts............................................15
Taxable Accounts.................................................15
Management...........................................................15
Investment Management............................................15
Code of Ethics...................................................16
Transfer and Administrative Services.............................16
Distribution of Fund Shares..........................................17
Further Information About American Century...........................17
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Capital Preservation
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases.......................... none
Maximum Sales Load Imposed on Reinvested Dividends............... none
Deferred Sales Load.............................................. none
Redemption Fee(1)................................................ none
Exchange Fee..................................................... none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees(2).............................................. 0.48%
12b-1 Fees....................................................... none
Other Expenses(3)............................................... 0.00%
Total Fund Operating Expenses................................... 0.48%
EXAMPLE:
You would pay the following expenses on a 1 year $ 5
$1,000 investment, assuming a 5% annual return and 3 years 15
redemption at the end of each time period: 5 years 27
10 years 60
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) A portion of the management fee may be paid by American Century Investment
Management, Inc. (the "Manager") to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed by
an affiliate of the Manager. See "Management - Transfer and Administrative
Services," page 16.
(3) Other expenses, which include the fees and expenses (including legal counsel
fees) of those Trustees who are not "interested persons" as defined in the
Investment Company Act of 1940 are estimated to be 0.0038 of 1% of average net
assets for the most recent fiscal year.
The purpose of the above table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the shares of the Fund offered by this
Prospectus. The example set forth above assumes reinvestment of all dividends
and distributions and uses a 5% annual rate of return as required by SEC
regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED
INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CAPITAL PRESERVATION
The Financial Highlights for each of the periods presented have been audited by
KPMG Peat Marwick LLP, independent auditors whose report thereon appears in the
Fund's annual report, which is incorporated by reference into the Statement of
Additional Information. The semiannual and annual reports contain additional
performance information and will be made available upon request and without
charge. The information presented is for a share outstanding throughout the
years ended March 31, except as noted.
1997 1996 1995 1994 1993(1) 1992 1991 1990 1989 1988
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income From Investment Operations
Net Investment Income ........... 0.05 0.05 0.04 0.03 0.01 0.04 0.06 0.07 0.08 0.06
Distributions
From Net Investment Income....... (0.05) (0.05) (0.04) (0.03) (0.01) (0.04) (0.06) (0.07) (0.08) (0.06)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN(2).................. 4.82% 5.21% 4.31% 2.63% 1.35% 3.88% 6.27% 7.77% 8.27% 6.30%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(3)......... 0.49% 0.51% 0.50% 0.51% 0.50%(4) 0.51% 0.52% 0.56% 0.57% 0.59%
Ratio of Net Investment Income
to Average Net Assets(3)......... 4.66% 5.07% 4.24% 2.59% 2.68%(4) 3.82% 6.03% 7.50% 8.00% 6.08%
Net Assets, End
of Period (in millions)..........$2,978 $3,078 $2,883 $2,787 $2,943 $3,046 $3,376 $3,099 $2,737 $2,187
(1) The Fund's fiscal year-end was changed from September 30 to March 31
beginning with the period ended March 31, 1993, resulting in a six-month period
in 1993.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any, and are not annualized.
(3) The ratios for the periods subsequent to March 31, 1995 include expenses paid through expense offset arrangements.
(4) Annualized.
</TABLE>
Prospectus Financial Highlights 5
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
The Fund has adopted certain investment restrictions that are set forth in the
Statement of Additional Information. Those restrictions, as well as the
investment objectives of the Fund identified on page 2 of this Prospectus and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The Fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objectives. These policies and practices, which are described throughout this
Prospectus, are not designated as fundamental policies and may be changed
without shareholder approval.
The Fund seeks to maintain a $1.00 share price, although there is no guarantee
it will be able to do so. Shares of the Fund are neither insured nor guaranteed
by the U.S. government.
The Fund seeks maximum safety and liquidity. Its secondary objective is to seek
to pay its shareholders the highest rate of return on their investment in the
Fund consistent with safety and liquidity. The Fund pursues its investment
objectives by investing exclusively in short-term U.S. Treasury securities
guaranteed by the direct full faith and credit pledge of the U.S. government.
The Fund's dollar-weighted average portfolio maturity will not exceed 90 days.
While the risks associated with investing in short-term U.S. Treasury securities
are very low, an investment in the Fund is not risk-free.
RISK FACTORS AND INVESTMENT TECHNIQUES
The obligations in which the Fund may invest differ from one another in their
interest rates, maturities, dates of issuance and interest payment schedules.
The pertinent features of the types of obligations in which the Fund may invest
are described in this section.
U.S. TREASURY SECURITIES
U.S. Treasury bills, notes, zero-coupon bonds, and other bonds are direct
obligations of the U.S. Treasury, which has never failed to pay interest and
repay principal when due. Treasury bills have initial maturities of one year or
less, Treasury notes from two to ten years, and Treasury bonds more than 10
years. Although U.S. Treasury securities carry little principal risk if held to
maturity, the prices of these securities (like all debt securities) change
between issuance and maturity in response to fluctuating market interest rates.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information regarding the investment practices of the Fund, see
the Statement of Additional Information.
WHEN-ISSUED AND FORWARD COMMITMENT AGREEMENTS
The Fund may sometimes purchase new issues of securities on a when-issued or
forward commitment basis when, in the opinion of American Century Investment
Management Inc. (the "Manager") such purchases will further the investment
objectives of the Fund. The price of when-issued securities is established at
the time the commitment to purchase is made. Delivery of and payment for these
securities typically occurs 3 to 10 days after the commitment to purchase.
Market rates of interest on debt securities at the time of delivery may be
higher or lower than those contracted for on the security. Accordingly, the
value of the security may decline prior to delivery, which could result in a
loss to the Fund. A separate account for the Fund consisting of cash or
appropriate liquid securities in an amount at least equal to the when-issued
commitments will be established and maintained with the custodian. No income
will accrue to the Fund prior to delivery.
6 Information Regarding the Fund American Century Investments
OTHER TECHNIQUES
The Manager may buy other types of securities or employ other portfolio
management techniques on behalf of the Fund. When SEC guidelines require it to
do so, the Fund will set aside cash or appropriate liquid assets in a segregated
account to cover the Fund's obligations.
PERFORMANCE ADVERTISING
From time to time, the Fund may advertise performance data. Fund performance may
be shown by presenting one or more performance measurements, including yield and
effective yield.
A quotation of yield reflects the Fund's income over a stated period expressed
as a percentage of its share price. Yield is calculated by measuring the income
generated by an investment in the Fund over a seven-day period (net of Fund
expenses). This income is then annualized, that is, the amount of income
generated by the investment over the seven-day period is assumed to be generated
over each similar period each week throughout a full year and is shown as a
percentage of the investment. The effective yield is calculated in a similar
manner but, when annualized, the income earned by the investment is assumed to
be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect on the assumed reinvestment.
Yields are calculated according to accounting methods that are standardized in
accordance with SEC rules. The SEC yield should be regarded as an estimate of
the Fund's rate of investment income, and it may not equal the Fund's actual
income distribution rate, the income paid to a shareholder's account, or the
income reported in the Fund's financial statements.
The Fund may also include in advertisements data comparing performance with the
performance of non-related investment media, published editorial comments and
performance rankings compiled by independent organizations (such as Lipper
Analytical Services or IBC's Money Fund Report) and publications that monitor
the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, Fund performance may be compared to well-known indices of market
performance including the IBC's Money Fund Average and Bank Rate Monitor
National Index of 2 1/2-year CD rates. Fund performance may also be compared, on
a relative basis, to other funds in our fund family. This relative comparison,
which may be based upon historical or expected fund performance, volatility or
other fund characteristics, may be presented numerically, graphically or in
text. Fund performance may also be combined or blended with other funds in our
fund family, and that combined or blended performance may be compared to the
same indices to which individual funds may be compared.
All performance information advertised by the Fund is historical in nature and
is not intended to represent or guarantee future results. The value of Fund
shares when redeemed may be more or less than their original cost.
Prospectus Information Regarding the Fund 7
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The Fund offered by this Prospectus is a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-2021 for a brochure or prospectuses for the other funds in the
American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing Fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 13.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing your
taxpayer identification number. (You must also certify whether you are subject
to withholding for failing to report income to the IRS.) Investments received
without a certified taxpayer identification number will be returned.
The minimum investment is $2,500 ($1,000 for IRA accounts).
The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on our retirement plans, which are available for individual
investors or for those investing through their employers.
Please note: If you register your account as belonging to multiple owners (e.g.,
as joint tenants) you must provide us with specific authorization on your
application in order for us to accept written or telephone instructions from a
single owner. Otherwise, all owners will have to agree to any transactions that
involve the account (whether the transaction request is in writing or over the
telephone).
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S. dollars to
American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or mail
a completed application and provide your bank with the following information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see "Bank to Bank Information" below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
o Taxpayer identification or Social Security number
o If more than one account, account numbers and amount to be invested in each
account.
8 How to Invest with American Century Investments American Century Investments
o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA, SARSEP-IRA, SIMPLE Employer or SIMPLE
Employee.
BY EXCHANGE
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information on
opening an account by exchanging from another American Century account. See this
page for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of our
Investor Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
4917 Town Center Drive
Leawood, Kansas 66211
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or government
direct deposit (see "Automatic Investment Plan" on this page) or by any of the
methods below. The minimum investment requirement for subsequent investments:
$250 for checks submitted without the investment slip portion of a previous
statement or confirmation, $50 for all other types of subsequent investments.
BY MAIL
When making subsequent investments, enclose your check with the investment slip
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account. You may call an Investor Services Representative or use our
Automated Information Line.
BY ONLINE ACCESS
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 8 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investor Centers.
The locations of our four Investor Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange your
Fund shares to our other funds. An exchange request will be processed the same
day it is received if it is received before the funds' net asset values are
calculated, which is one hour prior to the close of the New York Stock Exchange
for the funds in American Century Target Maturities Trust, and at the close of
the Exchange for all of our other funds. See "When Share Price is Determined,"
page 14.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
Prospectus How to Invest with American Century Investments 9
BY MAIL
You may direct us in writing to exchange your shares from one American Century
account to another. For additional information, please see our Investor Services
Guide.
BY TELEPHONE
You can make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line--see page 11) if you have
authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to get the appropriate form.
BY ONLINE ACCESS
You can make exchanges online if you have authorized us to accept instructions
over the Internet. You can authorize this by selecting "Full Services" on your
application or by calling us at 1-800-345-2021 to get the appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be made
at the next net asset value determined after a complete redemption request is
received.
Please note that a request to redeem shares in an IRA or 403(b) plan must be
accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a redemption
form, which we will send to you upon request, or by a letter to us. Certain
redemptions may require a signature guarantee. Please see "Signature Guarantee,"
page 11.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem your
shares by calling an Investor Services Representative.
BY CHECK-A-MONTH
You may redeem shares by Check-A-Month. A Check-A-Month plan automatically
redeems enough shares each month to provide you with a check in an amount you
choose (minimum $50). To set up a Check-A-Month plan, please call and request
our Check-A-Month brochure.
OTHER AUTOMATIC REDEMPTIONS
You may elect to make redemptions automatically by authorizing us to send funds
directly to you or to your account at a bank or other financial institution. To
set up automatic redemptions, call one of our Investor Services Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered owner
of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank wire charges, which is
deducted from redemption proceeds. Once the funds are transmitted, the time of
receipt and the funds' availability are not under our control.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the required
minimum, a letter will be sent advising you of the necessity to bring the value
10 How to Invest with American Century Investments American Century Investments
of the shares held in the account up to the minimum. If action is not taken
within 90 days of the letter's date, the shares held in the account will be
redeemed and the proceeds from the redemption will be sent by check to your
address of record. We reserve the right to increase the investment minimums.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a signature
guarantee. Which transactions will require a signature guarantee will depend on
which service options you elect when you open your account. For example, if you
choose "In Writing Only," a signature guarantee will be required when:
o redeeming more than $25,000; or
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You may obtain a signature guarantee from a bank or trust company, credit union,
broker-dealer, securities exchange or association, clearing agency or savings
association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if you
live outside the United States and would like to know how to obtain a signature
guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction, or to
change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage. These
are listed on the account application. Please make note of these options and
elect the ones that are appropriate for you. Be aware that the "Full Services"
option offers you the most flexibility. You will find more information about
each of these service options in our Investor Services Guide.
Our special investor services include:
AUTOMATED INFORMATION LINE
We offer an Automated Information Line, 24 hours a day, seven days a week, at
1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. If you have authorized us to accept telephone instructions, you
also may exchange shares from one fund to another via the Automated Information
Line. Redemption instructions cannot be given via the Automated Information
Line.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week at www.americancentury.com
to access your funds' daily share prices, receive updates on major market
indexes and view historical performance of your funds. If you select "Full
Services" on your application, you can use your personal access code and Social
Security number to view your account balances and account activity, make
subsequent investments from your bank account or exchange shares from one fund
to another.
CHECKWRITING
We offer CheckWriting as a service option for your account. CheckWriting allows
you to redeem shares in your account by writing a draft ("check") against your
account balance. (Shares held in certificate form may not be redeemed by check.)
There is no limit on the number of checks you can write, but each one must be
for at least $100.
When you write a check, you will continue to receive dividends on all shares
until your check is presented for payment to our clearing bank. If you redeem
all shares in your account by check, any accrued distributions on the redeemed
shares will be paid to you in cash on the next monthly distribution date.
If you want to add CheckWriting to an existing account that offers CheckWriting,
contact us by telephone or mail for an appropriate form. For a new account, you
may elect CheckWriting on your purchase application by choosing the "Full
Services" option. CheckWriting is not available for any account held in an IRA
or 403(b) plan.
CheckWriting redemptions may only be made on checks provided by us. Currently,
there is no charge for checks or for the CheckWriting service.
We will return checks drawn on insufficient funds or on funds from investments
made by any means
Prospectus How to Invest with American Century Investments 11
other than by wire within the previous 15 days. Neither the
company nor our clearing bank will be liable for any loss or expenses associated
with returned checks. Your account may be assessed a $15 service charge for
checks drawn on insufficient funds.
A stop payment may be ordered on a check written against your account. We will
use reasonable efforts to stop a payment, but we cannot guarantee that we will
be able to do so. If we are successful in fulfilling a stop-payment order, your
account may be assessed a $15 fee.
TAX-QUALIFIED RETIREMENT PLANS
The Fund is available for your tax-deferred retirement plan. Call or write us
and request the appropriate forms for:
o Individual Retirement Accounts (IRAs);
o 403(b) plans for employees of public school systems and non-profit
organizations; or
o Profit sharing plans and pension plans for corporations and other employers.
If your IRA and 403(b) accounts do not total $10,000, each account is subject to
an annual $10 fee, up to a total of $30 per year.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment. Please
refer to the Investor Services Guide for further information about the policies
discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares for a
period of time, or to reject any specific purchase order (including purchases by
exchange). Additionally, purchases may be refused if, in the opinion of the
Manager, they are of a size that would disrupt the management of the Fund.
(2) We reserve the right to make changes to any stated investment requirements,
including those that relate to purchases, transfers and redemptions. In
addition, we may also alter, add to or terminate any investor services and
privileges. Any changes may affect all shareholders or only certain series or
classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of residence.
(4) Transactions requesting a specific price and date will be refused. Once you
have mailed or otherwise transmitted your transaction instructions to us, they
may not be modified or canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting personal
identification from callers, recording telephone calls, and providing written
confirmations of telephone transactions. These procedures are designed to
protect shareholders from unauthorized or fraudulent instructions. If we do not
employ reasonable procedures to confirm the genuineness of instructions, then we
may be liable for losses due to unauthorized or fraudulent instructions. The
company, its transfer agent and investment advisor will not be responsible for
any loss due to instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the registration. If
the owner's name appears in the registration as Mary Elizabeth Jones, she should
sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an increase in
the number of shareholder telephone calls. If you experience difficulty in
reaching us during such periods, you may send your transaction instructions by
mail, express mail or courier service, or you may visit one of our Investor
Centers. You may also use our Automated Information Line if you have requested
and received an access code and are not attempting to redeem shares.
(9) If you fail to provide us with the correct certified taxpayer identification
number, we may reduce any redemption proceeds by $50 to
12 How to Invest with American Century Investments American Century Investments
cover the penalty the IRS will impose on us for failure to report your correct
taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated statement
that summarizes all of your American Century holdings, as well as an individual
statement for each fund you own that reflects all year-to-date activity in your
account. You may request a statement of your account activity at any time.
With the exception of most automatic transactions and transactions by
CheckWriting, each time you invest, redeem, transfer or exchange shares, we will
send you a confirmation of the transaction. Transactions initiated by
CheckWriting will be confirmed on a monthly basis. See the Investor Services
Guide for more detail.
Carefully review all the information relating to transactions on your statements
and confirmations to ensure that your instructions were acted on properly.
Please notify us immediately in writing if there is an error. If you fail to
provide notification of an error with reasonable promptness, i.e., within 30
days of non-automatic transactions or within 30 days of the date of your
consolidated quarterly statement, in the case of automatic transactions, we will
deem you to have ratified the transaction.
No later than January 31st of each year, we will send you reports that you may
use in completing your U.S. income tax return. See the Investor Services Guide
for more information.
Each year, we will send you an annual and a semiannual report relating to your
fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your Fund.
EMPLOYER-SPONSORED RETIREMENT PLANS AND
INSTITUTIONAL ACCOUNTS
Information contained in our Investor Services Guide pertains to shareholders
who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.
If you own or are considering purchasing Fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the Fund,
exchange them for shares of other American Century funds, and redeem them will
depend on the terms of your plan.
If you own or are considering purchasing Fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.
Prospectus How to Invest with American Century Investments 13
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net asset
value is determined by calculating the total value of the Fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds except American Century Target
Maturities Trust, net asset value is determined at the close of regular trading
on each day that the New York Stock Exchange is open, usually 3 p.m. Central
time. Net asset value for Target Maturities is determined one hour prior to the
close of the Exchange.
Investments and requests to redeem or exchange shares will receive the share
price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the net asset value
of the Fund is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined on, the next day
the Exchange is open.
Investments are considered received only when payment is received by us. Wired
funds are considered received on the day they are deposited in our bank account
if they are deposited before the net asset value is determined.
Investments by telephone pursuant to your prior authorization to us to draw on
your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day by
mail before the net asset value is determined will receive that day's price.
Investments and instructions received after that time will receive the price
determined on the next business day.
If you invest in Fund shares through an employer-sponsored retirement plan or
other financial intermediary, it is the responsibility of your plan recordkeeper
or financial intermediary to transmit your purchase, exchange and redemption
requests to the Fund's transfer agent prior to the applicable cut-off time for
receiving orders and to make payment for any purchase transactions in accordance
with the Fund's procedures or any contractual arrangement with the Fund or the
Fund's distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
Pursuant to a determination by the Fund's Board of Trustees and Rule 2a-7 under
the Investment Company Act of 1940 (the "Investment Company Act"), portfolio
securities of the Fund are valued at amortized cost. When a security is valued
at amortized cost, it is valued at its cost when purchased, and thereafter by
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument.
WHERE TO FIND YIELD INFORMATION
The yield of the Fund is published weekly in leading financial publications and
daily in many local newspapers. Yield information may also be obtained by
calling us or by accessing our Web site at www.americancentury.com.
DISTRIBUTIONS
At the close of each day including Saturdays, Sundays and holidays, dividends
are declared and credited (i.e., available for redemption) daily and distributed
monthly on the last Friday of each month.
You will begin to participate in the distributions the day after your purchase
is effective. See "When Share Price is Determined," on this page. If you redeem
shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed (other than by CheckWriting), the
distribution on the redeemed shares will be included with your redemption
proceeds.
The Fund does not expect to realize any long-term capital gains and,
accordingly, does not expect to make any capital gains distributions.
14 Additional Information You Should Know American Century Investments
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 59 1/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.
TAXES
The Fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders,
it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If Fund shares are purchased through tax-deferred accounts, such as a qualified
employer-sponsored retirement or savings plan, income and capital gains
distributions paid by the Fund will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If Fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income of the
Fund do not qualify for the 70% dividends-received deduction for corporations
since they are derived from interest income.
Distributions are taxable to you regardless of whether they are taken in cash or
reinvested, even if the value of your shares is below your cost. If you purchase
shares shortly before a capital gain distribution, you must pay income taxes on
the distribution, even though the value of your investment (plus cash received,
if any) will not have increased.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or a
substantial part of such distribution are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue Code,
we are required by federal law to withhold and remit to the IRS 31% of
reportable payments (which may include dividends, capital gains distributions
and redemptions). Those regulations require you to certify that the Social
Security number or tax identification number you provide is correct and that you
are not subject to 31% withholding for previous under-reporting to the IRS. You
will be asked to make the appropriate certification on your application.
Payments reported by us that omit your Social Security number or tax
identification number will subject us to a penalty of $50, which will be charged
against your account if you fail to provide the certification by the time the
report is filed. That charge is not refundable.
MANAGEMENT
INVESTMENT MANAGEMENT
American Century-Benham Capital Preservation Fund is a diversified, open-end
series of American Century Government Income Trust (the "Trust"), organized as a
Massachusetts business trust on July 24, 1985, that was formerly known as the
Benham Government Income Trust. Under the laws of the Commonwealth of
Massachusetts, the Board of Trustees is responsible for managing the business
and affairs of the Trust.
Prospectus Additional Information You Should Know 15
Acting pursuant to an investment management agreement entered into with the
Trust, American Century Investment Management, Inc. (the "Manager") serves as
the investment manager of the Fund. The Manager pays all the expenses of the
Fund except brokerage, taxes, interest, fees and expenses of the non-interested
person Trustees (including counsel fees) and extraordinary expenses. Its
principal place of business is American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. The Manager has been providing investment advisory
services to investment companies and other clients since 1958.
The Manager supervises and manages the investment portfolio of the Fund and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the Fund. The Fund's team meets regularly to review
portfolio holdings and to discuss purchase and sale activity. The team adjusts
holdings in the portfolio as it deems appropriate in pursuit of the Fund's
investment objectives. Individual portfolio manager members of the team may also
adjust portfolio holdings of the Fund as necessary between team meetings.
The portfolio manager members of the team managing the Fund and their work
experience for the last five years are as follows:
AMY O'DONNELL has been primarily responsible for the day-to-day management of
Capital Preservation since May, 1997. Ms. O'Donnell joined Benham Management
Corporation ("BMC"), a predecessor to the Manager, in 1987 as a research analyst
and was promoted to her current position in 1992.
