[american century logo]
American
Century(sm)
Prospectus
and
Proxy
Statement
JUNE 2, 1997
Important Voting Information Inside!
[front cover]
TABLE OF CONTENTS
LETTER FROM THE PRESIDENT......................................................1
IMPORTANT INFORMATION YOU SHOULD CONSIDER......................................2
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS......................................6
COMBINED PROSPECTUS/PROXY STATEMENT............................................8
COMPARISON OF CERTAIN INFORMATION REGARDING THE FUNDS..........................9
RISK FACTORS..................................................................11
TRANSACTION AND OPERATING EXPENSE INFORMATION.................................11
ADDITIONAL INFORMATION ABOUT THE PROPOSED TRANSACTION.........................12
Summary of Plan of Reorganization........................................12
Description of New Capital Preservation Fund Securities..................14
Reasons Supporting the Reorganization....................................14
Federal Income Tax Consequences..........................................15
Capitalization...........................................................15
INFORMATION ABOUT THE FUNDS...................................................16
Fundamental Investment Restrictions......................................18
INFORMATION RELATING TO VOTING MATTERS........................................19
General Information......................................................19
Voting and Revocation of Proxies.........................................19
Record Date..............................................................19
Quorum...................................................................20
Shareholder Vote Required................................................20
Cost of Proxy Solicitation...............................................20
Certain Shareholders.....................................................20
Appraisal Rights.........................................................21
Annual Meetings..........................................................21
ADDITIONAL INFORMATION........................................................21
Litigation...............................................................22
Financial Statements.....................................................22
Other Business...........................................................22
Shareholder Inquiries....................................................22
APPENDIX I: STANDARDIZED FUNDAMENTAL INVESTMENT RESTRICTIONS..................23
APPENDIX II: CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS......................24
Table of Contents American Century Investments
American Century Investments
4500 Main Street
Kansas City, Missouri 64111
June 2, 1997
Dear American Century Shareholder:
I am writing to ask for your support of an important proposal affecting
your fund. The proposal will be voted on at an upcoming Special Meeting of
Shareholders to be held on July 30, 1997. Please take a few minutes to read the
enclosed materials, complete and sign the proxy voting card and mail it back to
us.
You are being asked to approve the combination of the Capital Preservation
Fund and Capital Preservation Fund II into a new American Century fund also
called the Capital Preservation Fund.
One reason for the combination is the management efficiencies achieved by
combining these two very similar funds. Moreover, the Capital Preservation Fund
II was established in 1980 to provide shareholders with a fund that was more
responsive to the volatile, increasing short-term interest rates of that time.
Since the late 1980s, the economic and interest rate environment that led to the
creation of Capital Preservation Fund II has not existed. Additionally, there
are no indications that those conditions will return in the foreseeable future.
As a result, the manager believes that a fund managed in the style of the
Capital Preservation Fund has better potential to provide a higher yield to
shareholders.
After reviewing many factors, your Board of Directors believes the
combination is in your fund's and your best interests for the following reasons:
o lower total fees to shareholders;
o management and operational efficiencies may be achieved by combining
two funds into one;
o the change in the U.S. economy; and
o there will be no dilution of the interests of existing shareholders.
We encourage you to vote "FOR" the reorganization.
I know you are busy and may feel you don't have time to review the proxy
materials and vote for the meeting. But your vote is very important. Please take
a few minutes to review the enclosed materials and sign and return your proxy
card as soon as possible. If shareholders don't return their proxies, additional
expenses must be incurred to pay for follow-up mailings and telephone calls.
To more efficiently handle this proxy solicitation, we have hired D. F.
King and Co., Inc. to act as our proxy solicitor. If you have any questions or
need any help in voting your shares, please call them at 1-800-755-3107. Any
question they cannot respond to will be forwarded to us immediately.
Thank you for your time in considering this important proposal. We believe
the reorganization will enable us to better serve your needs. Thank you for
investing with American Century and for your continued support.
Sincerely,
/s/James M. Benham
James M. Benham
President and Chairman of the Board
Proxy Statement 1
IMPORTANT INFORMATION
YOU SHOULD CONSIDER
The following Q&A is a brief summary of some of the issues that may be
important to you. More detailed information is available, as described elsewhere
in this document. Please read all the enclosed proxy materials before voting.
Please remember to vote your shares as soon as possible. If enough shareholders
return their proxy cards soon, additional costs for follow-up mailings and phone
calls may be avoided.
If you own other American Century funds and/or accounts, you may receive
additional proxy statements and proxy voting cards in a separate mailing. It is
important that you vote ALL proxy cards that you receive.
WHAT IS THE PURPOSE OF THE UPCOMING MEETING?
Your Board of Directors has recommended reorganizing the Capital
Preservation Fund and Capital Preservation Fund II by combining them into a new
American Century fund. The combination requires shareholder approval. The
meeting will be held on Wednesday, July 30, 1997, at 10 a.m. Central time at the
companies' offices at 4500 Main Street, Kansas City, Missouri. Shareholders of
record as of the close of business on May 16, 1997, are eligible to vote.
WHY IS THE REORGANIZATION BEING PROPOSED?
Like your fund, the New Capital Preservation Fund is a money market fund
that seeks maximum safety and liquidity and, like the existing Capital
Preservation Fund, seeks to achieve its objective by investing in short-term
U.S. Treasury securities. The reorganization seeks to improve operational and
investment management efficiencies by combining two funds with the same
investment objectives and very similar investment policies, strategies and
approaches, into a single, larger portfolio of assets. Moreover, the Capital
Preservation Fund II was established in 1980 to provide shareholders with a fund
that was more responsive to the volatile, increasing short-term interest rates
of that time. Since the late 1980s, the economic and interest rate environment
that led to the creation of Capital Preservation Fund II has not existed.
Additionally, there are no indications that those conditions will return in the
foreseeable future. As a result, the manager believes that a fund managed in the
style of the Capital Preservation Fund has better potential to provide a higher
yield to shareholders.
HOW WILL THE REORGANIZATION BE ACCOMPLISHED?
Shareholders of the Capital Preservation Fund and Capital Preservation Fund
II are being asked to approve the combination of their fund into the New Capital
Preservation Fund. The reorganization will take the form of a sale of assets by
the Capital Preservation Fund and Capital Preservation Fund II in exchange for
shares of the New Capital Preservation Fund. Your fund will then distribute the
shares it receives to its shareholders.
2 Important Information You Should Consider American Century Investments
WHAT WILL I GET IF THE REORGANIZATION IS APPROVED?
As a result of the liquidating distribution, you will receive shares of the
New Capital Preservation Fund in an amount equal to the dollar value of your
shares on the date the combination takes place (probably August 30th).
WHY DID THE BOARD OF DIRECTORS APPROVE THE REORGANIZATION?
AFTER REVIEWING MANY FACTORS, YOUR BOARD OF DIRECTORS UNANIMOUSLY
DETERMINED THAT THE REORGANIZATION WAS IN THE BEST INTERESTS OF EACH FUND AND
ITS SHAREHOLDERS. Some of the factors considered include:
o the similarity of the two funds' investment objectives, policies and
strategies;
o the possibility of achieving management operational efficiencies;
o the all-inclusive management fee of the New Capital Preservation Fund
is lower than the total expense ratios of each of the Capital
Preservation Fund and Capital Preservation Fund II;
o the fact that economic changes over the last five to ten years have
diminished the need for a money market fund that is positioned to take
advantage of rising short-term interest rates; and
o that there will be no dilution of the interests of existing
shareholders.
HOW WILL THE REORGANIZATION AFFECT THE MANAGEMENT TEAM OF YOUR FUND?
Amy O'Donnell, the lead portfolio manager for the Capital Preservation
Fund, will serve as lead manager for the New Capital Preservation Fund and
oversee the work of the portfolio management team. Denise Tabacco, the lead
portfolio manager for the Capital Preservation Fund II, will also serve on the
portfolio management team of the New Capital Preservation Fund.
WILL THE EXCHANGE OF CAPITAL PRESERVATION FUND AND CAPITAL PRESERVATION
FUND II SHARES FOR NEW CAPITAL PRESERVATION FUND SHARES CAUSE ME TO REALIZE
INCOME OR CAPITAL GAINS FOR TAX PURPOSES?
No. The exchange of shares in the reorganization will be tax-free. Your
tax basis and holding period for your shares will be unchanged.
HOW DO THE FEE STRUCTURE AND TOTAL EXPENSE RATIO OF THE CAPITAL
PRESERVATION FUND AND CAPITAL PRESERVATION FUND II COMPARE TO THAT OF THE NEW
CAPITAL PRESERVATION FUND'S?
The New Capital Preservation Fund has an "all-inclusive" management fee.
Under this "all-inclusive" management fee, the New Capital Preservation Fund
pays a single management fee. The all-inclusive fee has been calculated for the
current fiscal year at 0.48% of its average net assets. In exchange for the
all-inclusive fee, the manager is responsible for paying all of the costs
associated with providing or procuring all of the services of the fund but is
not responsible for taxes, interest, brokerage commissions, the fees and
expenses of outside directors, and extraordinary items. In contrast, with
respect to the Capital Preservation Fund and Capital Preservation Fund II, the
funds (and hence, their shareholders) pay separate fees for investment
Proxy Statement Important Information You Should Consider 3
advisory, administrative, custodial and transfer agency services. In addition,
there are other expenses, such as the cost of annual audits, that are paid for
by the funds. The total of all the fees is currently capped at a 0.53% annual
fee for the Capital Preservation Fund and a 0.73% annual fee for the Capital
Preservation Fund II. For the year ended March 31, 1996, the Capital
Preservation Fund paid total operating expenses of 0.51% and the Capital
Preservation Fund II would have paid, without waivers, total operating expenses
of 0.76%.
IS THE NEW CAPITAL PRESERVATION FUND RISKIER THAN THE CAPITAL PRESERVATION
FUND OR THE CAPITAL PRESERVATION FUND II?
The New Capital Preservation Fund will essentially be the same fund as the
Capital Preservation Fund. It will continue to seek maximum safety and liquidity
for shareholders by investing exclusively in short-term U.S. Treasury securities
guaranteed by the direct full faith and credit of the U.S. government. While the
risks associated with investing in short-term U.S Treasury securities are very
low, investment in the fund is not risk free. Capital Preservation Fund II
shareholders will have a slightly higher interest rate risk as shareholders of
the New Capital Preservation Fund than the Capital Preservation Fund II since
the Capital Preservation Fund II restricts its average portfolio maturity to
seven days or less.
HOW DO I VOTE MY SHARES?
We've made it easy for you. You can vote by mail, phone, fax or in person
at the Special Meeting. To vote by mail, sign and send us the enclosed proxy
voting card in the envelope provided. You can fax your vote by signing the proxy
voting card and faxing both sides of the card to 1-888-PROXY-FAX
(1-888-776-9932). D.F. King & Co., Inc., our proxy solicitor, can accept your
vote over the phone -- simply call 1-800-755-3107. Or, you can vote in person at
the Special Meeting set for July 30, 1997.
If you have any questions regarding the proxy statement or need
assistance in voting your shares, please call D.F. King & Co., Inc. at
1-800-755-3107.
IF I SEND MY PROXY IN NOW AS REQUESTED, CAN I CHANGE MY VOTE LATER?
