SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
File No. 2-99222
Pre-Effective Amendment No. ____
Post-Effective Amendment No._37_ [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
File No. 811-4363
Amendment No._38_
(Check appropriate box or boxes.)
AMERICAN CENTURY GOVERNMENT INCOME TRUST
__________________________________________________
(Exact Name of Registrant as Specified in Charter)
American Century Tower
4500 Main Street, Kansas City, MO 64111
________________________________________
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (816) 531-5575
David C. Tucker, Esq., 4500 Main Street, Kansas City, MO 64111
_________________________________________________________________
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: July 6, 1999
It is proposed that this filing become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
PROSPECTUS
JULY 6, 1999
- --------------------------------------------------------------------------------
CAPITAL PRESERVATION FUND
GOVERNMENT AGENCY MONEY MARKET FUND
SHORT-TERM TREASURY FUND
INTERMEDIATE-TERM TREASURY FUND
LONG-TERM TREASURY FUND
SHORT-TERM GOVERNMENT FUND
GNMA FUND
INFLATION-ADJUSTED TREASURY FUND
INVESTOR CLASS
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this Prospectus is accurate or complete. Anyone who
tells you otherwise is committing a crime.
Distributed by Funds Distributor, Inc.
Dear Investor,
Reading a prospectus doesn't have to be a chore. We've done the hard work so you
can focus on what's important--learning about the funds. Take a look inside and
you'll see this prospectus is different from others. It takes a clear-cut
approach to fund information.
Here's what you'll find:
o The funds' primary investments and risks
o A description of who may or may not want to invest in the funds
o Fund performance, including returns for each year, best and worst quarters
and average annual returns compared to the funds' benchmarks
o An overview of ways to best manage your accounts
o Helpful tips and definitions of key investment terms
Whether you're a current investor or investing in mutual funds for the first
time, this prospectus will give you a clear understanding of the funds. If you
have questions, our Investor Services Representatives are available weekdays, 7
a.m. to 7 p.m., and Saturdays, 9 a.m. to 2 p.m., Central time. Our toll-free
number is 1-800-345-2021. We look forward to helping you achieve your financial
goals.
Sincerely,
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
TABLE OF CONTENTS
An Overview of the Funds.......................................................2
Fund Performance History.......................................................2
Fees and Expenses..............................................................3
Information about the Funds....................................................4
Capital Preservation Fund
Government Agency Money Market Fund
Short-Term Treasury Fund
Intermediate-Term Treasury Fund
Long-Term Treasury Fund
Short-Term Government Fund
GNMA Fund
Inflation-Adjusted Treasury Fund
Basics of Fixed-Income Investing..............................................12
Management....................................................................15
Investing with American Century...............................................18
Share Price and Distributions.................................................21
Taxes.........................................................................22
Multiple Class Information....................................................22
Financial Highlights..........................................................23
**********LEFT MARGIN CALLOUTS
Throughout this book you'll find definitions to key investment terms and
phrases. When you see a word printed in GREEN ITALICS, look for its definition
in the left margin.
o........This symbol highlights special information and helpful tips.
**********END LEFT MARGIN CALLOUTS
AN OVERVIEW OF THE FUNDS
WHAT ARE THE FUNDS' INVESTMENT GOALS?
These funds seek income and investment returns with very low to moderate risk of
principal loss.
WHAT ARE THE FUNDS' PRIMARY INVESTMENTS STRATEGIES AND PRINCIPAL RISKS?
The funds invest most of their assets in DEBT SECURITIES issued by the U.S.
government or its agencies or instrumentalities. The chart below shows the
primary differences among the funds. A more detailed description about the
funds' investment strategies and risks begins on page 4.
<TABLE>
<CAPTION>
Fund Primary Investments Principal Risks
- --------------------------- ---------------------------------------------- -------------------------------
<S> <C> <C>
Capital Preservation Very short-term U.S. Treasury securities
Government Agency Money Very short-term U.S. government securities Very low credit risk
Market
Short-Term Treasury U.S. Treasury securities that mature in Some interest rate risk
three years or less
Intermediate-Term Treasury U.S. Treasury securities that mature in Interest rate risk
three or more years
Long-Term Treasury U.S. Treasury securities that mature in 10 High interest rate risk
years or more
Short-Term Government U.S. government securities that mature in Some credit risk
three years or less
GNMA Fund Ginnie Maes, which are mortgage-backed Interest rate risk
securities issued by Government National
Mortgage Association
Inflation Adjusted Inflation-indexed U.S. Treasury securities Some interest rate risk
Treasury
- --------------------------- ---------------------------------------------- -------------------------------
</TABLE>
WHO MAY WANT TO INVEST IN THE FUNDS?
The funds may be a good investment if you
>> are seeking current income
>> prefer a relatively safe investment over one that may provide better
long-term investment returns
>> are comfortable with the funds' other investment risks
WHO MAY NOT WANT TO INVEST IN THE FUNDS?
The funds may not be a good investment if you are
>> investing for long-term growth
>> looking for the added security of FDIC insurance
**********LEFT MARGIN CALLOUTS
DEBT SECURITIES include fixed income investments such as notes, bonds,
commercial paper and Treasury bills.
o An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. Although the money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose money
by investing in them.
**********END LEFT MARGIN CALLOUTS
FUND PERFORMANCE HISTORY
Capital Preservation Fund
Government Agency Money Market Fund
ANNUAL TOTAL RETURNS(1)
The following bar chart shows the performance of the funds' Investor Class
shares for each of the last 10 calendar years or for each full year in the life
of the fund if less than 10 years. It indicates the volatility of the funds'
historical returns from year to year.
<TABLE>
<CAPTION>
- ---------------- ------- ----------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ---------------- ------- ----------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital 4.92% 4.97% 4.85% 5.32% 3.63% 2.65% 3.31% 5.62 7.64 8.28%
Preservation
- ---------------- ------- ----------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
Government 5.07% 5.07% 4.93% 5.50% 3.75% 2.68% 3.39% 6.01% 8.34% N/A
Agency Money
Market
- ---------------- ------- ----------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
</TABLE>
1 As of June 30, 1999, the end of the most recent calendar quarter, the
funds' year-to-date returns were Capital Preservation, xx% and Government
Agency Money Market, xx%.
The highest and lowest quarterly returns for the period reflected by the
Government Agency Money Market bar chart are:
Highest Lowest
Capital Preservation xx% xx%
Government Agency Money Market xx% xx%
AVERAGE ANNUAL RETURNS
The following table shows the average annual returns of the funds' Investor
Class Shares for the periods indicated. The benchmarks are unmanaged indices
that have no operating costs and are included in the table for performance
comparison.
<TABLE>
For the calendar year ended December 31, 1998 1 year 5 years Life of
Fund(1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Preservation 4.92% 4.74% 5.31%
- ------------------------------------------------------------------------------------------------
Government Agency Money Market 5.07% 4.86% 4.98%
90-Day Treasury Bill Index 4.50% 4.95% ---(2)
</TABLE>
1 The inception dates for the funds are: Capital Preservation, October 13,
1972, and Government Agency Money Market, December 5, 1989.
2 Life of Fund for Capital Preservation, 7.05% and for Government Agency
Money Market, 4.94%
**********LEFT MARGIN CALLOUTS
o The performance information on this page is designed to help you understand
how fund returns can vary. Keep in mind that past performance does not
predict how the funds will perform in the future.
o For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at
www.americancentury.com
**********END LEFT MARGIN CALLOUTS
FUND PERFORMANCE HISTORY
Short-Term Treasury Fund
Intermediate-Term Treasury Fund
Long-Term Treasury Fund
ANNUAL TOTAL RETURNS(1)
The following bar chart shows the performance of the funds' Investor Class
shares for each of the last 10 calendar years or for each full year in the life
of the fund if less than 10 years. It indicates the volatility of the funds'
historical returns from year to year.
<TABLE>
<CAPTION>
- ---------------- -------- ---------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ---------------- -------- ---------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term 6.44% 6.11% 4.12% 9.93% 0.15% 5.32% N/A N/A N/A N/A
Treasury
- ---------------- -------- ---------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
- ---------------- -------- ---------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
Intermediate-Term 8.94% 8.38% 4.08% 13.70% -2.34% 7.91% 6.55% 13.75% 9.20% 11.93%
Treasury
- ---------------- -------- ---------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
- ---------------- -------- ---------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
Long-Term 12.76% 14.76% -1.36% 29.25% -9.25% 17.64% N/A N/A N/A N/A
Treasury
- ---------------- -------- ---------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
</TABLE>
1 As of June 30, 1999, then end of the most recent calendar quarter, the
funds' year-to-date returns were Short-Term Treasury, _______,
Intermediate-Term Treasury, ______; and Long-Term Treasury, _____.
The highest and lowest quarterly returns for the period reflected by the bar
chart are:
Highest Lowest
Short-Term Treasury xx% xx%
Intermediate-Term Treasury xx% xx%
Long-Term Treasury xx% xx%
AVERAGE ANNUAL RETURNS
The following table shows the average annual returns of the funds' Investor
Class Shares for the periods indicated. The benchmarks are unmanaged indices
that have no operating costs and are included in the table for performance
comparison.
<TABLE>
<CAPTION>
For the calendar year December 31, 1998 1 year 5 years 10 years Life of Fund*
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Treasury 6.44% 5.30 N/A 5.07%
Lehman 1- to 3-Year Government Securities Index 6.96% 5.96% N/A 5.66%(2)
- --------------------------------------------------------------------------------------------------------------------
Intermediate-Term Treasury 8.94% 6.41% 8.04% 8.86%
Salomon 3- to 10-Year Treasury Index 10.21% 7.14% 8.67% 9.88%(3)
- --------------------------------------------------------------------------------------------------------------------
Long-Term Treasury 12.76% 8.41% N/A 9.38%
Salomon Long-Term Treasury/Agency Index N/A N/A N/A N/A(3)
</TABLE>
1 The inception dates for the funds are: Short-Term Treasury and Long-Term
Treasury, September 8, 1992; and Intermediate-Term Treasury, May 16, 1980.
2 Benchmark from September 30, 1992.
3 Benchmark from May 31, 1980.
**********LEFT MARGIN CALLOUTS
o The performance information on this page is designed to help you understand
how fund returns can vary. Keep in mind that past performance does not
predict how the funds will perform in the future.
o For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at
www.americancentury.com
**********END LEFT MARGIN CALLOUTS
FUND PERFORMANCE HISTORY
Inflation-Adjusted Treasury Fund
ANNUAL TOTAL RETURNS(1)
The following bar chart shows the performance of the fund's Investor Class
shares for each full year in the life of the fund. It indicates the volatility
of the fund's historical returns from year to year.
- ------------------------------------ -------------------------------------------
1998
- ------------------------------------ -------------------------------------------
Inflation-Adjusted Treasury 3.45%
- ------------------------------------ -------------------------------------------
1 As of June 30, 1999, the end of the most recent calendar quarter,
Inflation-Adjusted Treasury's year-to-date return was _______.
The highest and lowest quarterly returns for the period reflected by the bar
chart are:
Highest Lowest
Inflation-Adjusted Treasury xx% xx%
AVERAGE ANNUAL RETURNS
The following table shows the average annual returns of the fund's Investor
Class Shares for the periods indicated. The benchmark is an unmanaged index that
has no operating costs and is in the table for performance comparison.
For the calendar year ended December 31, 1998 1 year Life of
Fund(1)
- --------------------------------------------------------------------------------
Inflation-Adjusted Treasury 3.45% 2.36%
Salomon U.S. Inflation-Linked Index 3.92% 3.30%(2)
1 The inception date for the fund is February 10, 1997.
2 Benchmark from February 28, 1997.
**********LEFT MARGIN CALLOUTS
o The performance information on this page is designed to help you understand
how fund returns can vary. Keep in mind that past performance does not
predict how the funds will perform in the future.
o For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at
www.americancentury.com
**********END LEFT MARGIN CALLOUTS
FUND PERFORMANCE HISTORY
Short-Term Government Fund
ANNUAL TOTAL RETURNS(1)
The following bar chart shows the performance of the fund's Investor Class
shares for each of the last 10 calendar years. It indicates the volatility of
the fund's historical returns from year to year.