DENISE TABACCO has co-managed Capital Preservation since January, 1996. Ms.
Tabacco joined BMC in 1988, the Portfolio Department in 1991 and was promoted to
her current position in 1995.
The activities of the Manager are subject only to direction of the Board of
Trustees. Each series of the Trust (except Capital Preservation) pays the
Manager a monthly investment advisory fee equal to its pro rata share of the
dollar amount derived from applying the Trust's average daily net assets to an
investment advisory fee schedule.
For the services provided to Capital Preservation, the Manager receives a
monthly fee based on a percentage of the average net assets of the Fund. The
annual rate at which this fee is assessed is determined monthly in a two-step
process: First, a fee rate schedule is applied to the assets of all of the money
market funds managed by the Manager (the "Investment Category Fee"). Second, a
separate fee rate schedule is applied to the assets of all of the funds managed
by the Manager (the "Complex Fee"). The Investment Category Fee and the Complex
Fee are then added to determine the unified management fee payable by the Fund
to the Manager. Currently the Investment Category Fee is an annual rate of 0.18%
of the average net assets of the Fund. The Complex Fee is an annual rate of
0.30% of the average net assets of the Fund. Further information about the
calculation of the annual management fee is contained in the Statement of
Additional Information.
On the first business day of each month, the Fund pays a management fee to the
Manager for the previous month at the specified rate. The fee for the previous
month is calculated by multiplying the applicable fee for the Fund by the
aggregate average daily closing value of the Fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The Fund and the Manager have adopted a Code of Ethics, which restricts personal
investing practices by employees of the Manager and its affiliates. Among other
provisions, the Code of Ethics requires that employees with access to
information about the purchase or sale of securities in the Fund's portfolio
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of the Fund
shareholders come before the interests of the people who manage the Fund.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri,
64111 acts as transfer agent and dividend-paying agent for the Fund. It provides
facilities, equipment and personnel
16 Additional Information You Should Know American Century Investments
to the Fund and is paid for such services by the Manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the Fund as a funding medium, by broker-dealers and financial advisors
for their customers investing in shares of American Century or by sponsors of
multi mutual fund no- or low-transaction fee programs. The Manager or an
affiliate may enter into contracts to pay them for such recordkeeping and
administrative services out of its management fee.
Although there is no sales charge levied by the Fund, transactions in shares of
the Fund may be executed by brokers or investment advisors who charge a
transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the Fund or the
Manager. You should be aware of the fact that these transactions may be made
directly with American Century without incurring such fees.
From time to time, special services may be offered to shareholders who maintain
higher share balances in our family of funds. These services may include the
waiver of minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the Manager or its
affiliates.
The Manager and the transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the Board of Directors of
American Century Companies, Inc. owns a majority of its common stock.
DISTRIBUTION OF FUND SHARES
The Fund's shares are distributed by American Century Investment Services, Inc.
(the "Distributor"), a registered broker-dealer and an affiliate of the Manager.
The Manager pays all expenses for promoting and distributing the Fund's shares.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
The Trust is an open-end management investment company. Its principal office of
the Trust is American Century Tower, 4500 Main Street, P.O. Box 419200, Kansas
City, Missouri 64141-6200. All inquiries may be made by mail to that address or
by telephone to 1-800-345-2021 (international calls: 816-531-5575).
The Fund is an individual series of the Trust which issues shares with no par
value. The assets belonging to each series of shares are held separately by the
custodian and in effect each series is a separate fund.
Each share is entitled to one vote. Matters affecting only one series are voted
upon only by that series.
Shares have non-cumulative voting rights, which means that the holders of more
than 50% of the votes cast in an election of Trustees can elect all of the
Trustees 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 Trustees.
Unless required by the Investment Company Act, it will not be necessary for the
Trust to hold annual meetings of shareholders. As a result, shareholders may not
vote each year on the election of Trustees or the appointment of auditors.
However, pursuant to the Trust's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request that the Trust hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF THE POLICIES, PRACTICES AND PROCEDURES
DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION,
WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER
APPROVAL IS EXPRESSLY REQUIRED.
THIS PROSPECTUS CONSTITUTES AN OFFER TO SELL SECURITIES OF THE FUND ONLY IN
THOSE STATES WHERE THE FUND'S SHARES HAVE BEEN REGISTERED OR OTHERWISE QUALIFIED
FOR SALE. THE FUND WILL NOT ACCEPT APPLICATIONS FROM PERSONS RESIDING IN STATES
WHERE THE FUND'S SHARES ARE NOT REGISTERED.
Prospectus Additional Information You Should Know 17
NOTES
18 Notes American Century Investments
NOTES
Notes 19
NOTES
20 Notes American Century Investments
NOTES
Notes 21
P.O. Box 419200
Kansas City, Missouri
64141-6200
Investor Services:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-444-3485
Fax: 816-340-7962
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9708 [recycled logo]
SH-BKT-9296 Recycled
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[american century logo]
American
Century(sm)
AUGUST 1, 1997
BENHAM GROUP(R)
Capital Preservation
Government Agency
Short-Term Treasury
Intermediate-Term Treasury
Long-Term Treasury
ARM Fund
GNMA Fund
Inflation-Adjusted Treasury
[front cover]
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1997
AMERICAN CENTURY GOVERNMENT INCOME TRUST
This Statement is not a prospectus but should be read in conjunction with the
Funds' current Prospectuses dated August 1, 1997. The Funds' annual reports for
the fiscal year ended March 31, 1997, are incorporated herein by reference.
Please retain this document for future reference. To obtain the Prospectus, call
American Century Investments toll-free at 1-800-345-2021 (international calls:
816-531-5575), or write P.O. Box 419200, Kansas City, Missouri 64141-6200.
TABLE OF CONTENTS
Investment Policies and Techniques.............................. 2
Investment Restrictions......................................... 8
Portfolio Transactions...........................................9
Valuation of Portfolio Securities...............................10
Performance.....................................................10
Taxes...........................................................12
About the Trust.................................................13
Trustees and Officers...........................................14
Management......................................................15
Transfer and Administrative Services............................19
Distribution of Fund Shares.....................................19
Additional Purchase and Redemption Information..................20
Other Information...............................................21
NOTE: Throughout this document, Short-Term Treasury, Intermediate-Term Treasury,
Long-Term Treasury, ARM Fund, GNMA Fund and Inflation-Adjusted Treasury are
referred to collectively as the "Variable-Price Funds." Capital Preservation and
Government Agency are referred to as the "Money Market Funds."
Statement of Additional Information 1
INVESTMENT POLICIES AND TECHNIQUES
The following pages provide a more detailed description of the securities and
investment practices identified in the Prospectus. Unless otherwise noted, the
policies described in this Statement of Additional Information are not
fundamental and may be changed by the Board of Trustees.
REPURCHASE AGREEMENTS (VARIABLE-PRICE FUNDS)
In a repurchase agreement (a "repo"), a Fund buys a security at one price and
simultaneously agrees to sell it back to the seller at an agreed upon price on a
specified date (usually within seven days from the date of purchase) or on
demand. The repurchase price exceeds the purchase price by an amount that
reflects an agreed-upon rate of return and that is unrelated to the interest
rate on the underlying security. Delay or losses could result if the other party
to the agreement defaults or becomes bankrupt.
The Funds may engage in repurchase agreements collateralized by U.S. Treasury
bills, notes, and bonds, or by mortgage-backed GNMA certificates, which are
guaranteed by the Government National Mortgage Association and backed by the
full faith and credit of the U.S. government.
Repos may involve risks not associated with direct investments in U.S.
government debt securities. If the seller fails to complete the terms of the
agreement, the Fund may experience delays in recovering its cash or incur costs
in the disposal of securities it has purchased under the agreement. A Fund could
also suffer a loss if the securities decline in value before they can be sold in
the open market.
American Century Investment Management, Inc. (the "Manager") attempts to
minimize the risks associated with repurchase agreements by adhering to written
guidelines which govern repurchase agreements. These guidelines strictly govern
(i) the type of securities which may be acquired and held under repurchase
agreements; (ii) collateral requirements for sellers under repurchase
agreements; (iii) the amount of a Fund's net assets that may be committed to
repurchase agreements that mature in more than seven days; and (iv) the manner
in which the Fund must take delivery of securities subject to repurchase
agreements. Moreover, the Board of Trustees reviews and approves, on a quarterly
basis, the creditworthiness of brokers, dealers and banks with whom a Fund may
enter into repurchase agreements. A Fund may enter into a repurchase agreement
only with an entity that appears on a list of those which have been approved by
the Board as sufficiently creditworthy.
The Funds have received permission from the Securities and Exchange Commission
(SEC) to participate in joint repurchase agreements collateralized by U.S.
government securities with other mutual funds advised by the Manager or its
affiliates. Joint repos are expected to increase the income a Fund can earn from
repo transactions without increasing the risks associated with these
transactions.
Under the Investment Company Act of 1940 (the "Investment Company Act"), repos
are considered to be loans.
WHEN-ISSUED AND FORWARD COMMITMENT AGREEMENTS (ALL FUNDS)
The Funds may engage in securities transactions on a when-issued or forward
commitment basis, in which the transaction price and yield are each fixed at the
time the commitment is made, but payment and delivery occur at a future date
(typically 15 to 45 days later).
When purchasing securities on a when-issued or forward commitment basis, each
Fund assumes the rights and risks of ownership, including the risk of price and
yield fluctuations. Although a Fund will make commitments to purchase or sell
securities with the intention of actually receiving or delivering them, it may
sell the securities before the settlement date if doing so is deemed advisable
as a matter of investment strategy.
In purchasing securities on a when-issued or forward commitment basis, a Fund
will establish and maintain until the settlement date a segregated account
consisting of cash or appropriate liquid securities in an amount sufficient to
meet the purchase price. When the time comes to pay for such securities, the
Fund will meet its obligations with available cash, through the sale of
securities, or, although it would not normally expect to do so, by selling the
when-issued securities themselves (which may have a market value greater or less
than the Fund's payment obligation). Selling securities to meet when-issued or
forward commitment obligations may generate taxable capital gains or losses.
2 American Century Investments
ROLL TRANSACTIONS (ALL FUNDS EXCEPT CAPITAL PRESERVATION)
A Fund may sell a security and at the same time make a commitment to purchase
the same or a comparable security at a future date and specified price.
Conversely, a Fund may purchase a security and at the same time make a
commitment to sell the same or a comparable security at a future date and
specified price. These types of transactions are executed simultaneously in what
are known as "dollar-rolls," "cash and carry," or financing transactions. For
example, a broker-dealer may seek to purchase a particular security that a Fund
owns. The Fund will sell that security to the broker-dealer and simultaneously
enter into a forward commitment agreement to buy it back at a future date. This
type of transaction generates income for the Fund if the dealer is willing to
execute the transaction at a favorable price in order to acquire a specific
security. As an operating policy, the Manager limits forward commitment
transactions (including roll transactions) to 35% of a Fund's total assets and
will not enter into when-issued or forward commitment transactions with
settlement dates that exceed 120 days.
When engaging in roll transactions, the Fund will maintain until the settlement
date a segregated account consisting of cash or appropriate liquid securities in
an amount sufficient to meet the purchase price, as described above.
INTEREST RATE RESETS ON FLOATING-RATE U.S. GOVERNMENT AGENCY SECURITIES (ALL
FUNDS EXCEPT CAPITAL PRESERVATION)
Interest rate resets on floating-rate U.S. government agency securities
generally occur at intervals of one year or less in response to changes in a
predetermined interest rate index. There are two main categories of indexes,
those based on U.S. Treasury securities and those derived from a calculated
measure, such as a cost of funds index. Commonly used indexes include the
three-month, six-month, and one-year Treasury bill rate; the two-year Treasury
note yield; the Eleventh District Federal Home Loan Bank Cost of Funds Index
(EDCOFI); and the London Interbank Offered Rate (LIBOR). Fluctuations in the
prices of floating-rate U.S. government agency securities are typically
attributed to differences between the coupon rates on these securities and
prevailing market interest rates between interest rate reset dates.
MASTER DEMAND NOTES (GOVERNMENT AGENCY ONLY)
Government Agency may acquire variable-rate master demand notes issued by U.S.
government agencies such as the Student Loan Marketing Association. Master
demand notes allow the Fund to lend money at varying rates of interest under
direct agreements with borrowers. The Fund may adjust the amount of money loaned
under a master demand note daily or weekly up to the full amount specified in
the agreement, and the borrower may prepay up to the full amount of the loan
without penalty. Master demand notes may or may not be backed by bank letters of
credit. Although, as direct agreements between lenders and borrowers, there is
no secondary market for master demand notes, these instruments are redeemable
(immediately repayable by the borrower) at par plus accrued interest at any
time.
SECURITIES LENDING (ALL FUNDS EXCEPT CAPITAL PRESERVATION AND INTERMEDIATE-TERM
TREASURY)
The Manager has received approval from the Board of Trustees to engage in
securities lending on behalf of the Funds. Such loans are made with the
intention of allowing the Funds to earn additional income by lending its
portfolio securities to banks and broker-dealers. If a borrower defaulted on a
securities loan, the lending Fund could experience delays in recovering the
securities it loaned; if the value of the loaned securities increased over the
value of the collateral, the Fund could suffer a loss. To minimize the risk of
default on securities loans, the Manager adheres to guidelines prescribed by the
Board of Trustees governing lending of securities. These guidelines strictly
govern (i) the type and amount of collateral that must be received by the Fund;
(ii) the circumstances under which additions to that collateral must be made by
borrowers; (iii) the return received by the Fund on the loaned securities; (iv)
the limitations on the percentage of Fund assets on loan; and (v) the credit
standards applied in evaluating potential borrowers of portfolio securities. In
addition, the guidelines require that the Fund have the option to terminate any
loan of a portfolio security at any time
Statement of Additional Information 3
and set requirements for recovery of securities from borrowers.
MORTGAGE-BACKED SECURITIES (ARM FUND AND GNMA FUND)
BACKGROUND. A mortgage-backed security represents an ownership interest in a
pool of mortgage loans. The loans are made by financial institutions to finance
home and other real estate purchases. As the loans are repaid, investors receive
payments of both interest and principal.
Like fixed-income securities such as U.S. Treasury bonds, mortgage-backed
securities pay a stated rate of interest over the life of the security. However,
unlike a bond, which returns principal to the investor in one lump sum at
maturity, mortgage-backed securities return principal to the investor in
increments over the life of the security.
Because the timing and speed of principal repayments vary, the cash flow on
mortgage securities is irregular. If mortgage holders sell their homes,
refinance their loans, prepay their mortgages, or default on their loans, the
principal is distributed pro rata to investors.
As with other fixed-income securities, the prices of mortgage securities
fluctuate in response to changing interest rates; when interest rates fall, the
prices of mortgage securities rise, and vice versa. Changing interest rates have
additional significance for mortgage-backed securities investors, however,
because they influence prepayment rates (the rates at which mortgage holders
prepay their mortgages), which in turn affect the yields on mortgage-backed
securities. When interest rates decline, prepayment rates generally increase.
Mortgage holders take advantage of the opportunity to refinance their mortgages
at lower rates with lower monthly payments. When interest rates rise, mortgage
holders are less inclined to refinance their mortgages. The effect of prepayment
activity on yield depends on whether the mortgage-backed security was purchased
at a premium or at a discount.
A Fund may get back principal sooner than it expected because of accelerated
prepayments. Under these circumstances, the Fund might have to reinvest returned
principal at rates lower than it would have earned if principal payments were
made on schedule. Conversely, a mortgage-backed security may exceed its
anticipated life if prepayment rates decelerate unexpectedly. Under these
circumstances, a Fund might miss an opportunity to earn interest at higher
prevailing rates.
GINNIE MAE CERTIFICATES. The Government National Mortgage Association (GNMA or
Ginnie Mae) is a wholly owned corporate instrumentality of the United States
within the Department of Housing and Urban Development. The National Housing Act
of 1934 (Housing Act), as amended, authorizes Ginnie Mae to guarantee the timely
payment of interest and repayment of principal on certificates that are backed
by a pool of mortgage loans insured by the Federal Housing Administration under
the Housing Act, or by Title V of the Housing Act of 1949 (FHA Loans), or
guaranteed by the Veterans' Administration under the Servicemen's Readjustment
Act of 1944 (VA Loans), as amended, or by pools of other eligible mortgage
loans. The Housing Act provides that the full faith and credit of the U.S.
government is pledged to the payment of all amounts that may be required to be
paid under any guarantee. Ginnie Mae has unlimited authority to borrow from the
U.S. Treasury in order to meet its obligations under this guarantee.
Ginnie Mae certificates represent a pro rata interest in one or more pools of
the following types of mortgage loans: (a) fixed-rate level payment mortgage
loans; (b) fixed-rate graduated payment mortgage loans (GPMs); (c) fixed-rate
growing equity mortgage loans (GEMs); (d) fixed-rate mortgage loans secured by
manufactured (mobile) homes (MHs); (e) mortgage loans on multifamily residential
properties under construction (CLCs); (f) mortgage loans on completed
multifamily projects (PLCs); (g) fixed-rate mortgage loans that use escrowed
funds to reduce the borrower's monthly payments during the early years of the
mortgage loans (buydown mortgage loans); and (h) mortgage loans that provide for
payment adjustments based on periodic changes in interest rates or in other
payment terms of the mortgage loans.
FANNIE MAE CERTIFICATES. The Federal National Mortgage Association (FNMA or
Fannie Mae) is a federally chartered and privately owned corporation established
under the Federal National Mortgage Association Charter Act. Fannie Mae was
originally established in 1938 as a U.S. government agency designed to provide
supplemental liquidity to the
4 American Century Investments
mortgage market and was reorganized as a stockholder-owned and privately managed
corporation by legislation enacted in 1968. Fannie Mae acquires capital from
investors who would not ordinarily invest in mortgage loans directly and thereby
expands the total amount of funds available for housing. This money is used to
buy home mortgage loans from local lenders, replenishing the supply of capital
available for mortgage lending.
Fannie Mae certificates represent a pro rata interest in one or more pools of
FHA Loans, VA Loans, or, most commonly, conventional mortgage loans (i.e.,
mortgage loans that are not insured or guaranteed by a governmental agency) of
the following types: (a) fixed-rate level payment mortgage loans; (b) fixed-rate
growing equity mortgage loans; (c) fixed-rate graduated payment mortgage loans;
(d) adjustable-rate mortgage loans; and (e) fixed-rate mortgage loans secured by
multifamily projects.
Fannie Mae certificates entitle the registered holder to receive amounts
representing a pro rata interest in scheduled principal and interest payments
(at the certificate's pass-through rate, which is net of any servicing and
guarantee fees on the underlying mortgage loans), any principal prepayments, and
a proportionate interest in the full principal amount of any foreclosed or
otherwise liquidated mortgage loan. The full and timely payment of interest and
repayment of principal on each Fannie Mae certificate is guaranteed by Fannie
Mae; this guarantee is not backed by the full faith and credit of the U.S.
government.
FREDDIE MAC CERTIFICATES. The Federal Home Loan Mortgage Corporation (FHLMC or
Freddie Mac) is a corporate instrumentality of the United States created
pursuant to the Emergency Home Finance Act of 1970 (FHLMC Act), as amended.
Freddie Mac was established primarily for the purpose of increasing the
availability of mortgage credit. Its principal activity consists of purchasing
first-lien conventional residential mortgage loans (and participation interests
in such mortgage loans) and reselling these loans in the form of mortgage-backed
securities, primarily Freddie Mac certificates.
Freddie Mac certificates represent a pro rata interest in a group of mortgage
loans (a Freddie Mac certificate group) purchased by Freddie Mac. The mortgage
loans underlying Freddie Mac certificates consist of fixed- or adjustable-rate
mortgage loans with original terms to maturity of between ten and thirty years,
substantially all of which are secured by first-liens on one- to four-family
residential properties or multifamily projects. Each mortgage loan must meet
standards set forth in the FHLMC Act. A Freddie Mac certificate group may
include whole loans, participation interests in whole loans, undivided interests
in whole loans, and participations composing another Freddie Mac certificate
group.
Freddie Mac guarantees to each registered holder of a Freddie Mac certificate
the timely payment of interest at the rate provided for by the certificate.
Freddie Mac also guarantees ultimate collection of all principal on the related
mortgage loans, without any offset or deduction, but generally does not
guarantee the timely repayment of principal. Freddie Mac may remit principal at
any time after default on an underlying mortgage loan, but no later than 30 days
following (a) foreclosure sale, (b) payment of a claim by any mortgage insurer,
or (c) the expiration of any right of redemption, whichever occurs later, and in
any event no later than one year after demand has been made upon the mortgager
for accelerated payment of principal. Obligations guaranteed by Freddie Mac are
not backed by the full faith and credit of the U.S. government.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS). A CMO is a multiclass bond backed by
a pool of mortgage pass-through certificates or mortgage loans. CMO's may be
collateralized by (a) Ginnie Mae, Fannie Mae, or Freddie Mac pass-through
certificates, (b) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of Veterans' Affairs, (c)
unsecuritized conventional mortgages, or (d) any combination thereof.
In structuring a CMO, an issuer distributes cash flow from the underlying
collateral over a series of classes called "tranches." Each CMO is a set of two
or more tranches, with average lives and cash flow patterns designed to meet
specific investment objectives. The average life expectancies of the different
tranches in a four-part deal, for example, might be two, five, seven, and twenty
years.
As payments on the underlying mortgage loans are collected, the CMO issuer pays
the coupon rate of
Statement of Additional Information 5
interest to the bondholders in each tranche. At the outset, scheduled and
unscheduled principal payments go to investors in the first tranches. Investors
in later tranches do not begin receiving principal payments until the prior
tranches are paid off. This basic type of CMO is known as a "sequential pay" or
"plain vanilla" CMO.
Some CMOs are structured so that the prepayment or market risks are transferred
from one tranche to another. Prepayment stability is improved in some tranches
if other tranches absorb more prepayment variability.
The final tranche of a CMO often takes the form of a Z-bond, also known as an
"accrual bond" or "accretion bond." Holders of these securities receive no cash
until the earlier tranches are paid in full. During the period that the other
tranches are outstanding, periodic interest payments are added to the initial
face amount of the Z-bond but are not paid to investors. When the prior tranches
are retired, the Z-bond receives coupon payments on its higher principal balance
plus any principal prepayments from the underlying mortgage loans. The existence
of a Z-bond tranche helps stabilize cash flow patterns in the other tranches. In
a changing interest rate environment, however, the value of the Z-bond tends to
be more volatile.