Yes. A proxy can be revoked at any time by writing to us, by sending us
another proxy, or by attending the meeting and voting in person. Even if you
plan to attend the meeting to vote in person, we ask that you return the
enclosed proxy. Doing so will help us achieve a quorum for the meeting.
WHEN AND HOW WILL THE COMBINATION TAKE PLACE?
Subject to receiving shareholder approval, the reorganization is
anticipated to take place on August 30, 1997. After both funds have calculated
their net asset value on August 29, the Capital Preservation Fund and Capital
Preservation Fund II will transfer all of their assets and liabilities to the
New Capital Preservation Fund in exchange for its shares. The Capital
Preservation Fund and Capital Preservation Fund II will then make a liquidating
distribu-
4 Important Information You Should Consider American Century Investments
tion of those shares to their shareholders according to the value of their
accounts immediately prior to the transfer of assets. THE VALUE OF YOUR ACCOUNT
WILL NOT CHANGE AS A RESULT OF THIS REORGANIZATION.
HOW WILL THE DISTRIBUTION, PURCHASE, REDEMPTION AND EXCHANGE POLICIES AND
PROCEDURES CHANGE AS A RESULT OF THE REORGANIZATION?
They won't. The New Capital Preservation Fund has the same distribution,
purchase, redemption and exchange policies and procedures as the Capital
Preservation Fund and Capital Preservation Fund II.
WHERE CAN I GET MORE INFORMATION ABOUT BOTH FUNDS?
Each fund is registered with the Securities and Exchange Commission. As a
result, each has on file with the Commission a Prospectus and Statement of
Additional Information with even more detailed information than is contained in
this document. A copy of the New Capital Preservation Fund's Prospectus
accompanies this Combined Prospectus/Proxy Statement. In addition, the funds
issue joint semiannual and annual reports to their shareholders that contain
financial and operating information regarding the funds. The performance listing
and results of operations of the Capital Preservation Fund will survive the
reorganization. As a result, for information regarding the manager's discussion
and analysis of that fund's recent performance, you should refer to the funds'
most recent Semiannual Report, dated September 30, 1996, which you have
previously received. If you would like a copy of the Capital Preservation Fund
or Capital Preservation Fund II's Prospectus, Statement of Additional
Information, most recent Annual Report or Semiannual Report, please call D. F.
King and Co., Inc. at 1-800-755-3107.
Proxy Statement Important Information You Should Consider 5
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.
AMERICAN CENTURY CAPITAL PRESERVATION FUND II, INC.
American Century Investments
4500 Main Street
P. O. Box 419200
Kansas City, Missouri 64141-6200
(800) 345-2021
TO BE HELD ON JULY 30, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of the
American Century - Benham Capital Preservation Fund, a portfolio of American
Century Capital Preservation Fund, Inc. and American Century - Benham Capital
Preservation Fund II, a portfolio of American Century Capital Preservation Fund
II, Inc., will be held at the companies' offices at 4500 Main Street, Kansas
City, Missouri on Wednesday, July 30, 1997, at 10:00 a.m. (Central time) for the
following purposes:
1. To consider and act upon a proposal to approve an Agreement and Plan of
Reorganization and the transactions contemplated thereby, including:
(a) the transfer of substantially all of the assets and liabilities of the
Capital Preservation Fund and Capital Preservation Fund II to a
corresponding portfolio of the American Century Government Income
Trust (the "New Capital Preservation Fund") in exchange for shares of
that Fund;
(b) the distribution of such New Capital Preservation Fund shares to the
shareholders of the Capital Preservation Fund and Capital Preservation
Fund II according to their respective interests; and
(c) the termination under state law and the Investment Company Act of
1940, as amended, of the American Century Capital Preservation Fund,
Inc. and American Century Capital Preservation Fund II, Inc.; and
2. To transact such other business as may properly come before the Special
Meeting of Shareholders or any adjournment(s) thereof.
The proposed reorganization and related matters are described in the
attached Combined Prospectus/Proxy Statement.
6 Notice of Special Meeting of Shareholders American Century Investments
Shareholders of record as of the close of business on May 16, 1997, are
entitled to notice of, and to vote at, the Special Meeting or any adjournment(s)
thereof.
WE URGE YOU TO MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE
POSTAGE-PAID ENVELOPE PROVIDED SO YOU WILL BE REPRESENTED AT THE MEETING.
The Board of Directors recommend that you cast your note FOR the
reorganization.
BY ORDER OF THE BOARD OF DIRECTORS
William M. Lyons
Executive Vice President
June 2, 1997
Proxy Statement Notice of Special Meeting of Shareholders 7
COMBINED PROSPECTUS/
PROXY STATEMENT
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.
AMERICAN CENTURY CAPITAL PRESERVATION FUND II, INC.
June 2, 1997
This Combined Prospectus/Proxy Statement is furnished in connection with
the solicitation of votes by the Board of Directors of the Capital Preservation
Fund and Capital Preservation Fund II in connection with a Special Meeting of
Shareholders to be held on Wednesday, July 30, 1997, 10 a.m. Central time at the
companies' offices at 4500 Main Street, Kansas City, Missouri.
At the Special Meeting, shareholders of the Capital Preservation Fund and
Capital Preservation Fund II are being asked to approve the combination of their
funds into a new American Century fund (the "New Capital Preservation Fund").
Each fund involved in the reorganization is a similarly managed
diversified, open-end money market mutual fund that seeks maximum safety and
liquidity. The purpose of the reorganization is to achieve management and
operational efficiencies by combining these similar funds. Each fund has shares
registered with the Securities and Exchange Commission.
This Combined Prospectus/Proxy Statement constitutes the Proxy Statement of
your fund for the Special Meeting of Shareholders and a prospectus for the
shares of the New Capital Preservation Fund that are to be issued in connection
with the reorganization. It is intended to give you the information you need to
consider and vote on the proposed reorganization. You should retain this
document for future reference.
A Statement of Additional Information, dated June 2, 1997, about your fund
and the New Capital Preservation Fund has been filed with the Commission and is
incorporated into this document by reference. A copy of the Statement of
Additional Information may be obtained without charge upon request by calling or
writing to us at the address or telephone number set forth below.
The principal executive offices of your fund and the New Capital
Preservation Fund are located at American Century Investments, 4500 Main
Street, P. O. Box 419200, Kansas City, Missouri 64141-6200. The funds'
telephone number is 1-800-345-2021.
A copy of the New Capital Preservation Fund prospectus accompanies this
document and is incorporated into it by reference.
8 Combined Prospectus/Proxy Statement American Century Investments
The information contained in this Combined Prospectus/Proxy Statement is
required by rules of the Securities and Exchange Commission; some of it is
highly technical. If you have any questions about these materials or how to vote
your shares, please call our proxy solicitor, D. F. King and Co., Inc., at
1-800-755-3107.
LIKE ALL MUTUAL FUND SHARES, THE SECURITIES OF AMERICAN CENTURY'S NEW
CAPITAL PRESERVATION FUND 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
ON THE ADEQUACY OR ACCURACY OF THIS COMBINED PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representations other than those contained in this Combined Prospectus/Proxy
Statement and in the materials expressly incorporated herein by reference. If
given or made, such other information or representations must not be relied upon
as having been authorized by your fund, American Century's New Capital
Preservation Fund or anyone affiliated with American Century Investments.
PLEASE NOTE THAT THE SPECIAL MEETING OF SHAREHOLDERS WILL BE A BUSINESS
MEETING ONLY. IT IS NOT A SHAREHOLDER SEMINAR.
COMPARISON OF CERTAIN INFORMATION REGARDING THE FUNDS
The following chart is provided to show a comparison of certain key
attributes of your fund with the New Capital Preservation Fund. The Total
Expenses Ratios for the Capital Preservation Fund and Capital Preservation Fund
II are stated as of their most recent fiscal year ended March 31, 1996, while
the Total Expense Ratio shown for the New Capital Preservation Fund is the fee
that will be in place at the time of the reorganization.
<TABLE>
<CAPTION>
CAPITAL PRESERVATION CAPITAL PRESERVATION NEW CAPITAL
FUND FUND II PRESERVATION FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Type of Fund Money Market Money Market Money Market
Investment Seeks maximum Seeks maximum Seeks maximum safety
Objective safety and liquidity. safety and liquidity. and liquidity.
Secondarily, the fund Secondarily, the fund Secondarily, the fund
seeks to pay its seeks to pay its seeks to pay its
shareholders the shareholders the shareholders the
highest rate of return highest rate of return highest rate of return
on their investment on their investment on their investment
consistent with safety consistent with safety consistent with safety
and liquidity. and liquidity. and liquidity.
Proxy Statement Comparison of Certain Information Regarding the Funds 9
CAPITAL PRESERVATION CAPITAL PRESERVATION NEW CAPITAL
FUND FUND II PRESERVATION FUND
- -------------------------------------------------------------------------------------------------------------
Invests Short-term U.S. Treasury Repurchase agreements Short-term U.S.
Exclusively In securities guaranteed by collateralized by Treasury securities
the direct full faith and securities that are backed guaranteed by the
credit pledge of the by the full faith and direct full faith and
U.S. government. credit of the U.S. credit pledge of the
government. U.S. government.
Limitation on Not to exceed 90 days. Not to exceed 7 days. Not to exceed 90 days.
Dollar-Weighted
Average Portfolio
Maturity
Total Expense 0.51% 0.73% (after waivers) 0.48%
Ratio (at 03/31/96) 0.76% (without waivers)
Distribution Policy Declared and credited Declared and credited Declared and credited
daily. Distributed daily. Distributed daily. Distributed
monthly. monthly. monthly.
Purchases and Same as New Capital Same as New Capital See pages 8-10 of
Exchanges Preservation Fund Preservation Fund accompanying
Prospectus
Redemption Policies Same as New Capital Same as New Capital See pages 10-11 of
Preservation Fund Preservation Fund accompanying
Prospectus
Investment Advisor Benham Management BMC American Century
Corporation(1) ("BMC") Investment Manage-
ment, Inc.(1) ("ACIM")
Transfer Agent American Century American Century American Century
Services Corporation Services Corporation Services Corporation
Distributor American Century American Century American Century
Investment Investment Investment
Services, Inc. Services, Inc. Services, Inc.
Custodians Chase Manhattan Bank Chase Manhattan Bank Chase Manhattan Bank
Independent KPMG Peat KPMG Peat Coopers & Lybrand
Auditors Marwick LLP Marwick LLP
- -----------------------
(1) BMC and ACIM are both wholly owned subsidiaries of American Century
Companies, Inc. Through this and many other proposals being submitted to
shareholders, American Century is seeking to consolidate all of its investment
advisory activities in ACIM.
10 Comparison of Certain Information Regarding the Funds American Century Investments
</TABLE>
RISK FACTORS
Because the funds have the same investment objective and share
substantially similar investment policies, approaches and procedures, your Board
of Directors does not believe that the reorganization exposes shareholders of
the New Capital Preservation Fund to any new or different risks than they are
exposed to as shareholders of the Capital Preservation Fund or Capital
Preservation Fund II. As previously discussed, the New Capital Preservation Fund
will have a slightly higher interest rate risk than Capital Preservation Fund II
since Capital Preservation Fund II restricts its average portfolio maturity to
seven days or less. In contrast, the New Capital Preservation Fund restricts its
average portfolio maturity to 90 days or less. For a discussion of the various
investment policies, approaches and procedures of the New Capital Preservation
Fund, and the risks associated therewith, please see the accompanying prospectus
beginning at page 6.