<TABLE>
<CAPTION>
- ------------------ --------- ---------- --------- ---------- ---------- --------- ------------ ----------- -------- -----------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ------------------ --------- ---------- --------- ---------- ---------- --------- ------------ ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term 6.04% 6.02% 4.11% 10.51% -0.49% 4.17% 4.39% 11.64% 7.53% 9.99%
Government
- ------------------ --------- ---------- --------- ---------- ---------- --------- ------------ ----------- -------- -----------
</TABLE>
1 As of June 30, 1999, the end of the most recent calendar quarter,
Short-Term Government's year-to-date return was ______.
The highest and lowest quarterly returns for the period reflected by the bar
chart are:
Highest Lowest
Short-Term Government xx% xx%
AVERAGE ANNUAL RETURNS
The following table shows the average annual returns of the fund's Investor
Class Shares for the periods indicated. The benchmark is an unmanaged index that
has no operating costs and is included in the table for performance comparison.
<TABLE>
For calendar year ended December 31, 1998 1 year 5 years 10 years Life of
Fund(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Government 6.04% 5.18% 6.33% 7.16%
Salomon 1- to 3-Year Treasury/Agency Index X.XX% X.XX% X.XX% X.XX%(2)
</TABLE>
1 The inception date for the fund is December 15, 1982.
2 Benchmark from December 31, 1982.
**********LEFT MARGIN CALLOUTS
o The performance information on this page is designed to help you understand
how fund returns can vary. Keep in mind that past performance does not
predict how the funds will perform in the future.
o For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at
www.americancentury.com
**********END LEFT MARGIN CALLOUTS
FUND PERFORMANCE HISTORY
GNMA Fund
ANNUAL TOTAL RETURNS(1)
The following bar chart shows the performance of the fund's Investor Class
shares for each of the last 10 calendar years. It indicates the volatility of
the fund's historical returns from year to year.
<TABLE>
<CAPTION>
- ------------- ---------- ----------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ------------- ---------- ----------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GNMA 6.33% 8.79% 5.21% 15.86% -1.67% 6.59% 7.67% 15.56% 10.15% 13.90%
- ------------- ---------- ----------- ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
</TABLE>
1 As of June 30, 1999, the end of the most recent calendar quarter, GNMA's
year-to-date return was ____.
The highest and lowest quarterly returns for the period reflected by the bar
chart are:
Highest Lowest
GNMA xx% xx%
AVERAGE ANNUAL RETURNS
The following table shows the average annual returns of the fund's Investor
Class Shares for the periods indicated. The benchmark is an unmanaged index that
has no operating costs and is included in the table for performance comparison.
<TABLE>
<CAPTION>
For the calendar year ended December 31, 1998 1 year 5 years 10 years Life of
Fund(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GNMA Fund 6.33% 6.75% 8.72% 8.70%
Salomon 30-Year GNMA Index X.XX% X.XX% X.XX% X.XX%(2)
</TABLE>
1 The inception date for the fund is September 23, 1985.
2 Benchmark from September 30, 1985.
**********LEFT MARGIN CALLOUTS
o The performance information on this page is designed to help you understand
how fund returns can vary. Keep in mind that past performance does not
predict how the funds will perform in the future.
o For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at
www.americancentury.com
**********END LEFT MARGIN CALLOUTS
FEES AND EXPENSES
There are no sales loads or fees or other charges
>> to buy fund shares directly from American Century
>> to reinvest dividends in additional shares
>> to exchange into the Investor Class shares of other American Century funds
The following table describes the fees and expenses that you will pay if you buy
and hold shares of the funds.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Distribution and Other Total Annual Fund
Fee(1)(2) Service (12b-1) Fees Expenses(3) Operating Expenses
........................................... ................ ........................ .............. .......................
<S> <C> <C> <C>
Capital Preservation 0.47% None 0.00% 0.47%
........................................... ................ ........................ .............. .......................
Government Agency Money Market 0.47% None 0.00% 0.47%
........................................... ................ ........................ .............. .......................
Short-Term Treasury 0.50% None 0.00% 0.50%
........................................... ................ ........................ .............. .......................
Intermediate-Term Treasury 0.50% None 0.00% 0.50%
........................................... ................ ........................ .............. .......................
Long-Term Treasury 0.50% None 0.00% 0.50%
........................................... ................ ........................ .............. .......................
Inflation-Adjusted Treasury 0.50% None 0.00% 0.50%
........................................... ................ ........................ .............. .......................
Short-Term Government 0.58% None 0.00% 0.58%
........................................... ................ ........................ .............. .......................
GNMA Fund 0.58% None 0.00% 0.58%
........................................... ................ ........................ .............. .......................
</TABLE>
1 A portion of the management fee may be paid by the fund's advisor to
unaffiliated third parties who provide recordkeeping and administrative
services that would otherwise be performed by an affiliate of the advisor.
2 Based on expenses incurred during the funds' most recent fiscal year. The
funds have a stepped fee schedule. As a result, the funds' management fee
rates generally decrease as fund assets increase.
3 Other expenses, which include the fees and expenses of the funds'
independent trustees, their legal counsel and interest were less than
0.005% for the most recent fiscal year.
EXAMPLES
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you ...
o invest $10,000 in the fund
o redeem all of your shares at the end of the periods shown below
o earn a 5% return each year and
o incur the same operating expenses shown above,
... your cost of investing in the fund would be:
<TABLE>
1 year 3 years 5 years 10 years
............................................ .................. ................... ................... ...................
<S> <C> <C> <C> <C>
Capital Preservation $48 $151 $263 $591
............................................ .................. ................... ................... ...................
Government Agency Money Market $48 $151 $263 $591
............................................ .................. ................... ................... ...................
Short-Term Treasury $51 $160 $279 $627
............................................ .................. ................... ................... ...................
Intermediate-Term Treasury $51 $160 $279 $627
............................................ .................. ................... ................... ...................
Long-Term Treasury $51 $160 $279 $627
............................................ .................. ................... ................... ...................
Inflation-Adjusted Treasury $51 $160 $279 $627
............................................ .................. ................... ................... ...................
Short-Term Government $59 $186 $323 $724
............................................ .................. ................... ................... ...................
GNMA Fund $59 $186 $323 $724
............................................ .................. ................... ................... ...................
</TABLE>
**********LEFT MARGIN CALLOUTS
o Use this example to compare the costs of investing in other funds. Of
course, your actual costs may be higher or lower.
**********END LEFT MARGIN CALLOUTS
INFORMATION ABOUT THE FUNDS
CAPITAL PRESERVATION FUND
GOVERNMENT AGENCY MONEY MARKET FUND
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
The funds are money market funds that seek maximum safety and liquidity and seek
to pay shareholders the highest rate of return consistent with this objective.
In addition, Government Agency Money Market seeks to purchase only those
securities with income that will be exempt from state income tax.
HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?
The funds buy very short-term U.S. Treasury securities that are guaranteed by
the direct full faith and credit pledge of the U.S. government.
Government Agency Money Market also buys other very short-term securities issued
by the U.S. government, its agencies and instrumentalities. The U.S. government
provides varying levels of financial support to these agencies and
instrumentalities.
The funds may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the fund may purchase securities in advance to generate additional
income.
WHAT IS THE DIFFERENCE BETWEEN THE TWO FUNDS?
The funds differ in the types of securities that they may buy, as shown on the
table below.
<TABLE>
Type of Security Capital Preservation Government Agency Money Market
- ----------------------------------- -------------------------- -----------------------------------------
<S> <C> <C>
U.S. Treasury Yes Yes
U.S. government agency No Yes
U.S. government instrumentality No Yes
</TABLE>
U.S. Treasury securities are believed to be the safest securities because they
are
>> supported by the government's full faith and credit pledge; this is the
highest credit quality available
>> the most widely traded and most liquid securities investors can buy
Other types of U.S. government securities do not necessarily feature the full
faith and credit nor the liquidity of market that U.S. Treasury securities do.
On the other hand, other U.S. government securities generally have higher yields
than U.S. Treasury securities
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUNDS?
Because very short-term securities are among the safest securities available,
the interest they pay is among the lowest for income-paying securities.
Accordingly, the yield on these funds will likely be lower than funds that
invest in longer-term or lower-quality securities.
SHORT-TERM TREASURY FUND
INTERMEDIATE-TERM TREASURY FUND
LONG-TERM TREASURY FUND
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
These funds seek the highest level of current income exempt from state income
tax while maintaining safety of capital.
HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?
The funds buy U.S. Treasury securities guaranteed by the direct full faith and
credit pledge of the U.S. government.
The funds also may buy securities issued by the U.S. government, its agencies
and instrumentalities. The U.S. government provides varying levels of financial
support to these agencies and instrumentalities. The fund may invest up to 35%
of its total assets in these securities. In addition, the funds can only buy
U.S. government securities with income that is exempt from state income tax.
The fund may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the fund may purchase securities in advance to generate additional
income.
WHAT IS THE DIFFERENCE BETWEEN THE THREE FUNDS?
The funds differ in the maturity of the debt securities they purchase. This
difference is shown on the chart below.
Expected Weighted Average Maturity
Range
- ---------------------------------------------------------------------------
Short-Term Treasury 13 months-3 years
Intermediate-Term Treasury 3-10 years
Long-Term Treasury 20-30 years
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUNDS?
The funds have different weighted average maturities. Because of this, the funds
will respond differently to changes in interest rates. Funds with longer
weighted average maturities are more sensitive to interest rate changes. When
interest rates rise, the values of the funds usually fall, but the values of
funds with longer weighted average maturities generally will fall farther.
The funds' share values will fluctuate. In general, the funds that have higher
potential income have a higher potential loss. If you sell your shares when
their value is less than the price you paid, you will lose money.
Potential Income Potential Loss
- -------------------------------------------------------------------------------
Short-Term Treasury Lower Lower
Intermediate-Term Treasury Moderate Moderate
Long-Term Treasury Higher Higher
INFLATION-ADJUSTED TREASURY FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Inflation-Adjusted Treasury seeks total return consistent with investment in
U.S. Treasury inflation-adjusted securities.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVE?
The fund buys inflation-indexed U.S. Treasury securities guaranteed by the
direct full faith and credit pledge of the U.S. government. These
inflation-indexed securities are designed to protect the future purchasing power
of the money invested in them.
The fund also may buy U.S. Treasury securities that are not inflation-indexed.
The fund may invest up to 35% of its total assets in these securities.
The fund may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the fund may purchase securities in advance to generate additional
income.
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUND?
Inflation-adjusted securities are sold based upon an assumption about real
interest rates. "Real" interest rates are the market rate of interest minus the
anticipated rate of inflation. Changes in real interest rates affect the amount
of income the fund generates. Generally, when real interest rates rise, the
fund's share value will decline. The opposite is true when interest rates
decline. This real interest rate risk is higher for Inflation-Adjusted Treasury
than for funds that do not invest in inflation-indexed securities.
As with all funds, at any given time, the value of your shares of
Inflation-Adjusted Treasury may be worth more or less than the price you paid.
If you sell your shares when the value is less than the price you paid, you will
lose money.
SHORT-TERM GOVERNMENT FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Short-Term Government seeks high current income while maintaining safety of
principal.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVE?
The fund buys short-term securities issued by the U.S. government, its agencies
and instrumentalities, including mortgage-backed securities. The U.S. government
provides varying levels of financial support to these agencies and
instrumentalities. The fund also may buy short-term U.S. Treasury securities
guaranteed by the direct full faith and credit pledge of the U.S. government.
The fund may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the fund may purchase securities in advance to generate additional
income.
The weighted average maturity of the fund is expected to be three years or less.
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUND?
Interest rate changes affect the amount of income the fund generates. Generally,
when interest rates rise, the fund's share value will decline. The opposite is
true when interest rates decline. This interest rate risk is higher for
Short-Term Government than for funds that have shorter weighted average
maturities, such as money market funds.