As CMOs have evolved, some classes of CMO bonds have become more prevalent. The
planned amortization class (PAC) and targeted amortization class (TAC), for
example, were designed to reduce prepayment risk by establishing a sinking-fund
structure. PAC and TAC bonds assure to varying degrees that investors will
receive payments over a predetermined period under various prepayment scenarios.
Although PAC and TAC bonds are similar, PAC bonds are better able to provide
stable cash flows under various prepayment scenarios than TAC bonds because of
the order in which these tranches are paid.
The existence of a PAC or TAC tranche can create higher levels of risk for other
tranches in the CMO because the stability of the PAC or TAC tranche is achieved
by creating at least one other tranche-known as a companion bond, support, or
non-PAC bond--that absorbs the variability of principal cash flows. Because
companion bonds have a high degree of average life variability, they generally
pay a higher yield. A TAC bond can have some of the prepayment variability of a
companion bond if there is also a PAC bond in the CMO issue.
Floating-rate CMO tranches (floaters) pay a variable rate of interest that is
usually tied to the London Interbank Offered Rate (LIBOR). Institutional
investors with short-term liabilities, such as commercial banks, often find
floating-rate CMOs attractive investments. "Super floaters" (which float a
certain percentage above LIBOR) and "inverse floaters" (which float inversely to
LIBOR) are variations on the floater structure that have highly variable cash
flows.
STRIPPED MORTGAGE-BACKED SECURITIES (ARM FUND ONLY). Stripped mortgage
securities are created by segregating the cash flows from underlying mortgage
loans or mortgage securities to create two or more new securities, each with a
specified percentage of the underlying security's principal or interest
payments. Mortgage securities may be partially stripped so that each investor
class receives some interest and some principal. When securities are completely
stripped, however, all of the interest is distributed to holders of one type of
security, known as an interest-only security, or IO, and all of the principal is
distributed to holders of another type of security known as a principal-only
security, or PO. Strips can be created in a pass-through structure or as
tranches of a CMO.
The market values of IOs and POs are very sensitive to interest rate and
prepayment rate fluctuations. POs, for example, increase (or decrease) in value
as interest rates decline (or rise). The price behavior of these securities also
depends on whether the mortgage collateral was purchased at a premium or
discount to its par value. Prepayments on discount coupon POs generally are much
lower than prepayments on premium coupon POs. IOs may be used to hedge a Fund's
other investments because prepayments cause the value of an IO strip to move in
the opposite direction from other mortgage-backed securities.
ADJUSTABLE-RATE MORTGAGE LOANS (ARMS). ARMs eligible for inclusion in a mortgage
pool will generally provide for a fixed initial mortgage interest rate for a
specified period of time, generally for either the first three, six, twelve,
thirteen, thirty-six, or sixty scheduled monthly payments. Thereafter, the
interest rates are subject to periodic adjustment based on changes in an index.
6 American Century Investments
ARMs have minimum and maximum rates beyond which the mortgage interest rate may
not vary over the lifetime of the loan. Certain ARMs provide for additional
limitations on the maximum amount by which the mortgage interest rate may adjust
for any single adjustment period. Negatively amortizing ARMs may provide
limitations on changes in the required monthly payment. Limitations on monthly
payments can result in monthly payments that are greater or less than the amount
necessary to amortize a negatively amortizing ARM by its maturity at the
interest rate in effect during any particular month.
There are two types of indexes that provide the basis for ARM rate adjustments:
those based on market rates and those based on a calculated measure, such as a
cost of funds index or a moving average of mortgage rates. Commonly utilized
indexes include the one-year, three-year, and five-year constant maturity U.S.
Treasury rates (as reported by the Federal Reserve Board); the three-month
Treasury bill rate; the 180-day Treasury bill rate; rates on longer-term
Treasury securities; the Eleventh District Federal Home Loan Bank Cost of Funds
Index (EDCOFI); the National Median Cost of Funds Index; the one-month,
three-month, six-month, or one-year London Interbank Offered Rate (LIBOR); or
six-month CD rates. Some indexes, such as the one-year constant maturity
Treasury rate or three-month LIBOR, are highly correlated with changes in market
interest rates. Other indexes, such as the EDCOFI, tend to lag behind changes in
market rates and be somewhat less volatile over short periods of time.
The EDCOFI reflects the monthly weighted average cost of funds of savings and
loan associations and savings banks whose home offices are located in Arizona,
California, and Nevada (the Federal Home Loan Bank Eleventh District) and who
are member institutions of the Federal Home Loan Bank of San Francisco (the FHLB
of San Francisco), as computed from statistics tabulated and published by the
FHLB of San Francisco. The FHLB of San Francisco normally announces the Cost of
Funds Index on the last working day of the month following the month in which
the cost of funds was incurred.
One-year and three-year Constant Maturity Treasury (CMT) rates are calculated by
the Federal Reserve Bank of New York, based on daily closing bid yields on
actively traded Treasury securities submitted by five leading broker-dealers.
The median bid yields are used to construct a daily yield curve.
The National Median Cost of Funds Index, similar to the EDCOFI, is calculated
monthly by the Federal Home Loan Bank Board (FHLBB) and represents the average
monthly interest expenses on liabilities of member institutions. A median,
rather than an arithmetic mean, is used to reduce the effect of extreme numbers.
The London Interbank Offered Rate Index (LIBOR) is the rate at which banks in
London offer Eurodollars in trades between banks. LIBOR has become a key rate in
the U.S. domestic money market because it is perceived to reflect the true
global cost of money.
The Manager may invest in ARMs whose periodic interest rate adjustments are
based on new indexes as these indexes become available.
ZERO-COUPON SECURITIES (SHORT-TERM TREASURY, INTERMEDIATE-TERM TREASURY,
LONG-TERM TREASURY AND INFLATION-ADJUSTED TREASURY)
Zero-coupon U.S. Treasury securities are the unmatured interest coupons and
underlying principal portions of U.S. Treasury notes and bonds. Originally,
these securities were created by broker-dealers who bought Treasury notes and
bonds and deposited these securities with a custodian bank. The broker-dealers
then sold receipts representing ownership interests in the coupons or principal
portions of the notes and bonds. Some examples of zero-coupon securities sold
through custodial receipt programs are CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and generic TRs
(Treasury Receipts).
The U.S. Treasury subsequently introduced a program called Separate Trading of
Registered Interest and Principal of Securities (STRIPS). In this program,
eligible securities may be presented to the U.S. Treasury and exchanged for
their component parts, which are then traded in book-entry form. (Book-entry
trading eliminated the bank credit risks associated with broker-dealer sponsored
custodial receipt programs.) STRIPS are direct obligations of the U.S.
government and have the same credit risks as other U.S. Treasury securities.
Statement of Additional Information 7
Principal and interest on bonds issued by the Resolution Funding Corporation
(REFCORP) have also been separated and issued as stripped securities. The U.S.
government and its agencies may issue securities in zero-coupon form. These
securities are referred to as "original issue zero-coupon securities."
OTHER INVESTMENT COMPANIES
Each Fund may invest in securities issued by open and closed-end investment
companies which are consistent with its investment objective and policies. Such
purchases will be made in the open market where no commission or profit to a
sponsor or dealer results from the purchase other than the customary brokers'
commissions. As a shareholder of another investment company, a Fund would bear,
along with other shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees. These expenses would be in addition
to the management fee that the Fund bears directly in connection with its own
operations.
INVESTMENT RESTRICTIONS
The Funds' investment restrictions are set forth below. These investment
restrictions are fundamental and may not be changed without approval of "a
majority of the outstanding votes of shareholders" of a Fund, as determined in
accordance with the Investment Company Act.
AS A FUNDAMENTAL POLICY, EACH FUND SHALL NOT:
1) issue senior securities, except as permitted under the Investment Company Act
of 1940.
2) borrow money, except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not exceeding
331/3% of the Fund's total assets (including the amount borrowed) less
liabilities (other than borrowings).
3) lend any security or make any other loan if, as a result, more than 331/3% of
the Fund's total assets would be lent to other parties, except, (i) through the
purchase of debt securities in accordance with its investment objective,
policies and limitations, or (ii) by engaging in repurchase agreements with
respect to portfolio securities.
4) 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.
5) 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).
6) act as an underwriter of securities issued by others, except to the extent
that the Fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities.
7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments; provided that this limitation
shall not prohibit the Fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities.
8) invest for purposes of exercising control over management. In addition, the
Funds are subject to the following additional investment restrictions which are
not fundamental and may be changed by the Board of Trustees.
AS AN OPERATING POLICY, EACH FUND:
a) shall not purchase additional investment securities at any time during which
outstanding borrowings exceed 5% of the total assets of the Fund.
b) shall not purchase any securities which would cause 25% or more of the value
of the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (i) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions and
repurchase agreements secured by
8 American Century Investments
such instruments, (ii) wholly-owned finance companies will be considered to be
in the industries of their parents if their activities are primarily related to
financing the activities of the parents, (iii) utilities will be divided
according to their services, for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry, and
(iv) personal credit and business credit businesses will be considered separate
industries.
c) [Money Market Funds only] shall not purchase or sell futures contracts or
call options. This limitation does not apply to options attached to, or acquired
or traded together with, their underlying securities, and does not apply to
securities that incorporate features similar to options or futures contracts.
d) shall not purchase any security or enter into a repurchase agreement if, as a
result, more than 15% of its net assets (10% for the Money Market Funds) would
be invested in repurchase agreements not entitling the holder to payment of
principal and interest within seven days and in securities that are illiquid by
virtue of legal or contractual restrictions on resale or the absence of a
readily available market.
e) shall not sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short, and
provided that transactions in futures contracts and options are not deemed to
constitute selling securities short.
f) shall not purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions, and
provided that margin payments in connection with futures contracts and options
on futures contracts shall not constitute purchasing securities on margin.
For purposes of the investment restriction (5), relating to concentration, a
Fund shall not purchase any securities which would cause 25% or more of the
value of the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (i) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions and
repurchase agreements secured by such instruments, (ii) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of the parents,
(iii) utilities will be divided according to their services, for example, gas,
gas transmission, electric and gas, electric and telephone will each be
considered a separate industry, and (iv) personal credit and business credit
businesses will be considered separate industries.
PORTFOLIO TRANSACTIONS
Each Fund's assets are invested by the Manager in a manner consistent with the
Fund's investment objectives, policies, and restrictions, and with any
instructions the Board of Trustees may issue from time to time. Within this
framework, the Manager is responsible for making all determinations as to the
purchase and sale of portfolio securities and for taking all steps necessary to
implement securities transactions on behalf of the Funds.
In placing orders for the purchase and sale of portfolio securities, the Manager
will use its best efforts to obtain the best possible price and execution and
will otherwise place orders with broker-dealers subject to and in accordance
with any instructions the Board of Trustees may issue from time to time. The
Manager will select broker-dealers to execute portfolio transactions on behalf
of the Funds solely on the basis of best price and execution.
U.S. government securities generally are traded in the over-the-counter market
through broker-dealers. A broker-dealer is a securities firm or bank that makes
a market for securities by offering to buy at one price and sell at a slightly
higher price. The difference between the prices is known as a spread.
On behalf of the Funds, the Manager transacts in round lots ($100,000 to $10
million or more) whenever possible. Since commissions are not charged for
round-lot transactions of U.S. Treasury securities, the Funds' transaction costs
consist solely of custodian charges and dealer mark-ups. Each Fund may hold its
portfolio securities to maturity or sell or swap them
Statement of Additional Information 9
for others, depending upon the level and slope of, and anticipated changes in,
the yield curve. The Funds paid no brokerage commissions during the fiscal year
ended March 31, 1997.
The portfolio turnover rates for each of the Variable-Price Funds appear in the
Financial Highlights appearing in the Prospectus.
VALUATION OF PORTFOLIO SECURITIES
Each Fund's net asset value per share ("NAV") is calculated as of the close of
business of the New York Stock Exchange (the "Exchange"), usually at 3:00 p.m.
Central time each day the Exchange is open for business. The Exchange has
designated the following holiday closings for 1997: New Year's Day (observed),
Martin Luther King Jr. Day, Presidents` Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas (observed). Although
the Funds expect the same holiday schedule to be observed in the future, the
Exchange may modify its holiday schedule at any time.
Each Fund's share price is calculated by adding the value of all portfolio
securities and other assets, deducting liabilities, and dividing the result by
the number of shares outstanding. Expenses and interest on portfolio securities
are accrued daily.
Securities held by the Money Market Funds are valued on the basis of amortized
cost. This method involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium paid at
the time of purchase. Although this method provides certainty in valuation, it
generally disregards the effect of fluctuating interest rates on an instrument's
market value. Consequently, the instrument's amortized cost value may be higher
or lower than its market value, and this discrepancy may be reflected in a
Fund's yield. During periods of declining interest rates, for example, the daily
yield on Fund shares computed as described above may be higher than that of a
fund with identical investments priced at market value. The converse would apply
in a period of rising interest rates.
The Money Market Funds each operate pursuant to Investment Company Act Rule
2a-7, which permits valuation of portfolio securities on the basis of amortized
cost. As required by the Rule, the Board of Trustees has adopted procedures
designed to stabilize, to the extent reasonably possible, each Money Market
Fund's price per share as computed for the purposes of sales and redemptions at
$1.00. While the day-to-day operation of each Money Market Fund has been
delegated to the Manager, the quality requirements established by the procedures
limit investments to certain instruments that the Board of Trustees has
determined present minimal credit risks and that have been rated in one of the
two highest rating categories as determined by a nationally recognized
statistical rating organization or, in the case of unrated securities, of
comparable quality. The procedures require review of each Money Market Fund's
portfolio holdings at such intervals as are reasonable in light of current
market conditions to determine whether the Money Market Fund's net asset value
calculated by using available market quotations deviates form the per-share
value based on amortized cost. The procedures also prescribe the action to be
taken if such deviation should occur.
Most securities held by the Variable-Price Funds are valued at current market
value as provided by an independent pricing service. Other securities are priced
at fair value as determined in good faith pursuant to guidelines established by
the Funds' Board of Trustees.
PERFORMANCE
A Fund may quote performance in various ways. Historical performance information
will be used in advertising and sales literature and is not indicative of future
results. A Fund's share price, yield and return will vary with changing market
conditions.
For the MONEY MARKET FUNDS, yield quotations are based on the change in the
value of a hypothetical investment (excluding realized gains and losses from the
sale of securities and unrealized appreciation and depreciation of securities)
over a seven-day period (base period) and stated as a percentage of the
investment at the start of the base period (base-period return). The base-period
return is then annualized by multiplying it by 365/7, with the resulting yield
figure carried to at least the nearest hundredth of one percent.
Calculations of effective yield begin with the same base-period return used to
calculate yield, but the
10 American Century Investments
return is then annualized to reflect weekly compounding according to the
following formula:
Effective Yield = [(Base-Period Return + 1)365/7] - 1
Each Money Market Fund's yield for the seven-day period ended March 31, 1997, is
indicated in the following table.
7-Day 7-Day Effective
Fund Yield Yield
- -----------------------------------------------------------
Capital Preservation 4.73% 4.84%
Government Agency 4.82 4.94
- -----------------------------------------------------------
For the VARIABLE-PRICE FUNDS, yield quotations are based on the investment
income per share earned during a particular 30-day period, less expenses accrued
during the period (net investment income), and are computed by dividing the
Fund's net investment income by its share price on the last day of the period,
according to the following formula:
YIELD = 2 [(a - b + 1)6 - 1]
-----
cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends, and d =
the maximum offering price per share on the last day of the period.
Each Variable-Price Fund's yield for the 30-day period ended March 31, 1997, is
indicated in the following table.
Fund 30-day Yield
- -----------------------------------------------------------
Short-Term Treasury 5.64%
Intermediate-Term Treasury 6.27
Long-Term Treasury 6.65
ARM Fund 5.94
GNMA Fund 6.92
Inflation-Adjusted Treasury 6.22
- -----------------------------------------------------------
Total returns quoted in advertising and sales literature reflect all aspects of
a Fund's return, including the effect of reinvesting dividends and capital gain
distributions and any change in the Fund's NAV during the period.
Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in a Fund over a stated period
and then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative return of 100% over 10
years would produce an average annual total return of 7.18%, which is the steady
annual rate that would result in 100% growth on a compounded basis in 10 years.
While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the Funds' performance is
not constant over time, but changes from year to year, and that average annual
returns represent averaged figures as opposed to actual year-to-year
performance.
The Funds' average annual returns for the one-year, five-year, ten-year, and
life-of-fund periods ended March 31, 1997, are indicated in the following table.
Average Annual Total Returns
- --------------------------------------------------------------------------------
Life-of-
Fund One-Year Five-Years Ten-Years Fund
- --------------------------------------------------------------------------------
Capital Preservation1 4.82% 3.99% 5.33% 5.33%
Government Agency2 4.89 4.09 N/A 4.96
Short-Term Treasury3 4.62 N/A N/A 4.41
Intermediate-Term
Treasury4 4.05 5.97 6.60 8.68
Long-Term Treasury3 2.65 N/A N/A 6.23
ARM Fund5 6.17 4.54 N/A 4.90
GNMA Fund6 5.84 6.75 8.14 8.72
Inflation-Adjusted
Treasury7 N/A N/A N/A (1.98)
- --------------------------------------------------------------------------------
1 Commenced operations on October 13, 1972.
2 Commenced operations on December 5, 1989.
3 Commenced operations on September 8, 1992.
4 Commenced operations on May 16, 1980.
5 Commenced operations on September 3, 1991.
6 Commenced operations on September 23, 1985.
7 Commenced operations on February 10, 1997.
In addition to average annual total returns, each Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount and may be calculated for a
Statement of Additional Information 11
single investment, a series of investments, or a series of redemptions over any
time period. Total returns may be broken down into their components of income
and capital (including capital gains and changes in share price) to illustrate
the relationship of these factors and their contributions to total return.
Performance information may be quoted numerically or in a table, graph, or
similar illustration.
The Funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indexes of market
performance. This may include comparisons with funds that, unlike American
Century funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be used for such comparisons may include, but are not
limited to, U.S. Treasury bill, note, and bond yields, money market fund yields,
U.S. government debt and percentage held by foreigners, the U.S. money supply,
net free reserves, and yields on current-coupon GNMAs (source: Board of
Governors of the Federal Reserve System); the federal funds and discount rates
(source: Federal Reserve Bank of New York); yield curves for U.S. Treasury
securities and AA/AAA-rated corporate securities (source: Bloomberg Financial
Markets); yield curves for AAA-rated tax-free municipal securities (source:
Telerate); yield curves for foreign government securities (sources: Bloomberg
Financial Markets and Data Resources, Inc.); total returns on foreign bonds
(source: J.P. Morgan Securities Inc.); various U.S. and foreign government
reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper Analytical Services, Inc. or Morningstar,
Inc.; mutual fund rankings published in major nationally distributed
periodicals; data provided by the Investment Company Institute; Ibbotson
Associates, Stocks, Bonds, Bills, and Inflation; major indexes of stock market
performance; and indexes and historical data supplied by major securities
brokerage or investment advisory firms. The Funds may also utilize reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance.
The Funds' shares are sold without a sales charge (or load). No-load funds offer
an advantage to investors when compared to load funds with comparable investment
objectives and strategies.
TAXES
FEDERAL INCOME TAX
Each Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying, each Fund will not incur federal or state income taxes on its net
investment income and on its net realized capital gains to the extent
distributed as dividends to shareholders.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a nondeductible 4% excise tax at the
Fund level. To avoid the tax, a Fund must distribute during each calendar year
an amount equal to the sum of (a) at least 98% if its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (b) at
least 98% of its capital gains in excess of capital losses (adjusted for certain
ordinary losses) for a one-year period generally ending on October 31st of the
calendar year, and (c) all ordinary income and capital gains for previous years
that were not distributed during such years.
Under the Code, dividends derived from interest, and any short-term capital
gains, are federally taxable to shareholders as ordinary income, regardless of
whether such dividends are taken in cash or reinvested in additional shares.
Distributions made from a Fund's net realized long-term capital gains (if any)
and designated as capital gain dividends are taxable to shareholders as
long-term capital gains, regardless of the length of time shares are held.
Corporate investors are not eligible for the dividends-received deduction with
respect to distributions from the Funds. A distribution will be treated as paid
on December 31st of a calendar year if it is declared by a Fund in October,
November or December of the year with a record date in such a month and paid by
the Fund during January of the following year. Such distributions will be
taxable to shareholders in the calendar year the distributions are declared,
rather than the calendar year in which the distributions are received.
12 American Century Investments
Upon redeeming, selling, or exchanging shares of a Variable-Price Fund, a
shareholder will realize a taxable gain or loss depending upon his or her basis
in the shares liquidated. The gain or loss generally will be long-term or
short-term depending on the length of time the shares were held. However, a loss
recognized by a shareholder in the disposition of shares on which capital gain
dividends were paid (or deemed paid) before the shareholder had held his or her
shares for more than six months would be treated as a long-term capital loss for
tax purposes to the extent of capital gain dividends paid (or deemed paid).
The Funds may invest in obligations issued at a discount. In that case, a
portion of the discount element generally is included in the Fund's investment
company taxable income in each taxable period in which the obligation is held.
Such amounts are subject to the Fund's tax-related distribution requirements
even if not received by the Fund in cash in that period.
Dividends paid by Capital Preservation, Government Agency, Short-Term Treasury,
Intermediate-Term Treasury, Long-Term Treasury and Inflation-Adjusted Treasury
are exempt from state personal income taxes in all states to the extent these
Funds derive their income from debt securities of the U.S. government, whose
interest payments are state tax-exempt.
The information above is only a summary of some of the tax considerations
generally affecting the Funds and their shareholders. No attempt has been made
to discuss individual tax consequences. The Funds' distributions may also be
subject to state, local, or foreign taxes. To determine whether a Fund is a
suitable investment based on his or her tax situation, a prospective investor
may wish to consult a tax advisor.
ABOUT THE TRUST
American Century Government Income Trust (the "Trust"), formerly known as Benham
Government Income Trust, is a registered open-end management investment company
that was organized as a Massachusetts business trust on July 24, 1985.