<TABLE>
<CAPTION>
TRANSACTION AND
OPERATING EXPENSE INFORMATION
The table below compares shareholder transaction expenses and annual fund
operating expenses of the Capital Preservation Fund, Capital Preservation Fund
II and pro forma expenses of the New Capital Preservation Fund.
Pro Forma:
Capital Capital New Capital
Preservation Preservation Preservation
Fund Fund II Fund
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases............ none none none
Maximum Sales Load Imposed
on Reinvested Dividends.......................... none none none
Deferred Sales Load................................ none none none
Redemption Fee(1).................................. none none none
Exchange Fee....................................... none none none
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
Proxy Statement Transaction and Operating Expense Information 11
Pro Forma:
Capital Capital New Capital
Preservation Preservation Preservation
Fund Fund II Fund
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees.................................... 0.27% 0.43%(2) 0.48%
12b-1 Fees......................................... none none none
Other Expenses..................................... 0.24% 0.30%(2) 0.00%(3
Total Fund Operating Expenses...................... 0.51%(2) 0.73%(2) 0.48%
EXAMPLE:
You would pay the following expenses 1 year $ 5 $ 7 $ 5
on a $1,000 investment, assuming a 5% 3 years 16 23 15
annual return and redemption at the 5 years 29 41 27
end of each time period. 10 years 64 91 60
(2) The fund's investment advisor has agreed to limit the fund's total
operating expenses to specified percentages of the fund's average daily net
assets. The agreement provides that the advisor may recover amounts
absorbed on behalf of the fund during the preceding 11 months if, and to
the extent that, for any given month fund expenses were less than the
expense limit in effect at that time. The current expense limit for the
Capital Preservation Fund and Capital Preservation Fund II is 0.53% and
0.73% respectively. This expense limit is subject to annual renewal in
June. Amounts which are paid by unaffiliated third parties do not apply to
these limitations. If the expense limit was not in effect, the Management
Fee, Other Expenses and Total Operating Expenses for the Capital
Preservation Fund II would have been 0.46%, 0.30% and 0.76%, respectively.
(3) The manager expects Other Expenses to be less than 0.005% of 1% of average
net assets for the combined funds' next fiscal year end.
</TABLE>
The purpose of the table is to help you compare the various costs and
expenses that shareholders bear, directly or indirectly, as a result of owning
shares of the funds. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN SHOULD BE CONSIDERED
INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
ADDITIONAL INFORMATION ABOUT
THE PROPOSED TRANSACTION
SUMMARY OF PLAN OF REORGANIZATION
Subject to receipt of shareholder approval, the reorganization will be
carried out pursuant to the terms of the Agreement and Plan of
12 Additional Information About the Proposed Transaction
American Century Investments
Reorganization, a copy of which is included in the Statement of Additional
Information. The following is a brief summary of some of the important terms of
that Agreement.
EFFECTIVE TIME OF THE REORGANIZATION. The Agreement requires that the
exchange of assets for stock take place after the close of business on one
business day but before (or as of) the opening of business on the next business
day (the "Effective Time"). It is currently anticipated that the reorganization
will take place after the close of business on August 29, 1997, but before (or
as of) the opening of business on September 2, 1997. However, the Agreement
gives the officers of the funds the flexibility to choose another date.
EXCHANGE OF ASSETS. After the close of business on August 29th (or such
other business day as selected by the manager), each fund will determine the
value of their assets and liabilities in the same manner as described on page 14
of the accompanying Prospectus. The assets and liabilities of the Capital
Preservation Fund and Capital Preservation Fund II will then be transferred to
the New Capital Preservation Fund in exchange for that number of full and
fractional shares (rounded to the third decimal place) of shares that have the
same aggregate net asset value as the value of the net assets received in the
exchange. The Capital Preservation Fund and Capital Preservation Fund II will
retain enough cash to pay any unpaid dividends and distributions payable by the
funds.
LIQUIDATING DISTRIBUTIONS AND TERMINATION OF THE CAPITAL PRESERVATION FUND
AND CAPITAL PRESERVATION FUND II. Immediately after the exchange of their assets
for New Capital Preservation Fund shares, the Capital Preservation Fund and
Capital Preservation Fund II will distribute pro rata all of the shares they
receive in the exchange to their shareholders of record at the Effective Time.
All of the outstanding shares of the Capital Preservation Fund and Capital
Preservation Fund II will be redeemed and canceled and their stock books closed.
As a result, such shareholders will become shareholders of the New Capital
Preservation Fund. The investment advisor for Capital Preservation Fund and
Capital Preservation Fund II will then take steps to withdraw each investment
company's registration under applicable federal securities laws and dissolve
them under applicable state law.
SHAREHOLDER APPROVAL. Consummation of the reorganization requires
approval of the Capital Preservation Fund and Capital Preservation Fund II
shareholders.
REPRESENTATIONS AND WARRANTIES. The Agreement and Plan of Reorganization
contains representations and warranties made by each fund to the others
concerning the fund's formation and existence under applicable state law, its
power to consummate the reorganization, its qualification as a "regulated
investment company" under applicable tax law, the registration of its shares
under federal law and other matters that are customary in a reorganization of
this type. The representations and warranties terminate at the Effective Time.
Proxy Statement Additional Information About the Proposed Transaction 13
CONDITIONS TO CLOSING. The Agreement contains conditions to closing the
proposed reorganization for the benefit of each fund. The conditions to closing
require approval of the reorganization by Capital Preservation Fund and Capital
Preservation Fund II shareholders, that all representations of the other funds
be true in all material respects, receipt of the legal opinion described on page
15 under the caption "Federal Income Tax Consequences," and other matters that
are customary in a reorganization of this type.
TERMINATION OF AGREEMENT. The Agreement may be terminated by a fund as a
result of a failure by the other funds to meet one of its conditions to
closing, or by mutual consent.
GOVERNING LAW. The Agreement states that it is to be interpreted under
Massachusetts law, the state of organization of the New Capital Preservation
Fund.
DESCRIPTION OF NEW CAPITAL PRESERVATION FUND SECURITIES
The New Capital Preservation Fund is one of several series of shares
offered by American Century Government Income Trust. Each series is commonly
referred to as a mutual fund. The assets belonging to each series of shares are
held separately by the custodian.
American Century is currently authorized to issue one class of New Capital
Preservation Fund shares, although more classes might be offered in the future.
Your Board of Directors believes there are no material differences between
the rights of a Capital Preservation Fund or Capital Preservation Fund II
shareholder and the rights of a shareholder of the New Capital Preservation
Fund. Each share, irrespective of series, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except for
those matters that must be voted on separately by the fund affected. Matters
affecting only one fund are voted upon only by that fund.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act of 1940, it is not necessary
for the fund to hold annual meetings of shareholders. As a result, shareholders
may not vote each year on the election of directors or the appointment of
auditors. However, pursuant to the fund's bylaws, the holders of at least 10% of
the votes entitled to be cast may request the fund to hold a special meeting of
shareholders.
REASONS SUPPORTING THE REORGANIZATION
The reasons supporting the combination of these funds are summarized in
the second question of the Q&A at the front of this document. With
14 Additional Information About the Proposed Transaction
American Century Investments
regard to Capital Preservation Fund II, the economic and interest rate
environment that led to the creation of that fund has, for the most part, ceased
to exist. Capital Preservation Fund II was created in 1980 to respond quickly to
interest rate increases. By investing in repurchase agreements that normally
mature in seven days or less, the fund maintains a relatively short weighted
average maturity. Since there are no indications that the U.S. economy will soon
return to a volatile, rising interest rate environment, the manager believes
that shareholders will benefit from a fund with a lower fee that is managed in
the style of the Capital Preservation Fund.
With regard to shareholders of the Capital Preservation Fund, the
reorganization will not result in any change to their investment. The New
Capital Preservation Fund is a series of American Century Government Income
Trust, which is a Massachusetts business trust that issues seven other bond
funds that invest in U.S. government securities. The reformation of this fund
and Capital Preservation Fund II as a single series of American Century
Government Income Trust, will allow the manager to eliminate the corporate
upkeep and various federal securities law filings for two separately registered
investment companies. This and other anticipated operational efficiencies have
enabled the manager to propose a single, "all-inclusive" management fee that is
lower than the total expense ratios for the combining funds for their most
recently completed fiscal year and all prior years.
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the reorganization is subject to the condition that we
receive a legal opinion from Dechert, Price & Rhoads to the effect that for
federal income tax purposes (i) no gain or loss will be recognized by you, the
Capital Preservation Fund, Capital Preservation Fund II or New Capital
Preservation Fund, (ii) your basis in the New Capital Preservation Fund shares
that you receive will be the same as your basis in the Capital Preservation Fund
and Capital Preservation Fund II shares held by you immediately prior to the
reorganization, and (iii) your holding period for the New Capital Preservation
Fund shares will include your holding period for your Capital Preservation Fund
and Capital Preservation Fund II shares.
We have not sought a tax ruling from the Internal Revenue Service, but are
relying upon the opinion of counsel referred to above. That opinion is not
binding on the IRS and does not preclude them from taking a contrary position.
You should consult your own advisors concerning the potential
tax consequences.
CAPITALIZATION
As of March 31, 1997, (i) the capitalization of the Capital Preservation
Fund and the Capital Preservation Fund II are $2,977,972,397 and $226,472,861,
respectively, and the pro forma capitalization of the New Capital Preservation
Fund, as adjusted to give effect to the reorganization, is
Proxy Statement Additional Information About the Proposed Transaction 15
$3,204,445,257. If the reorganization is consummated, the capitalization of the
New Capital Preservation Fund is likely to be different at the Effective Time of
the reorganization as a result of market fluctuations of the fund's portfolio
securities and purchase and redemption activity in the funds.
INFORMATION ABOUT THE FUNDS
A complete description of all material information regarding the New
Capital Preservation Fund and American Century Government Income Trust is
contained in the Prospectus accompanying this Combined Prospectus/Proxy
Statement. Complete information about the Capital Preservation Fund and Capital
Preservation Fund II is contained in their Prospectus, which you have previously
received. If you would like another copy of that Prospectus, please call
1-800-755-3107. The content of each Prospectus is incorporated into this
document by reference. The chart below lists types of information about the
funds and pages in the Prospectus where that information can be found.
<TABLE>
INFORMATION ABOUT THE CAN BE FOUND IN THE
FOLLOWING ITEMS: FOLLOWING PLACES:
- ---------------------------------------------------------------------------------------------------------------
IN THE CAPITAL PRESERVATION
IN THE NEW FUND AND CAPITAL
CAPITAL PRESERVATION PRESERVATION
FUND PROSPECTUS FUND II PROSPECTUS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Condensed financial information about the funds.
See Financial Highlights........................ Page 5 Pages 5-6
Organization and proposed operation of
the funds, including a description of the
investment objectives and policies, and
how the funds seek to achieve such objectives.