Short-Term Government invests in mortgage-backed securities. When homeowners
refinance their mortgages to take advantage of declining interest rates, their
existing mortgages are prepaid. The mortgages, which back the securities
purchased by Short-Term Government, may be prepaid in this fashion. Because of
this "prepayment risk," the fund may benefit less from declining interest rates
than other short-term funds.
As with all funds, at any given time the value of your shares of Short-Term
Government may be worth more or less than the price you paid. If you sell your
shares when the value is less than the price you paid, you will lose money.
GNMA FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Short-Term Government seeks high current income while maintaining safety of
principal.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVE?
The fund buys short-term securities issued by the U.S. government, its agencies
and instrumentalities, including mortgage-backed securities. The U.S. government
provides varying levels of financial support to these agencies and
instrumentalities. The fund also may buy short-term U.S. Treasury securities
guaranteed by the direct full faith and credit pledge of the U.S. government.
The fund may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the fund may purchase securities in advance to generate additional
income.
The weighted average maturity of the fund is expected to be three years or less.
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUND?
Interest rate changes affect the amount of income the fund generates. Generally,
when interest rates rise, the fund's share value will decline. The opposite is
true when interest rates decline. This interest rate risk is higher for
Short-Term Government than for funds that have shorter weighted average
maturities, such as money market funds.
Short-Term Government invests in mortgage-backed securities. When homeowners
refinance their mortgages to take advantage of declining interest rates, their
existing mortgages are prepaid. The mortgages, which back the securities
purchased by Short-Term Government, may be prepaid in this fashion. Because of
this "prepayment risk," the fund may benefit less from declining interest rates
than other short-term funds.
As with all funds, at any given time the value of your shares of Short-Term
Government may be worth more or less than the price you paid. If you sell your
shares when the value is less than the price you paid, you will lose money.
BASICS OF FIXED INCOME INVESTING
DEBT SECURITIES
When a fund buys a debt security, which is also called a fixed-income security,
it is essentially lending money to the issuer of the security. Notes, bonds,
commercial paper and Treasury bills are examples of debt securities. After the
issuer first sells the debt security, it may be bought and sold by other
investors. The price of the security may rise or fall based on many factors,
including changes in interest rates, inflation and liquidity.
The fund managers decide which debt securities to buy and sell by
>> determining which securities help a fund meet its maturity requirements
>> identifying securities that satisfy a fund's credit quality requirements
>> evaluating the current economic conditions and assessing the risk of
inflation
>> evaluating special features of the securities that may make them more or
less attractive
WEIGHTED AVERAGE MATURITY
Like most loans, debt securities eventually must be repaid (or refinanced) at
some date. This date is called the maturity date. The number of days left to a
debt security's maturity date is called the remaining maturity. The longer a
debt security's remaining maturity, the more sensitive it is to changes in
interest rates.
Because a bond fund will own many debt securities, the fund managers calculate
the average of the remaining maturities of all of the debt securities the fund
owns to evaluate the interest rate sensitivity of the entire portfolio. This
average is weighted according to the size of the fund's individual holdings and
is called WEIGHTED AVERAGE MATURITY. The following chart shows how a fund
manager would calculate the weighted average maturity for a fund that owned only
two debt securities.
<TABLE>
Amount of Security Owned Percent of Portfolio Remaining Maturity Weighted Maturity
- ---------------------- ------------------------------ ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Debt Security A $100,000 25% 10 years 2.5 years
Debt Security B $300,000 75% 20 years 15.0 years
WEIGHTED AVERAGE MATURITY 17.5 YEARS
</TABLE>
TYPES OF RISK
The basic types of risk that the funds face are described below.
INTEREST RATE RISK
Generally, interest rates and the prices of debt securities move in opposite
directions. So when interest rates fall, the prices of most debt securities
rise; when interest rates rise, prices fall. Because the funds invest primarily
in debt securities, changes in interest rates will affect the funds'
performance.
The degree to which interest rate changes affect the funds' performance varies
and is related to the weighted average maturity of each fund. For example, when
interest rates rise, you can expect the share value of a long-term bond fund to
fall more than that of a short-term bond fund. When rates fall, the opposite is
true. This sensitivity to interest rate changes is called interest rate risk.
***********LEFT MARGIN CALLOUTS
WEIGHTED AVERAGE MATURITY is a tool that the fund managers use to approximate
the remaining maturity of a fund's investment portfolio.
o The longer a fund's weighted average maturity, the more sensitive it is to
changes in interest rates.
***********END LEFT MARGIN CALLOUTS
When interest rates change, longer maturity bonds experience a greater change in
price. The following table shows the effect of a 1% increase in interest rates
on the price of 7% coupon bonds of differing maturities:
<TABLE>
Remaining Maturity Current Price Price after 1% increase Change in price
- ------------------------ ----------------- ------------------------------ ----------------------
<S> <C> <C> <C>
1 year $100.00 $99.06 -0.94%
3 years 100.00 97.38 -2.62%
10 years 100.00 93.20 -6.80%
30 years 100.00 88.69 -11.31%
</TABLE>
CREDIT RISK
Credit risk is the risk that an obligation won't be paid and a loss will result.
A high credit rating indicates a high degree of confidence by the rating
organization that the issuer will be able to withstand adverse business,
financial or economic conditions and be able to make interest and principal
payments on time. Generally, a lower credit rating indicates a greater risk of
non-payment. A lower rating also may indicate that the issuer has a more senior
series of debt securities, which means that if the issuer has difficulties
making its payments, the more senior series of debt is first in line for
payment.
It's not as simple as buying the highest-rated debt securities. Higher credit
ratings usually mean lower interest rates, so investors often purchase
securities that aren't the highest rated to increase return. If a fund purchases
lower-rated securities, it assumes additional credit risk.
While U.S. government securities are not rated, they are generally regarded as
having the equivalent of the highest credit quality available. Because the funds
offered by this Prospectus invest in government securities, they are considered
to have very low credit risk.
LIQUIDITY RISK
Debt securities can become difficult to sell for a variety of reasons, such as
lack of an active trading market. When a fund's investments become difficult to
sell, it is said to have a problem with liquidity. The chance that a fund will
have liquidity issues is called liquidity risk.
INFLATION RISK
The safest investments usually have the lowest potential income and performance.
There is a risk, then, that returns from the investment may fail to
significantly outpace inflation. Even if the value of your investment has not
gone down, your money will not be worth as much as if there had been no
inflation. Your after-inflation return may be quite small. This risk is called
inflation risk.
**********LEFT MARGIN CALLOUTS
o Credit quality may be lower when the issuer has
o a high debt level
o a short operating history
o a senior level of debt
o a difficult, competitive environment
o The Statement of Additional Information provides a detailed description of
these securities ratings.
**********END LEFT MARGIN CALLOUTS
A COMPARISON OF BASIC RISK FACTORS
The following chart depicts the basic risks of investing in the funds. It is
designed to help you compare these funds with each other; it shouldn't be used
to compare these funds with other mutual funds.
<TABLE>
<CAPTION>
Interest Rate Credit Risk Liquidity Risk Inflation Risk
Risk
- ------------------------------------ ------------------- ------------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Capital Preservation Lowest Very Low Similar (Very Low) Lowest
Government Agency Money Market Lowest Low Similar (Very Low) Lowest
Short-Term Treasury Low Very Low Similar (Very Low) Low
Intermediate-Term Treasury Moderate Very Low Similar (Very Low) Moderate
Long-Term Treasury Highest Very Low Similar (Very Low) Highest
Inflation-Adjusted Treasury Low Very Low Similar (Very Low) Low
Short-Term Government Low Low Similar (Very Low) Low
GNMA Fund High Very Low Similar (Very Low) High
</TABLE>
The funds engage in a variety of investment techniques as they pursue their
investment objectives. Each technique has its own characteristics, and may pose
some level of risk to the funds. If you would like to learn more about these
techniques, you should review the Statement of Additional Information before
making an investment.
MANAGEMENT
WHO MANAGES THE FUNDS?
The Board of Trustees, investment advisor and fund management team play key
roles in the management of the funds.
THE BOARD OF TRUSTEES
The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired an investment advisor to do so.
More than half of the trustees are independent of the funds' advisor, that is,
they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958. American Century is
headquartered at 4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provided to the funds during their most recent fiscal year,
the advisor received a unified management fee based on a percentage of the
average net assets of the Investor Class of shares of each fund. The rate of the
management fee for a fund is determined on a class-by-class basis monthly using
a two-step formula that takes into account the fund's strategy (money market,
bond or equity) and the total amount of mutual fund assets the advisor manages.
The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor paid all
expenses of managing and operating the fund except brokerage expenses, taxes,
interest, fees and expenses of the independent directors (including legal
counsel fees) and extraordinary expenses.
MANAGEMENT FEES PAID BY THE FUNDS TO THE ADVISOR AS A PERCENTAGE OF AVERAGE NET
ASSETS FOR THE MOST RECENT FISCAL YEAR ENDED MARCH 31, 1999
- ------------------------------------------------------------------- ------------
Capital Preservation 0.47%
Government Agency Money Market 0.47%
Short-Term Treasury 0.50%
Intermediate-Term Treasury 0.50%
Long-Term Treasury 0.50%
Inflation-Adjusted Treasury 0.50%
Short-Term Government 0.58%
GNMA Fund 0.58%
THE FUND MANAGEMENT TEAM
The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. Teams meet regularly to review portfolio holdings
and to discuss purchase and sale activity. Team members buy and sell securities
for a fund as they see fit, guided by the fund's investment objective and
strategy.
The portfolio managers who lead each team are identified below:
CAPITAL PRESERVATION
GOVERNMENT AGENCY MONEY MARKET
DENISE TABACCO
Ms. Tabacco, Portfolio Manager, has been a member of the Capital Preservation
team since _____, 1995 and a member of the Government Agency Money Market team
since __________. She joined American Century in 1988, becoming a member of its
portfolio department in 1991. She was promoted to Portfolio Manager in 1995. She
has a bachelor's degree in accounting from San Diego University and an MBA in
finance from Golden Gate University.
GNMA
CASEY C. COLTON
Mr. Colton, Vice President and Senior Portfolio Manager, has been a member of
GNMA Fund team since January 1994. Mr. Colton joined American Century in 1990.
He holds a bachelor's degree in business administration from San Jose State
University and a master's degree from the University of Southern California. He
is a Chartered Financial Analyst and a Certified Public Accountant.
INTERMEDIATE-TERM TREASURY
ROBERT V. GAHAGAN
Mr. Gahagan, Vice President and Portfolio Manager, has been a member of the
Intermediate-Term Treasury team since January 1998. He joined American Century
in 1983. He holds a bachelor's degree in economics and an MBA from the
University of Missouri, Kansas City.
SHORT-TERM TREASURY
SHORT-TERM GOVERNMENT
NEWLIN RANKIN
Mr. Rankin, Senior Portfolio Manager, has been a member of the Short-Term
Treasury team since March 1996 and the Short-Term Government team since January
1995. He joined American Century in 1994. Previously, he was an Assistant Vice
President at Wells Fargo Bank. He holds a bachelor's degree and an MBA from the
University of San Francisco.
LONG-TERM TREASURY
INFLATION-ADJUSTED TREASURY
DAVID W. SCHROEDER
Mr. Schroeder, Vice President and Senior Portfolio Manager, supervises the
American Century Government Income Trust team and has been a member of the
Long-Term Treasury team since September 1992 and the Inflation-Adjusted Treasury
team since its inception on February 10, 1997. He joined American Century in
1990. He holds a bachelor of arts degree from Pomona College.
**********LEFT MARGIN CALLOUTS
o CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests
of fund shareholders come before the interests of the people who manage the
funds. Among other provisions, the Code of Ethics prohibits portfolio
managers and other investment personnel from buying securities in an
initial public offering or from profiting from the purchase and sale of the
same security within 60 calendar days. In addition, the Code of Ethics
requires portfolio managers and other employees with access to information
about the purchase or sale of securities by the funds to obtain approval
before executing permitted personal trades.
**********END LEFT MARGIN CALLOUTS
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Trustees may change any other policies
and investment strategies.