Currently, there are eight series of the Trust as follows: American Century -
Benham Capital Preservation Fund, American Century - Benham Government Agency
Money Market Fund (formerly known as Benham Government Agency Fund), American
Century - Benham Short-Term Treasury Fund (formerly known as Benham Short-Term
Treasury and Agency Fund), American Century - Benham Intermediate-Term Treasury
Fund (formerly known as Benham Treasury Note Fund), American Century - Benham
Long-Term Treasury Fund (formerly known as Benham Long-Term Treasury and Agency
Fund), American Century - Benham Adjustable Rate Government Securities Fund
(formerly known as Benham Adjustable Rate Government Securities Fund), American
Century - Benham GNMA Fund (formerly known as Benham GNMA Income Fund), and
American Century - Benham Inflation-Adjusted Treasury Fund. The Board of
Trustees may create additional series from time to time.
The Declaration of Trust permits the Board of Trustees to issue an unlimited
number of full and fractional shares of beneficial interest without par value,
which may be issued in series (funds). Shares issued are fully paid and
nonassessable when issued and have no preemptive, conversion, or similar rights.
Each series votes separately on matters affecting that series exclusively.
Voting rights are not cumulative, so that investors holding more than 50% of the
Trust's (i.e., all series') outstanding shares may elect a Board of Trustees.
The Trust has instituted dollar-based voting, meaning that the number of votes
you are entitled to is based upon the dollar value of your investment. The
election of Trustees is determined by the votes received from all Trust
shareholders, without regard to whether a majority of shareholders of any one
series voted in favor of a particular nominee or all nominees as a group. Each
shareholder has equal rights to dividends and distributions declared by the Fund
and to the net assets of such Fund upon its liquidation or dissolution
proportionate to his or her share ownership interest in the Fund. Shares of each
series have equal voting rights, although each series votes separately on
matters affecting that series exclusively.
Shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration
Statement of Additional Information 13
of Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Trust. The Declaration of Trust also provides for
indemnification and reimbursement of expenses of any shareholder held personally
liable for obligations of the Trust. The Declaration of Trust provides that the
Trust will, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. The Declaration of Trust further provides that the Trust may maintain
appropriate insurance (for example, fidelity, bonding, and errors and omissions
insurance) for the protection of the Trust, its shareholders, Trustees,
officers, employees, and agents to cover possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss because of shareholder
liability is limited to circumstances in which both inadequate insurance exists
and the Trust is unable to meet its obligations.
CUSTODIAN BANKS: Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, New
York 11245 and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64106,
serve as custodians of the Funds' assets. Services provided by the custodian
banks include (a) settling portfolio purchases and sales, (b) reporting failed
trades, (c) identifying and collecting portfolio income, and (d) providing
safekeeping of securities. The custodians take no part in determining the Funds'
investment policies or in determining which securities are sold or purchased by
the Fund.
INDEPENDENT AUDITORS: KPMG Peat Marwick LLP, 1000 Walnut, Suite 1600, Kansas
City, Missouri 64106, serves as the Trust's independent auditors and audits the
annual financial statements.
For the current fiscal year, which started on April 1, 1997, the Trustees of the
Funds have selected Coopers & Lybrand LLP to serve as independent auditors of
the Funds. The address of Coopers & Lybrand LLP is City Center Square, 1100 Main
Street, Suite 900, Kansas City, Missouri 64105-2140.
TRUSTEES AND OFFICERS
The Trust's activities are overseen by a Board of Trustees, including six
independent Trustees. The individuals listed below whose names are marked by an
asterisk (*) are "interested persons" of the Trust (as defined in the Investment
Company Act) by virtue of, among other considerations, their affiliation with
either the Trust; the Trust's Manager, American Century Investment Management,
Inc. (ACIM); the Trust's agent for transfer and administrative services,
American Century Services Corporation (ACS); the Trust's distribution agent,
American Century Investment Services, Inc. (ACIS); their parent corporation,
American Century Companies, Inc. (ACC) or ACC's subsidiaries; or other funds
advised by the Manager. Each Trustee listed below serves as Trustee or Director
of other funds advised by the Manager.
Unless otherwise noted, dates in parentheses indicate the dates the Trustee or
officer began his or her service in a particular capacity. The Trustees' and
officers' address with the exception of Mr. Stowers and Ms. Roepke is 1665
Charleston Road, Mountain View, California 94043. The address of Mr. Stowers and
Ms. Roepke is American Century Tower, 4500 Main Street, Kansas City, Missouri
64111.
TRUSTEES
*JAMES M. BENHAM, Chairman of the Board of Trustees (1985), President and Chief
Executive Officer (1996). Mr. Benham is also President and Chairman of the Board
of the Manager (1971), and a member of the Board of Governors of the Investment
Company Institute (1988). Mr. Benham has been in the securities business since
1963, and he frequently comments through the media on economic conditions,
investment strategies, and the securities markets.
ALBERT A. EISENSTAT, independent Trustee (1995). Mr. Eisenstat is an independent
Director of each of Commercial Metals Co. (1982), Sungard Data Systems (1991)
and Business Objects S/A (1994). Previously, he served as Vice President of
Corporate Development and Corporate Secretary of Apple Computer and served on
its Board of Directors (1985 to 1993).
RONALD J. GILSON, independent Trustee (1995); Mr. Gilson is Charles J. Meyers
Professor of Law and Business at Stanford Law School (1979) and the Mark and Eva
Stern Professor of Law and Business at Columbia University School of Law (1992);
counsel to Marron, Reid & Sheehy (a San Francisco law firm, 1984).
14 American Century Investments
MYRON S. SCHOLES, independent Trustee (1985). Mr. Scholes is a principal of
Long-Term Capital Management (1993). He is also Frank E. Buck Professor of
Finance at the Stanford Graduate School of Business (1983) and a Director of
Dimensional Fund Advisors (1982) and the Smith Breeden Family of Funds (1992).
From August 1991 to June 1993, Mr. Scholes was a Managing Director of Salomon
Brothers Inc. (securities brokerage).
KENNETH E. SCOTT, independent Trustee (1985). Mr. Scott is Ralph M. Parsons
Professor of Law and Business at Stanford Law School (1972) and a Director of
RCM Capital Funds, Inc. (1994).
ISAAC STEIN, independent Trustee (1992). Mr. Stein is former Chairman of the
Board (1990 to 1992) and Chief Executive Officer (1991 to 1992) of Esprit de
Corp. (clothing manufacturer). He is a member of the Board of Raychem
Corporation (electrical equipment, 1993), President of Waverley Associates, Inc.
(private investment firm, 1983), and a Director of ALZA Corporation
(pharmaceuticals, 1987). He is also a Trustee of Stanford University (1994) and
Chairman of Stanford Health Services (hospital, 1994).
*JAMES E. STOWERS III, Trustee (1995). Mr. Stowers III is Chief Executive
Officer and Director of ACC; President, Chief Executive Officer and Director of
ACS and ACIS.
JEANNE D. WOHLERS, independent Trustee (1985). Ms. Wohlers is a private investor
and an independent Director and Partner of Windy Hill Productions, LP.
Previously, she served as Vice President and Chief Financial Officer of Sybase,
Inc. (software company, 1988 to 1992).
OFFICERS
*JAMES M. BENHAM, President and Chief Executive Officer (1996).
*WILLIAM M. LYONS, Executive Vice President (1996); President, Chief Operating
Officer and General Counsel of ACC, Executive Vice President, Chief Operating
Officer and General Counsel of ASC and ACIS; Assistant Secretary of ACC;
Secretary of ACS and ACIS.
*DOUGLAS A. PAUL, Secretary (1988), Vice President (1990), and General Counsel
(1990); Secretary and Vice President of the funds advised by the Manager.
*C. JEAN WADE, Controller (1996).
*MARYANNE ROEPKE, CPA, Chief Financial Officer and Treasurer (1995); Vice
President and Assistant Treasurer of ACS.
The table on the next page summarizes the compensation that the Trustees
received for the Funds' fiscal year ended March 31, 1997, as well as the
compensation received for serving as a Director or Trustee of all other funds
advised by the Manager.
As of July 3, 1997, the Trust's officers and Trustees, as a group, owned less
than 1% of the outstanding shares of each Fund.
MANAGEMENT
Each Fund has an investment management agreement with the Manager dated August
1, 1997. This agreement was approved by the shareholders of the Funds (except
Capital Preservation) on July 30, 1997.
For the services provided to the Funds, the Manager receives a monthly fee based
on a percentage of the average net assets of the Fund. The annual rate at which
this fee is assessed is determined monthly in a two-step process: First, a fee
rate schedule is applied to the assets of all of the funds of its investment
category managed by the Manager (the "Investment Category Fee"). For example,
when calculating the fee for a Money Market Fund, all of the assets of the money
market funds managed by the Manager are aggregated. The three investment
categories are Money Market Funds, Bond Funds and Equity Funds. Second, a
separate fee rate schedule is applied to the assets of all of the funds managed
by the Manager (the "Complex Fee"). The Investment Category Fee and the Complex
Fee are then added to determine the unified management fee payable by the Fund
to the Manager.
Statement of Additional Information 15
<TABLE>
<CAPTION>
TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED MARCH 31, 1997
Aggregate Pension or Retirement Estimated Total Compensation
Name of Compensation Benefits Accrued As Part Annual Benefits From The American Century
Trustee1 From Each Fund2 of Fund Expenses Upon Retirement Family of Funds3
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert Eisenstat $17,891 (Capital Preservation) Not Applicable Not Applicable $72,250
1,761 (Government Agency)
1,048 (Short-Term)
1,510 (Intermediate-Term)
1,163 (Long-Term)
1,405 (ARM)
2,776 (GNMA)
134 (Inflation-Adjusted)
Ronald J. Gilson $10,349 (Capital Preservation) Not Applicable Not Applicable $70,250
1,677 (Government Agency)
1,061 (Short-Term)
1,467 (Intermediate-Term)
1,143 (Long-Term)
1,353 (ARM)
2,595 (GNMA)
133 (Inflation-Adjusted)
Myron S. Scholes $15,743 (Capital Preservation) Not Applicable Not Applicable $63,500
1,417 (Government Agency)
1,022 (Short-Term)
1,296 (Intermediate-Term)
1,079 (Long-Term)
1,214 (ARM)
1,996 (GNMA)
134 (Inflation-Adjusted)
Kenneth E. Scott $12,757 (Capital Preservation) Not Applicable Not Applicable $80,250
2,063 (Government Agency)
1,085 (Short-Term)
1,722 (Intermediate-Term)
1,240 (Long-Term)
1,559 (ARM)
3,486 (GNMA)
133 (Inflation-Adjusted)
Ezra Solomon4 $7,125 (Capital Preservation) Not Applicable Not Applicable $26,167
1,148 (Government Agency)
753 (Short-Term)
1,020 (Intermediate-Term)
821 (Long-Term)
961 (ARM)
1,680 (GNMA)
133 (Inflation-Adjusted)
Isaac Stein $10,585 (Capital Preservation) Not Applicable Not Applicable $71,250
1,715 (Government Agency)
1,064 (Short-Term)
1,493 (Intermediate-Term)
1,153 (Long-Term)
1,373 (ARM)
2,684 (GNMA)
134 (Inflation-Adjusted)
16 American Century Investments
TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED MARCH 31, 1997 (CONT.)
Aggregate Pension or Retirement Estimated Total Compensation
Name of Compensation Benefits Accrued As Part Annual Benefits From The American Century
Trustee1 From Each Fund2 of Fund Expenses Upon Retirement Family of Funds3
- ------------------------------------------------------------------------------------------------------------------------------
Jeanne D. Wohlers $19,012 (Capital Preservation) Not Applicable Not Applicable $77,000
1,941 (Government Agency)
1,061 (Short-Term)
1,635 (Intermediate-Term)
1,209 (Long-Term)
1,498 (ARM)
3,198 (GNMA)
134 (Inflation-Adjusted)
1 Interested Trustees receive no compensation for their services as such.
2 For the Fiscal year ended March 31, 1997, Capital Preservation paid fees to
the Trustees as an investment portfolio in American Century Capital
Preservation Fund, Inc., a registered investment company within the fund
complex, as described in footnote 3 below.
3 Includes compensation paid by the fifteen investment company members of the
American Century family of funds.
4 Retired December, 1996.
</TABLE>
The schedules by which the Investment Category Fee are determined are as
follows:
MONEY MARKET FUNDS
Category Assets Fee Rate
- ---------------------------------------
First $1 billion 0.2500%
Next $1 billion 0.2070%
Next $3 billion 0.1660%
Next $5 billion 0.1490%
Next $15 billion 0.1380%
Next $25 billion 0.1375%
Thereafter 0.1370%
- ---------------------------------------
VARIABLE-PRICE FUNDS (EXCEPT GNMA AND ARM)
Category Assets Fee Rate
- ---------------------------------------
First $1 billion 0.2800%
Next $1 billion 0.2280%
Next $3 billion 0.1980%
Next $5 billion 0.1780%
Next $15 billion 0.1650%
Next $25 billion 0.1630%
Thereafter 0.1625%
- ---------------------------------------
GNMA AND ARM
Category Assets Fee Rate
- ---------------------------------------
First $1 billion 0.3600%
Next $1 billion 0.3080%
Next $3 billion 0.2780%
Next $5 billion 0.2580%
Next $15 billion 0.2450%
Next $25 billion 0.2430%
Thereafter 0.2425%
- ---------------------------------------
The Complex Fee Schedule is as follows:
Complex Assets Fee Rate
- ---------------------------------------
First $2.5 billion 0.3100%
Next $7.5 billion 0.3000%
Next $15.0 billion 0.2985%
Next $25.0 billion 0.2970%
Next $50.0 billion 0.2960%
Next $100.0 billion 0.2950%
Next $100.0 billion 0.2940%
Next $200.0 billion 0.2930%
Next $250.0 billion 0.2920%
Next $500.0 billion 0.2910%
Thereafter 0.2900%
- ---------------------------------------
On the first business day of each month, the Funds pay a management fee to the
Manager for the previous month at the specified rate. The fee for the previous
month is calculated by multiplying the applicable fee for a Fund by the
aggregate average daily closing value of a Fund's net assets during the previous
month by a fraction, the numerator of which is the number of days in the
previous month and the denominator of which is 365 (366 in leap years).
The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution or until the first
meeting of shareholders following such execution and for as long thereafter as
its continuance is specifically approved at least annually by (1) the Funds'
Board of Trustees, or by the vote of a majority of outstanding
Statement of Additional Information 17
votes (as defined in the Investment Company Act) and (2) by the vote of a
majority of the Trustees of the Funds who are not parties to the agreement or
interested persons of the Manager, cast in person at a meeting called for the
purpose of voting on such approval.
The management agreement provides that it may be terminated at any time without
payment of any penalty by the Funds' Board of Trustees, or by a vote of a
majority of the Funds' shareholders, on 60 days' written notice to the Manager,
and that it shall be automatically terminated if it is assigned.
The management agreement provides that the Manager shall not be liable to the
Funds or its shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
The management agreement also provides that the Manager and its officers,
Trustees and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.
Certain investments may be appropriate for the Funds and also for other clients
advised by the Manager. Investment decisions for the Funds and other clients are
made with a view to achieving their respective investment objectives after
consideration of such factors as their current holdings, availability of cash
for investment, and the size of their investment generally. A particular
security may be bought or sold for only one client or series, or in different
amounts and at different times for more than one but less than all clients or
series. In addition, purchases or sales of the same security may be made for two
or more clients or series on the same date. Such transactions will be allocated
among clients in a manner believed by the Manager to be equitable to each. In
some cases this procedure could have an adverse effect on the price or amount of
the securities purchased or sold by the Fund.
The Manager may aggregate purchase and sale orders of the Funds with purchase
and sale orders of its other clients when the Manager believes that such
aggregation provides the best execution for the Funds. The Funds' Board of
Trustees has approved the policy of the Manager with respect to the aggregation
of portfolio transactions. Where portfolio transactions have been aggregated,
the Funds participate at the average share price for all transactions in that
security on a given day and share transaction costs on a pro rata basis. The
Manager will not aggregate portfolio transactions of the Funds unless it
believes such aggregation is consistent with its duty to seek best execution on
behalf of the Funds and the terms of the management agreement. The Manager
receives no additional compensation or remuneration as a result of such
aggregation.
In addition to managing the Funds, the Manager was also acting as an investment
adviser to 12 institutional accounts and to the following registered investment
companies: American Century Mutual Funds, Inc., American Century World Mutual
Funds, Inc., American Century Premium Reserves, Inc., American Century Variable
Portfolios, Inc., American Century Capital Portfolios, Inc., American Century
Strategic Asset Allocations, Inc., American Century Municipal Trust, American
Century Investment Trust, American Century Target Maturities Trust, American
Century California Tax-Free and Municipal Funds, American Century Quantitative
Equity Funds and American Century International Bond Funds.
Prior to August 1, 1997, Benham Management Corporation served as the investment
advisor to the Funds. Benham Management Corporation is, like the Manager,
wholly-owned by ACC.
Investment advisory fees paid by each Fund to the Manager for the fiscal years
ended March 31, 1997, 1996 and 1995 (or its affiliate, Benham Management
Corporation), are indicated in the following table. Fee amounts are net of
reimbursements.
18 American Century Investments
Investment Advisory Fees*
- --------------------------------------------------------------------------------
Fiscal Fiscal Fiscal
Fund 1997 1996 1995
- --------------------------------------------------------------------------------
Capital Preservation $8,107,075 $8,039,420 $7,631,805
Government Agency 1,441,378 1,104,214 1,014,951
Short-Term Treasury 77,935 118,721 60,440
Intermediate-Term Treasury 881,647 867,876 875,087
Long-Term Treasury 339,340 174,665 33,915
ARM Fund 730,283 971,274 1,646,614
GNMA Fund 3,115,478 2,980,327 2,807,230
Inflation-Adjusted Treasury 0 N/A N/A
- --------------------------------------------------------------------------------
*Net of Reimbursements
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend paying agent for the Funds. It
provides physical facilities, including computer hardware and software and
personnel, for the day-to-day administration of the Funds and of the Manager.
The Manager pays American Century Services Corporation for such services.
Prior to August 1, 1997, the Funds paid American Century Services Corporation
directly for its services as transfer agent and administrative services agent.
Administrative service and transfer agent fees paid by each Fund for the fiscal
years ended March 31, 1997, 1996, and 1995 are indicated in the following
tables. Fee amounts are net of reimbursements.
Administrative Fees*
- --------------------------------------------------------------------------------
Fiscal Fiscal Fiscal
Fund 1997 1996 1995
- --------------------------------------------------------------------------------
Capital Preservation $2,871,948 $2,896,754 $2,781,843
Government Agency 459,802 475,745 478,410
Short-Term Treasury 33,371 39,657 30,662
Intermediate-Term Treasury 300,336 301,079 312,814
Long-Term Treasury 112,936 69,302 23,884
ARM Fund 249,492 423,862 595,079
GNMA Fund 1,059,314 1,149,339 1,003,636
Inflation-Adjusted Treasury 0 N/A N/A
- --------------------------------------------------------------------------------
*Net of Reimbursements
Transfer Agent Fees*
- --------------------------------------------------------------------------------
Fiscal Fiscal Fiscal
Fund 1997 1996 1995
- --------------------------------------------------------------------------------
Capital Preservation $2,449,205 $2,536,792 $2,582,343
Government Agency 553,760 591,421 636,462
Short-Term Treasury 34,555 44,415 36,254
Intermediate-Term Treasury 258,334 283,949 317,653
Long-Term Treasury 181,017 120,818 37,365
ARM Fund 329,914 329,830 684,702
GNMA Fund 1,150,565 1,033,782 1,178,768
Inflation-Adjusted Treasury 0 N/A N/A
- --------------------------------------------------------------------------------
*Net of Reimbursements
DISTRIBUTION OF FUND SHARES
The Funds' shares are distributed by American Century Investment Services, Inc.
(the "Distributor"), a registered broker-dealer and an affiliate of the Manager.
The Manager pays all expenses for promoting and distributing the Funds' shares.
The Funds do not pay any commissions or other fees to the Distributor or to any
other broker-dealers or financial intermediaries in connection with the
distribution of Fund shares.
Statement of Additional Information 19
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Funds' shares are continuously offered at net asset value. Share
certificates are issued (without charge) only when requested in writing.
Certificates are not issued for fractional shares. Dividend and voting rights
are not affected by the issuance of certificates.
American Century may reject or limit the amount of an investment to prevent any
one shareholder or affiliated group from controlling the Trust or one of its
series; to avoid jeopardizing a Fund's tax status; or whenever, in the Manager's
opinion, such rejection is in the Trust's or a Fund's best interest.
As of July 3, 1997, to the knowledge of the Trust, the shareholders listed in
the following chart were the only record holders of greater than 5% of the
outstanding shares of the individual Funds.
FUND SHORT-TERM TREASURY
- ---------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94104
# of Shares Held 677,124
% of Total Shares
Outstanding 18.3%
- ---------------------------------------------------------
Shareholder Name and J. Harris Morgan
Address P.O. Box 556
Greenville, TX 75403
# of Shares Held 314,616
% of Total Shares
Outstanding 8.5%
- ---------------------------------------------------------
Shareholder Name and Allied Clearings Co.
Address P.O. Box 94303
Pasadena, CA 91109
# of Shares Held 197,075
% of Total Shares
Outstanding 5.3%
- ---------------------------------------------------------
FUND INTERMEDIATE-TERM TREASURY
- ---------------------------------------------------------
Shareholder Name and Chase Manhattan Bank NA
Address 770 Broadway 10th FL
New York, NY 10003
# of Shares Held 2,850,290
% of Total Shares
Outstanding 9.1%
- ---------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94104
# of Shares Held 3,029,972
% of Total Shares
Outstanding 9.7%
- ---------------------------------------------------------
FUND LONG-TERM TREASURY
- ---------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94104
# of Shares Held 7,694,829
% of Total Shares
Outstanding 55.5%
- ---------------------------------------------------------
FUND ARM FUND
- ---------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94104
# of Shares Held 1,268,779
% of Total Shares
Outstanding 5.3%
- ---------------------------------------------------------
FUND GNMA FUND
- ---------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94104
# of Shares Held 21,394,507
% of Total Shares
Outstanding 19.5%
- ---------------------------------------------------------
20 American Century Investments
FUND INFLATION-ADJUSTED TREASURY
- ---------------------------------------------------------
Shareholder Name and Leonard Chase
Address 2165 Gunpower Dr.