See Further Information
About American Century.......................... Page 17 Page 31
See Investment Policies of the Funds............ Page 6 Pages 13-15
See Risk Factors and Investment
Techniques...................................... Page 6 Page 15-18
See Other Investment Practices, Their
Characteristics and Risks....................... Pages 6-7 Page 18
16 Information About the Funds American Century Investments
INFORMATION ABOUT THE CAN BE FOUND IN THE
FOLLOWING ITEMS: FOLLOWING PLACES:
- ---------------------------------------------------------------------------------------------------------------
IN THE CAPITAL PRESERVATION
IN THE NEW FUND AND CAPITAL
CAPITAL PRESERVATION PRESERVATION
FUND PROSPECTUS FUND II PROSPECTUS
- ---------------------------------------------------------------------------------------------------------------
A description of the individuals who will be
managing the funds, the services the
investment manager will provide, and its fees.
See Management -
Investment Management........................... Pages 15-16 Pages 28-30
The funds' policies with respect to
dividends and distributions and tax
consequences of investments in the funds.
See Distributions............................... Pages 14-15 Page 27
See Taxes....................................... Page 15 Pages 27-28
An explanation of "net asset value" of your shares.
See When Share Price is Determined.............. Page 14 Page 26
See How Share Price is Determined............... Page 14 Pages 26-27
Information about the transaction and
operating expenses of the funds.
See Transaction and Operating
Expense Table................................... Page 4 Page 4
Information about distribution of the
funds' shares, such as the name of the
funds' transfer agent and dividend
paying agent, distributor of fund shares,
and charges that may be imposed
by broker-dealers.
See Distribution of Fund Shares................. Page 17 Page 30
See Transfer and
Administrative Services......................... Pages 16-17 Page 30
The funds' minimum initial and
subsequent investments.
See How to Open An Account...................... Page 8 Page 20-21
Discussion regarding each fund's
voting rights and restrictions
of shareholders.
See Further Information
About American Century.......................... Page 17 Page 31
Proxy Statement Information About the Funds 17
INFORMATION ABOUT THE CAN BE FOUND IN THE
FOLLOWING ITEMS: FOLLOWING PLACES:
- ---------------------------------------------------------------------------------------------------------------
IN THE CAPITAL PRESERVATION
IN THE NEW FUND AND CAPITAL
CAPITAL PRESERVATION PRESERVATION
FUND PROSPECTUS FUND II PROSPECTUS
- ---------------------------------------------------------------------------------------------------------------
Procedures for redeeming shares, refusals
to honor redemption requests and
involuntary redemption of shares.
See How to Redeem Shares........................ Page 10 Page 22
See Redemption of Shares in
Low-Balance Accounts............................ Pages 10-11 Page 22
</TABLE>
The performance history of the Capital Preservation Fund will survive the
reorganization. As a result, for information regarding the manager's discussion
and analysis of that fund's recent performance, you should refer to the most
recent Semiannual Report, dated September 30, 1996, which you have previously
received.
FUNDAMENTAL INVESTMENT RESTRICTIONS
Neither the Capital Preservation Fund, Capital Preservation Fund II nor the
New Capital Preservation Fund may change its investment objective or any of its
investment policies or restrictions designated as "fundamental" in its
prospectus or statement of additional information without shareholder approval.
The New Capital Preservation Fund has adopted investment restrictions that
are consistent with the other funds within the American Century family of funds.
If you would like to review those policies as proposed, they are set forth in
Appendix I. If you would like to review the Capital Preservation Fund and
Capital Preservation Fund II's current investment limitations, they are set
forth in Appendix II.
If the reorganization proposed by this proxy is not approved, it is
anticipated that the manager will propose that the Board of Directors approve
the submission to a vote of shareholders of substantially similar policies as
set forth in Appendix I in order to make its investment restrictions consistent
with the other funds within the American Century family of funds.
A complete discussion of all material information about the your fund is
contained in its current prospectus, which is incorporated into this document by
reference.
18 Information About the Funds American Century Investments
INFORMATION RELATING
TO VOTING MATTERS
GENERAL INFORMATION
This Combined Prospectus/Proxy Statement is being furnished in connection
with the solicitation of proxies by the Board of Directors of your fund. To
more efficiently handle the proxy solicitation, American Century Investment
Management, Inc. has hired D. F. King and Co., Inc. to act as proxy solicitor.
Proxies may also be solicited by officers and employees of the investment
advisors of the funds, their affiliates and employees. It is anticipated that
the solicitation of proxies will be primarily by mail, telephone, facsimile or
personal interview. Authorizations to execute proxies may be obtained by
telephonic or electronically transmitted instructions in accordance with
procedures designed to authenticate the shareholder's identity and to confirm
that the shareholder has received the Combined Prospectus/ Proxy Statement and
proxy voting card. If you have any questions regarding voting your shares or
the proxy, you should call D. F. King and Co., Inc. at 1-800-755-3107.
You should be aware that in the event that shareholders of one but not both
of the Capital Preservation Fund and Capital Preservation Fund II approve the
reorganization, then American Century may elect either to reorganize the fund
whose shareholders approved the transaction, or continue operating both funds as
they are currently being operated.
VOTING AND REVOCATION OF PROXIES
The fastest and most convenient way to vote your shares is to complete,
sign and mail the enclosed proxy voting card to us in the enclosed envelope.
This will help us obtain a quorum for the meeting and avoid the cost of
additional proxy solicitation efforts.
You may also fax your vote by signing the proxy voting card and faxing
both sides of the card to 1-888-PROXY-FAX (1-888-776-9932). D. F. King & Co.
, Inc. can also accept your vote over the phone by simply calling
1-800-755-3107. If you return your proxy to us, we will vote it exactly as you
tell us. If you simply sign the card and return it, we will follow the
recommendation of your Board of Directors and vote "FOR" the reorganization.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by submitting a written notice of revocation, or a subsequently
executed proxy, or by attending the meeting and voting in person.
RECORD DATE
Only shareholders of record at the close of business on May 16, 1997, will
be entitled to vote at the meeting.
Proxy Statement Information Relating to Voting Matters 19
QUORUM
A quorum is the number of shareholders legally required to be at a meeting
in order to conduct business. The quorum for the Special Meeting of Shareholders
is 50% of the outstanding shares of each fund entitled to vote at the meeting.
Shares may be represented in person or by proxy. Proxies properly executed and
marked with a negative vote or an abstention will be considered to be present at
the meeting for the purposes of determining the existence of a quorum for the
transaction of business. If a quorum is not present at the meeting, or if a
quorum is present at the meeting but sufficient votes are not received to
approve the Agreement and Plan of Reorganization, the persons named as proxies
may propose one or more adjournments of the meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares affected by the adjournment that are represented
at the meeting in person or by proxy. If a quorum is not present, the persons
named as proxies will vote those proxies for which they are required to vote FOR
the Agreement and Plan of Reor-ganization in favor of such adjournments, and
will vote those proxies for which they are required to vote AGAINST such
proposals at any adjournment.
SHAREHOLDER VOTE REQUIRED
The Agreement and Plan of Reorganization must be approved by the holders of
a majority of the outstanding shares of the Capital Preservation Fund and
Capital Preservation II in accordance with the provisions of their respective
Articles of Incorporation and the requirements of the Investment Company Act.
The term "majority of the outstanding shares" means more than 50% of its
outstanding shares.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a proposal
because instructions have not been received from the beneficial owners) will be
counted for purposes of determining whether or not a quorum is present for
purposes of convening the meeting. Abstentions and broker non-votes will,
however, be considered to be a vote against the Agreement and Plan of
Reorganization.
COST OF PROXY SOLICITATION
The cost of the proxy solicitation and shareholder meeting will be borne by
American Century Investment Management, Inc. and not by the shareholders of
either fund.
CERTAIN SHAREHOLDERS
At May 5, 1997, there were no shareholders of record of either the Capital
Preservation Fund or the Capital Preservation Fund II that owned 5% or more of
the outstanding shares of either such fund.
20 Information Relating to Voting Matters American Century Investments
At May 5, 1997, the Directors and officers of the issuer of the Capital
Preservation Fund and Capital Preservation Fund II, as a group, owned less than
1% of the outstanding shares of each fund.
APPRAISAL RIGHTS
Shareholders of the Capital Preservation Fund and Capital Preservation Fund
II are not entitled to any rights of share appraisal under the fund's Articles
of Incorporation, or under the laws of the State of California.
Shareholders have, however, the right to redeem their fund shares until the
reorganization, and thereafter shareholders may redeem from American Century
Government Income Trust their New Capital Preservation Fund shares acquired in
the reorganization at net asset value.
ANNUAL MEETINGS
American Century Government Income Trust, the issuer of the New Capital
Preservation Fund, does not intend to hold annual meetings of shareholders
unless and until such time as less than a majority of the Trustees holding
office have been elected by the shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election directors. Pursuant to
the fund's bylaws, the shareholders of New Capital Preservation Fund have the
right to call a special meeting of shareholders and such meeting will be called
when requested in writing by the holders of record of 10% or more of the fund's
votes entitled to be cast at the meeting. To the extent required by law, the
manager will assist in shareholder communications on such matters.
The Capital Preservation Fund and Capital Preservation Fund II do not
intend to hold an annual meeting of shareholders this year for the election of
directors or the ratification of the appointment of auditors.
ADDITIONAL INFORMATION
Information about the Capital Preservation Fund and Capital Preservation
Fund II is incorporated into this document by reference from its Prospectus and
Statement of Additional Information, each dated September 3, 1996, revised
January 1, 1997. Information about the New Capital Preservation Fund is
incorporated herein by reference from its Prospectus and Statement of Additional
Information, each dated June 2, 1997, copies of each of which may be obtained
without charge by writing or calling D. F. King and Co., Inc. at 1-800-755-3107.
Reports and other information filed by American Century Government Income
Trust, American Century Capital Preservation Fund, Inc. and American Century
Capital Preservation Fund II, Inc. may be inspected and copied at the Public
Reference Facilities maintained by the Commission at
Proxy Statement Additional Information 21
450 Fifth Street, N.W., Washington, DC 20549, and copies of such materials may
be obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, DC 20549,
at prescribed rates or by accessing the Web site maintained by the SEC
(www.sec.gov).
LITIGATION
Neither American Century Government Income Trust, American Century
Capital Preservation Fund, Inc. nor American Century Capital Preservation Fund
II, Inc. is involved in any litigation or proceeding.
FINANCIAL STATEMENTS
The financial highlights and financial statements for the Capital
Preservation Fund for the year ended March 31, 1996, and six month period ended
September 30, 1996, are contained in its Annual Report and Semiannual Report to
Shareholders, and in its prospectus and statement of additional information,
each dated January 1, 1997, each of which is incorporated by reference into this
Combined Prospectus/Proxy Statement. The financial highlights and the financial
statements for the Capital Preservation Fund II for the fiscal year ended March
31, 1996, and six month period ended September 30, 1996, are contained in its
Annual Report and Semiannual Report to Shareholders, and in its prospectus and
statement of additional information, each dated January 1, 1997, each of which
are incorporated by reference in this Combined Prospectus/Proxy Statement.
The audited financial statements of the Capital Preservation Fund and
Capital Preservation Fund II for the fiscal year ended March 31, 1996, contained
in its Annual Reports and incorporated herein in reliance on the reports of KPMG
Peat Marwick LLP, independent auditors, given upon the authority of such firm as
experts in accounting and auditing.
OTHER BUSINESS
The Board of Directors is not aware of any other business to be brought
before the meeting. However, if any other matters come before the meeting, it is
the intention that proxies that do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be directed to D. F. King & Co., Inc. at
1-800-755-3107 or addressed to us at the address or telephone number set forth
on the cover page of this Combined Prospectus/Proxy Statement.