YEAR 2000 ISSUES
Many of the world's computer systems were originally programmed in a way that
prevented them from properly recognizing or processing date-sensitive
information relating to the Year 2000 and beyond. Because this may impact the
computer systems of various American Century-affiliated and external service
providers for the funds, American Century formally initiated a Year 2000
readiness project in July 1997. It involves a team of information technology
professionals assisted by outside consultants and guided by a senior-level
steering committee. The team's goal is to assess the impact of the Year 2000 on
American Century's systems, renovate or replace noncompliant critical systems
and test those systems. In addition, the team has been working to gather
information about the Year 2000 efforts of the funds' other major service
providers.
Although American Century believes its critical systems will function properly
in the Year 2000, this is not guaranteed. If the efforts of American Century or
its external service providers are not successful, the funds' business,
particularly the provision of shareholder services, may be hampered.
In addition, the issuers of securities the funds own could have Year 2000
computer problems. These problems could negatively affect the value of their
securities, which, in turn, could impact the funds' performance. The advisor has
established a process to gather publicly available information about the Year
2000 readiness of these issuers. However, this process may not uncover all
relevant information, and the information gathered may not be complete and
accurate. Moreover, an issuer's Year 2000 readiness is only one of many factors
the fund managers may consider when making investment decisions, and other
factors may receive greater weight.
INVESTING WITH AMERICAN CENTURY
SERVICES AUTOMATICALLY AVAILABLE TO YOU
You automatically will have access to the services listed below when you open
your account. If you do not want these services, see "Conducting Business in
Writing" below.
CONDUCTING BUSINESS IN WRITING
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.
<TABLE>
<CAPTION>
WAYS TO MANAGE YOUR ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
<S> <C> <C>
BY TELEPHONE Open an account Make additional investments
Investor Relations If you are a current investor, you Call us or use our Automated Information Line
1-800-345-2021 can open an account by exchanging if you have authorized us to invest from your
shares from another American Century bank account.
Business; Not-For-Profit and account. (This service is not
Employer-Sponsored Retirement available if you have chosen to do Sell shares
Plans business in writing only.) Call an Investor Relations Representative.
1-800-345-3533
Exchange shares
Automated Information Line Call us or use our Automated
1-800-345-8765 Information Line if you have
authorized us to accept telephone
instructions.
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
By Mail or Fax Open an account Make additional investments
PO Box 419200 Send a signed and completed Send us your check or money order for at
Kansas City, MO 64141-6200 application and check or money order least $50 with an investment slip or $250
payable to American Century without an investment slip. If you don't have
Fax 816-340-7962 Investments. an investment slip, include your name,
address and account number on your check or
Exchange shares money order.
Send us written instructions to
exchange your shares from one Sell shares
American Century account to another. Send us written instructions to sell shares
or send us a redemption form. Call an
Investor Relations Representative to request
a form.
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
ONLINE Open an account Make additional investments
www.americancentury.com If you are a current investor, you Make an additional investment into an
can open an account by exchanging established American Century account if you
shares from another American Century have authorized us to invest from your bank
account. (This service is not account.
available if you have chosen to do
business in writing only.) Sell shares
Not available.
Exchange shares
Exchange shares from another American Century
account.
</TABLE>
A NOTE ABOUT MAILINGS TO SHAREHOLDERS
To reduce expenses and demonstrate respect for our environment, we will deliver
most financial reports, prospectuses and account statements to households in a
single envelope, even if the accounts are registered under different names. If
you would like additional copies of financial reports and prospectuses or
separate mailing of account statements, please call us.
YOUR GUIDE TO SERVICES AND POLICIES
When you open an account, you will receive a services guide, which explains the
services available to you and the policies of the funds and the transfer agent.
<TABLE>
- -------------------------------- ------------------------------------------------ -----------------------------------------------
- -------------------------------- ------------------------------------------------ -----------------------------------------------
<S> <C> <C>
BY WIRE Open an account Make additional investments
Call us to set up your account or mail Follow the wire instructions provided in the
a completed application to the address "Open an account" section
provided in the "By Mail" section and
give your bank the following Sell shares
information: You can receive redemption proceeds by
o Please remember that o Our bank information: wire or electronic transfer. (This
if you request Commerce Bank N.A. service is not available if you have
redemptions by wire, $10 Routing No. 101000019 chosen to do business in writing only.)
will be deducted from the Account No. 2804918
amount wired. Your bank o The fund name
also may charge a fee. o Your American Century account number*
o Your name
o The contribution year (for IRAs only)
Exchange shares
Not available.
*For additional investments only
- -------------------------------- ------------------------------------------------ -----------------------------------------------
- -------------------------------- ------------------------------------------------ -----------------------------------------------
AUTOMATICALLY Open an account Make additional investments
Not available. Select "Establish Automatic Investments" on
your application to make automatic purchases
Exchange shares of shares on a regular basis. You must invest
Send us written instructions to set up at least $600 per year per account.
an automatic exchange of your shares
from one American Century account to Sell shares
another. If you have at least $10,000 in your account,
sell shares automatically by establishing
Check-A-Month or Automatic Redemption.
- -------------------------------- ------------------------------------------------ -----------------------------------------------
- -------------------------------- ------------------------------------------------------------------------------------------------
IN PERSON If you prefer to handle your transactions in person, visit
one of our Investor Centers and a representative can help
you open an account, make additional investments, sell or
exchange shares.
4500 Main Street 4917 Town Center Dr.
Kansas City, Missouri Leawood, Kansas
8 a.m. to 5 p.m. 8 a.m. to 6 p.m., Monday-Friday
8 a.m. to noon, Saturday
1665 Charleston Road 2000 S. Colorado Blvd.
Mountain View, California Denver, Colorado
8:30 a.m. to 5 p.m. 8:30 a.m. to 5 p.m.
</TABLE>
MINIMUM INITIAL INVESTMENT AMOUNTS
To open an account the minimum investments are as follows:
- --------------------------------------------------------------------------------
Individual or Joint $2,500
Traditional IRA $1,000
Roth IRA $1,000
Education IRA $500
UGMA/UTMA $2,500
403(b) No minimum
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
If your redemption activity causes your account balance to fall below the
minimum initial investment amount we will notify you and give you 90 days to
meet the minimum. If you do not meet the deadline, American Century will redeem
the shares in the account and send the proceeds to your address of record.
ABUSIVE TRADING PRACTICES
We do not permit market-timing or other abusive trading practices in our funds.
Excessive, short-term (market-timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds - up to seven days - or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of cash. If we make payment
in securities, we will value the securities, selected by the fund, in the same
manner as we do in computing the fund's net asset value. We may provide these
securities in lieu of cash without prior notice.
If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you do business with us through a FINANCIAL INTERMEDIARY or a retirement
plan, your ability to purchase, exchange and redeem shares will depend on the
policies of that entity. Some policy differences may include
o minimum investment requirements
o exchange policies
o fund choices
o cut-off time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the funds' annual reports, semiannual
reports and Statements of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform for their clients recordkeeping and
administrative services that would otherwise be performed by American Century's
transfer agent. In some circumstances, American Century will pay the service
provider a fee for performing those services.
Although transactions in fund shares may be made directly with American Century
at no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received. The funds have authorized
those intermediaries to accept orders on their behalf up to the time at which
the net asset value is determined. If those orders are transmitted to American
Century and paid for in accordance with the contract, they will be priced at the
net asset value next determined after your request is received in the form
required by the intermediary on a fund's behalf.
**********LEFT MARGIN CALLOUTS
o FINANCIAL INTERMEDIARIES include banks, broker-dealers, insurance companies
and investment advisors.
**********END LEFT MARGIN CALLOUTS
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE of the funds as of the close of
regular trading on the New York Stock Exchange (usually 4 p.m. Eastern time)
each day the Exchange is open. On days when the Exchange is not open, we do not
calculate the net asset value. The net asset value of a fund share is the
current value of the fund's investments, minus any liabilities, divided by the
number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily available
from an independent pricing service, the advisor may determine their fair value
in accordance with procedures adopted by the fund's Board of Trustees. Trading
of securities in foreign markets may not take place on every day the Exchange is
open. Also, trading in some foreign markets may take place on weekends or
holidays when a fund's net asset value is not calculated. So, the value of a
fund's portfolio may be affected on days when you can't purchase or redeem
shares of the fund.
We will price your purchase, exchange or redemption at the net asset value next
determined after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as a
regulated investment company means that the fund will not be subject to state or
federal income tax on amounts distributed. The distributions generally consist
of dividends and interest received, as well as CAPITAL GAINS realized on the
sale of investment securities. Each money market fund declares distributions
from net income daily. These distributions are paid on the last Friday of each
month. Each of the other funds pays distributions from net income monthly. Each
fund (except the money market funds) generally pays distributions of capital
gains, if any, once a year in December. A fund may make more frequent
distributions if necessary to comply with Internal Revenue Code provisions.
You will begin to participate in fund distributions the day after your purchase
is effective. If you redeem shares, you will receive the distribution declared
for the day you redeem. If you redeem all shares, we will include the
distributions on the redeemed with your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
our Investor Services Guide for further information regarding distributions and
your distribution options.
**********LEFT MARGIN CALLOUTS
The NET ASSET VALUE of a fund is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased. Tax becomes due on capital gains once an
asset is sold.
**********END LEFT MARGIN CALLOUTS
TAXES
The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received and capital gains they have generated through their investment
activities. Tax consequences also result from sales of fund shares by investors
after the net asset value has increased or decreased.
TAX-DEFERRED ACCOUNTS
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation, but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through an employer-sponsored
retirement or savings plan, or through an IRA, please consult your plan
administrator, your summary plan description or a professional tax advisor.
TAXABLE ACCOUNTS
If you own fund shares through a taxable account, distributions by the fund and
sales by you of fund shares may cause you to be taxed.
TAXABILITY OF DISTRIBUTIONS
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short-term or long-term and are taxed
as follows:
<TABLE>
Type of distribution Tax rate for 15% bracket Tax rate for 28% bracket or above
- --------------------------- ---------------------------------------- -----------------------------------------
<S> <C> <C>
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
</TABLE>
The tax status of any distribution of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund or whether you reinvest your distributions in
additional shares or take them as income. American Century will detail the tax
status of fund distributions for each calendar year in an annual tax mailing
(Form 1099) from the fund.
Distributions may also be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.
TAXES ON TRANSACTIONS
Your redemptions -- including exchanges to other American Century funds -- are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares held for 12 months or less. Long-term
capital gains are gains on fund shares held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that any loss realized upon
the sale or redemption of shares held for six months or less will be treated as
a long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to such shares. If a loss is realized on the redemption
of fund shares, the reinvestment in additional fund shares within 30 days before
or after the redemption may be subject to the wash sale rules of the Internal
Revenue Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes. If you have not certified to us that your social
security number or tax identification number is correct and that you are not
subject to 31% withholding, we are required to withhold and remit to the IRS 31%
of dividends, capital gains distributions and redemptions.
**********LEFT MARGIN CALLOUTS
o BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution
is sometimes known as buying a dividend. In taxable accounts, you must pay
income taxes on the distribution whether you reinvest the distribution or
take it in cash. In addition, you will have to pay taxes on the
distribution whether the value of your investment decreased, increased or
remained the same after you bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up
taxable gains throughout the period covered by a distribution, as
securities are sold at a profit. We distribute those gains to you, after
subtracting any losses, even if you did not own the shares when the gains
occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
**********END LEFT MARGIN CALLOUTS
MULTIPLE CLASS INFORMATION
American Century offers two classes of all of the funds (except Capital
Preservation): Investor Class and Advisor Class. Capital Preservation offers
only an Investor class of shares. The shares offered by this Prospectus are
Investor Class shares and have no up-front or deferred charges, commissions, or
12b-1 fees.
American Century offers the other class of shares primarily to institutional
investors, through institutional distribution channels, such as
employer-sponsored retirement plans, or through banks, broker-dealers and
insurance companies. The other class has different fees, expenses, and/or
minimum investment requirements than the Investor Class. The difference in the
fee structures among the classes is the result of their separate arrangements
for shareholder and distribution services and not the result of any difference
in amounts charged by the advisor for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class.