Palm Bay, FL 32905
# of Shares Held 40,150
% of Total Shares
Outstanding 8.9%
- ---------------------------------------------------------
Shareholder Name and American Century
Address Investment Management
4500 Main Street
Kansas City, MO 64111
# of Shares Held 101,445
% of Total Shares
Outstanding 22.6%
- ---------------------------------------------------------
ACS charges neither fees nor commissions on the purchase and sale of fund
shares. However, ACS may charge fees for special services requested by a
shareholder or necessitated by acts or omissions of a shareholder. For example,
ACS may charge a fee for processing dishonored investment checks or stop-payment
requests. See the Investor Services Guide for more information.
OTHER INFORMATION
For further information, please refer to registration statement and exhibits on
file with the SEC in Washington, DC. These documents are available upon payment
of a reproduction fee. Statements in the Prospectus and in this Statement of
Additional Information concerning the contents of contracts or other documents,
copies of which are filed as exhibits to the registration statement, are
qualified by reference to such contracts or documents.
Statement of Additional Information 21
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INFLATION-ADJUSTED TREASURY
For a Share Outstanding Throughout the Periods as Indicated
1997(1) 1997(2)
PER-SHARE DATA
<S> <C> <C>
Net Asset Value, Beginning of Period............................... $9.74 $10.00
---------- ----------
Income From Investment Operations
Net Investment Income........................................... 0.13 0.06
Net Unrealized Gain on Investment Transactions.................. (0.05) (0.26)
---------- ----------
Total From Investment Operations................................ 0.08 (0.20)
---------- ----------
Distributions
From Net Investment Income...................................... (0.13) (0.06)
---------- ----------
Net Asset Value, End of Period..................................... $9.69 $9.74
========== ==========
TOTAL RETURN(3)................................................. 0.85% (1.98)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets(4)............ 0.50% 0.50%
Ratio of Net Investment Income to Average Net Assets(4)......... 5.30% 5.03%
Portfolio Turnover Rate......................................... 32% -
Net Assets, End of Period (in thousands)........................ $4,312 $2,277
(1) Three months ended June 30, 1997 (unaudited).
(2) February 10, 1997 (inception) through March 31, 1997.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any, and are not annualized.
(4) Annualized.
</TABLE>
See Notes to Financial Statements
22 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment securities:
<S> <C>
U.S. Treasury Inflation Indexed Notes, 3.375%, 1/15/07, at value..................... $2,947,396
(principal amount and identified cost of $2,985,000 and $2,980,655, respectively)
Tennessee Valley Authority, 3.375%, 1/15/07, at value................................ 971,974
(principal amount and identified cost of $1,000,000 and $976,389, respectively)
Cash. .................................................................................. 329,123
Interest receivable..................................................................... 62,434
Prepaid expenses and other assets....................................................... 3,858
---------------
4,314,785
---------------
LIABILITIES
Payable for capital shares redeemed..................................................... 757
Payable to affiliates (Note 2).......................................................... 1,376
Dividends payable....................................................................... 1,148
---------------
3,281
---------------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES............................................. $4,311,504
===============
CAPITAL SHARES
Outstanding (Unlimited number of shares authorized)..................................... 444,923
===============
NET ASSET VALUE PER SHARE............................................................... $9.69
===============
NET ASSETS CONSIST OF:
Capital paid in......................................................................... $4,378,802
Accumulated undistributed net realized loss on investments.............................. (29,624)
Net unrealized depreciation on investments (Note 3)..................................... (37,674)
---------------
$4,311,504
===============
See Notes to Financial Statements
</TABLE>
Statement of Additional Information Statement of Assets and Liabilities 23
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INVESTMENT INCOME
INCOME:
<S> <C>
Interest................................................................... $49,945
-------------
EXPENSES (NOTE 2):
Registration and filing fees............................................... 3,672
Printing and postage....................................................... 9,411
Directors' fees and expenses............................................... 1,294
Investment advisory fees................................................... 2,393
Transfer agency fees....................................................... 1,507
Administrative fees........................................................ 816
Auditing and legal fees.................................................... 36
Other operating expenses................................................... 283
-------------
Total expenses......................................................... 19,412
Amount reimbursed.......................................................... (15,132)
-------------
Net expenses........................................................... 4,280
-------------
NET INVESTMENT INCOME...................................................... 45,665
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3)
Net realized loss on investments........................................... (29,624)
Change in net unrealized depreciation on investments....................... 7,634
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS............................ (21,990)
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $23,675
=============
</TABLE>
See Notes to Financial Statements
24 Statement of Operations American Century Investments
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
THREE MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND PERIOD ENDED MARCH 31, 1997
INCREASE IN NET ASSETS 1997(1) 1997(2)
OPERATIONS
<S> <C> <C>
Net investment income........................................................... $ 45,665 $ 10,540
Net realized loss on investments................................................ (29,624) -
Change in net unrealized depreciation on investments............................ 7,634 (45,308)
-------------- --------------
Net increase (decrease) in net assets resulting from operations................. 23,675 (34,768)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income...................................................... (45,665) (10,540)
-------------- --------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold....................................................... 2,400,704 2,627,000
Proceeds from reinvestment of distributions..................................... 42,564 8,426
Payments for shares redeemed.................................................... (387,150) (312,742)
-------------- --------------
Net increase in net assets from capital share transactions...................... 2,056,118 2,322,684
-------------- --------------
NET increase in net assets...................................................... 2,034,128 2,277,376
NET ASSETS
Beginning of period............................................................. 2,277,376 -
-------------- --------------
End of period................................................................... $4,311,504 $2,277,376
============== ==============
TRANSACTIONS IN SHARES OF THE FUNDS
Sold............................................................................ 246,578 264,716
Issued in reinvestment of distributions......................................... 4,378 861
Redeemed........................................................................ (39,796) (31,814)
-------------- --------------
Net increase.................................................................... 211,160 233,763
============== ==============
(1) Three months ended June 30, 1997 (unaudited).
(2) February 10, 1997 (inception) through March 31, 1997.
</TABLE>
See Notes to Financial Statements
Statement of Additional Information Statement of Changes in Net Assets 25
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Government Income Trust (the Trust) is
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. American Century -- Benham Treasury
Inflation-Adjusted Securities Fund is one of the seven funds composing the
Trust. The Fund's investment objective is to provide a total return consistent
with investment in U.S. Treasury inflation-adjusted securities. The Fund seeks
to achieve its investment objective by investing at least 65% of its total
assets in Treasury Inflation-Adjusted Securities that are backed by the full
faith and credit of the U.S. government and indexed or otherwise structured by
the U.S. Treasury to provide protection against inflation. Treasury
Inflation-Adjusted Securities may be issued by the U.S. Treasury in the form of
notes or bonds. Up to 35% of the Fund's total assets may be invested in Treasury
Inflation-Adjusted Securities issued by U.S. government agencies and
government-sponsored organizations, when such securities become available. The
Fund may also invest in U.S. Treasury securities which are not indexed to
inflation for liquidity and total return, or if at any time the manger believes
there is an inadequate supply of appropriate Treasury Inflation-Adjusted
Securities in which to invest. The following significant accounting policies,
related to the Fund, are in accordance with accounting policies generally
accepted in the investment company industry.
SECURITY VALUATIONS -- Securities are valued through valuations obtained through
a commercial pricing service or at the mean of the most recent bid and asked
prices. When valuations are not readily available, securities are valued at fair
value as determined in accordance with procedures adopted by the Board of
Trustees.
SECURITIES TRANSACTIONS -- Security transactions are accounted for on the date
purchased or sold. Net realized gains and losses are determined on the
identified cost basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes amortization of discounts and premiums. Premiums and discounts are
amortized using the effective interest rate method. The difference between
original principal and the inflation-adjusted principal is amortized on a
straight-line basis and is included in interest income.
INCOME TAX STATUS -- It is the Fund's policy to distribute all net investment
income and net realized capital gains to shareholders and to otherwise qualify
as a regulated investment company under the provisions of the Internal Revenue
Code. Accordingly, no provision has been made for federal or state taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared daily and distributed monthly. Distributions from net realized gains
are declared and paid annually.
The character of distributions made during the year from net investment income
or net realized capital gains may differ from their ultimate characterization
for federal income tax purposes. These differences are due to differences in the
recognition of income and expense items for financial statement and tax
purposes.
SUPPLEMENTARY INFORMATION -- Certain officers and trustees of the Trust are also
officers and/or directors, and, as a group, controlling stockholders of American
Century Companies, Inc. (ACC), the parent of the Trust's investment advisor,
Benham Management Corporation (BMC), the Trust's distributor, American Century
Investment Services, Inc. (ACIS), and the Trust's transfer agent, American
Century Services Corporation (ACSC).
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the period. Actual results could differ from these
estimates.
26 Notes to Financial Statements American Century Investments
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The Trust has entered into an Investment Advisory Agreement with BMC that
provides the Trust with investment advisory services in exchange for an
investment advisory fee. ACSC pays all compensation of Trust officers and
trustees who are officers or directors of ACC or any of its subsidiaries. In
addition, promotion and distribution expenses are paid by BMC. The investment
advisory fee is paid monthly by the Fund based on its pro rata share of the
dollar amount derived from applying the Trust's average daily closing net assets
to the following annualized investment advisory fee schedule:
0.50% of the first $100 million
0.45% of the next $100 million
0.40% of the next $100 million
0.35% of the next $100 million
0.30% of the next $100 million
0.25% of the next $1 billion
0.24% of the next $1 billion
0.23% of the next $1 billion
0.22% of the next $1 billion
0.21% of the next $1 billion
0.20% of the next $1 billion
0.19% of the average daily net assets over $6.5 billion
The Trust has an Administrative Services and Transfer Agency Agreement with
ACSC. Under the Agreement, ACSC provides substantially all administrative and
transfer agency services necessary to operate the Fund. Fees for these services
are based on transaction volume, number of accounts and average daily closing
net assets for funds advised by BMC.
The Trust has an additional agreement with BMC pursuant to which BMC established
a contractual expense guarantee that limits Fund expenses (excluding items such
as brokerage commissions, taxes, interest, custodian earnings credits, and
extraordinary expenses) to 0.50% of average daily closing net assets. The
agreement provides that BMC may recover amounts (representing expenses in excess
of the Fund's expense guarantee rate) absorbed during the preceding 11 months,
if, and to the extent that, for any given month, the Fund's expenses are less
than the expense guarantee rate in effect at that time.
The payable to affiliates as of June 30, 1997, based on the above agreements was
as follows:
Administrative Services and Transfer Agent . . . . . . . . . $1,376
On July 30, 1997, the shareholders of the Fund approved a new management
agreement with American Century Investment Management, Inc. (an affiliate of
BMC) which replaces the existing contracts between the Fund and BMC and ACSC for
advisory, administrative and transfer agency services. Under the agreement, ACIM
will provide all services required by the fund in exchange for one "unified"
fee. Had the new agreement been in effect for the fiscal year ended June 30,
1997, the annual expense ratio of the Fund would have been 0.58%. However, ACIM
has agreed to waive expenses which exceed 0.50% of average daily net assets
until May 31, 1998.
Final proxy tabulations were not available at the time this report was printed.
The Trust has a Distribution Agreement with ACIS, which is responsible for
promoting sales of and distributing the Trust's shares.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of U.S. Treasury and Agency obligations, other than
short-term investments, for the three months ended June 30, 1997, totaled
$2,852,482 and $988,785, respectively.
As of June 30, 1997, accumulated net unrealized depreciation was $37,674, which
consisted entirely of unrealized depreciation.
Statement of Additional Information Notes to Financial Statements 27
P.O. Box 419200
Kansas City, Missouri
64141-6200
Investor Services:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-444-3485
Fax: 816-340-7962
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9708 [recycled logo]
SH-BKT-9284 Recycled
<PAGE>
AMERICAN CENTURY GOVERNMENT INCOME TRUST
1933 Act Post-Effective Amendment No. 33
1940 Act Amendment No. 34
- --------------------------------------------------------------------------------
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS. Audited financial statements for each series of
American Century Government Income Trust for the fiscal year ended
March 31, 1997, are filed herein as included in the Trust's Statement
of Additional Information by reference to the Annual Report dated
March 31, 1997, filed on May 30, 1997 (Accession #
0000773674-97-000008).
(b) 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 # 0000773674-96-000004).
(b) Amendment to the Declaration of Trust dated October 21,
1996 is incorporated herein by reference to Exhibit 1 of
Post-Effective Amendment No. 31 filed on February 7, 1997
(Accession # 0000773674-97-000002).
(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 1 of Post-Effective Amendment No. 31 filed on February
7, 1997 (Accession # 0000773674-97-000002).
(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 # 0000773674-96-000004).
(3) Not applicable.
(4) (a) Specimen copy of American Century - Benham GNMA Fund share
certificate is incorporated herein by reference to Exhibit 4
to the registration statement filed on July 26, 1985.
(b) Specimen copy of American Century - Benham Adjustable Rate
Government Securities Fund share certificate is incorporated
herein by reference to Exhibit 4 to Post-Effective Amendment
No. 17 filed on September 30, 1991.
(c) Specimen copy of American Century - Benham
Intermediate-Term Treasury Fund share certificate is
incorporated herein by reference to Exhibit 4 to
Post-Effective Amendment No. 18 filed on November 27, 1991.
(d) Specimen copy of American Century - Benham Government
Agency Money Market Fund share certificate is incorporated
herein by reference to Exhibit 4 to Post-Effective Amendment
No. 18 filed on November 27, 1991.
(e) Specimen copy of American Century - Benham Short-Term
Treasury Fund share certificate is incorporated herein by
reference to Exhibit 4(e) to Post-Effective Amendment No. 24
filed on November 29, 1992.
(f) Specimen copy of American Century - Benham Long-Term
Treasury Fund share certificate is incorporated herein by
reference to Exhibit 4(f) to Post-Effective Amendment No. 24
filed on November 29, 1992.
(g) Specimen copy of American Century - Benham
Inflation-Adjusted Treasury Fund share certificate is
incorporated herein by reference to Exhibit 4 of
Post-Effective Amendment No. 31 filed on February 7, 1997
(Accession # 0000773674-97-000002).
(h) Specimen copy of American Century - Benham Capital
Preservation Fund share certificate to be filed by amendment.
(5) Investor Class Investment Management Agreement between
American Century - Benham Capital Preservation Fund, American
Century - Benham GNMA Fund, American Century - Benham
Government Agency Money Market Fund, American Century - Benham
Short-Term Treasury Fund, American Century - Benham
Intermediate-Term Treasury Fund, American Century - Benham
Long-Term Treasury Fund and American Century - Benham
Inflation Adjusted Treasury Fund and American Century
Investment Management, Inc. , dated as of August 1, 1997, is
included herein.
(6) Distribution Agreement between American Century Government
Income Trust and American Century Investment Services, Inc.
dated as of August 1, 1997, is included herein.
(7) Not applicable.
(8) 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 # 0000773674-97-000002).
(9) Transfer Agency Agreement between American Century Government
Income Trust and American Century Services Corporation, dated
as of August 1, 1997, is included herein.
(10) (a) Opinion and consent of counsel as to the legality of the
securities being registered, dated May 30, 1997 is
incorporated herein by reference to Rule 24f-2 Notice filed on
May 30, 1997 (Accession # 773674-97-000009).
(b) Opinion and consent of counsel as to the legality of the
American Century - Benham Capital Preservation Fund is
included herein.
(11) Consent of KPMG Peat Marwick LLP, independent auditors, is
included herein.
(12) Not applicable.
(13) Not applicable.
(14) (a) American Century Individual Retirement Account Plan,
including all instructions and other relevant documents, dated
February 1992, is incorporated herein by reference to Exhibit
14(a) to Post-Effective Amendment No. 23 filed on September
28, 1992.
(b) American Century Pension/Profit Sharing plan, including
all instructions and other relevant documents, dated February
1992, is incorporated herein by reference to Exhibit 14(b) to
Post-Effective Amendment No. 23 filed on September 28, 1992.
(15) Not applicable.
(16) Schedule for computation of each performance quotation
provided in response to Item 22 is included herein.
(17) Power of Attorney dated February 28, 1997 is included herein.
Item 25. Persons Controlled by or Under Common Control with Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
As of June 30, 1997, each series of Benham Government Income Trust had the
following number shareholders of record:
American Century - Benham Capital Preservation Fund 0
American Century - Benham Government Agency Money Market Fund 16,354
American Century - Benham Short-Term Treasury Fund 1,133
American Century - Benham Intermediate-Term Treasury Fund 9,152
American Century - Benham Long-Term Treasury Fund 2,892
American Century - Benham Adjustable Rate Government Securities Fund 11,279
American Century - Benham GNMA Fund 36,435
American Century - Benham Inflation-Adjusted Treasury Fund 248
Item 27. 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 or 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."
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 #
0000773674-96-000004).
Item 28. Business and Other Connections of Investment Advisor.
American Century Investment Management, Inc., the investment manager to each of
the Registrant's Funds, is engaged in the business of managing investments for
deferred compensation plans and other institutional investors.
Item 29. Principal Underwriters.
The Registrant's distribution agent, American Century Investment Services, Inc.,
is distribution agent to American Century Capital Preservation Fund, Inc.,
American Century Capital Preservation Fund II, Inc., American Century California
Tax-Free and Municipal Funds, American Century Government Income Trust, American
Century Municipal Trust, American Century Target Maturities Trust, American
Century Quantitative Equity Funds, American Century International Bond Funds,
American Century Investment Trust, American Century Manager Funds, American
Century Variable Portfolios, Inc., American Century Capital Portfolios, Inc.,
American Century Mutual Funds, Inc., American Century Premium Reserves, Inc.,
American Century Strategic Asset Allocations, Inc. and American Century World
Mutual Funds, Inc. The information required with respect to each director,
officer or partner of American Century Investment Services, Inc. is incorporated
herein by reference to American Century Investment Services, Inc. Form B-D filed
on November 21, 1985 (SEC File No. 8-35220; Firm CRD No. 17437).
Item 30. Location of Accounts and Records.
American Century Investment Management, Inc., the Registrant and its agent for
transfer and administrative services, American Century Services Corporation,
maintain their principal office at 4500 Main St., Kansas City, MO 64111.
American Century Services Corporation maintains physical possession of each
account, book, or other document, and shareholder records as required by
ss.31(a) of the 1940 Act and rules thereunder. The computer and data base for
shareholder records are located at Central Computer Facility, 401 North Broad
Street, Sixth Floor, Philadelphia, PA 19108.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
(b) Registrant hereby undertakes to call a meeting of shareholders of the Trust
upon written request of shareholders owning at least one-tenth of the
outstanding shares.
(c) Registrant hereby undertakes to file, with respect to American
Century--Benham Capital Preservation Fund, a post-effective amendment using
financial statements which need not be certified, within four to six months
from the commencement of operations.
(d) The Registrant undertakes to assist shareholders in their communications
with other shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 33/Amendment No. 34 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Mountain View, and State of
California, on the 25th day of July, 1997. I hereby certify that this Amendment
meets the requirement for immediate effectiveness pursuant to Rule 485(b).
AMERICAN CENTURY GOVERNMENT INCOME TRUST
By: /s/ Douglas A. Paul
Douglas A. Paul
Vice President and Associate General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 33/Amendment No. 34 has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Date
<S> <C> <C>
* Chairman of the Board of Trustees, July 25, 1997
- --------------------------------- President, and
James M. Benham Chief Executive Officer
* Trustee July 25, 1997
- ---------------------------------
Albert A. Eisenstat
* Trustee July 25, 1997
- ---------------------------------
Ronald J. Gilson
* Trustee July 25, 1997
- ---------------------------------
Myron S. Scholes
* Trustee July 25, 1997
- ---------------------------------
Kenneth E. Scott
* Trustee July 25, 1997
- ---------------------------------
Isaac Stein
* Trustee July 25, 1997
- ---------------------------------
James E. Stowers III
* Trustee July 25, 1997
- ---------------------------------
Jeanne D. Wohlers
* Chief Financial Officer, Treasurer July 25, 1997
- ---------------------------------
Maryanne Roepke
</TABLE>
/s/ Douglas A. Paul
*by Douglas A. Paul, Attorney in Fact (pursuant to a Power of Attorney dated
February 28, 1997).
EXHIBIT DESCRIPTION
EX-99.B1 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 #
0000773674-96-000004).
b) Amendment to the Declaration of Trust dated October 21, 1996 is
incorporated herein by reference to Exhibit 1 of Post-Effective
Amendment No. 31 filed on February 7, 1997 (Accession #
0000773674-97-000002).
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 1 of
Post-Effective Amendment No. 31 filed on February 7, 1997 (Accession
# 0000773674-97-000002).
EX-99.B2 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 # 0000773674-96-000004).
EX-99.B4) a) Specimen copy of American Century - Benham GNMA Fund share
certificate is incorporated herein by reference to Exhibit 4 to the
registration statement filed on July 26, 1985.
b) Specimen copy of American Century - Benham Adjustable Rate
Government Securities Fund share certificate is incorporated herein
by reference to Exhibit 4 to Post-Effective Amendment No. 17 filed
on September 30, 1991.
c) Specimen copy of American Century - Benham Intermediate-Term
Treasury Fund share certificate is incorporated herein by reference
to Exhibit 4 to Post-Effective Amendment No. 18 filed on November
27, 1991.
d) Specimen copy of American Century - Benham Government Agency
Money Market Fund share certificate is incorporated herein by
reference to Exhibit 4 to Post-Effective Amendment No. 18 filed on
November 27, 1991.
e) Specimen copy of American Century - Benham Short-Term Treasury
Fund share certificate is incorporated herein by reference to
Exhibit 4(e) to Post-Effective Amendment No. 24 filed on November
29, 1992.
f) Specimen copy of American Century - Benham Long-Term Treasury
Fund share certificate is incorporated herein by reference to
Exhibit 4(f) to Post-Effective Amendment No. 24 filed on November
29, 1992.
g) Specimen copy of American Century - Benham Inflation-Adjusted
Treasury Fund share certificate is incorporated herein by reference
to Exhibit 4 of Post-Effective Amendment No. 31 filed on February 7,
1997 (Accession # 0000773674-97-000002).
h) Specimen copy of American Century - Benham Capital Preservation
Fund share certificate to be filed by amendment.