SHAREHOLDERS ARE REQUESTED TO DATE AND SIGN EACH ENCLOSED PROXY VOTING
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE. PLEASE RETURN YOUR PROXY VOTING
CARD EVEN IF YOU ARE PLANNING TO ATTEND THE MEETING. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.
22 Additional Information American Century Investments
APPENDIX I
STANDARDIZED FUNDAMENTAL
INVESTMENT RESTRICTIONS
The New Capital Preservation Fund has adopted the fundamental investment
restrictions set forth in the following table. These limitations are consistent
with the other funds within the American Century family of funds. These
fundamental investment restrictions cannot be changed without the approval of
the fund's shareholders.
CATEGORY STANDARD LIMITATION
- -----------------------------------------------------------------------------
SENIOR SECURITIES The fund shall not issue senior securities, except
as permitted under the Investment Company Act of
1940.
- -----------------------------------------------------------------------------
BORROWING The fund shall not borrow money, except that 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).
- -----------------------------------------------------------------------------
LENDING The fund shall not 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.
- -----------------------------------------------------------------------------
REAL ESTATE The fund shall not purchase or sell real estate
unless acquired as a result of ownership of
securities or other instruments. This policy shall
not prevent the fund from investment in securities
or other instruments backed by real estate or
securities of companies that deal in real estate or
are engaged in the real estate business.
- -----------------------------------------------------------------------------
CONCENTRATION The fund shall not concentrate its investments in
securities of issuers in a particular industry
(other than securities issued or guaranteed by the
U. S. government or any of its agencies or
instrumentalities).
- -----------------------------------------------------------------------------
Proxy Statement Appendix I 23
CATEGORY STANDARD LIMITATION
- -----------------------------------------------------------------------------
UNDERWRITING The fund shall not act as an underwriter of
securities issued by others, except to the extent
that the fund may be considered an underwriter within
the meaning of the Securities Act of 1933 in the
disposition of restricted securities.
- -----------------------------------------------------------------------------
COMMODITIES The fund shall not purchase or sell physical
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.
- -----------------------------------------------------------------------------
INVESTING FOR CONTROL The fund shall not invest for purposes of exercising
control over management.
- -----------------------------------------------------------------------------
APPENDIX II
CURRENT FUNDAMENTAL
INVESTMENT RESTRICTIONS
The existing fundamental investment restrictions for the Capital
Preservation Fund and Capital Preservation Fund and Capital Preservation Fund
II is set forth in the table below.
CATEGORY CURRENT LIMITATIONS
- -----------------------------------------------------------------------------
SENIOR SECURITIES The funds may not issue or sell any class of senior
security, except to the extent that notes
evidencing temporary borrowing might be deemed such.
- -----------------------------------------------------------------------------
BORROWING The Capital Preservation Fund may not borrow
amounts in excess of 33 1/3 of the cost or 5% of
the market value of its total assets, whichever is
less, and then only from a bank and as a temporary
measure for extraordinary or emergency purposes. To
secure any such borrowing, the fund may pledge or
hypothecate not in excess of 331/3% of the value of
its total assets.
- -----------------------------------------------------------------------------
24 Appendix II American Century Investments
CATEGORY CURRENT LIMITATIONS
- -----------------------------------------------------------------------------
The Capital Preservation Fund II may not borrow
amounts in excess of 331/3% of the market value of
its total assets, and then only from a bank and as a
temporary measure to satisfy redemption requests or
for extraordinary or emergency purposes, and provided
that immediately after any such borrowing there is an
asset coverage of at least 300 per centum for all
such borrowings. To secure any such borrowing, the
fund may pledge or hypothecate not in excess of
331/3% of the value of its total assets. The fund
will not purchase any security while borrowings
representing more than 5% of its total assets are
outstanding.
- -----------------------------------------------------------------------------
LENDING The funds may not lend money other than through the
purchase of debt securities in accordance with its
investment policies (management considers that this
restriction precludes purchase of other than publicly
held debt securities).
- -----------------------------------------------------------------------------
UNDERWRITING The funds may not act as an underwriter of securities
issued by others.
- -----------------------------------------------------------------------------
REAL ESTATE/ The funds may not purchase or sell real estate,
COMMODITIES commodities, or commodity contracts, or buy or sell
foreign exchange.
- -----------------------------------------------------------------------------
EQUITY SECURITIES The funds may not purchase any equity
securities in any companies, including warrants or
bonds with warrants attached, or any preferred
stocks, convertible bonds, or convertible debentures.
- -----------------------------------------------------------------------------
INVESTMENT COMPANIES The funds may not acquire or retain the
securities of any other investment company.
- -----------------------------------------------------------------------------
DEBT SECURITIES The funds may not purchase any debt
securities that are not rated AA or AAA, or the
equivalent thereof, by either of the major
statistical rating services (Moody's or Standard and
Poor's) or that, in the Fund's opinion, are the
equivalent thereof.
- -----------------------------------------------------------------------------
FURTHER LIABILITY The funds may not purchase securities for which a
Fund might be liable for further payment or
liability.
- -----------------------------------------------------------------------------
SHORT SELLING The funds may not engage in any short-selling
operations.
- -----------------------------------------------------------------------------
Proxy Statement Appendix II 25
CATEGORY CURRENT LIMITATIONS
- -----------------------------------------------------------------------------
CONCENTRATION The funds may not invest more than 25% of its total
assets in any one industry (this restriction does
not apply to securities of the U. S. government or
its instrumentalities or agencies or to
certificates of deposit or bankers' acceptances of
U. S. commercial banks having assets over $10
billion).
- -----------------------------------------------------------------------------
DIVERSIFICATION The funds may not purchase the securities of any
issuer (other than securities issued or guaranteed
by the U.S. Government, its agencies or
instrumentalities) if, as a result of (a) more than
5% of its total assets would be invested in the
securities of that issuer, or (b) a fund would hold
more than 10% of the outstanding voting securities
of that issuer.
- -----------------------------------------------------------------------------
MARGIN TRANSACTIONS The funds may not engage in margin transactions or
in transactions involving puts, calls, straddles or
spreads.
- -----------------------------------------------------------------------------
RESTRICTED SECURITIES The funds may not invest in portfolio securities
that the Fund may not be free to sell to the public
without registering under the Securities Act of
1933 or taking similar action under other
securities laws.
- -----------------------------------------------------------------------------
INVESTING FOR CONTROL The funds may not purchase securities of companies
in which directors or management personnel of a
fund or its advisor have a substantial interest. (A
fund may not purchase or retain securities of any
company in which an officer or Director of the fund
or its advisor is an officer, Director or security
holder if such officers and Directors who
individually own beneficially more than one-half of
one percent (0.5%) of the shares or securities of
such company together own beneficially more than 5%
of the shares or securities of such company.
Portfolio securities of a fund may not be purchased
from or sold to the fund's advisor or its
Directors, officers or employees.)
- -----------------------------------------------------------------------------
26 Appendix II American Century Investments
NOTES
Notes 27
NOTES
28 Notes American Century Investments
NOTES
Notes 29
[american century logo]
American
Century(sm)
9705 [recycled logo]
SH-BKT-8603-D Recycled
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[american century logo]
American
Century(sm)
June 2, 1997
[front cover]
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.
AMERICAN CENTURY CAPITAL PRESERVATION FUNDS II, INC.
American Century Investments
4500 Main Street
P. O. Box 419200
Kansas City, MO 64141-6200
Statement of Additional Information
1997 Special Meeting of Shareholders of American Century Capital
Preservation Fund, Inc. and American Century Capital Preservation Fund II, Inc.
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement/Prospectus dated June
2, 1997 for the Special Meeting of Shareholders to be held on July 30, 1997.
Copies of the Combined Proxy Statement/Prospectus may be obtained at no charge
by calling D. F. King & Co., the proxy solicitor for the funds, at
1-800-755-3107, or American Century Investments at (800) 345-2021.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement/Prospectus.
Further information about the New Capital Preservation Fund is
contained in and incorporated by reference to its Statement of Additional
Information dated September 3, 1996, revised January 1, 1997, copies of which
are included herewith.
Further information about the Capital Preservation Fund and Capital
Preservation Fund II are contained in and incorporated by reference to their
Statements of Additional Information each dated January 1., 1997. The audited
financial statements and related independent accountant's reports for the
Capital Preservation Fund and Capital Preservation Fund II are contained in the
Annual Report dated March 31, 1996, are incorporated herein by reference. No
other parts of the Annual Report are incorporated by reference herein.
The date of this Statement of Additional Information is June 2, 1997.
TABLE OF CONTENTS
General Information.......................................................... 2
Pro Forma Financial Statements............................................... 2
Agreement and Plan of Reorganization......................................... 2
<PAGE>
GENERAL INFORMATION
The shareholders of the Capital Preservation Fund and Capital
Preservation Fund II are being asked to approve or disapprove an Agreement and
Plan of Reorganization (the "Reorganization Agreement") among the American
Century Government Income Trust, American Century Capital Preservation Fund,
Inc. and American Century Capital Preservation Fund II, Inc. and the transaction
contemplated thereby. A copy of the proposed Reorganization Agreement is
contained in this Statement of Additional Information beginning at page [2]. A
summary of the material provisions of such Agreement is contained in the
Combined Proxy Statement/Prospectus. The Reorganization Agreement contemplates
the transfer of substantially all of the assets and liabilities of the Capital
Preservation Fund and Capital Preservation Fund II to the New Capital
Preservation Fund in exchange for full and fractional shares representing
interests in such fund. The shares issued by the New Capital Preservation Fund
will have an aggregate net asset value equal to the aggregate net asset value of
the shares of each of the Capital Preservation Fund and Capital Preservation
Fund II that are outstanding immediately before the effective time of the
reorganization.
Following the exchange, the Capital Preservation Fund and Capital
Preservation Fund II will each make a liquidating distribution of New Capital
Preservation Fund shares to their shareholders. Each shareholder owning shares
of the Capital Preservation Fund and Capital Preservation Fund II at the
effective time of the reorganization will receive shares of the New Capital
Preservation of equal value, plus the right to receive any unpaid dividends and
distributions that were declared before the effective time of the reorganization
by the Capital Preservation Fund and Capital Preservation Fund II shares. Upon
completion by he reorganization, the American Century Capital Preservation Fund,
Inc. and American Century Capital Preservation Fund II, Inc. will be terminated
under state law and deregistered under the Investment Company Act of 1940.
The Special Meeting of Shareholders to consider the Reorganization
Agreement will be held at 10:00 a.m. Central time on July 30, 1997 at the
offices of American Century Tower I, 4500 Main Street, Kansas City, Missouri.
For further information about the transaction, see the Combined Proxy
Statement/Prospectus.
PRO FORMA FINANCIAL STATEMENTS
In accordance with Item 14(a)(2) of Form N-14, pro forma financial statements
were not prepared for the proposed combination of the American Century - Benham
Capital Preservation Fund and the American Century - Benham Capital Preservation
Fund II, since the net asset value of the American Century - Benham Capital
Preservation Fund II (non-surviving fund) did not exceed ten percent of the net
asset value of the American Century - Benham Capital Preservation Fund
(surviving fund) on March 10, 1997.