Different fees and expenses will affect performance. For additional information
concerning the other classes of shares not offered by this Prospectus, call us
at 1-800-345-3533 for Advisor Class shares. You also may contact a sales
representative or financial intermediary who offers that class of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, and (d) each class
may have different exchange privileges.
Financial Highlights
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The tables on the next few pages itemize what contributed to the changes in
share price during the period. They also show the changes in share price for
this period in comparison to changes over the last five fiscal years (or less,
if the share class is not five years old).
On a per-share basis, each table includes:
o share price at the beginning of the period
o investment income and capital gains or losses
o distributions of income and capital gains paid to shareholders
o share price at the end of the period
Each table also includes some key statistics for the period:
o Total Return--the overall percentage of return of the fund, assuming the
reinvestment of all distributions
o Expense Ratio--operating expenses as a percentage of average net assets
o Net Income Ratio--net investment income as a percentage of average net assets
o Portfolio Turnover--the percentage of the fund's buying and selling activity
The Financial Highlights for the fiscal years ended March 31, 1997 and 1998 have
been audited by PricewaterhouseCoopers, LLP, independent accountants. Their
report is included in the funds' annual reports, which are incorporated by
reference into the Statement of Additional Information, and are available upon
request. Prior years' information was audited by other independent auditors,
whose report also is incorporated by reference into the Statement of Additional
Information.
<TABLE>
<CAPTION>
Capital Preservation
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31
1999 1998 1997 1996 1995
----------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C>
Beginning of Audited numbers $1.00 $1.00 $1.00 $1.00
Year not available
----------------------------------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.05 0.05 0.05 0.04
----------------------------------------------------------------------------
Distributions
From Net
Investment Income (0.05) (0.05) (0.05) (0.04)
----------------------------------------------------------------------------
Net Asset Value,
End of Year $1.00 $1.00 $1.00 $1.00
============================================================================
TOTAL 5.06% 4.82% 5.21% 4.31%
Return(1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(2) 0.49% 0.49% 0.51% 0.50%
Ratio of Net Investment
Income to Average
Net Assets 4.90% 4.66% 5.07% 4.24%
Net Assets, End
of Year (in thousands) $3,144,584 $2,978,015 $3,077,558 $2,883,350
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(2) The ratios for years ended March 31, 1997 and March 31, 1996 include
expenses paid through expense offset arrangements.
Government Agency
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31
1999 1998 1997 1996 1995
--------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $1.00 $1.00 $1.00 $1.00
Year numbers not
available
--------------------------------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.05 0.05 0.05 0.04
--------------------------------------------------------------------------
Distributions
From Net
Investment Income (0.05) (0.05) (0.05) (0.04)
--------------------------------------------------------------------------
Net Asset Value,
End of Year $1.00 $1.00 $1.00 $1.00
==========================================================================
TOTAL 5.14% 4.89% 5.35% 4.47%
Return(1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(2) 0.51% 0.57% 0.51% 0.50%
Ratio of Net Investment
Income to Average
Net Assets 5.02% 4.76% 5.20% 4.35%
Net Assets, End
of Year (in thousands) $487,791 $470,759 $503,328 $461,803
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(2) The ratios for years ended March 31, 1997 and March 31, 1996 include
expenses paid through expense offset arrangements.
Investor Class
Short-Term Treasury
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31
1999 1998 1997 1996 1995
---------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $9.68 $9.84 $9.73 $9.86
Year numbers not
available
---------------------------------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.53 0.52 0.53 0.50
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions 0.12 (0.07) 0.11 (0.13)
---------------------------------------------------------------------------
Total From
Investment Operations 0.65 0.45 0.64 0.37
---------------------------------------------------------------------------
Distributions
From Net
Investment (0.53) (0.52) (0.53) (0.50)
Income
From Net Realized
Gains on Investment Transactions - - (0.09) - -
---------------------------------------------------------------------------
Total Distributions (0.53) (0.61) (0.53) (0.50)
---------------------------------------------------------------------------
Net Asset Value,
End of Year $9.80 $9.68 $9.84 $9.73
===========================================================================
TOTAL 6.89% 4.62% 6.71% 3.85%
RETURN(1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.55% 0.61% 0.67% 0.67%
Ratio of Net Investment Income
to Average Net Assets 5.45% 5.26% 5.39% 5.22%
Portfolio Turnover Rate 140% 234% 224% 141%
Net Assets, End
of Year (in thousands) $40,874 $35,854 $35,648 $56,090
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
Investor Class
Intermediate-Term Treasury
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31
1999 1998 1997 1996 1995
----------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $10.06 $10.24 $9.99 $10.18
Year numbers not
available
----------------------------------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.59 0.58 0.58 0.53
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions 0.50 (0.18) 0.25 (0.19)
----------------------------------------------------------------------------
Total From
Investment Operations 1.09 0.40 0.83 0.34
----------------------------------------------------------------------------
Distributions
From Net
Investment (0.59) (0.58) (0.58) (0.53)
Income
From Net Realized
Gains on Investment Transactions - - - -
----------------------------------------------------------------------------
Total Distributions (0.59) (0.58) (0.58) (0.53)
----------------------------------------------------------------------------
Net Asset Value,
End of $10.56 $10.06 $10.24 $9.99
Year
============================================================================
TOTAL 11.04% 4.05% 8.42% 3.54%
RETURN(1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.51% 0.51% 0.53% 0.53%
Ratio of Net Investment Income
to Average Net Assets 5.63% 5.72% 5.65% 5.35%
Portfolio Turnover Rate 194%(2) 110% 168% 92%
Net Assets, End
of Year (in $374,861 $328,784 $311,020 $305,353
thousands)
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(2) Purchases, sales and market value amounts for Benham Intermediate-Term
Government prior to the merger were excluded from the portfolio turnover
calculation. See Note 5 in notes to financial statements.
Investor Class
Long-Term Treasury
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31
1999 1998 1997 1996 1995
----------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $9.32 $9.67 $9.05 $9.38
Year numbers not
available
----------------------------------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.61 0.60 0.60 0.60
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions 1.26 (0.35) 0.62 (0.33)
----------------------------------------------------------------------------
Total From
Investment Operations 1.87 0.25 1.22 0.27
----------------------------------------------------------------------------
Distributions
From Net
Investment (0.61) (0.60) (0.60) (0.60)
Income
From Net Realized
Gains on Investment Transactions - - - -
In Excess of Net Realized
Gains - - - -
----------------------------------------------------------------------------
Total Distributions (0.61) (0.60) (0.60) (0.60)
----------------------------------------------------------------------------
Net Asset Value,
End of Year $10.58 $9.32 $9.67 $9.05
============================================================================
TOTAL 20.48% 2.65% 13.46% 3.25%
RETURN(1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.54% 0.60% 0.67% 0.67%
Ratio of Net Investment Income
to Average Net Assets 6.00% 6.28% 5.93% 6.84%
Portfolio Turnover Rate 57% 40% 112% 147%
Net Assets, End
of Year (in $103,381 $126,570 $110,741 $34,906
thousands)
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
FINANCIAL HIGHLIGHTS
SHORT-TERM GOVERNMENT
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
INVESTOR CLASS
1999 1998(1) 1997 1996 1995
-----------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $9.49 $9.47 $9.51 $9.27
Period numbers
not
available
-----------------------------------------------------------------
Income From
Investment Operations
Net Investment
Income 0.21 0.52 0.51 0.52
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions (0.03) 0.02 (0.04) 0.24
-----------------------------------------------------------------
Total From
Investment Operations 0.18 0.54 0.47 0.76
-----------------------------------------------------------------
Distributions
From Net
Investment (0.21) (0.52) (0.51) (0.52)
Income
-----------------------------------------------------------------
Net Asset Value,
End of $9.46 $9.49 $9.47 $9.51
Period
=================================================================
TOTAL 1.95% 5.86% 5.09% 8.42%
RETURN(2)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.59%(3) 0.68% 0.70% 0.70%
Ratio of Net Investment
Income to Average
Net 5.43%(3) 5.53% 5.39% 5.53%
Assets
Portfolio
Turnover Rate 54% 293%(4) 246% 128%
Net Assets, End
of Period (in $808,464 $519,332 $349,772 $391,331
thousands)
(1) The fund's fiscal year end was changed from October 31 to March 31
resulting in a five month reporting period. For years ended prior to 1998,
the fund's fiscal year end was October 31.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
(4) Purchases, sales, and the market value of securities for Benham Adjustable
Rate Government Securities Fund prior to the merger were excluded from the
portfolio turnover calculation. See Note 5 in the Notes to Financial
Statements.
GNMA Fund
Investor Class
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $10.33 $10.45 $10.18 $10.35
Year numbers not
available
-------------------------------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.69 0.71 0.74 0.72
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions 0.34 (0.12) 0.27 (0.18)
-------------------------------------------------------------------------
Total From
Investment Operations 1.03 0.59 1.01 0.54
-------------------------------------------------------------------------
Distributions
From Net
Investment (0.69) (0.71) (0.74) (0.71)
Income
-------------------------------------------------------------------------
Net Asset Value,
End of Year $10.67 $10.33 $10.45 $10.18
=========================================================================
TOTAL 10.21% 5.84% 10.08% 5.53%
Return(1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(2) 0.58% 0.55% 0.58% 0.58%
Ratio of Net Investment
Income to Average
Net 6.49% 6.84% 6.98% 7.08%
Assets
Portfolio Turnover Rate 133% 105% 64% 120%
Net Assets, End
of Year (in thousands) $1,285,641 $1,119,165 $1,120,019 $979,670
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(2) The ratios for years ended March 31, 1997 and March 31, 1996, include
expenses paid through expense offset arrangements.
INFLATION-ADJUSTED TREASURY
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
INVESTOR CLASS
1999 1998 1997(1)
---------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited numbers $9.74 $10.00
Period not available
---------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.44 0.06
Net Realized and Unrealized Gain (Loss)
on Investment (0.11) (0.26)
Transactions
---------------------------------------------------
Total From Investment 0.33 (0.20)
Operations
---------------------------------------------------
Distributions
From Net
Investment (0.44) (0.06)
Income
---------------------------------------------------
Net Asset Value,
End of $9.63 $9.74
Period
===================================================
TOTAL 3.45% (1.98)%
RETURN(2)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.50% 0.50%(3)
Ratio of Net Investment
Income to Average
Net 4.45% 5.03%(3)
Assets
Portfolio Turnover Rate 69% -
Net Assets, End
of Period (in $5,279 $2,277
thousands)
(1) February 10, 1997 (inception) through March 31, 1997.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
</TABLE>
More information about the funds is contained in these documents
Annual and Semiannual Reports. These reports contain more information about the
funds' investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.
Statement of Additional Information. The SAI contains a more detailed, legal
description of the funds' operations, investment restrictions, policies and
practices. The SAI is incorporated by reference into this Prospectus. This means
that it is legally part of this Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
any questions about the funds or your accounts, by contacting American Century
at the address or telephone numbers listed below.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC).
o In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location and hours.
o On the internet www.sec.gov.
o By mail SEC Public Reference Section
Washington, D.C. 20549-6009
(The SEC will charge a fee for copying the documents
you request.)
American Century Investments
P.O. Box 419200
Kansas City, Missouri 64141-6200
Investment Company Act File No. 811-4363
<PAGE>
[LOGO]
PROSPECTUS
JULY 6, 1999
- --------------------------------------------------------------------------------
CAPITAL PRESERVATION FUND
GOVERNMENT AGENCY MONEY MARKET FUND
SHORT-TERM TREASURY FUND
INTERMEDIATE-TERM TREASURY FUND
LONG-TERM TREASURY FUND
SHORT-TERM GOVERNMENT FUND
GNMA FUND
INFLATION-ADJUSTED TREASURY FUND
ADVISOR CLASS
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this Prospectus is accurate or complete. Anyone who
tells you otherwise is committing a crime.
Distributed by Funds Distributor, Inc.