EX-99.B5 Investor Class Investment Management Agreement between American
Century - Benham Capital Preservation Fund, American Century -
Benham GNMA Fund, American Century - Benham Government Agency Money
Market Fund, American Century - Benham Short-Term Treasury Fund,
American Century - Benham Intermediate-Term Treasury Fund, American
Century - Benham Long-Term Treasury Fund and American Century -
Benham Inflation Adjusted Treasury Fund and American Century
Investment Management, Inc. , dated as of August 1, 1997, is
included herein.
EX-99.B6 Distribution Agreement between American Century Government Income
Trust and American Century Investment Services, Inc. dated as of
August 1, 1997, is included herein.
EX-99.B8 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 # 0000773674-97-000002).
EX-99.B9 Transfer Agency Agreement between American Century Government Income
Trust and American Century Services Corporation, dated as of August
1, 1997, is included herein.
EX-99.B10 a) Opinion and consent of counsel as to the legality of the
securities being registered, dated May 30, 1997 is incorporated
herein by reference to Rule 24f-2 Notice filed on May 30, 1997
(Accession # 773674-97-000009).
b) Opinion and consent of counsel as to the legality of the American
Century - Benham Capital Preservation Fund is included herein.
EX-99.B11 Consent of KPMG Peat Marwick LLP, independent auditors, is included
herein.
EX-99.B14 a) American Century Individual Retirement Account Plan, including
all instructions and other relevant documents, dated February 1992,
is incorporated herein by reference to Exhibit 14(a) to
Post-Effective Amendment No. 23 filed on September 28, 1992.
b) American Century Pension/Profit Sharing plan, including all
instructions and other relevant documents, dated February 1992, is
incorporated herein by reference to Exhibit 14(b) to Post-Effective
Amendment No. 23 filed on September 28, 1992.
EX-99.B16 Schedule for computation of each performance quotation provided in
response to Item 22 is included herein.
EX-99.B17 Power of Attorney dated February 28, 1997 is included herein.
EX-27.5.1 FDS for American Century - Benham GNMA Fund.
EX-27.5.2 FDS for American Century - Benham Intermediate-Term Treasury Fund.
EX-27.4.3 FDS for American Century - Benham Government Agency Money Market
Fund.
EX-27.5.4 FDS for American Century - Benham Adjustable Rate Government
Securities Fund.
EX-27.5.5 FDS for American Century - Benham Short-Term Treasury Fund.
EX-27.5.6 FDS for American Century - Benham Long-Term Treasury Fund.
EX-27.5.7 FDS for American Century - Benham Inflation-Adjusted Treasury Fund
(for the period ended March 31, 1997)
EX-27.5.8 FDS for American Century - Benham Inflation-Adjusted Treasury Fund
(for the period ended June 30, 1997)
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
MANAGEMENT AGREEMENT
Investor Class
This MANAGEMENT AGREEMENT is made and entered into by and between the
registered investment companies listed on Exhibit A to this Agreement (the
"Companies"), as of the dates noted on such Exhibit A, and American Century
Investment Management, Inc., a Delaware corporation (the "Investment Manager").
IN CONSIDERATION of the mutual promises and agreements herein
contained, the parties agree as follows:
1. Investment Management Services. The Investment Manager shall supervise
the investments of each series of shares of the Companies contemplated
as of the date hereof, and such subsequent series of shares as the
Companies shall select the Investment Manager to manage. In such
capacity, the Investment Manager shall maintain a continuous investment
program for each such series, determine what securities shall be
purchased or sold by each series, secure and evaluate such information
as it deems proper and take whatever action is necessary or convenient
to perform its functions, including the placing of purchase and sale
orders.
2. Compliance With Laws. All functions undertaken by the Investment
Manager hereunder shall at all times conform to, and be in accordance
with, any requirements imposed by:
(a) the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules and regulations promulgated thereunder;
(b) any other applicable provisions of law;
(c) the Declaration of Trust or Articles of Incorporation
applicable to each of the Companies as amended from time to
time;
(d) the By-Laws of the Companies as amended from time to time; and
(e) the registration statement of the Companies, as amended from
time to time, filed under the Securities Act of 1933 and the
1940 Act.
3. Board Supervision. All of the functions undertaken by the Investment
Manager hereunder shall at all times be subject to the direction of the
Board of Trustees or Board of Directors (collectively, the "Board of
Directors") of the Companies, its executive committee, or any committee
or officers of the Companies acting under the authority of the Board of
Directors.
4. Payment Of Expenses. The Investment Manager will pay all of the
expenses of each series of the Companies' shares that it shall manage,
other than interest, taxes, brokerage commissions, portfolio insurance,
extraordinary expenses and the fees and expenses of those Directors who
are not "interested persons" as defined in 1940 Act (hereinafter
referred to as the "Independent Directors") (including counsel fees).
The Investment Manager will provide the Companies with all physical
facilities and personnel required to carry on the business of each
series that the Investment Manager shall manage, including but not
limited to office space, office furniture, fixtures and equipment,
office supplies, computer hardware and software and salaried and hourly
paid personnel. The Investment Manager may at its expense employ others
to provide all or any part of such facilities and personnel.
5. Account Fees. The Board of Directors may impose fees for various
account services, proceeds of which may be remitted to the appropriate
Fund or the Investment Manager at the discretion of the Board. At least
60 days' prior written notice of the intent to impose such fee must be
given to the shareholders of the affected series.
6. Management Fees.
(a) In consideration of the services provided by the Investment
Manager, each series of shares of the Companies managed by the
Investment Manager shall pay to the Investment Manager a per
annum management fee (hereinafter, the "Applicable Fee"). The
calculation of the Applicable Fee for a series is performed as
follows:
(i) Each series is assigned to one of three categories
based on its overall investment objective
("Investment Category"). The Investment Category
assignments appear in Exhibit B to this Agreement.
(ii) Each series is assigned a fee schedule within its
Investment Category in Exhibit C to this Agreement.
The Investment Category assets managed by the
Investment Manager determines the first component of
a series' fee. This fee is referred to as the
"Investment Category Fee". The determination of the
Investment Category assets is as follows:
a) Money Market Fund Category. The assets which
are used to determine the fee for this
Investment Category is the sum of the assets
of all of the open-end investment company
series which invest primarily in debt
securities, are subject to Rule 2a-7 under
the 1940 Act, managed by the Investment
Manager and distributed to the public by
American Century Investment Services, Inc.
b) Bond Fund Category. The assets which are
used to determine the fee for this
Investment Category is the sum the assets of
all of the open-end investment company
series which invest primarily in debt
securities, are not subject to Rule 2a-7
under the 1940 Act, are managed by the
Investment Manager and are distributed to
the public by American Century Investment
Services, Inc.
c) Equity Fund Category. The assets which are
used to determine the fee for this
Investment Category is the sum the assets of
all of the open-end investment company
series which invest primarily in equity
securities, are managed by the Investment
Manager and are distributed to the public by
American Century Investment Services, Inc.
(iii) A fee which is based on the total assets in all of
the Investment Categories is determined by the
schedule which appears in Exhibit D. This fee is
referred to as the series' "Complex Fee".
(iv) The Applicable Fee for a series is the sum of the
Investment Category Fee and the Complex Fee.
(v) The assets which are used to compute the Applicable
Fee shall be the assets of all of the open-end
investment companies managed by the Investment
Manager. Any exceptions to this requirement shall be
approved by the Board of Directors of the Companies.
(b) On the first business day of each month, each series of shares
shall pay the management fee at the rate specified by
subparagraph (a) of this paragraph 6 to the Investment Manager
for the previous month. The fee for the previous month shall
be calculated by multiplying the Applicable Fee for such
series by the aggregate average daily closing value of the
series' net assets during the previous month, and further
multiplying that product by a fraction, the numerator of which
shall be the number of days in the previous month, and the
denominator of which shall be 365 (366 in leap years).
(c) In the event that the Board of Directors of a Company shall
determine to issue any additional series of shares for which
it is proposed that the Investment Manager serve as investment
manager, the Company and the Investment Manager shall enter
into an Addendum to this Agreement setting forth the name of
the series, the Applicable Fee and such other terms and
conditions as are applicable to the management of such series
of shares.
7. Continuation Of Agreement. This Agreement shall continue in effect,
unless sooner terminated as hereinafter provided, for a period of two
years from the execution hereof, and for as long thereafter as its
continuance is specifically approved, as to each series of the
Companies, at least annually (i) by the Board of Directors of the
Companies or by the vote of a majority of the outstanding voting
securities of the Companies, and (ii) by the vote of a majority of the
Directors of the Companies, who are not parties to the agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
8. Termination. This Agreement may be terminated, with respect to any
series, by the Investment Manager at any time without penalty upon
giving the appropriate Company 60 days' written notice, and may be
terminated, with respect to any series, at any time without penalty by
the Board of Directors of a Company or by vote of a majority of the
outstanding voting securities of such series on 60 days' written notice
to the Investment Manager.
9. Effect Of Assignment. This Agreement shall automatically terminate in
the event of assignment by the Investment Manager, the term
"assignment" for this purpose having the meaning defined in Section
2(a)(4) of the 1940 Act.
10. Other Activities. Nothing herein shall be deemed to limit or restrict
the right of the Investment Manager, or the right of any of its
officers, directors or employees (who may also be a trustee, officer or
employee of a Company), to engage in any other business or to devote
time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, firm, individual or
association.
11. Standard Of Care. In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of its obligations or duties
hereunder on the part of the Investment Manager, it, as an inducement
to it to enter into this Agreement, shall not be subject to liability
to the Companies or to any shareholder of the Companies for any act or
omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
12. Separate Agreement. The parties hereto acknowledge that certain
provisions of the 1940 Act, in effect, treat each series of shares of a
registered investment company as a separate investment company.
Accordingly, the parties hereto hereby acknowledge and agree that, to
the extent deemed appropriate and consistent with the 1940 Act, this
Agreement shall be deemed to constitute a separate agreement between
the Investment Manager and each series of shares of the Companies
managed by the Investment Manager.
13. Use of the Names "American Century" and "Benham." The name "American
Century" and all rights to the use of the names "American Century" and
"Benham" are the exclusive property of American Century Services
Corporation ("ACSC"), an affiliate of the Investment Manager. ACSC has
consented to, and granted a non-exclusive license for, the use by the
Companies and their respective series of the names "American Century"
and "Benham" in the name of the Companies and any series of shares
thereof. Such consent and non-exclusive license may be revoked by ACSC
in its discretion if ACSC, the Investment Manager, or a subsidiary or
affiliate of either of them is not employed as the investment manager
of each series of shares of the Companies. In the event of such
revocation, the Companies and each series of shares thereof using the
name "American Century" or "Benham" shall cease using the name
"American Century" or "Benham", unless otherwise consented to by ACSC
or any successor to its interest in such names.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
indicated on Exhibit A.
AMERICAN CENTURY CALIFORNIA TAX-FREE AND
MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY TARGET MATURITIES TRUST
Attest:
/*/Douglas A. Paul /*/James M. Benham
Secretary President and Chief Executive Officer
Attest: AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
/*/William M. Lyons /*/James E. Stowers III
Secretary President and Chief Executive Officer
<PAGE>
Exhibit A
<TABLE>
Registered Investment Companies Subject to Management Agreement
- --------------------------------------------------------------------------------- ----------------------------------
Registered Investment Company and Funds Date
- --------------------------------------------------------------------------------- ----------------------------------
<S> <C>
American Century California Tax-Free and Municipal Funds
Benham California High Yield Municipal Fund August 1, 1997
Benham California Insured Tax-Free Fund August 1, 1997
Benham California Intermediate-Term Tax-Free Fund August 1, 1997
Benham California Limited-Term Tax-Free Fund August 1, 1997
Benham California Long-Term Tax-Free Fund August 1, 1997
Benham California Municipal Money Market Fund August 1, 1997
Benham California Tax-Free Money Market Fund August 1, 1997
American Century Government Income Trust
Benham Capital Preservation Fund August 1, 1997
Benham GNMA Fund August 1, 1997
Benham Government Agency Money Market Fund August 1, 1997
Benham Inflation-Adjusted Treasury Fund August 1, 1997
Benham Intermediate-Term Treasury Fund August 1, 1997
Benham Long-Term Treasury Fund August 1, 1997
Benham Short-Term Government Fund August 1, 1997
Benham Short-Term Treasury Fund August 1, 1997
American Century International Bond Funds
Benham International Bond Fund August 1, 1997
American Century Investment Trust
Benham Prime Money Market Fund August 1, 1997
American Century Municipal Trust
Benham Arizona Intermediate-Term Municipal Fund August 1, 1997
Benham Florida Intermediate-Term Municipal Fund August 1, 1997
Benham Florida Municipal Money Market Fund August 1, 1997
Benham Intermediate-Term Tax-Free Fund August 1, 1997
Benham Limited-Term Tax-Free Fund August 1, 1997
Benham Long-Term Tax-Free Fund August 1, 1997
Benham Tax-Free Money Market Fund August 1, 1997
American Century Quantitative Equity Funds
American Century Equity Growth Fund August 1, 1997
American Century Global Gold Fund August 1, 1997
American Century Global Natural Resources Fund August 1, 1997
American Century Income & Growth Fund August 1, 1997
American Century Utilities Fund August 1, 1997
American Century Target Maturities Trust
Benham Target Maturities Trust: 2000 August 1, 1997
Benham Target Maturities Trust: 2005 August 1, 1997
Benham Target Maturities Trust: 2010 August 1, 1997
Benham Target Maturities Trust: 2015 August 1, 1997
Benham Target Maturities Trust: 2020 August 1, 1997
Benham Target Maturities Trust: 2025 August 1, 1997
- --------------------------------------------------------------------------------- ----------------------------------
</TABLE>
By executing this Exhibit A, each Fund executes the Management Agreement to
which it is attached and all of its Exhibits and amendments as of the date
specified above.
AMERICAN CENTURY CALIFORNIA TAX-FREE AND
MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY INVESTMENT AMERICAN CENTURY TARGET MATURITIES TRUST
MANAGEMENT, INC.
/*/James E. Stowers III /*/James M. Benham
President and President and
Chief Executive Officer Chief Executive Officer
<PAGE>
Exhibit B
Series Investment Categories
- --------------------------------------------------------------------------------
Investment Category Series
- --------------------------------------------------------------------------------
Money Market Funds Benham California Municipal Money Market Fund
Benham California Tax-Free Money Market Fund
Benham Capital Preservation Fund
Benham Florida Municipal Money Market Fund
Benham Government Agency Money Market Fund
Benham Prime Money Market Fund
Benham Tax-Free Money Market Fund
Bond Funds Benham Arizona Intermediate-Term Municipal Fund
Benham California High Yield Municipal Fund
Benham California Insured Tax-Free Fund
Benham California Intermediate-Term Tax-Free Fund
Benham California Limited-Term Tax-Free Fund
Benham California Long-Term Tax-Free Fund
Benham Florida Intermediate-Term Municipal Fund
Benham GNMA Fund
Benham Inflation-Adjusted Treasury Fund
Benham Intermediate-Term Tax-Free Fund
Benham Intermediate-Term Treasury Fund
Benham International Bond Fund
Benham Limited-Term Tax-Free Fund
Benham Long-Term Tax-Free Fund
Benham Long-Term Treasury Fund
Benham Short-Term Government Fund
Benham Short-Term Treasury Fund
Benham Target Maturities Trust: 2000
Benham Target Maturities Trust: 2005
Benham Target Maturities Trust: 2010
Benham Target Maturities Trust: 2015
Benham Target Maturities Trust: 2020
Benham Target Maturities Trust: 2025
Equity Funds American Century Equity Growth Fund
American Century Global Gold Fund
American Century Global Natural Resources Fund
American Century Income & Growth Fund
American Century Utilities Fund
- --------------------------------------------------------------------------------
Dated: August 1, 1997
AMERICAN CENTURY CALIFORNIA TAX-FREE AND
MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY INVESTMENT AMERICAN CENTURY TARGET MATURITIES TRUST
MANAGEMENT, INC.
As executed on behalf of As executed on behalf of the above in
the above inExhibit A by Exhibit A by
James E. Stowers III James M. Benham
President and President and
Chief Executive Officer Chief Executive Officer
<PAGE>
Exhibit C
<TABLE>
Investment Category Fee Schedules: Money Market Funds
Schedule 1
------------------------------------------------------------------
<S> <C> <C>
CATEGORY ASSETS FEE RATE Schedule 1 Funds:
First $1 billion 0.2500% Benham Capital Preservation Fund
Next $1 billion 0.2070% Benham Government Agency Money Market Fund
Next $3 billion 0.1660% ------------------------------------------------------------------
Next $5 billion 0.1490%
Next $15 billion 0.1380%
Next $25 billion 0.1375%
Thereafter 0.1370%
Schedule 2
------------------------------------------------------------------
CATEGORY ASSETS FEE RATE Schedule 2 Funds:
First $1 billion 0.2700% Benham California Tax-Free Money Market Fund
Next $1 billion 0.2270% Benham California Municipal Money Market Fund
Next $3 billion 0.1860% Benham Florida Municipal Money Market Fund
Next $5 billion 0.1690% Benham Tax-Free Money Market Fund
Next $15 billion 0.1580% ------------------------------------------------------------------
Next $25 billion 0.1575%
Thereafter 0.1570%
Schedule 3
------------------------------------------------------------------
CATEGORY ASSETS FEE RATE Schedule 3 Funds:
First $1 billion 0.3700% Benham Prime Money Market Fund
Next $1 billion 0.3270% ------------------------------------------------------------------
Next $3 billion 0.2860%
Next $5 billion 0.2690%
Next $15 billion 0.2580%
Next $25 billion 0.2575%
Thereafter 0.2570%
<PAGE>
Category Fee Schedules: Bond Funds
Schedule 1
------------------------------------------------------------------
CATEGORY ASSETS FEE RATE Schedule 1 Funds:
First $1 billion 0.2800% Benham Short-Term Treasury Fund
Next $1 billion 0.2280% Benham Intermediate-Term Treasury Fund
Next $3 billion 0.1980% Benham Long-Term Treasury Fund
Next $5 billion 0.1780% Benham California Limited-Term Municipal Fund
Next $15 billion 0.1650% Benham California Intermediate-Term Municipal Fund
Next $25 billion 0.1630% Benham California Long-Term Municipal Fund
Thereafter 0.1625% Benham California Insured Tax-Free Fund
Benham Arizona Intermediate-Term Municipal Fund
Benham Florida Intermediate-Term Municipal Fund
Benham Limited-Term Tax-Free Fund
Benham Intermediate-Term Tax-Free Fund
Benham Long-Term Tax-Free Fund
Benham Inflation-Adjusted Treasury Fund
------------------------------------------------------------------
Schedule 2
------------------------------------------------------------------
CATEGORY ASSETS FEE RATE Schedule 2 Funds:
First $1 billion 0.3100% Benham California High-Yield Municipal Fund
Next $1 billion 0.2580% ------------------------------------------------------------------
Next $3 billion 0.2280%
Next $5 billion 0.2080%
Next $15 billion 0.1950%
Next $25 billion 0.1930%
Thereafter 0.1925%
Schedule 3
------------------------------------------------------------------
CATEGORY ASSETS FEE RATE Schedule 3 Funds:
First $1 billion 0.3600% Benham GNMA Fund
Next $1 billion 0.3080% Benham Short-Term Government Fund
Next $3 billion 0.2780% Benham Target Maturities Trust: 2000
Next $5 billion 0.2580% Benham Target Maturities Trust: 2005
Next $15 billion 0.2450% Benham Target Maturities Trust: 2010
Next $25 billion 0.2430% Benham Target Maturities Trust: 2015
Thereafter 0.2425% Benham Target Maturities Trust: 2020
Benham Target Maturities Trust: 2025
------------------------------------------------------------------
Category Fee Schedules: Bond Funds
(continued)
Schedule 4
------------------------------------------------------------------
CATEGORY ASSETS FEE RATE Schedule 4 Funds:
First $1 billion 0.6100% Benham International Bond Fund
Next $1 billion 0.5580% ------------------------------------------------------------------
Next $3 billion 0.5280%
Next $5 billion 0.5080%
Next $15 billion 0.4950%
Next $25 billion 0.4930%
Thereafter 0.4925%
Category Fee Schedules: Equity Funds
Schedule 1
------------------------------------------------------------------
CATEGORY ASSETS FEE RATE Schedule 1 Funds:
First $1 billion 0.5200% American Century Equity Growth Fund
Next $5 billion 0.4600% American Century Global Gold Fund
Next $15 billion 0.4160% American Century Global Natural Resources Fund
Next $25 billion 0.3690% American Century Income & Growth Fund
Next $50 billion 0.3420% American Century Utilities Fund
Next $150 billion 0.3390% ------------------------------------------------------------------
Thereafter 0.3380%
Dated: August 1, 1997
AMERICAN CENTURY CALIFORNIA TAX-FREE AND
MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC. AMERICAN CENTURY TARGET MATURITIES TRUST
As executed on behalf of the above in As executed on behalf of the above in
Exhibit A by Exhibit A by
James E. Stowers III James M. Benham
President and Chief Executive Officer President and Chief Executive Officer
</TABLE>
<PAGE>
Exhibit D
Complex Fee Schedule
COMPLEX ASSETS FEE RATE
First $2.5 billion 0.3100%
Next $7.5 billion 0.3000%
Next $15.0 billion 0.2985%
Next $25.0 billion 0.2970%
Next $50.0 billion 0.2960%
Next $100.0 billion 0.2950%
Next $100.0 billion 0.2940%
Next $200.0 billion 0.2930%
Next $250.0 billion 0.2920%
Next $500.0 billion 0.2910%
Thereafter 0.2900%
Dated: August 1, 1997
AMERICAN CENTURY CALIFORNIA TAX-FREE AND
MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY INVESTMENT AMERICAN CENTURY TARGET MATURITIES TRUST
MANAGEMENT, INC.
As executed on behalf of As executed on behalf of the above in
the above in Exhibit A by Exhibit A by
James E. Stowers III James M. Benham
President and President and Chief Executive Officer
Chief Executive Officer
AMERICAN CENTURY INVESTMENT SERVICES, INC.
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT is made and entered into by and between
each of the open-end management investment companies listed on SCHEDULE A,
attached hereto, as of the dates noted on such SCHEDULE A, together with all
other open end management investment companies subsequently established and made
subject to this Agreement in accordance with SECTION 11 (the "Issuers") and
AMERICAN CENTURY INVESTMENT SERVICES, INC., a Delaware corporation
("Distributor").