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.,
AMERICAN CENTURY CAPITAL PRESERVATION FUND II, INC.
and
AMERICAN CENTURY GOVERNMENT INCOME TRUST
DATED __________________, 1997
TABLE OF CONTENTS
1. Transfer of Assets of the Acquired Funds....................................3
2. Liquidating Distributions and Termination of the
Acquired Funds............................................................5
3. Valuation Times.............................................................6
4. Certain Representations, Warranties and Agreements
of the Acquired Companies.................................................6
5. Certain Representations, Warranties and Agreements
of the Acquiring Company..................................................4
6. Shareholder Action on Behalf of the Acquired Funds..........................6
7. Registration Statement and Proxy Solicitation Materials.....................6
8. Effective Times of the Reorganization.......................................6
9. The Acquiring Company's Conditions..........................................7
10. The Acquired Companies' Conditions.........................................9
11. Tax Documents.............................................................10
12. Further Assurances........................................................10
13. Termination of Representations and Warranties.............................10
14. Termination of Agreement..................................................10
15. Amendment and Waiver......................................................11
16. Governing Law.............................................................11
17. Successors and Assigns....................................................11
18. Beneficiaries.............................................................11
19. Acquired Company Liability................................................11
20. Acquiring Company Liability...............................................12
21. Notices...................................................................12
22. Expenses..................................................................13
23. Entire Agreement..........................................................13
24. Counterparts..............................................................13
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION made as of ________________, 1997 by and
among American Century Government Income Trust, a Massachusetts business trust
(the "Acquiring Company"), and American Century Capital Preservation Fund, Inc.
and American Century Capital Preservation Fund II, Inc., each a California
corporation ( the "Acquired Companies").
WHEREAS, the parties desire that substantially all of the assets and liabilities
of the Acquired Companies be transferred to, and be acquired and assumed by, an
Acquiring Company portfolio in exchange for shares of the Acquiring Company's
portfolio which shall thereafter be distributed by the Acquired Companies to the
holders of shares of its portfolios, all as described in this Agreement (the
"Reorganization");
WHEREAS, the parties intend that the American Century-Benham Capital
Preservation Fund, a portfolio of American Century Government Income Trust (the
"Acquiring Fund"), will have nominal assets and liabilities before the
Reorganization and will continue the investment operations of the American
Century-Benham Capital Preservation Fund, a portfolio of American Century
Capital Preservation Fund, Inc. and American Century-Benham Capital Preservation
Fund II, a portfolio of American Century Capital Preservation Fund II, Inc.,
(collectively the "Acquired Funds"), after the Reorganization;
WHEREAS, the parties intend that the transfers of assets, assumptions of
liabilities and distributions of shares in the Acquired Funds (as defined in
Section 1.2) be treated as a tax-free reorganization under Section 368(a)(1)(C),
368(a)(1)(D) or 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, the parties intend that in connection with the Reorganization the
Acquired Funds, as defined below, shall be terminated under state law and
de-registered as described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and subject to the terms and conditions hereof, and
intending to be legally bound hereby, the Acquiring Company and the Acquired
Companies agree as follows:
1. Transfer of Assets of the Acquired Funds.
1.1. At the Effective Time of the Reorganization (as defined in Section 8)
with respect to the Acquired Funds, as set forth in Section 1.2, all
property of every description, and all interests, rights, privileges
and powers of the Acquired Funds other than cash in an amount
necessary to pay any unpaid dividends and distributions as provided in
Section 4.7 (such assets, the "Acquired Fund Assets") shall be
transferred and conveyed by the Acquired Funds to the Acquiring
Company on behalf of the Acquiring Fund and shall be accepted by the
Acquiring Company on behalf of such Acquiring Fund, and the Acquiring
Company, on behalf of such Acquiring Fund, shall assume all known
liabilities whether accrued, absolute, contingent or otherwise, of the
Acquired Funds reflected in the calculation of such Acquired Funds'
net asset value (the "Acquired Fund Liabilities"), so that at and
after the Effective Time of the Reorganization with respect to the
Acquired Funds: (i) all assets of the Acquired Funds shall become and
be the assets of its Acquiring Fund; and (ii) all known liabilities of
the Acquired Funds reflected as such in the calculation of each
Acquired Funds' net asset values shall attach to the Acquiring Fund as
aforesaid and may thenceforth be enforced against the Acquiring Fund
to the extent as if the same had been incurred by it. Without limiting
the generality of the foregoing, the Acquired Fund Assets shall
include all property and assets of any nature whatsoever, including,
without limitation, all cash, cash equivalents, securities, other
investments, claims and receivables (including dividend and interest
receivables) owned by the Acquired Funds, and any deferred or prepaid
expenses shown as an asset on the Acquired Funds' books, at the
Effective Time of the Reorganization of the Acquired Funds, and all
good will, all other intangible property and all books and records
belonging to the Acquired Funds. Recourse by any person for the
Acquired Fund Liabilities assumed by the Acquiring Fund shall, at and
after the Effective Time of the Reorganization of the Acquired Funds,
be limited to the Acquiring Fund.
1.2. The assets of the Acquired Funds shall be acquired by the Acquiring
Fund identified below:
ACQUIRING FUND ACQUIRED FUNDS
-------------- --------------
American Century Government American Century Capital Preservation
Income Trust Fund, Inc.
Capital Preservation Fund Capital Preservation Fund
American Century Captial Preservation
Fund, Inc.
Capital Preservation Fund II
1.3. In exchange for the transfer of the Acquired Fund Assets and the
assumption of the Acquired Fund Liabilities, the Acquiring Company
shall simultaneously issue at the applicable Effective Time of the
Reorganization to the Acquired Funds a number of full and fractional
shares to the third decimal place, of the Acquiring Fund specified in
Section 1.2 all determined and adjusted as provided in this Agreement.
The number of shares of the Acquiring Fund so issued will have an
aggregate net asset value equal to the value of the Acquired Fund
Assets that are represented by shares of the corresponding Acquired
Funds, the holders of which shall receive shares of the Acquiring
Fund, as specified in Section 1.2, all determined and adjusted as
provided in this Agreement.
1.4. The net asset value of such class of shares of the Acquiring Fund and
the net asset value of the Acquired Funds shall be determined as of
the applicable Valuation Time specified in Section 3.
1.5. The net asset value of shares of the Acquiring Fund shall be computed
in the manner set forth in the Acquiring Fund's then current
prospectus under the Securities Act of 1933, as amended (the "1933
Act"). The net asset value of the Acquired Fund Assets to be
transferred by the Acquired Companies shall be computed by the
Acquired Company and shall be subject to adjustment by the amount, if
any, agreed to by the Acquiring Company and the Acquired Companies. In
determining the value of the securities transferred by the Acquired
Funds to the Acquiring Fund, each security shall be priced in
accordance with the policies and procedures of the Acquiring Company
as described in its then current prospectus and statement of
additional information and adopted by the Acquiring Company's Board of
Trustees, which are and shall be consistent with the policies now in
effect for the Acquired Companies. Price quotations and the security
characteristics relating to establishing such quotations shall be
determined by the Acquiring Company, provided that such determination
shall be subject to the approval of the Acquired Companies.
1.6. The value of the Acquired Fund Assets of the Acquired Funds and the
value of the shares of the Acquiring Fund shall be based on the
amortized cost valuation procedures that have been adopted by the
Board of Trustees of the Acquiring Company and the Boards of Directors
of the Acquired Companies, respectively. Any provision in this
Agreement to the contrary notwithstanding, if the difference between
the per share net asset values of an Acquired Fund and the Acquiring
Fund equals or exceeds $.0025 at the applicable Valuation Time, as
computed by using such market values in accordance with the policies
and procedures established by the Acquiring Company (or as otherwise
mutually determined by the Board of Trustees of the Acquiring Company
and the Boards of Directors of the Acquired Companies), either of the
Boards shall have the right to postpone the applicable Valuation Time
and the applicable Effective Time of the Reorganization with respect
to both such Acquired Funds until such time as the per share
difference is less than $.0025.
2. Liquidating Distributions and Termination of the Acquired Funds.
Immediately after the Effective Time of the Reorganization with respect to the
Acquired Funds, such Acquired Funds shall distribute in complete liquidation pro
rata to the record holders of its shares at the applicable Effective Time of the
Reorganization the shares of the Acquiring Fund identified in Section 1.2 to be
received by the record holders of such Acquired Funds. In addition, each
shareholder of record of the Acquired Funds shall have the right to receive any
unpaid dividends or other distributions which were declared before the
applicable Effective Time of the Reorganization with respect to the shares of
the Acquired Funds that are held by the shareholder at the applicable Effective
Time of the Reorganization. In accordance with instructions it receives from the
Acquired Companies, the Acquiring Company shall record on its books the
ownership of shares of the Acquiring Fund by the record holders of shares of the
Acquired Funds identified in Section 1.2. All of the issued and outstanding
shares of the Acquired Funds shall be redeemed and canceled on the books of the
Acquired Companies at the Effective Time of the Reorganization of the Acquired
Funds and shall thereafter represent only the right to receive the shares of the
Acquiring Funds identified in Section 1.2, and the Acquired Funds' transfer
books shall be closed permanently. As soon as practicable after the Effective
Time of the Reorganization with respect to the Acquired Fund, the Acquired
Companies shall make fillings and take all other steps as shall be necessary and
proper to effect their complete dissolution, and shall file an application
pursuant to Section 8 (f) of the Investment Company Act of 1940, as amended (the
"1940 Act") for an order declaring that each has ceased to be an investment
company and any and all documents that may be necessary to terminate their
existence under state law. After the Effective Time of the Reorganization with
respect to the Acquired Funds, the Acquired Company shall not conduct any
business except in connection with its liquidation, dissolution, and
deregistration.
3. Valuation Times.
Subject to Section 1.5 hereof, the Valuation Time for the Reorganization with
respect to the Acquired Funds shall be as set forth in the Acquired Funds
prospectus on such date as may be agreed in writing by the duly authorized
officers of both parties hereto.
4. Certain Representations, Warranties and Agreements of the Acquired
Companies.
The Acquired Companies, on behalf of itself and each Acquired Fund, represents
and warrants to, and agrees with, the Acquiring Company as follows:
4.1. The Acquired Companies are California corporations duly created
pursuant to their Articles of Incorporation for the purpose of acting
as management investment companies under the 1940 Act, and are validly
existing under the laws of, and duly authorized to transact business
in, the State of California. The Acquired Funds are registered with
the Securities and Exchange Commission (the "SEC") as open-end
management investment companies under the 1940 Act and such
registration is in full force and effect.
4.2. The Acquired Companies have the power to own all of their properties
and assets and, subject to the approvals of shareholders referred to
herein, to carry out and consummate the transactions contemplated
hereby, and has all necessary federal, state and local authorizations
to carry on its business as now being conducted and to consummate the
transactions contemplated by this Agreement.
4.3. This Agreement has been duly authorized, executed and delivered by the
Acquired Companies, and represents the Acquired Companies' valid and
binding contract, enforceable in accordance with its terms, subject as
to enforcement to bankruptcy, insolvency reorganization, arrangement,
moratorium, and other similar laws of general applicability relating
to or affecting creditors' rights and to general principles of equity.