Dear Investor,
Reading a prospectus doesn't have to be a chore. We've done the hard work so you
can focus on what's important--learning about the funds. Take a look inside and
you'll see this prospectus is different from others. It takes a clear-cut
approach to fund information.
Here's what you'll find:
o The funds' primary investments and risks
o A description of who may or may not want to invest in the funds
o Fund performance, including returns for each year, best and worst quarters
and average annual returns compared to the funds' benchmarks
o An overview of ways to best manage your accounts
o Helpful tips and definitions of key investment terms
Whether you're a current investor or investing in mutual funds for the first
time, this prospectus will give you a clear understanding of the funds. If you
have questions, our Services Representatives are available weekdays, 8 a.m. to 5
p.m., Central time. Our toll-free number is 1-800-345-3533. We look forward to
helping you achieve your financial goals.
Sincerely,
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
TABLE OF CONTENTS
An Overview of the Funds......................................................2
Fund Performance History......................................................2
Fees and Expenses.............................................................3
Information about the Funds...................................................4
Capital Preservation Fund
Government Agency Money Market Fund
Short-Term Treasury Fund
Intermediate-Term Treasury Fund
Long-Term Treasury Fund
Short-Term Government Fund
GNMA Fund
Inflation-Adjusted Treasury Fund
Basics of Fixed-Income Investing.............................................12
Management...................................................................15
Investing with American Century..............................................18
Share Price and Distributions................................................21
Taxes........................................................................22
Multiple Class Information...................................................22
Financial Highlights.........................................................23
Performance Information of Other Class.......................................23
**********LEFT MARGIN CALLOUTS
Throughout this book you'll find definitions to key investment terms and
phrases. When you see a word printed in GREEN ITALICS, look for its definition
in the left margin.
o........This symbol highlights special information and helpful tips.
**********END LEFT MARGIN CALLOUTS
AN OVERVIEW OF THE FUNDS
WHAT ARE THE FUNDS' INVESTMENT GOALS?
These funds seek income and investment returns with very low to moderate risk of
principal loss.
WHAT ARE THE FUNDS' PRIMARY INVESTMENTS STRATEGIES AND PRINCIPAL RISKS?
The funds invest most of their assets in DEBT SECURITIES issued by the U.S.
government or its agencies or instrumentalities. The chart below shows the
primary differences among the funds. A more detailed description about the
funds' investment strategies and risks begins on page 4.
<TABLE>
Fund Primary Investments Principal Risks
- --------------------------- ---------------------------------------------- -------------------------------
<S> <C> <C>
Government Agency Money Very short-term U.S. government securities Very low credit risk
Market
Short-Term Treasury U.S. Treasury securities that mature in Some interest rate risk
three years or less
Intermediate-Term Treasury U.S. Treasury securities that mature in Interest rate risk
three or more years
Long-Term Treasury U.S. Treasury securities that mature in 10 High interest rate risk
years or more
Short-Term Government U.S. government securities that mature in Some credit risk
three years or less
GNMA Fund Ginnie Maes, which are mortgage-backed Interest rate risk
securities issued by Government National
Mortgage Association
Inflation Adjusted Inflation-indexed U.S. Treasury securities Some interest rate risk
Treasury
- --------------------------- ---------------------------------------------- -------------------------------
</TABLE>
WHO MAY WANT TO INVEST IN THE FUNDS?
The funds may be a good investment if you
>> are seeking current income
>> prefer a relatively safe investment over one that may provide better
long-term investment returns
>> are comfortable with the funds' other investment risks
WHO MAY NOT WANT TO INVEST IN THE FUNDS?
The funds may not be a good investment if you are
>> investing for long-term growth
>> looking for the added security of FDIC insurance
**********LEFT MARGIN CALLOUTS
DEBT SECURITIES include fixed income investments such as notes, bonds,
commercial paper and Treasury bills.
o An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. Although the money market fund seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose money
by investing in it.
**********END LEFT MARGIN CALLOUTS
FUND PERFORMANCE HISTORY
Government Agency Money Market Fund
Inflation-Adjusted Treasury Fund
Short-Term Government Fund
Long-Term Treasury Fund
When the Advisor Class of a fund has investment results for a full calendar
year, this section will feature charts that show Annual Total Returns Highest
and Lowest Quarterly Returns Average Annual Returns, including a comparison of
these returns to a benchmark index for the Advisor Class of the fund
In addition, investors can examine the performance of the fund's Investor Class
of shares. The Investor Class has a total expense ratio that is 0.25% lower than
the Advisor Class. If the Advisor Class had existed during the periods
presented, its performance would have been lower because of the additional
expense.
All past performance information is designed to help show you how fund returns
can vary. Keep in mind that past performance does not predict how the fund will
perform in the future.
**********BEGIN LEFT MARGIN CALLOUTS
o For current performance information, including yields, please call us at
1-800-345-3533 or visit American Century's Web site at
www.americancentury.com
**********END LEFT MARGIN CALLOUTS
FUND PERFORMANCE HISTORY
Short-Term Treasury Fund
Intermediate-Term Treasury Fund
GNMA Fund
ANNUAL TOTAL RETURNS(1)
The following bar chart shows the performance of the funds' Investor Class
shares for each of the last 10 calendar years or for each full year in the life
of the fund if less than 10 years. It indicates the volatility of the funds'
historical returns from year to year.
- ---------------- --------
1998
- ---------------- --------
- ---------------- --------
Short-Term 8.17%
Treasury
- ---------------- --------
- ---------------- --------
Intermediate-Term8.67%
Treasury
- ---------------- --------
- ---------------- --------
GNMA 6.06%
- ---------------- --------
1 As of June 30, 1999, then end of the most recent calendar quarter, the
funds' year-to-date returns were Short-Term Treasury, _______,
Intermediate-Term Treasury, ______; and GNMA, _____.
The highest and lowest quarterly returns for the period reflected by the bar
chart are:
Highest Lowest
Short-Term Treasury xx% xx%
Intermediate-Term Treasury xx% xx%
GNMA xx% xx%
AVERAGE ANNUAL RETURNS
The following table shows the average annual returns of the funds' Investor
Class Shares for the periods indicated. The benchmarks are unmanaged indices
that have no operating costs and are included in the table for performance
comparison.
For the calendar year December 31, 1998 1 year Life of
Fund(1)
- --------------------------------------------------------------------------------
Short-Term Treasury 6.17% 6.01%
Lehman 1- to 3-Year Government Securities Index 6.96% N/A(2)
- --------------------------------------------------------------------------------
Intermediate-Term Treasury 8.67% 9.19%
Salomon 3- to 10-Year Treasury Index 10.21% 9.84%(2)
- --------------------------------------------------------------------------------
GNMA 6.06% 6.52%
Salomon 30-Year GNMA Index N/A N/A(2)
1 The inception dates for the funds are: Intermediate-Term Treasury and GNMA,
October 9, 1997; and Short-Term Treasury, October 6, 1997.
2 Benchmark from October 31, 1997.
Performance Information of Other Class
The original class of shares of the fund was the Investor Class. For information
aobut the historical performance of the original class of shares, see page xx.
**********LEFT MARGIN CALLOUTS
o The performance information on this page is designed to help you understand
how fund returns can vary. Keep in mind that past performance does not
predict how the funds will perform in the future.
o For current performance information, including yields, please call us at
1-800-345-3533 or visit American Century's Web site at
www.americancentury.com
**********END LEFT MARGIN CALLOUTS
Fees and Expenses
There are no sales loads or fees or other charges
>> to buy fund shares directly from American Century
>> to reinvest dividends in additional shares
>> to exchange into the Advisor Class shares of other American Century funds
>> to redeem your shares
The following table describes the fees and expenses that you will pay if you buy
and hold shares of the funds.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Distribution and Other Total Annual Fund
Fee(1) Service (12b-1) Fees(2) Expenses(3) Operating Expenses
<S> <C> <C> <C> <C>
Government Agency Money Market 0.23% 0.50% 0.00% 0.73%
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
Short-Term Treasury 0.26% 0.50% 0.00% 0.76%
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
Intermediate-Term Treasury 0.26% 0.50% 0.00% 0.76%
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
Long-Term Treasury 0.26% 0.50% 0.00% 0.76%
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
Inflation-Adjusted Treasury 0.26% 0.50% 0.02% 0.78%
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
Short-Term Government 0.34% 0.50% 0.00% 0.84%
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
GNMA Fund 0.34% 0.50% 0.00% 0.84%
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
</TABLE>
1 Based on expenses incurred during the funds' most recent fiscal year. The
funds have a stepped fee schedule. As a result, the funds' management fee
rates generally decrease as fund assets increase.
2 Other expenses, which include the fees and expenses of the funds'
independent trustees, their legal counsel and interest were less than
0.005% for the most recent fiscal year.
EXAMPLES
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you ...
o invest $10,000 in the fund
o redeem all of your shares at the end of the periods shown below
o earn a 5% return each year and
o incur the same operating expenses shown above,
... your cost of investing in the fund would be:
<TABLE>
1 year 3 years 5 years 10 years
- -------------------------------------------- ------------------ ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Capital Preservation $xx $xx $xx $xx
- -------------------------------------------- ------------------ ------------------- ------------------- -------------------
Government Agency Money Market $74 $151 $263 $591
- -------------------------------------------- ------------------ ------------------- ------------------- -------------------
Short-Term Treasury $78 $242 $422 $939
- -------------------------------------------- ------------------ ------------------- ------------------- -------------------
Intermediate-Term Treasury $78 $242 $422 $939
- -------------------------------------------- ------------------ ------------------- ------------------- -------------------
Long-Term Treasury $78 $242 $422 $939
- -------------------------------------------- ------------------ ------------------- ------------------- -------------------
Inflation-Adjusted Treasury $80 $249 $432 $963
- -------------------------------------------- ------------------ ------------------- ------------------- -------------------
Short-Term Government $86 $268 $465 $1,034
- -------------------------------------------- ------------------ ------------------- ------------------- -------------------
GNMA Fund $86 $268 $465 $1,034
- -------------------------------------------- ------------------ ------------------- ------------------- -------------------
</TABLE>
**********LEFT MARGIN CALLOUTS
o Use this example to compare the costs of investing in other funds. Of
course, your actual costs may be higher or lower.
**********END LEFT MARGIN CALLOUTS
INFORMATION ABOUT THE FUNDS
GOVERNMENT AGENCY MONEY MARKET FUND
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?
The fund is a money market fund that seeks maximum safety and liquidity and
seeks to pay shareholders the highest rate of return consistent with this
objective. In addition, Government Agency Money Market seeks to purchase only
those securities with income that will be exempt from state income tax.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?
The fund buys very short-term U.S. Treasury securities that are guaranteed by
the direct full faith and credit pledge of the U.S. government.
Government Agency Money Market also buys other very short-term securities issued
by the U.S. government, its agencies and instrumentalities. The U.S. government
provides varying levels of financial support to these agencies and
instrumentalities.
The fund may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the fund may purchase securities in advance to generate additional
income.
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUND?
Because very short-term securities are among the safest securities available,
the interest they pay is among the lowest for income-paying securities.
Accordingly, the yield on this fund will likely be lower than funds that invest
in longer-term or lower-quality securities.
SHORT-TERM TREASURY FUND
INTERMEDIATE-TERM TREASURY FUND
LONG-TERM TREASURY FUND
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
These funds seek the highest level of current income exempt from state income
tax while maintaining safety of capital.
HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?
The funds buy U.S. Treasury securities guaranteed by the direct full faith and
credit pledge of the U.S. government.
The funds also may buy securities issued by the U.S. government, its agencies
and instrumentalities. The U.S. government provides varying levels of financial
support to these agencies and instrumentalities. The fund may invest up to 35%
of its total assets in these securities. In addition, the funds can only buy
U.S. government securities with income that is exempt from state income tax.
The fund may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the fund may purchase securities in advance to generate additional
income.
WHAT IS THE DIFFERENCE BETWEEN THE THREE FUNDS?
The funds differ in the maturity of the debt securities they purchase. This
difference is shown on the chart below.