WHEREAS, the common stock of each of the Issuers is currently divided
into a number of separate series of shares, or funds, each corresponding to a
distinct portfolio of securities, and many of which are also divided into
multiple classes of shares; and
WHEREAS, Distributor is a registered as a broker-dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc.;
and
WHEREAS, the Boards of Directors of the Issuers (the "Board") wish to
engage the Distributor to act as the distributor of the Funds;
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the parties agree as follows:
Section 1. General Responsibilities
Each Issuer hereby engages Distributor to act as exclusive distributor of the
shares of each class of its separate series, and any other series and classes as
may be designated from time to time hereafter (the "Funds"). The Funds subject
to this Distribution Agreement are identified on SCHEDULE A, as the same may be
amended from time to time. Sales of a Fund's shares shall be made only to
investors residing in those states in which such Fund is registered. After
effectiveness of each Fund's registration statement, Distributor will hold
itself available to receive, and will receive, by mail, telex, telephone, and/or
such other method as may be agreed upon between Distributor and Issuers, orders
for the purchase of Fund shares, and will accept or reject such orders on behalf
of the Funds in accordance with the provisions of the applicable Fund's
prospectus. Distributor will be available to transmit such orders as are so
accepted to the Fund's transfer agent as promptly as possible for processing at
the shares' net asset value next determined in accordance with the prospectuses.
a. Offering Price. All shares sold by Distributor under this Agreement
shall be sold at the net asset value per share ("Net Asset Value")
determined in the manner described in each Fund's prospectus, as it may
be amended from time to time, next computed after the order is accepted
by Distributor or its agents or affiliates. Each Fund shall determine
and promptly furnish to Distributor a statement of the Net Asset Value
of shares of said Fund's series at least once on each day on which the
Fund is open for business, as described in its current prospectus.
b. Promotional Support. Each Fund shall furnish to Distributor for use in
connection with the sale of its shares such written information with
respect to said Fund as Distributor may reasonably request. Each Fund
represents and warrants that such information, when authenticated by
the signature of one of its officers, shall be true and correct. Each
Fund shall also furnish to Distributor copies of its reports to its
shareholders and such additional information regarding said Fund's
financial condition as Distributor may reasonably request. Any and all
representations, statements and solicitations respecting a Fund's
shares made in advertisements, sales literature and in any other manner
whatsoever shall be limited to and conform in all respects to the
information provided hereunder.
c. Regulatory Compliance. Each Fund shall furnish to Distributor copies of
its current form of prospectus, as filed with the SEC, in such quantity
as Distributor may reasonably request from time to time, and authorizes
Distributor to use the prospectus in connection with the sale of such
Fund's shares. All such sales shall be initiated by offer of, and
conducted in accordance with, such prospectus and all of the provisions
of the Securities Act of 1933, the Investment Company Act of 1940
("1940 Act") and all the rules and regulations thereunder. Distributor
shall furnish applicable federal and state regulatory authorities with
any information or reports related to its services under this Agreement
which such authorities may lawfully request in order to ascertain
whether the Funds' operations are being conducted in a manner
consistent with any applicable law or regulations.
d. Acceptance. All orders for the purchase of its shares are subject to
acceptance by each Fund.
Section 2. Compensation
a. Retail Class and Institutional Class Shares. Except for the promises of
the Funds contained in this Agreement and their performance thereof,
Distributor shall not be entitled to compensation for its services
hereunder with respect to the Retail Class or the Services Class of
shares.
b. Distribution Class and Service Class Shares. For the services provided
and expenses incurred by Distributor as described in SECTION 2 AND
SECTION 3 of the Master Distribution and Shareholder Services Plan
adopted by the Board with respect to the Distribution Class of such
Funds, Distributor shall receive the compensation described in SECTION
1 of such Plan. For the services provided and expenses incurred by
Distributor as described in SECTION 2 of the Shareholder Services Plan
adopted by the Board with respect to the Service Class of such Funds,
Distributor shall receive the compensation described in SECTION 1 of
such Plan.
Section 3. Expenses
a. Distributor shall pay all expenses incurred by it in connection with
the performance of its distribution duties hereunder and under the
Master Distribution and Shareholder Services Plan, dated as of August
1, 1997, with respect to the Advisor Class of the Funds' shares,
including, but not limited to (A) payment of sales commission, ongoing
commissions and other payments to brokers, dealers, financial
institutions or others who sell Advisor Class shares pursuant to
Selling Agreements; (B) compensation to registered representatives or
other employees of Distributor who engage in or support distribution of
the Funds' Advisor Class shares; (C) compensation to, and expenses
(including overhead and telephone expenses) of, Distributor; (D) the
printing of prospectuses, statements of additional information and
reports for other than existing shareholders; (E) the preparation,
printing and distribution of sales literature and advertising materials
provided to the Funds' shareholders and prospective shareholders; (F)
receiving and answering correspondence from prospective shareholders,
including distributing prospectuses, statements of additional
information, and shareholder reports; (G) the providing of facilities
to answer questions from prospective investors about Fund shares; (H)
complying with federal and state securities laws pertaining to the sale
of Fund shares; (I) assisting investors in completing application forms
and selecting dividend and other account options; (J) the providing of
other reasonable assistance in connection with the distribution of Fund
shares; (K) the organizing and conducting of sales seminars and
payments in the form of transactional compensation or promotional
incentives; (L) profit on the foregoing; (M) the payment of "service
fees", as contemplated by the Rules of Fair Practice of the National
Association of Securities Dealers , Inc.; and (N) such other
distribution and services activities as the Issuers determine may be
paid for by the Issuers pursuant to the terms of this Agreement and in
accordance with Rule 12b-1 of the 1940 Act.
b. In addition to paying the above expenses with respect to the Advisor
Class, Distributor shall pay all expenses incurred with respect to the
Funds' other classes in connection with their registration under the
Securities Act of 1933 and the 1940 Act, the qualification of such
shares for sale in each jurisdiction designated by the Funds'
investment adviser, the issue and transfer of such shares (including
the expenses of confirming purchase and redemption orders and of
supplying the information, prices and other data to be furnished by the
Funds under this Agreement), the registration of Distributor as a
broker, and the registration and qualification of its officers,
directors and representatives under applicable federal and state laws.
Section 4. Independent Contractor
Distributor shall be an independent contractor. Neither Distributor nor any of
its officers, trustees, employees or representatives is or shall be an employee
of a Fund in connection with the performance of Distributor's duties hereunder.
Distributor shall be responsible for its own conduct and the employment,
control, compensation and conduct of its agents and employees, and for any
injury to such agents or employees or to others through its agents and
employees.
Section 5. Affiliation With The Funds
Subject to and in accordance with each Fund's formative documents, Section 10 of
the 1940 Act, it is understood: that the directors, officers, agents and
shareholders of the Funds are or may be interested in Distributor as directors,
officers, or shareholders of Distributor; that directors, officers, agents or
shareholders of Distributor are or may be interested in the Funds as directors,
officers, shareholders (directly or indirectly) or otherwise; and that the
affect of any such interest shall be governed by the 1940 Act and SECTION 4.
Section 6. Books And Records
It is expressly understood and agreed that all documents, reports, records,
books, files and other materials ("Fund Records") relating to this Agreement and
the services to be performed hereunder shall be the sole property of the Funds
and that such property, to the extent held by Distributor, shall be held by
Distributor as agent during the effective term of this Agreement. All Fund
Records shall be delivered to the applicable Fund upon the termination of this
Agreement, free from any claim or retention of rights by Distributor.
Section 7. Services Not Exclusive
The services of Distributor to the Funds hereunder are not to be deemed
exclusive, and Distributor shall be free to render similar services to others.
Section 8. Renewal And Termination
a. Term and Annual Renewal. The term of this Agreement shall be from the
date of its approval by the vote of a majority of the Board of each
Issuer, and it shall continue in effect from year to year thereafter
only so long as such continuance is specifically approved at least
annually by the vote of a majority of its Board, and the vote of a
majority of said directors who are neither parties to the Agreement nor
interested persons of any such party, cast at a meeting called for the
purpose of voting on such approval. "Approved at least annually" shall
mean approval occurring, with respect to the first continuance of the
Agreement, during the 90 days prior to and including the date of its
termination in the absence of such approval, and with respect to any
subsequent continuance, during the 90 days prior to and including the
first anniversary of the date upon which the most recent previous
annual continuance of the Agreement became effective. The effective
date of the Agreement with respect to each Fund is identified in the
Schedules attached to this Agreement.
b. Termination. This Agreement may be terminated at any time, without
payment of any penalty, by a Fund's Board, upon 60 days' written notice
to Distributor, and by Distributor upon 60 days' written notice to the
Fund. This Agreement shall terminate automatically in the event of its
assignment. The term "assignment" shall have the meaning set forth for
such term in Section 2(a)(4) of the 1940 Act.
Section 9. Severability
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or similar authority, the remainder of this Agreement
shall not be affected thereby.
Section 10. Applicable Law
This Agreement shall be construed in accordance with the laws of the State of
Missouri.
Section 11. Amendment
This Agreement and the Schedules forming a part hereof may be amended at any
time by a writing signed by each of the parties hereto. In the event that the
Board or trustees of any additional funds indicate by resolution that such funds
are to be made parties to this Agreement, whether such funds were in existence
at the time of the effective date of this Agreement or subsequently formed,
SCHEDULE A hereto shall be amended to reflect the addition of such new funds and
such new funds shall thereafter become parties hereto. In the event that such
new funds issue multiple classes of shares, SCHEDULES B, C, D, AND E, as
appropriate, shall be amended to reflect the addition of such new funds'
classes. In the event that any of the Funds listed on SCHEDULE A terminates its
registration as a management investment company, or otherwise ceases operations,
SCHEDULE A (and, as appropriate, SCHEDULES B, C, D, AND E) shall be amended to
reflect the deletion of such Fund and its various classes.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
indicated on SCHEDULE A.
AMERICAN CENTURY CALIFORNIA TAX-FREE AND
MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY TARGET MATURITIES TRUST
Attest:
/*/Douglas A. Paul /*/James M. Benham
Secretary President and Chief Executive Officer
Attest: AMERICAN CENTURY INVESTMENT SERVICES, INC.
/*/William M. Lyons /*/James E. Stowers III
Secretary President and Chief Executive Officer
<PAGE>
Schedule A
<TABLE>
COMPANIES AND FUNDS COVERED BY DISTRIBUTION AGREEMENT
- --------------------------------------------------------------------------------- ----------------------------------
Registered Investment Company and Funds Date
- --------------------------------------------------------------------------------- ----------------------------------
<S> <C>
American Century California Tax-Free and Municipal Funds
Benham California High Yield Municipal Fund August 1, 1997
Benham California Insured Tax-Free Fund August 1, 1997
Benham California Intermediate-Term Tax-Free Fund August 1, 1997
Benham California Limited-Term Tax-Free Fund August 1, 1997
Benham California Long-Term Tax-Free Fund August 1, 1997
Benham California Municipal Money Market Fund August 1, 1997
Benham California Tax-Free Money Market Fund August 1, 1997
American Century Government Income Trust
Benham Capital Preservation Fund August 1, 1997
Benham GNMA Fund August 1, 1997
Benham Government Agency Money Market Fund August 1, 1997
Benham Inflation-Adjusted Treasury Fund August 1, 1997
Benham Intermediate-Term Treasury Fund August 1, 1997
Benham Long-Term Treasury Fund August 1, 1997
Benham Short-Term Government Fund August 1, 1997
Benham Short-Term Treasury Fund August 1, 1997
American Century International Bond Funds
Benham International Bond Fund August 1, 1997
American Century Investment Trust
Benham Prime Money Market Fund August 1, 1997
American Century Municipal Trust
Benham Arizona Intermediate-Term Municipal Fund August 1, 1997
Benham Florida Intermediate-Term Municipal Fund August 1, 1997
Benham Florida Municipal Money Market Fund August 1, 1997
Benham Intermediate-Term Tax-Free Fund August 1, 1997
Benham Limited-Term Tax-Free Fund August 1, 1997
Benham Long-Term Tax-Free Fund August 1, 1997
Benham Tax-Free Money Market Fund August 1, 1997
American Century Quantitative Equity Funds
American Century Equity Growth Fund August 1, 1997
American Century Global Gold Fund August 1, 1997
American Century Global Natural Resources Fund August 1, 1997
American Century Income & Growth Fund August 1, 1997
American Century Utilities Fund August 1, 1997
American Century Target Maturities Trust
Benham Target Maturities Trust: 2000 August 1, 1997
Benham Target Maturities Trust: 2005 August 1, 1997
Benham Target Maturities Trust: 2010 August 1, 1997
Benham Target Maturities Trust: 2015 August 1, 1997
Benham Target Maturities Trust: 2020 August 1, 1997
Benham Target Maturities Trust: 2025 August 1, 1997
- --------------------------------------------------------------------------------- ----------------------------------
By executing this Schedule A, each Fund executes the Distribution Agreement to
which it is attached and all of its Exhibits and amendments as of the date
specified above.
AMERICAN CENTURY CALIFORNIA TAX-FREE AND MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY INVESTMENT SERVICES, INC. AMERICAN CENTURY TARGET MATURITIES TRUST
/*/James E. Stowers III /*/James M. Benham
President and Chief Executive Officer President and Chief Executive Officer
</TABLE>
<PAGE>
Schedule B
<TABLE>
<CAPTION>
FUNDS FEATURING MULTIPLE CLASSES OF SHARES
- ------------------------------------------------------------------ --------------- -------------- ----------------
Investor Advisor Institutional
<S> <C> <C> <C>
Fund Class Class Class
American Century Equity Growth Fund X X X
American Century Global Gold Fund X X
American Century Global Natural Resources Fund X X
American Century Income & Growth Fund X X X
American Century Utilities Fund X X
Benham GNMA Fund X X
Benham Government Agency Money Market Fund X X
Benham Intermediate-Term Treasury Fund X X
Benham International Bond Fund X X
Benham Long-Term Treasury Fund X X
Benham Short-Term Government Fund X X
Benham Short-Term Treasury Fund X X
Benham Target Maturities Trust: 2000 X X
Benham Target Maturities Trust: 2005 X X
Benham Target Maturities Trust: 2010 X X
Benham Target Maturities Trust: 2015 X X
Benham Target Maturities Trust: 2020 X X
Benham Target Maturities Trust: 2025 X X
- ------------------------------------------------------------------ --------------- -------------- ----------------
Dated: August 1, 1997
AMERICAN CENTURY CALIFORNIA TAX-FREE AND MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY INVESTMENT SERVICES, INC. AMERICAN CENTURY TARGET MATURITIES TRUST
As executed on behalf of the above in As executed on behalf of the above in
Schedule A by Schedule A by
James E. Stowers III James M. Benham
President and Chief Executive Officer President and Chief Executive Officer
</TABLE>
AMERICAN CENTURY SERVICES CORPORATION
TRANSFER AGENCY AGREEMENT
This TRANSFER AGENCY AGREEMENT is made and entered into by and between
the registered investment companies listed on Exhibit A to this Agreement (the
"Companies"), as of the dates noted on such Exhibit A, and American Century
Services Corporation, a Missouri corporation ("Services").
1. By action of their respective Board of Directors, the Companies
appointed Services as their transfer agent, and Services accepted such
appointment.
2. As transfer agent for the Companies, Services shall perform all the
functions usually performed by transfer agents of investment companies,
in accordance with the policies and practices of the Companies as
disclosed in the prospectuses of the Companies or of their various
series or otherwise communicated to Services from time to time,
including, but not limited to, the following:
(a) Recording the ownership, transfer, conversion and cancellation
of ownership of shares of the Companies on the books of the
Companies;
(b) Causing the issuance, transfer, conversion and cancellation of
stock certificates of the Companies;
(c) Establishing and maintaining records of accounts;
(d) Computing and causing to be prepared and mailed or otherwise
delivered to shareholders payment of redemption proceeds due
from the Companies on redemption of shares and notices of
reinvestment in additional shares of dividends, stock
dividends or stock splits declared by the Companies on shares
of the Companies;
(e) Furnishing to shareholders such information as may be
reasonably required by the Companies, including confirmation
of shareholder transactions and appropriate income tax
information;
(f) Addressing and mailing to shareholders prospectuses, annual
and semiannual reports; addressing and mailing proxy materials
for shareholder meetings prepared by or on behalf of the
Companies, and tabulating the proxy votes;
(g) Replacing allegedly lost, stolen or destroyed stock
certificates in accordance with and subject to usual and
customary procedures and conditions;
(h) Maintaining such books and records relating to transactions
effected by Services pursuant to this Agreement as are
required by the Investment Company Act of 1940, or by rules or
regulations thereunder, or by any other applicable provisions
of law, to be maintained by the Companies or their appointed
transfer agent with respect to such transactions; preserving,
or causing to be preserved, any such books and records for
such periods as may be required by any such law, rule or
regulation; furnishing Companies such information as to such
transactions and at such times as may be reasonably required
by it to comply with applicable laws and regulations,
including but not limited to the laws of the several states of
the United States;
(i) Dealing with and answering all correspondence from or on
behalf of shareholders relating to its functions under this
Agreement.
3. The Companies may perform on site inspection of records and accounts
and perform audits directly pertaining to the Companies' shareholder
accounts serviced by Services hereunder at Services' facilities in
accordance with reasonable procedures at the frequency necessary to
show proper administration of this agreement and the proper audit of
the Companies' financial statements. Services will cooperate with the
Companies' auditors and the representatives of appropriate regulatory
agencies and furnish all reasonably requested records and data.
4. (a) Services will at all times exercise due diligence and good faith in
performing its duties hereunder. Services will make every reasonable
effort and take all reasonably available measures to assure the
adequacy of its personnel and facilities as well as the accurate
performance of all services to be performed by it hereunder within the
time requirements of any applicable statutes, rules or regulations or
as disclosed in any of the Companies' prospectuses.
(b) Services shall not be responsible for, and the Companies agree to
indemnify Services, for any losses, damages or expenses (including
reasonable counsel fees and expenses) (a) resulting from any claim,
demand, action or suit not resulting from Services failure to exercise
good faith or due diligence and arising out of or in connection with
Services' duties on behalf of the fund hereunder; (b) for any delay,
error, or omission by reason or circumstance beyond its control,
including acts of civil or military authority, national emergencies,
labor difficulties (except with response to Services employees), fire,
mechanical breakdowns beyond its control, flood or catastrophe, act of
God, insurrection, war, riot or failure beyond its control of
transportation, communication or power supply; or (c) for any action
taken or omitted to be taken by Services in good faith in reliance on
(i) the authenticity of any instrument or communication reasonably
believed by it to be genuine and to have been properly made and signed
or endorsed by an appropriate person, or (ii) the accuracy of any
records or information provided to it by the Companies, (iii) any
authorization or instruction contained in any officers' instruction, or
(iv) any advise of counsel approved by the Companies who may be
internally employed counsel or outside counsel, in either case for the
Companies or Services.
5. Services shall not look to the Companies for compensation for its
services described herein. It shall be compensated entirely by American
Century Investment Management, Inc., pursuant to the management
agreement between American Century Investment Management, Inc. and the
Companies, which requires American Century Investment Management, Inc.
to pay, with certain exceptions, all of the expenses of the Companies.
6. (a) This Agreement may be terminated by either party at any time
without penalty upon giving the other party 60 days written notice
(which notice may be waived by either party).
(b) Upon termination, Services will deliver to the Companies all
microfilm records pertaining to shareholder accounts of the Companies,
and all records of shareholder accounts in machine readable form in the
format in which they are maintained by Services.
(c) All data processing programs used by Services in connection with
the performance of its duties under this Agreement are the sole and
exclusive property of Services, and after the termination of this
Agreement, the Companies shall have no right to use the same.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
indicated on Exhibit A.
AMERICAN CENTURY CALIFORNIA TAX-FREE AND
MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY TARGET MATURITIES TRUST
Attest:
/*/Douglas A. Paul /*/James M. Benham
Secretary President and Chief Executive Officer
Attest: AMERICAN CENTURY SERVICES CORPORATION
/*/William M. Lyons /*/James E. Stowers III
Secretary President and Chief Executive Officer
<PAGE>
Exhibit A
<TABLE>
COMPANIES AND FUNDS COVERED BY DISTRIBUTION AGREEMENT
- --------------------------------------------------------------------------------- ----------------------------------
Registered Investment Company and Funds Date
- --------------------------------------------------------------------------------- ----------------------------------
<S> <C>
American Century California Tax-Free and Municipal Funds
Benham California High Yield Municipal Fund August 1, 1997
Benham California Insured Tax-Free Fund August 1, 1997
Benham California Intermediate-Term Tax-Free Fund August 1, 1997
Benham California Limited-Term Tax-Free Fund August 1, 1997
Benham California Long-Term Tax-Free Fund August 1, 1997
Benham California Municipal Money Market Fund August 1, 1997
Benham California Tax-Free Money Market Fund August 1, 1997
American Century Government Income Trust
Benham Capital Preservation Fund August 1, 1997
Benham GNMA Fund August 1, 1997
Benham Government Agency Money Market Fund August 1, 1997
Benham Inflation-Adjusted Treasury Fund August 1, 1997
Benham Intermediate-Term Treasury Fund August 1, 1997
Benham Long-Term Treasury Fund August 1, 1997
Benham Short-Term Government Fund August 1, 1997
Benham Short-Term Treasury Fund August 1, 1997
American Century International Bond Funds
Benham International Bond Fund August 1, 1997
American Century Investment Trust
Benham Prime Money Market Fund August 1, 1997
American Century Municipal Trust
Benham Arizona Intermediate-Term Municipal Fund August 1, 1997
Benham Florida Intermediate-Term Municipal Fund August 1, 1997
Benham Florida Municipal Money Market Fund August 1, 1997
Benham Intermediate-Term Tax-Free Fund August 1, 1997
Benham Limited-Term Tax-Free Fund August 1, 1997
Benham Long-Term Tax-Free Fund August 1, 1997
Benham Tax-Free Money Market Fund August 1, 1997
American Century Quantitative Equity Funds
American Century Equity Growth Fund August 1, 1997
American Century Global Gold Fund August 1, 1997
American Century Global Natural Resources Fund August 1, 1997
American Century Income & Growth Fund August 1, 1997
American Century Utilities Fund August 1, 1997
American Century Target Maturities Trust
Benham Target Maturities Trust: 2000 August 1, 1997
Benham Target Maturities Trust: 2005 August 1, 1997
Benham Target Maturities Trust: 2010 August 1, 1997
Benham Target Maturities Trust: 2015 August 1, 1997
Benham Target Maturities Trust: 2020 August 1, 1997
Benham Target Maturities Trust: 2025 August 1, 1997
- --------------------------------------------------------------------------------- ----------------------------------
</TABLE>
By executing this Exhibit A, each Fund executes the Transfer Agency Agreement to
which it is attached and any of its Exhibits and amendments as of the date
specified above.