The execution and delivery of this Agreement does not and will not,
and the consummation of the transactions contemplated by this
Agreement will not, violate the Acquired Companies' Articles of
Incorporation, By-laws, or any agreement or arrangement to which it is
a party or by which it is bound.
4.4. Each Acquired Fund has elected to qualify and has qualified as "a
regulated investment company" under Subtitle A, Chapter 1, Subchapter
M, Part I of the Code, as of and since its first taxable year; has
been such a regulated investment company at all times since the end of
its first taxable year when it so qualified; and qualifies and shall
continue to qualify as a regulated investment company until the
Effective Time of the Reorganization with respect to each Acquired
Fund.
4.5. All federal, state, local and foreign income, profits, franchise,
sales, withholding, customs, transfer and other taxes, including
interest, additions to tax and penalties (collectively, "Taxes")
relating to the Acquired Fund Assets or properly shown to be due on
any return filed by any Acquired Fund with respect to taxable periods
ending on or prior to, and the portion of any interim period up to,
the date hereof have been fully and timely paid or provided for; and
there are no levies, liens, or other encumbrances relating to Taxes
existing, threatened or pending with respect to the Acquired Fund
Assets.
4.6. The financial statements of the Acquired Funds for the fiscal year
ended March 31, 1996, examined by KPMG Peat Marwick LLP, copies of
which have been previously furnished to the Acquiring Company, present
fairly the financial position of the Acquired Funds as of March 31,
1996 and the results of its operations for the year then ending, in
conformity with generally accepted accounting principles.
4.7. Prior to the Valuation Time, each Acquired Fund shall have declared a
dividend or dividends, with a record date and ex-dividend date prior
to such Valuation Time, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income, if any, for the taxable periods or
years ended on or before the Acquired Funds' most recent fiscal year
end, and for the period from said date to and including the Effective
Time of the Reorganization applicable to such Acquired Fund (computed
without regard to any deduction for dividends paid), and all of its
net capital gain, if any, realized in taxable periods or years ended
on or before such Acquired Fund's fiscal year end and for the period
from said date to and including the Effective Time of the
Reorganization applicable to such Acquired Fund.
4.8. At both the Valuation Time and the Effective Time of the
Reorganization with respect to the Acquired Funds, there shall be no
known liabilities of the Acquired Funds, whether accrued, absolute,
contingent or otherwise, not reflected in the net asset values per
share of each Acquired Fund's outstanding shares.
4.9. There are no legal, administrative or other proceedings pending or, to
the Acquired Companies' knowledge threatened, against the Acquired
Companies or the Acquired Funds which could result in liability on the
part of the Acquired Companies or the Acquired Funds.
4.10.Subject to the approvals of shareholders at both the Valuation Time
and the Effective Time of the Reorganization with respect to the
Acquired Funds, the Acquired Funds shall have full right, power and
authority to sell, assign, transfer and deliver the Acquired Fund
Assets of the Acquired Funds and, upon delivery and payment for the
Acquired Fund Assets as contemplated herein, the Acquiring Funds shall
acquire good and marketable title thereto, free and clear of all liens
and encumbrances, and subject to no restrictions on the ownership or
transfer thereof (except as imposed by federal or state securities
laws).
4.11.No consent, approval, authorization or order of any court or mutual
authority is required for the consummation by the Acquired Companies
of the transactions contemplated by this Agreement, except such as may
be required under the 1933 Act, the Securities Exchange Act of 1934,
as amended ("1934 Act"), the 1940 Act, the rules and regulations under
those Acts, and state securities laws.
4.12.Insofar as the following relate to the Acquired Companies, the
registration statement filed by the Acquiring Company on Form N-14
relating to the shares of the Acquiring Fund that will be registered
with the SEC pursuant to this Agreement, which, without limitation,
shall include a proxy statement of the Acquired Companies and the
prospectus of the Acquiring Company with respect to the transactions
contemplated by this Agreement, and any supplement or amendment
thereto or to the documents contained or incorporated therein by
reference (the "N-14 Registration Statement"), on the effective date
of the N-14 Registration Statement, at the time of any shareholders'
meeting referred to herein and at the Effective Time of the
Reorganization: (i) shall comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act, the rules
and regulations thereunder, and state securities laws, and (ii) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to
statements in or omissions from the N-14 Registration Statement made
in reliance upon and in conformity with information furnished by the
Acquired Companies for use in the N-14 Registration Statement.
4.13.All of the issued and outstanding shares of the Acquired Funds have
been duly and validly issued, are fully paid and non-assessable, and
were offered for sale and sold in conformity with all applicable
federal and state securities laws, and no shareholder of the Acquired
Funds has any preemptive right of subscription or purchase in respect
of such shares.
5. Certain Representations, Warranties and Agreements of the Acquiring
Company.
The Acquiring Company, on behalf of itself and the Acquiring Fund, represents
and warrants to, and agrees with, the Acquired Companies as follows:
5.1. It is a Massachusetts business trust duly created pursuant to a
Declaration of Trust for the purpose of acting as a management
investment company under the 1940 Act and is validly existing under
the laws of, and duly authorized to the Commonwealth of Massachusetts.
The Acquiring Fund is registered with the SEC as an open-end
management investment company under the 1940 Act and such registration
is in full force and effect.
5.2. It has the power to own all of its property and assets and to carry
out and consummate the transactions contemplated herein, and has all
necessary federal, state and local authorizations to carry on its
business as now being conducted and to consummate the transactions
contemplated by this Agreement.
5.3. This Agreement has been duly authorized, executed and delivered by the
Acquiring Company, and represents the Acquiring Company's valid and
binding contract, enforceable in accordance with its terms, subject as
to enforcement to bankruptcy, insolvency, reorganization, arrangement,
moratorium, and other similar laws of general applicability relating
to or affecting creditors' rights and to general principles of equity.
The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated by this Agreement will
not, violate the Acquiring Company's Declaration of Trust or By-laws
or any agreement or arrangement to which it is a party or by which it
is bound.
5.4. The Acquiring Fund will elect to qualify as a "regulated investment
company" under Subtitle A, Chapter 1, Subchapter M, Part I of the
Code, and intends to continue to qualify as a regulated investment
company.
5.5. At both the Valuation Time and the Effective Time of the
Reorganization with respect to the Acquiring Fund, there shall be no
known liabilities of the Acquiring Fund, whether accrued, absolute,
contingent or otherwise, not reflected in the net asset values per
share of its outstanding shares to be issued pursuant to this
Agreement.
5.6. There are no legal, administrative or other proceedings pending or, to
its knowledge, threatened against the Acquiring Company or the
Acquiring Fund which could result in liability on the part of the
Acquiring Company or the Acquiring Fund.
5.7. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Company of the transactions contemplated by this Agreement,
except such as may be required under the 1933 Act, the 1934 Act, the
1940 Act, the rules and regulations under those Acts, and state
securities laws.
5.8. Insofar as the following relate to the Acquiring Company, the N-14
Registration Statement on its effective date, at the time of any
shareholders' meetings referred to herein and at the Effective Time of
the Reorganization: (i) shall comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act, the rules
and regulations thereunder, and state securities laws, and (ii) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to
statements in or omissions from the N-14 Registration Statement made
in reliance upon and in conformity with information furnished by the
Acquiring Company for use in the N-14 Registration Statement.
5.9. The shares of the Acquiring Fund to be issued and delivered to the
Acquired Funds for the account of record holders of shares of the
Acquired Funds pursuant to the terms hereof shall have been duly
authorized as of the Effective Time of the Reorganization applying to
the Acquiring Fund and, when so issued and delivered, shall be
registered under the 1933 Act and under applicable state securities
laws, duly and validly issued, fully paid and non-assessable, and no
shareholder of the Acquiring Company shall have any preemptive right
of subscription or purchase in respect thereto.
6. Shareholder Action on Behalf of the Acquired Funds.
6.1. As soon as practicable after the effective date of the N-14
Registration Statement, but in any event prior to the Effective Time
of the Reorganization applicable to the Acquired Funds and as a
condition to the Reorganization, the Boards of Directors of the
Acquired Companies shall call, and the Acquired Companies shall hold,
a meeting of the shareholders of the Acquired Funds for the purpose of
considering and voting upon:
6.1.1. Approval of this Agreement and the transactions contemplated
hereby, including, without limitation:
6.1.1.1. The transfer of the Acquired Fund Assets belonging to
each Acquired Fund to the Acquiring Fund, and the assumption
by the Acquiring Fund of the Acquired Fund Liabilities of
such Acquired Funds, in exchange for shares of the Acquiring
Fund, as set forth in Section 1.2;
6.1.1.2. The liquidation of the Acquired Funds through the
distribution to its record holders of shares of the
Acquiring Fund as described in this Agreement; and
6.1.2. Such other matters as may be determined by the Boards of
Directors or authorized officers of the parties.
6.2. Approval of this Reorganization Agreement by the shareholders of the
Acquired Funds shall constitute the waiver of the application of any
fundamental policy of the Acquired Funds that might be deemed to
prevent them from taking the actions necessary to effectuate the
Reorganization as described, and such policies, if any, shall be
deemed to have been amended accordingly.
7. Registration Statement and Proxy Solicitation Materials.
The Acquiring Company shall file the N-14 Registration Statement under the 1933
Act, and the Acquired Companies shall file the combined prospectus/proxy
statement contained therein under the 1934 Act and 1940 Act proxy rules, with
the SEC as promptly as practicable. The Acquiring Company and the Acquired
Companies have cooperated and shall continue to cooperate with the other, and
has furnished and shall continue to furnish the other with the information
relating to itself that is required by the 1933 Act, the 1934 Act, the 1940 Act,
the rules and regulations under each of those Acts and state securities laws, to
be included in the N-14 Registration Statement.
8. Effective Times of the Reorganization.
Delivery of the Acquired Fund Assets of the Acquired Funds and shares of the
Acquiring Fund to be issued pursuant to Section 1 and the liquidation of the
Acquired Funds pursuant to Section 2 shall occur at the opening of business on
the next business day following the Valuation Time applicable to the Acquired
Funds, or on such other date, and at such place and time and date, as may be
determined by the President or any Vice President of each party hereto. The
respective date and time at which such actions are taken with respect to the
Acquired Funds are referred to herein as the "Effective Time of the
Reorganization." To the extent any Acquired Fund Assets are, for any reason, not
transferred at the applicable Effective Time of the Reorganization, the Acquired
Companies shall cause such Acquired Fund Assets to be transferred in accordance
with this Agreement at the earliest practicable date thereafter.
9. The Acquiring Company's Conditions.
The obligations of the Acquiring Company hereunder with respect to the Acquiring
Fund shall be subject to the following conditions precedent:
9.1. This Agreement and the transactions contemplated by this Agreement
shall have been approved by the shareholders of the Acquired Funds, in
the manner required by law.
9.2. The Acquired Company shall have duly executed and delivered to the
Acquiring Company such bills of sale, assignments, certificates and
other instruments of transfer ("Transfer Documents") as may be
necessary or desirable to transfer all right, title and interest of
the Acquired Companies and the Acquired Funds in and to the Acquired
Fund Assets of the Acquired Funds. The Acquired Fund Assets shall be
accompanied by all necessary state stock transfer stamps or cash for
the appropriate purchase price therefor.