Expected Weighted Average Maturity
Range
- -----------------------------------------------------------------------------
Short-Term Treasury 13 months-3 years
Intermediate-Term Treasury 3-10 years
Long-Term Treasury 20-30 years
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUNDS?
The funds have different weighted average maturities. Because of this, the funds
will respond differently to changes in interest rates. Funds with longer
weighted average maturities are more sensitive to interest rate changes. When
interest rates rise, the values of the funds usually fall, but the values of
funds with longer weighted average maturities generally will fall farther.
The funds' share values will fluctuate. In general, the funds that have higher
potential income have a higher potential loss. If you sell your shares when
their value is less than the price you paid, you will lose money.
Potential Income Potential Loss
- --------------------------------------------------------------------------------
Short-Term Treasury Lower Lower
Intermediate-Term Treasury Moderate Moderate
Long-Term Treasury Higher Higher
INFLATION-ADJUSTED TREASURY FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Inflation-Adjusted Treasury seeks total return consistent with investment in
U.S. Treasury inflation-adjusted securities.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVE?
The fund buys inflation-indexed U.S. Treasury securities guaranteed by the
direct full faith and credit pledge of the U.S. government. These
inflation-indexed securities are designed to protect the future purchasing power
of the money invested in them.
The fund also may buy U.S. Treasury securities that are not inflation-indexed.
The fund may invest up to 35% of its total assets in these securities.
The fund may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the fund may purchase securities in advance to generate additional
income.
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUND?
Inflation-adjusted securities are sold based upon an assumption about real
interest rates. "Real" interest rates are the market rate of interest minus the
anticipated rate of inflation. Changes in real interest rates affect the amount
of income the fund generates. Generally, when real interest rates rise, the
fund's share value will decline. The opposite is true when interest rates
decline. This real interest rate risk is higher for Inflation-Adjusted Treasury
than for funds that do not invest in inflation-indexed securities.
As with all funds, at any given time, the value of your shares of
Inflation-Adjusted Treasury may be worth more or less than the price you paid.
If you sell your shares when the value is less than the price you paid, you will
lose money.
SHORT-TERM GOVERNMENT FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Short-Term Government seeks high current income while maintaining safety of
principal.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVE?
The fund buys short-term securities issued by the U.S. government, its agencies
and instrumentalities, including mortgage-backed securities. The U.S. government
provides varying levels of financial support to these agencies and
instrumentalities. The fund also may buy short-term U.S. Treasury securities
guaranteed by the direct full faith and credit pledge of the U.S. government.
The fund may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the fund may purchase securities in advance to generate additional
income.
The weighted average maturity of the fund is expected to be three years or less.
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUND?
Interest rate changes affect the amount of income the fund generates. Generally,
when interest rates rise, the fund's share value will decline. The opposite is
true when interest rates decline. This interest rate risk is higher for
Short-Term Government than for funds that have shorter weighted average
maturities, such as money market funds.
Short-Term Government invests in mortgage-backed securities. When homeowners
refinance their mortgages to take advantage of declining interest rates, their
existing mortgages are prepaid. The mortgages, which back the securities
purchased by Short-Term Government, may be prepaid in this fashion. Because of
this "prepayment risk," the fund may benefit less from declining interest rates
than other short-term funds.
As with all funds, at any given time the value of your shares of Short-Term
Government may be worth more or less than the price you paid. If you sell your
shares when the value is less than the price you paid, you will lose money.
GNMA FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Short-Term Government seeks high current income while maintaining safety of
principal.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVE?
The fund buys short-term securities issued by the U.S. government, its agencies
and instrumentalities, including mortgage-backed securities. The U.S. government
provides varying levels of financial support to these agencies and
instrumentalities. The fund also may buy short-term U.S. Treasury securities
guaranteed by the direct full faith and credit pledge of the U.S. government.
The fund may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the fund may purchase securities in advance to generate additional
income.
The weighted average maturity of the fund is expected to be three years or less.
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUND?
Interest rate changes affect the amount of income the fund generates. Generally,
when interest rates rise, the fund's share value will decline. The opposite is
true when interest rates decline. This interest rate risk is higher for
Short-Term Government than for funds that have shorter weighted average
maturities, such as money market funds.
Short-Term Government invests in mortgage-backed securities. When homeowners
refinance their mortgages to take advantage of declining interest rates, their
existing mortgages are prepaid. The mortgages, which back the securities
purchased by Short-Term Government, may be prepaid in this fashion. Because of
this "prepayment risk," the fund may benefit less from declining interest rates
than other short-term funds.
As with all funds, at any given time the value of your shares of Short-Term
Government may be worth more or less than the price you paid. If you sell your
shares when the value is less than the price you paid, you will lose money.
BASICS OF FIXED INCOME INVESTING
DEBT SECURITIES
When a fund buys a debt security, which is also called a fixed-income security,
it is essentially lending money to the issuer of the security. Notes, bonds,
commercial paper and Treasury bills are examples of debt securities. After the
issuer first sells the debt security, it may be bought and sold by other
investors. The price of the security may rise or fall based on many factors,
including changes in interest rates, inflation and liquidity.
The fund managers decide which debt securities to buy and sell by
>> determining which securities help a fund meet its maturity requirements
>> identifying securities that satisfy a fund's credit quality requirements
>> evaluating the current economic conditions and assessing the risk of
inflation
>> evaluating special features of the securities that may make them more or
less attractive
WEIGHTED AVERAGE MATURITY
Like most loans, debt securities eventually must be repaid (or refinanced) at
some date. This date is called the maturity date. The number of days left to a
debt security's maturity date is called the remaining maturity. The longer a
debt security's remaining maturity, the more sensitive it is to changes in
interest rates.
Because a bond fund will own many debt securities, the fund managers calculate
the average of the remaining maturities of all of the debt securities the fund
owns to evaluate the interest rate sensitivity of the entire portfolio. This
average is weighted according to the size of the fund's individual holdings and
is called WEIGHTED AVERAGE MATURITY. The following chart shows how a fund
manager would calculate the weighted average maturity for a fund that owned only
two debt securities.
<TABLE>
Amount of Security Owned Percent of Portfolio Remaining Maturity Weighted Maturity
- ---------------------- ------------------------------ ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Debt Security A $100,000 25% 10 years 2.5 years
Debt Security B $300,000 75% 20 years 15.0 years
WEIGHTED AVERAGE MATURITY 17.5 YEARS
</TABLE>
TYPES OF RISK
The basic types of risk that the funds face are described below.
INTEREST RATE RISK
Generally, interest rates and the prices of debt securities move in opposite
directions. So when interest rates fall, the prices of most debt securities
rise; when interest rates rise, prices fall. Because the funds invest primarily
in debt securities, changes in interest rates will affect the funds'
performance.
The degree to which interest rate changes affect the funds' performance varies
and is related to the weighted average maturity of each fund. For example, when
interest rates rise, you can expect the share value of a long-term bond fund to
fall more than that of a short-term bond fund. When rates fall, the opposite is
true.
This sensitivity to interest rate changes is called interest rate risk.
***********LEFT MARGIN CALLOUTS
WEIGHTED AVERAGE MATURITY is a tool that the fund managers use to approximate
the remaining maturity of a fund's investment portfolio.
o The longer a fund's weighted average maturity, the more sensitive it is to
changes in interest rates.
***********END LEFT MARGIN CALLOUTS
When interest rates change, longer maturity bonds experience a greater change in
price. The following table shows the effect of a 1% increase in interest rates
on the price of 7% coupon bonds of differing maturities:
<TABLE>
Remaining Maturity Current Price Price after 1% increase Change in price
- ---------------------- ---------------- -------------------------- -------------------
<S> <C> <C> <C>
1 year $100.00 $99.06 -0.94%
3 years 100.00 97.38 -2.62%
10 years 100.00 93.20 -6.80%
30 years 100.00 88.69 -11.31%
</TABLE>
CREDIT RISK
Credit risk is the risk that an obligation won't be paid and a loss will result.
A high credit rating indicates a high degree of confidence by the rating
organization that the issuer will be able to withstand adverse business,
financial or economic conditions and be able to make interest and principal
payments on time. Generally, a lower credit rating indicates a greater risk of
non-payment. A lower rating also may indicate that the issuer has a more senior
series of debt securities, which means that if the issuer has difficulties
making its payments, the more senior series of debt is first in line for
payment.
It's not as simple as buying the highest-rated debt securities. Higher credit
ratings usually mean lower interest rates, so investors often purchase
securities that aren't the highest rated to increase return. If a fund purchases
lower-rated securities, it assumes additional credit risk.
While U.S. government securities are not rated, they are generally regarded as
having the equivalent of the highest credit quality available. Because the funds
offered by this Prospectus invest in government securities, they are considered
to have very low credit risk.
LIQUIDITY RISK
Debt securities can become difficult to sell for a variety of reasons, such as
lack of an active trading market. When a fund's investments become difficult to
sell, it is said to have a problem with liquidity. The chance that a fund will
have liquidity issues is called liquidity risk.
INFLATION RISK
The safest investments usually have the lowest potential income and performance.
There is a risk, then, that returns from the investment may fail to
significantly outpace inflation. Even if the value of your investment has not
gone down, your money will not be worth as much as if there had been no
inflation. Your after-inflation return may be quite small. This risk is called
inflation risk.
**********LEFT MARGIN CALLOUTS
o Credit quality may be lower when the issuer has
o a high debt level
o a short operating history
o a senior level of debt
o a difficult, competitive environment
o The Statement of Additional Information provides a detailed description of
these securities ratings.
**********END LEFT MARGIN CALLOUTS
A COMPARISON OF BASIC RISK FACTORS
The following chart depicts the basic risks of investing in the funds. It is
designed to help you compare these funds with each other; it shouldn't be used
to compare these funds with other mutual funds.
<TABLE>
Interest Rate Credit Risk Liquidity Risk Inflation Risk
Risk
- ------------------------------------ ------------------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Government Agency Money Market Lowest Low Similar (Very Low) Lowest
Short-Term Treasury Low Very Low Similar (Very Low) Low
Intermediate-Term Treasury Moderate Very Low Similar (Very Low) Moderate
Long-Term Treasury Highest Very Low Similar (Very Low) Highest
Inflation-Adjusted Treasury Low Very Low Similar (Very Low) Low
Short-Term Government Low Low Similar (Very Low) Low
GNMA Fund High Very Low Similar (Very Low) High
</TABLE>
The funds engage in a variety of investment techniques as they pursue their
investment objectives. Each technique has its own characteristics, and may pose
some level of risk to the funds. If you would like to learn more about these
techniques, you should review the Statement of Additional Information before
making an investment.
MANAGEMENT
WHO MANAGES THE FUNDS?
The Board of Trustees, investment advisor and fund management team play key
roles in the management of the funds.
THE BOARD OF TRUSTEES
The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired an investment advisor to do so.
More than half of the trustees are independent of the funds' advisor, that is,
they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958. American Century is
headquartered at 4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provided to the funds during their most recent fiscal year,
the advisor received a unified management fee based on a percentage of the
average net assets of the Advisor Class of shares of each fund. The rate of the
management fee for a fund is determined on a class-by-class basis monthly using
a two-step formula that takes into account the fund's strategy (money market,
bond or equity) and the total amount of mutual fund assets the advisor manages.
The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor paid all
expenses of managing and operating the fund except brokerage expenses, taxes,
interest, fees and expenses of the independent directors (including legal
counsel fees) and extraordinary expenses.
MANAGEMENT FEES PAID BY THE FUNDS TO THE ADVISOR AS A PERCENTAGE OF
AVERAGE NET ASSETS FOR THE MOST RECENT FISCAL YEAR
ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
Government Agency Money Market 0.23%
Short-Term Treasury 0.26%
Intermediate-Term Treasury 0.26%
Long-Term Treasury 0.26%
Inflation-Adjusted Treasury 0.26%
Short-Term Government 0.34%
GNMA Fund 0.34%
THE FUND MANAGEMENT TEAM
The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. Teams meet regularly to review portfolio holdings
and to discuss purchase and sale activity. Team members buy and sell securities
for a fund as they see fit, guided by the fund's investment objective and
strategy.