AMERICAN CENTURY CALIFORNIA TAX-FREE AND
MUNICIPAL FUNDS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY SERVICES AMERICAN CENTURY TARGET MATURITIES TRUST
CORPORATION
James E. Stowers III James M. Benham
President and President and
Chief Executive Officer Chief Executive Officer
July 31, 1997
American Century Government Income Trust
4500 Main Street
Kansas City, MO 64111
Dear Sirs:
As counsel for the American Century Government Income Trust (the "Trust"), I am
familiar with the Trust's registration under the Investment Company Act of 1940
and with the registration statement relating to its Common Shares (the "Shares")
under the Securities Act of 1933 (File No. 2-99222) (the "Registration
Statement"). I have also examined such other corporate records, agreements,
documents and instruments as I deemed appropriate in connection with the
establishment of a new series of the Trust, American Century-Benham Capital
Preservation Fund (the "Fund") .
Based upon the foregoing, it is my opinion that the Shares to be sold at the
public offering price and delivered by the Fund against receipt of the net asset
value of the Shares in compliance with the terms of the Registration Statement
and the requirements of applicable law, will be, when sold, duly and validly
authorized, and fully paid and non-assessable.
I consent to the filing of this opinion in connection with the Post-Effective
Amendment Number 33 to the Trust's Registration Statement under the Securities
Act of 1933 (and Amendment Number 34 under Investment Company Act of 1940) to be
filed with respect to the Fund with the Securities and Exchange Commission.
Very truly yours,
/s/ Douglas A. Paul
Douglas A. Paul
Secretary and Associate General Counsel
Consent of Independent Auditors
The Board of Trustees and Shareholders
American Century Government Income Trust:
We consent to the inclusion in American Century Government Income Trust's
Post-Effective Amendment No. 32 to the Registration Statement No. 2-99222 on
Form N-1A under the Securities Act of 1933 and Amendment No. 33 to the
Registration Statement No. 811-4363 filed on Form N-1A under the Investment
Company Act of 1940 of our reports dated May 2, 1997 on the financial statements
and financial highlights of the American Century-Benham Capital Preservation
Fund, American Century-Benham Short-Term Treasury Fund, American Century-Benham
Intermediate-Term Treasury Fund, American Century-Benham Long-Term Treasury
Fund, American Century-Benham GNMA Fund, American Century-Benham Adjustable Rate
Government Securities Fund, American Century-Benham Government Agency Money
Market Fund and American Century-Benham Inflation-Adjusted Treasury Fund (the
eight funds comprising American Century Government Income Trust) for the periods
indicated therein, which reports have been incorporated by reference into the
Statement of Additional Information of American Century Government Income Trust.
We also consent to the reference to our firm under the heading "Financial
Highlights" in the Prospectus and under the heading "About the Trust" in the
Statement of Additional Information which is incorporated by reference in the
Prospectus.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Kansas City, Missouri
July 29, 1997
BENHAM ADJUSTABLE RATE GOVERNMENT FUND
Average Annual Total Return
3/31/97
1/N
Formula: T = (ERV/P) - 1
P = A hypothetical initial payment of $1,000.
ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.
N = Number of years.
T = Average annual total return.
Calculation: P ERV N T
--------- --------- -------- -----
One Year $1,000.00 $1,062.00 1.000000 6.20%
Five Year $1,000.00 $1,248.60 5.000000 4.54%
Ten Year
Inception* $1,000.00 $1,305.40 5.574264 4.90%
TR = Total return for period TR=(ERV/P)- 30.54%
*Date Of Inception: 9/3/91
- --------------------------------------------------------------------------------
BENHAM ARM FUND
Yield Calculation
3/31/97
6
Formula: Yield = 2 [(A-B/C*D + 1) - 1]
A = Investment income earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of shares outstanding during the period that
were entitled to receive dividends.
D = The per share price on the last day of the period.
Calculation:
A = $1,274,696.16
B = $110,269.24
C = 25,044,588.887
D = $9.51
Yield = 5.94%
<PAGE>
BENHAM GOVT AGENCY MM
Yield Calculation
3/31/97
365/7
Effective Yield: = [ (Base Period Return) ] - 1
Base Period Return = 0.00092476
7 Day Effective Yield = 4.94%
Yield: = I/B X 365/7
Y = Yield
I = total income of hypothetical account over the seven
day period
B = beginning account value
I = 0.00092476
B = $1.00
7 Day Yield = 4.82%
<PAGE>
BENHAM INTERMEDIATE TREASURY FUND
Average Annual Total Return
3/31/97
1/N
Formula: T = (ERV/P) - 1
P = A hypothetical initial payment of $1,000.
ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.
N = Number of years.
T = Average annual total return.
Calculation: P ERV N T
--------- --------- --------- -----
One Year $1,000.00 $1,040.50 1.000000 4.05%
Five Year $1,000.00 $1,336.40 5.000000 5.97%
Ten Year $1,000.00 $1,894.00 10.000000 6.60%
Inception* $1,000.00 $4,073.80 16.873374 8.68%
TR = Total return for period TR=(ERV/P)- 307.38%
*Date Of Inception: 5/16/80
- --------------------------------------------------------------------------------
BENHAM INTERMEDIATE TERM TREASURY FUND
Yield Calculation
3/31/97
6
Formula: Yield = 2 [(A-B/C*D + 1) - 1]
A = Investment income earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of shares outstanding during the period that
were entitled to receive dividends.
D = The per share price on the last day of the period.
Calculation:
A = $1,842,094.37
B = $133,842.18
C = 32,904,064.550
D = $10.06
Yield = 6.27%
<PAGE>
BENHAM GNMA FUND
Average Annual Total Return
3/31/97
1/N
Formula: T = (ERV/P) - 1
P = A hypothetical initial payment of $1,000.
ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.
N = Number of years.
T = Average annual total return.
Calculation: P ERV N T
--------- --------- --------- ------
One Year $1,000.00 $1,058.70 1.000000 5.87%
Five Year $1,000.00 $1,386.30 5.000000 6.75%
Ten Year $1,000.00 $2,186.90 10.000000 8.14%
Inception* $1,000.00 $2,619.30 11.518138 8.72%
TR = Total return for period TR=(ERV/P)- 161.93%
*Date Of Inception: 9/23/85
- --------------------------------------------------------------------------------
BENHAM GNMA FUND
Yield Calculation
3/31/97
6
Formula: Yield = 2 [(A-B/C*D + 1) - 1]
A = Investment income earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of shares outstanding during the period that
were entitled to receive dividends.
D = The per share price on the last day of the period.
Calculation:
A = $6,858,736.98
B = $479,403.73
C = 108,570,396.658
D = $10.33
Yield = 6.92%
<PAGE>
BENHAM LONG TERM TREASURY FUND
Average Annual Total Return
3/31/97
1/N
Formula: T = (ERV/P) - 1
P = A hypothetical initial payment of $1,000.
ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.
N = Number of years.
T = Average annual total return.
Calculation: P ERV N T
--------- --------- -------- ------
One Year $1,000.00 $1,026.50 1.000000 2.65%
Five Year
Ten Year
Inception* $1,000.00 $1,317.00 4.558522 6.23%
TR = Total return for period TR=(ERV/P)- 31.70%
*Date Of Inception: 9/8/92
- --------------------------------------------------------------------------------
BENHAM LONG TERM TREASURY FUND
Yield Calculation
3/31/97
6
Formula: Yield = 2 [(A-B/C*D + 1) - 1]
A = Investment income earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of shares outstanding during the period that
were entitled to receive dividends.
D = The per share price on the last day of the period.
Calculation:
A = $716,159.81
B = $57,652.91
C = 12,916,975.877
D = $9.32
Yield = 6.65%
<PAGE>
BENHAM SHORT TERM TREASURY FUND
Average Annual Total Return
3/31/97
1/N
Formula: T = (ERV/P) - 1
P = A hypothetical initial payment of $1,000.
ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.
N = Number of years.
T = Average annual total return.
Calculation: P ERV N T
---------- --------- -------- -----
One Year $1,000.00 $1,046.20 1.000000 4.62%
Five Year
Ten Year
Inception* $1,000.00 $1,217.20 4.558522 4.41%
TR = Total return for period TR=(ERV/P)- 21.72%
*Date Of Inception: 9/8/92
- --------------------------------------------------------------------------------
BENHAM SHORT TERM TREASURY FUND
Yield Calculation
3/31/97
6
Formula: Yield = 2 [(A-B/C*D + 1) - 1]
A = Investment income earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of shares outstanding during the period that
were entitled to receive dividends.
D = The per share price on the last day of the period.
Calculation:
A = $184,970.23
B = $17,827.67
C = 3,718,656.448
D = $9.68
Yield = 5.64%
<PAGE>
BENHAM INFLATION ADJUSTED INDEX FUND
Average Annual Total Return
3/31/97
1/N
Formula: T = (ERV/P) - 1
P = A hypothetical initial payment of $1,000.
ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.
N = Number of years.
T = Average annual total return.
Calculation: P ERV N T
---------- --------- -------- -----
One Year
Five Year
Ten Year
Inception* $1,000.00 $980.20 0.134155 -13.85%
TR = Total return for period TR=(ERV/P)- 1.98%
*Date Of Inception: 2/10/97
- --------------------------------------------------------------------------------
BENHAM INFLATION ADJUSTED INDEX FUND
Yield Calculation
3/31/97
6
Formula: Yield = 2 [(A-B/C*D + 1) - 1]
A = Investment income earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of shares outstanding during the period that
were entitled to receive dividends.
D = The per share price on the last day of the period.
Calculation:
A = $9,736.36
B = $700.35
C = 181,178.820
D = $9.74
Yield = 6.22%
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, AMERICAN CENTURY
GOVERNMENT INCOME TRUST, hereinafter called the "Trust" and certain trustees and
officers of the Trust, do hereby constitute and appoint James M. Benham, James
E. Stowers, III, William M. Lyons, Douglas A. Paul, and Patrick A. Looby, and
each of them individually, their true and lawful attorneys and agents to take
any and all action and execute any and all instruments which said attorneys and
agents may deem necessary or advisable to enable the Trust to comply with the
Securities Act of 1933 and/or the Investment Company Act of 1940, as amended,
and any rules regulations, orders, or other requirements of the United States
Securities and Exchange Commission thereunder, in connection with the
registration under the Securities Act of 1933 and/or the Investment Company Act
of 1940, as amended, including specifically, but without limitation of the
foregoing, power and authority to sign the name of the Trust in its behalf and
to affix its seal, and to sign the names of each of such trustees and officers
in their capacities as indicated, to any amendment or supplement to the
Registration Statement filed with the Securities and Exchange Commission under
the Securities Act of 1933 and/or the Investment Company Act of 1940, as
amended, and to any instruments or documents filed or to be filed as a part of
or in connection with such Registration Statement; the Registration Statement on
Form N-14 and any amendments or supplements thereto to be filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940, as amended, and to any instruments or documents
filed or to be filed as part of or in connection with such Registration
Statement; and each of the undersigned hereby ratifies and confirms all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the Trust has caused this Power to be executed by
its duly authorized officers on this the 28th day of February, 1997.
AMERICAN CENTURY GOVERNMENT INCOME TRUST
(A Massachusetts Business Trust)
By: /s/ James M. Benham
James M. Benham, President
SIGNATURE AND TITLE
/s/ James M. Benham /s/ Isaac Stein
James M. Benham Isaac Stein
Chairman Director
/s/ Albert A. Eisenstat /s/ Jeanne D. Wohlers
Albert A. Eisenstat Jeanne D. Wohlers
Director Director
/s/ Ronald J Gilson /s/ James E. Stowers III
Ronald J. Gilson James E. Stowers, III
Director Director
/s/ Myron S. Scholes /s/ Maryanne Roepke
Myron S. Scholes Maryanne Roepke
Director Treasurer
/s/ Kenneth E. Scott
Kenneth E. Scott
Director Attest:
By: /s/ Douglas A. Paul
Douglas A. Paul, Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> AMERICAN CENTURY-BENHAM GNMA FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 1,134,397,583
<INVESTMENTS-AT-VALUE> 1,125,132,045
<RECEIVABLES> 30,761,530
<ASSETS-OTHER> 12,886
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,155,906,461
<PAYABLE-FOR-SECURITIES> 31,974,952
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,766,408
<TOTAL-LIABILITIES> 36,741,360
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,153,799,317
<SHARES-COMMON-STOCK> 108,338,176
<SHARES-COMMON-PRIOR> 107,220,778
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (25,368,678)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9,265,538)
<NET-ASSETS> 1,119,165,101
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 82,502,369
<OTHER-INCOME> 0
<EXPENSES-NET> 6,051,627
<NET-INVESTMENT-INCOME> 76,450,742
<REALIZED-GAINS-CURRENT> (1,660,256)
<APPREC-INCREASE-CURRENT> (10,865,815)
<NET-CHANGE-FROM-OPS> 63,924,671
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 76,433,695
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41,003,499
<NUMBER-OF-SHARES-REDEEMED> 45,535,917
<SHARES-REINVESTED> 5,649,816
<NET-CHANGE-IN-ASSETS> (854,135)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (23,708,422)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,108,362
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,125,625
<AVERAGE-NET-ASSETS> 1,096,607,072
<PER-SHARE-NAV-BEGIN> 10.45
<PER-SHARE-NII> 0.71
<PER-SHARE-GAIN-APPREC> (0.12)
<PER-SHARE-DIVIDEND> 0.71
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.33
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> AMERICAN CENTURY-BENHAM INTERMEDIATE-TERM TREASURY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 328,257,973
<INVESTMENTS-AT-VALUE> 323,072,363
<RECEIVABLES> 5,456,370
<ASSETS-OTHER> 2,170,712
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 330,699,445
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,915,247
<TOTAL-LIABILITIES> 1,915,247
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 342,410,897
<SHARES-COMMON-STOCK> 32,666,395
<SHARES-COMMON-PRIOR> 30,370,621
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,441,089)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5,185,610)
<NET-ASSETS> 328,784,198
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,776,755
<OTHER-INCOME> 0
<EXPENSES-NET> 1,604,860
<NET-INVESTMENT-INCOME> 18,171,895
<REALIZED-GAINS-CURRENT> (924,136)
<APPREC-INCREASE-CURRENT> (5,211,554)
<NET-CHANGE-FROM-OPS> 12,036,205
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18,170,832
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,222,087
<NUMBER-OF-SHARES-REDEEMED> 12,410,526
<SHARES-REINVESTED> 1,484,213
<NET-CHANGE-IN-ASSETS> 17,764,284
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7,516,953)
<OVERDISTRIB-NII-PRIOR> 1,063
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 881,647
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,604,860
<AVERAGE-NET-ASSETS> 317,594,834
<PER-SHARE-NAV-BEGIN> 10.24
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> (0.18)
<PER-SHARE-DIVIDEND> 0.58
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.06
<EXPENSE-RATIO> 0.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> AMERICAN CENTURY-BENHAM GOVERNMENT AGENCY MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 469,493,474
<INVESTMENTS-AT-VALUE> 469,493,474
<RECEIVABLES> 1,110,823
<ASSETS-OTHER> 1,546,384
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 472,150,681
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,391,869
<TOTAL-LIABILITIES> 1,391,869
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 470,758,812
<SHARES-COMMON-STOCK> 470,758,812
<SHARES-COMMON-PRIOR> 503,328,283
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 470,758,812
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,812,706
<OTHER-INCOME> 0
<EXPENSES-NET> 2,727,227
<NET-INVESTMENT-INCOME> 23,085,479
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 23,095,609
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 23,085,479
<DISTRIBUTIONS-OF-GAINS> 10,130
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 409,848,791
<NUMBER-OF-SHARES-REDEEMED> 464,737,370
<SHARES-REINVESTED> 22,319,108
<NET-CHANGE-IN-ASSETS> (32,569,471)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,348,058
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,658,289
<AVERAGE-NET-ASSETS> 485,177,756
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> AMERICAN CENTURY-BENHAM ADJUSTABLE RATE GOV SECURITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 235,637,718
<INVESTMENTS-AT-VALUE> 235,072,510
<RECEIVABLES> 1,618,037
<ASSETS-OTHER> 664,613
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 237,355,160
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,400,944
<TOTAL-LIABILITIES> 1,400,944
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 304,940,208
<SHARES-COMMON-STOCK> 24,809,699
<SHARES-COMMON-PRIOR> 31,524,695
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (68,420,784)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (565,208)
<NET-ASSETS> 235,954,216
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,238,999
<OTHER-INCOME> 0
<EXPENSES-NET> 1,518,122
<NET-INVESTMENT-INCOME> 14,720,877
<REALIZED-GAINS-CURRENT> 805,035
<APPREC-INCREASE-CURRENT> 347,071
<NET-CHANGE-FROM-OPS> 15,872,983
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,704,902
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,097,397
<NUMBER-OF-SHARES-REDEEMED> 17,070,965
<SHARES-REINVESTED> 1,258,372
<NET-CHANGE-IN-ASSETS> (62,583,859)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (69,225,819)
<OVERDISTRIB-NII-PRIOR> 15,975
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 729,724
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,546,721
<AVERAGE-NET-ASSETS> 251,606,422
<PER-SHARE-NAV-BEGIN> 9.47
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> 0.53
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.51
<EXPENSE-RATIO> 0.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> AMERICAN CENTURY-BENHAM SHORT-TERM TREASURY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 35,347,815
<INVESTMENTS-AT-VALUE> 35,137,451
<RECEIVABLES> 555,795
<ASSETS-OTHER> 317,785
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 36,011,031
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 156,754
<TOTAL-LIABILITIES> 156,754
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36,320,458
<SHARES-COMMON-STOCK> 3,703,962
<SHARES-COMMON-PRIOR> 3,624,308
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (255,817)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (210,364)
<NET-ASSETS> 35,854,277
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,071,681
<OTHER-INCOME> 0
<EXPENSES-NET> 214,294
<NET-INVESTMENT-INCOME> 1,857,387
<REALIZED-GAINS-CURRENT> (250,752)
<APPREC-INCREASE-CURRENT> (25,367)
<NET-CHANGE-FROM-OPS> 1,581,268
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,857,387
<DISTRIBUTIONS-OF-GAINS> 314,362
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,110,951
<NUMBER-OF-SHARES-REDEEMED> 2,205,268
<SHARES-REINVESTED> 173,971
<NET-CHANGE-IN-ASSETS> 206,105
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 309,297
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 97,899
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 234,258
<AVERAGE-NET-ASSETS> 35,299,586
<PER-SHARE-NAV-BEGIN> 9.84
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> (0.07)
<PER-SHARE-DIVIDEND> 0.52
<PER-SHARE-DISTRIBUTIONS> 0.09
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.68
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> AMERICAN CENTURY-BENHAM LONG-TERM TREASURY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 126,998,038
<INVESTMENTS-AT-VALUE> 124,697,691
<RECEIVABLES> 1,628,306
<ASSETS-OTHER> 1,000,925
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 127,326,922
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 757,079
<TOTAL-LIABILITIES> 757,079
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 131,497,215
<SHARES-COMMON-STOCK> 13,580,394
<SHARES-COMMON-PRIOR> 11,450,121
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,627,025)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,300,347)
<NET-ASSETS> 126,569,843
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,258,888
<OTHER-INCOME> 0
<EXPENSES-NET> 717,445
<NET-INVESTMENT-INCOME> 7,541,443
<REALIZED-GAINS-CURRENT> (1,648,291)
<APPREC-INCREASE-CURRENT> (2,530,525)
<NET-CHANGE-FROM-OPS> 3,362,627
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,541,443
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,640,532
<NUMBER-OF-SHARES-REDEEMED> 11,213,547
<SHARES-REINVESTED> 703,288
<NET-CHANGE-IN-ASSETS> 15,828,935
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (978,734)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 331,761
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 709,866
<AVERAGE-NET-ASSETS> 120,155,395
<PER-SHARE-NAV-BEGIN> 9.67
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> (0.35)
<PER-SHARE-DIVIDEND> 0.60
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.32
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> AMERICAN CENTURY-BENHAM INFLATION-ADJUSTED TREASURY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 2,102,200
<INVESTMENTS-AT-VALUE> 2,056,892
<RECEIVABLES> 14,789
<ASSETS-OTHER> 207,658
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,279,339
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,963
<TOTAL-LIABILITIES> 1,963
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,322,684
<SHARES-COMMON-STOCK> 233,763
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (45,308)
<NET-ASSETS> 2,277,376
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,587
<OTHER-INCOME> 0
<EXPENSES-NET> 1,047
<NET-INVESTMENT-INCOME> 10,540
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (45,308)
<NET-CHANGE-FROM-OPS> (34,768)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,540)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 264,716
<NUMBER-OF-SHARES-REDEEMED> 31,814
<SHARES-REINVESTED> 861
<NET-CHANGE-IN-ASSETS> 2,277,376
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 592
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 35,055
<AVERAGE-NET-ASSETS> 1,529,565
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 0.26
<PER-SHARE-DIVIDEND> 0.06
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.74
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> AMERICAN CENTURY-BENHAM INFLATION-ADJUSTED TREASURY
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 3,957,044
<INVESTMENTS-AT-VALUE> 3,919,370
<RECEIVABLES> 62,424
<ASSETS-OTHER> 332,981
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,314,785
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,281
<TOTAL-LIABILITIES> 3,281
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,378,802
<SHARES-COMMON-STOCK> 444,923
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (29,624)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (37,674)
<NET-ASSETS> 4,311,504
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 49,945
<OTHER-INCOME> 0
<EXPENSES-NET> 4,280
<NET-INVESTMENT-INCOME> 45,665
<REALIZED-GAINS-CURRENT> (29,624)
<APPREC-INCREASE-CURRENT> 7,634
<NET-CHANGE-FROM-OPS> 23,675
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 45,665
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 246,578
<NUMBER-OF-SHARES-REDEEMED> 39,796
<SHARES-REINVESTED> 4,378
<NET-CHANGE-IN-ASSETS> 2,034,128
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,393
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 19,412
<AVERAGE-NET-ASSETS> 3,420,472
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> 0.13
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.69
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