9.3. All representations and warranties made in this Agreement shall be
true and correct in all material respects as if made at and as of each
Valuation Time and each Effective Time of the Reorganization. As of
the Valuation Time and the Effective Time of the Reorganization
applicable to the Acquired Funds, there shall have been no material
adverse change in the financial position of the Acquired Funds since
March 31, 1996, other than those changes incurred in the ordinary
course of business as an investment company. No action, suit or other
proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or prohibit, or
obtain damages or other relief in connection with, this Agreement or
the transactions contemplated herein.
9.4. The Acquiring Company shall have received an opinion of Dechert Price
& Rhoads addressed to the Acquiring Company and the Acquired Companies
in a form reasonably satisfactory to them and dated the Effective Time
of the Reorganization applicable to the Acquired Funds, substantially
to the effect that for federal income tax purposes: (i) the transfers
of all of the Acquired Fund Assets hereunder, and the assumption by
the Acquiring Fund of Acquired Fund Liabilities, in exchange for
shares of the Acquiring Fund, and the distribution of said shares to
the shareholders of the Acquired Funds, as provided in this Agreement,
will each constitute a reorganization within the meaning of Section
368(a)(1)(C), 368(a)(1)(D) or 368(a)(1)(F) of the Code and with
respect to each reorganization, the Acquired Funds and the Acquiring
Fund will each be considered "a party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) in accordance with
Sections 361(a), 361(c)(1) and 357(a) of the Code, no gain or loss
will be recognized by the Acquired Funds as a result of such
transactions; (iii) in accordance with Section 1032(a) of the Code, no
gain or loss will be recognized by the Acquiring Fund as a result of
such transactions; (iv) in accordance with Section 354(a)(1) of the
Code, no gain or loss will be recognized by the shareholders of the
Acquired Funds on the distribution to them by the Acquired Funds of
shares of the Acquiring Fund in exchange for their shares of the
Acquired Funds; (v) in accordance with Section 358(a)(1) of the Code,
the aggregate basis of Acquiring Fund shares received by each
shareholder of the Acquired Funds will be the same as the aggregate
basis of the shareholder's Acquired Fund shares immediately prior to
the transactions; (vi) in accordance with Section 362(b) of the Code,
the basis of the Acquired Fund Assets to the Acquiring Fund will be
the same as the basis of the Acquired Fund Assets in the hands of the
Acquired Funds immediately prior to the exchange; (vii) in accordance
with Section 1223(1) of the Code, a shareholder's holding period for
Acquiring Fund shares will be determined by including the period for
which the shareholder held the shares of the Acquired Funds exchanged
therefor, provided that the shareholder held such shares of the
Acquired Funds as a capital asset; and (viii) in accordance with
Section 1223(2) of the Code, the holding period of the Acquiring Fund
with respect to the Acquired Fund Assets will include the period for
which the Acquired Fund Assets were held by the Acquired Funds.
9.5. The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to
enjoin consummation of the transactions contemplated by this Agreement
under Section 25(c) of the 1940 Act.
9.6. The N-14 Registration Statement shall have become effective under the
1933 Act and no stop order suspending such effectiveness shall have
been instituted or, to the knowledge of the Acquiring Company,
contemplated by the SEC and the parties shall have received all
permits and other authorizations necessary under state securities laws
to consummate the transactions contemplated by this Agreement.
9.7. The President or a Vice President of the Acquired Companies shall have
certified that the Acquired Companies have performed and complied in
all material respects with each of its agreements and covenants
required by this Agreement to be performed or complied with by it
prior to or at each Valuation Time and each Effective Time of the
Reorganization.
10. The Acquired Companies' Conditions.
The obligations of the Acquired Companies hereunder with respect to the Acquired
Funds shall be subject to the following conditions precedent:
10.1.This Agreement and the transactions contemplated by this Agreement
shall have been approved by the shareholders of the Acquired Funds, in
the manner required by law.
10.2.All representations and warranties of the Acquiring Company made in
this Agreement shall be true and correct in all material respects as
if made at and as of each Valuation Time and each Effective Time of
the Reorganization. As of the Valuation Time and the Effective Time of
the Reorganization applicable to the Acquired Funds, there shall have
been no material adverse change in the financial condition of the
Acquiring Fund since the date herein other than those changes incurred
in the ordinary course of business as an investment company. No
action, suit or other proceeding shall be threatened or pending before
any court or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
10.3.The Acquired Companies shall have received an opinion of Dechert
Price & Rhoads, addressed to the Acquiring Company and the Acquired
Companies in a form reasonably satisfactory to them and dated the
Effective Time of the Reorganization applicable to the Acquired Funds,
with respect to the matters specified in Section 9.4.
10.4.The N-14 Registration Statement shall have become effective under the
1933 Act and no stop order suspending such effectiveness shall have
been instituted, or to the knowledge of the Acquiring Company,
contemplated by the SEC and the parties shall have received all
permits and other authorizations necessary under state securities laws
to consummate the transactions contemplated by this Agreement.
10.5.The Acquired Companies shall not sell or otherwise dispose of any
shares of the Acquiring Fund to be received in the transactions
contemplated herein, except in distribution to its shareholders as
contemplated herein.
10.6.The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to
enjoin consummation of the transactions contemplated by this Agreement
under Section 25(c) of the 1940 Act.
10.7.The President or a Vice President of the Acquiring Company shall have
certified that the Acquiring Company has performed and complied in all
material respects with each of its agreements and covenants required
by this Agreement to be performed or complied with by it prior to or
at each Valuation Time and each Effective Time of the Reorganization.
11. Tax Documents.
The Acquired Companies shall deliver to the Acquiring Company at the Effective
Time of the Reorganization confirmations or other adequate evidence as to the
adjusted tax basis of the Acquired Fund Assets then delivered to the Acquiring
Fund in accordance with the terms of this Agreement.
12. Further Assurances.
Subject to the terms and conditions herein provided, each of the parties hereto
shall use its best efforts to take, or cause to be taken, such action, to
execute and deliver, or cause to be executed and delivered, such additional
documents and instruments, and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and under applicable
law to consummate and make effective the transactions contemplated by this
Agreement.
13. Termination of Representations and Warranties.
The representations and warranties of the parties set forth in this Agreement
shall terminate at the Effective Time of the Reorganization.
14. Termination of Agreement.
14.1.This Agreement may be terminated by a party at any time at or prior to
the Effective Time of the Reorganization by the Board of Trustees of
the Acquiring Company or the Boards of Directors of either of the
Acquired Companies, as provided below:
14.1.1. By the Acquiring Company with respect to its Acquiring Fund if
the conditions set forth in Section 9 are not satisfied as
specified in said Section;
14.1.2. By either of the Acquired Companies if the conditions set
forth in Section 10 are not satisfied as specified in said
Section;
14.1.3. By the mutual consent of the parties.
14.2.If a party terminates this Agreement because one or more of its
conditions precedent have not been fulfilled, or if this Agreement is
terminated by mutual consent, this Agreement will become null and void
without any liability of either party or any of their investment
portfolios to the other; provided, however, that if such termination
is by the Acquiring Company pursuant to Section 14.1.1 as a result of
a breach by the Acquired Companies of any of their representations,
warranties or covenants in this Agreement, or such termination is by
either Acquired Company pursuant to Section 14.1.2 as a result of a
breach by the Acquiring Company of any of its representations,
warranties or covenants in this Agreement, nothing herein shall affect
the non-breaching party's right to damages on account of such other
party's breach.
15. Amendment and Waiver.
At any time prior to or (to the fullest extent permitted by law) after approval
of this Agreement by the shareholders of the Acquired Companies, (a) the parties
hereto may, by written agreement authorized by their respective Boards of
Trustees or Directors, as the case may be, or their respective Presidents or any
Vice Presidents, and with or without the approval of their shareholders, amend
any of the provisions of this Agreement, and (b) either party may waive any
breach by the other party or the failure to satisfy any of the conditions to its
obligations (such waiver to be in writing and executed by the President or Vice
President of the waiving party with or without the approval of such party's
shareholders).
16. Governing Law.
This Agreement and the transactions contemplated hereby shall be governed,
construed and enforced in accordance with the laws of Massachusetts, without
giving effect to the conflicts of law principles otherwise applicable therein.
17. Successors and Assigns.
This Agreement shall be binding upon the respective successors and permitted
assigns of the parties hereto. This Agreement and the rights, obligations and
liabilities hereunder may not be assigned by either party without the consent of
the other party.
18. Beneficiaries.
Nothing contained in this Agreement shall be deemed to create rights in persons
not parties hereto, other than the successors and permitted assigns of the
parties.
19. Acquired Company Liability.
19.1.Both parties specifically acknowledge and agree that any liability of
the Acquired Companies under this Agreement with respect to any
Acquired Fund, or in connection with the transactions contemplated
herein with respect to an Acquired Fund, shall be discharged only out
of the assets of that particular Acquired Fund and that no other
portfolio shall be liable with respect thereto.
20. Acquiring Company Liability.
20.1.The names "American Century Government Income Trust" and "Trustees of
American Century Government Income Trust" refer respectively to the
trusts created and the trustees, as trustees but not individually or
personally, acting from time to time under a Declaration of Trust
dated May 1, 1984, which is hereby referred to and copies of which are
on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Acquiring Company.
The obligations of the Acquiring Company entered into in the name or
on behalf thereof by any of the trustees, representatives or agents
are made not individually, but in such capacities, and are not binding
upon any of the trustees, shareholders or representatives of the
Acquiring Company personally, but bind only the trust property, and
all persons dealing with any portfolio of the Acquiring Company must
look solely to the trust property belonging to such portfolio for the
enforcement of any claims against the Acquiring Company.
20.2.Both parties specifically acknowledge and agree that any liability of
the Acquiring Company under this Agreement with respect to the
Acquiring Fund, or in connection with the transactions contemplated
herein with respect to the Acquiring Fund, shall be discharged only
out of the assets of such Acquiring Fund and that no other portfolio
of the Acquiring Company shall be liable with respect thereto.
21. Notices.
All notices required or permitted herein shall be in writing and shall be deemed
to be properly given when delivered personally or by telecopier to the party
entitled to receive the notice or when sent by certified or registered mail,
postage prepaid, or delivered to a nationally recognized overnight courier
service, in each case properly addressed to the party entitled to receive such
notice at the address or telecopier number stated below or to such other address
or telecopier number as may hereafter be furnished in writing by notice
similarly given by one party to the other party hereto:
If to American Century Government Income Trust,
American Century Capital Preservation Fund, Inc. or
American Century Capital Preservation Fund II, Inc.
Pat Looby
4500 Main Street
Kansas City, Missouri 64111-6200
22. Expenses.
Each party represents to the other that its expenses incurred in connection with
the Reorganization will be borne by American Century Investment, Inc. or one or
more of its affiliates.
23. Entire Agreement.
This Agreement embodies the entire agreement and understanding of the parties
hereto and supersedes any and all prior agreements, arrangements and
understandings relating to matters provided for herein.
24. Counterparts.
This Agreement may be executed in any number of counterparts, each of which,
when executed and delivered shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers designated below as of the date first
written above.
AMERICAN CENTURY GOVERNMENT INCOME TRUST
ATTEST:
- --------------------------------------- By:--------------------------------
AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.
ATTEST:
- --------------------------------------- By:--------------------------------
AMERICAN CENTURY CAPITAL PRESERVATION FUND II, INC.
ATTEST:
- --------------------------------------- By:--------------------------------
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