The portfolio managers who lead each team are identified below:
GOVERNMENT AGENCY MONEY MARKET
DENISE TABACCO
Ms. Tabacco, Portfolio Manager, has been a member of the Government Agency Money
Market team since __________. She joined American Century in 1988, becoming a
member of its portfolio department in 1991. She was promoted to Portfolio
Manager in 1995. She has a bachelor's degree in accounting from San Diego
University and an MBA in finance from Golden Gate University.
GNMA
CASEY C. COLTON
Mr. Colton, Vice President and Senior Portfolio Manager, has been a member of
GNMA Fund team since January 1994. Mr. Colton joined American Century in 1990.
He holds a bachelor's degree in business administration from San Jose State
University and a master's degree from the University of Southern California. He
is a Chartered Financial Analyst and a Certified Public Accountant.
INTERMEDIATE-TERM TREASURY
ROBERT V. GAHAGAN
Mr. Gahagan, Vice President and Portfolio Manager, has been a member of the
Intermediate-Term Treasury team since January 1998. He joined American Century
in 1983. He holds a bachelor's degree in economics and an MBA from the
University of Missouri, Kansas City.
SHORT-TERM TREASURY
SHORT-TERM GOVERNMENT
NEWLIN RANKIN
Mr. Rankin, Senior Portfolio Manager, has been a member of the Short-Term
Treasury team since March 1996 and the Short-Term Government team since January
1995. He joined American Century in 1994. Previously, he was an Assistant Vice
President at Wells Fargo Bank. He holds a bachelor's degree and an MBA from the
University of San Francisco.
LONG-TERM TREASURY
INFLATION-ADJUSTED TREASURY
DAVID W. SCHROEDER
Mr. Schroeder, Vice President and Senior Portfolio Manager, supervises the
American Century Government Income Trust team and has been a member of the
Long-Term Treasury team since September 1992 and the Inflation-Adjusted Treasury
team since its inception on February 10, 1997. He joined American Century in
1990. He holds a bachelor of arts degree from Pomona College.
**********LEFT MARGIN CALLOUTS
o CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests
of fund shareholders come before the interests of the people who manage the
funds. Among other provisions, the Code of Ethics prohibits portfolio
managers and other investment personnel from buying securities in an
initial public offering or from profiting from the purchase and sale of the
same security within 60 calendar days. In addition, the Code of Ethics
requires portfolio managers and other employees with access to information
about the purchase or sale of securities by the funds to obtain approval
before executing permitted personal trades.
**********END LEFT MARGIN CALLOUTS
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Trustees may change any other policies
and investment strategies.
YEAR 2000 ISSUES
Many of the world's computer systems were originally programmed in a way that
prevented them from properly recognizing or processing date-sensitive
information relating to the Year 2000 and beyond. Because this may impact the
computer systems of various American Century-affiliated and external service
providers for the funds, American Century formally initiated a Year 2000
readiness project in July 1997. It involves a team of information technology
professionals assisted by outside consultants and guided by a senior-level
steering committee. The team's goal is to assess the impact of the Year 2000 on
American Century's systems, renovate or replace noncompliant critical systems
and test those systems. In addition, the team has been working to gather
information about the Year 2000 efforts of the funds' other major service
providers.
Although American Century believes its critical systems will function properly
in the Year 2000, this is not guaranteed. If the efforts of American Century or
its external service providers are not successful, the funds' business,
particularly the provision of shareholder services, may be hampered.
In addition, the issuers of securities the funds own could have Year 2000
computer problems. These problems could negatively affect the value of their
securities, which, in turn, could impact the funds' performance. The advisor has
established a process to gather publicly available information about the Year
2000 readiness of these issuers. However, this process may not uncover all
relevant information, and the information gathered may not be complete and
accurate. Moreover, an issuer's Year 2000 readiness is only one of many factors
the fund managers may consider when making investment decisions, and other
factors may receive greater weight.
INVESTING WITH AMERICAN CENTURY
ELIGIBILITY FOR ADVISOR CLASS SHARES
The Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement or savings plans and for persons purchasing shares
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative and distribution services.
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you do business with us through a financial intermediary or a retirement
plan, your ability to purchase, exchange and redeem shares will depend on the
policies of that entity. Some policy differences may include
minimum investment requirements
exchange policies
fund choices
cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the funds' annual reports, semiannual
reports and Statements of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although transactions in fund shares may be made directly with American Century
at no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds has authorized
those intermediaries to accept orders on its behalf up to the time at which the
net asset value is determined. If those orders are transmitted to American
Century and paid for in accordance with the contract, they will be priced at the
net asset value next determined after your request is received in the form
required by the intermediary on a fund's behalf.
ABUSIVE TRADING PRACTICES
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds - up to seven days - or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of cash. If we make payment
in securities, we will value the securities, selected by the fund, in the same
manner as we do in computing the fund's net asset value. We may provide these
securities in lieu of cash without prior notice.
If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.
********LEFT MARGIN CALLOUTS
o FINANCIAL INTERMEDIARIES include banks, broker-dealers, insurance companies
and investment advisors.
**********END LEFT MARGIN CALLOUTS
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE of the funds as of the close of
regular trading on the New York Stock Exchange (usually 4 p.m. Eastern time)
each day the Exchange is open. On days when the Exchange is not open, we do not
calculate the net asset value. The net asset value of a fund share is the
current value of the fund's investments, minus any liabilities, divided by the
number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily available
from an independent pricing service, the advisor may determine their fair value
in accordance with procedures adopted by the fund's Board of Trustees. Trading
of securities in foreign markets may not take place on every day the Exchange is
open. Also, trading in some foreign markets may take place on weekends or
holidays when a fund's net asset value is not calculated. So, the value of a
fund's portfolio may be affected on days when you can't purchase or redeem
shares of the fund.
We will price your purchase, exchange or redemption at the net asset value next
determined after we receive your transaction request in good order.
It is the responsibility of your plan recordkeeper or financial intermediary to
transmit your purchase, exchange and redemption requests to the funds transfer
agent prior to the applicable cut-off time for receiving orders and to make
payment for any purchase transactions in accordance with the funds' procedures
or any contractual arrangements with the funds or the funds' distributor in
order for you to receive that day's price.
DISTRIBUTIONS
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as a
regulated investment company means that the fund will not be subject to state or
federal income tax on amounts distributed. The distributions generally consist
of dividends and interest received, as well as CAPITAL GAINS realized on the
sale of investment securities. Each money market fund declares distributions
from net income daily. These distributions are paid on the last Friday of each
month. Each of the other funds pays distributions from net income monthly. Each
fund (except the money market funds) generally pays distributions of capital
gains, if any, once a year in December. A fund may make more frequent
distributions if necessary to comply with Internal Revenue Code provisions.
You will begin to participate in fund distributions the day after your purchase
is effective. If you redeem shares, you will receive the distribution declared
for the day you redeem. If you redeem all shares, we will include the
distributions on the redeemed with your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
our Investor Services Guide for further information regarding distributions and
your distribution options.
**********LEFT MARGIN CALLOUTS
The NET ASSET VALUE of a fund is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased. Tax becomes due on capital gains once an
asset is sold.
**********END LEFT MARGIN CALLOUTS
TAXES
The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received and capital gains they have generated through their investment
activities. Tax consequences also result from sales of fund shares by investors
after the net asset value has increased or decreased.
TAX-DEFERRED ACCOUNTS
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation, but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through an employer-sponsored
retirement or savings plan, or through an IRA, please consult your plan
administrator, your summary plan description or a professional tax advisor.
TAXABLE ACCOUNTS
If you own fund shares through a taxable account, distributions by the fund and
sales by you of fund shares may cause you to be taxed.
TAXABILITY OF DISTRIBUTIONS
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short-term or long-term and are taxed
as follows:
<TABLE>
Type of distribution Tax rate for 15% bracket Tax rate for 28% bracket or above
- --------------------------- ----------------------------- -----------------------------------------
<S> <C> <C>
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
</TABLE>
The tax status of any distribution of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund or whether you reinvest your distributions in
additional shares or take them as income. American Century will detail the tax
status of fund distributions for each calendar year in an annual tax mailing
(Form 1099) from the fund.
Distributions may also be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.
TAXES ON TRANSACTIONS
Your redemptions -- including exchanges to other American Century funds -- are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares held for 12 months or less. Long-term
capital gains are gains on fund shares held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that any loss realized upon
the sale or redemption of shares held for six months or less will be treated as
a long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to such shares. If a loss is realized on the redemption
of fund shares, the reinvestment in additional fund shares within 30 days before
or after the redemption may be subject to the wash sale rules of the Internal
Revenue Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes. If you have not certified to us that your social
security number or tax identification number is correct and that you are not
subject to 31% withholding, we are required to withhold and remit to the IRS 31%
of dividends, capital gains distributions and redemptions.
**********LEFT MARGIN CALLOUTS
o BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution
is sometimes known as buying a dividend. In taxable accounts, you must pay
income taxes on the distribution whether you reinvest the distribution or
take it in cash. In addition, you will have to pay taxes on the
distribution whether the value of your investment decreased, increased or
remained the same after you bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up
taxable gains throughout the period covered by a distribution, as
securities are sold at a profit. We distribute those gains to you, after
subtracting any losses, even if you did not own the shares when the gains
occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
**********END LEFT MARGIN CALLOUTS
MULTIPLE CLASS INFORMATION
American Century offers two classes of the fund: Investor Class and Advisor
Class. The shares offered by this Prospectus are Advisor Class shares and are
offered primarily to institutional investors through institutional distribution
channels, such as employer-sponsored retirement plans, or through banks,
broker-dealers and insurance companies.
American Century offers another class of shares that has no up-front or deferred
charges, commissions or 12b-1 fees. The other class has different fees, expenses
and/or minimum investment requirements than the Investor Class. The difference
in the fee structures between the classes is the result of their separate
arrangements for shareholder and distribution services and not the result of any
difference in amounts charged by the advisor for core investment advisory
services. Accordingly, the core investment advisory expenses do not vary by
class. Different fees and expenses will affect performance. For additional
information concerning the other classes of shares not offered by this
Prospectus, call us at 1-800-345-2021 for Investor Class shares. You also can
contact a sales representative or financial intermediary who offers that class
of shares.
Except as described below, all classes of shares of the fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; and (d) each class
may have different exchange privileges.
SERVICE AND DISTRIBUTION FEES
Investment Company Act Rule 12b-1 permits mutual funds that adopt a written plan
to pay out of fund assets certain expenses associated with the distribution of
their shares. The funds' Advisor Class shares have a 12b-1 Plan. Under the Plan,
the fund pays an annual fee of 0.50% of fund assets, half for certain
shareholder and administrative services and half for distribution services. The
advisor, as paying agent for the funds, pays all or a portion of such fees to
the banks, broker-dealers and insurance companies that make such shares
available. Because these fees are paid out of the fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. For additional
information about the Plan and its terms, see "Multiple Class Structure - Master
Distribution and Shareholder Services Plan" in the Statement of Additional
Information.
Financial Highlights
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The tables on the next few pages itemize what contributed to the changes in
share price during the period. They also show the changes in share price for
this period in comparison to changes over the last five fiscal years (or less,
if the share class is not five years old).
On a per-share basis, each table includes:
o share price at the beginning of the period
o investment income and capital gains or losses
o distributions of income and capital gains paid to shareholders
o share price at the end of the period
Each table also includes some key statistics for the period:
o Total Return--the overall percentage of return of the fund, assuming the
reinvestment of all distributions
o Expense Ratio--operating expenses as a percentage of average net assets
o Net Income Ratio--net investment income as a percentage of average net
assets
o Portfolio Turnover--the percentage of the fund's buying and selling
activity
The Financial Highlights for the fiscal years ended March 31, 1998 and 1999 have
been audited by PricewaterhouseCoopers, LLP, independent accountants. Their
report is included in the funds' annual reports, which are incorporated by
reference into the Statement of Additional Information, and are available upon
request. Prior years' information was audited by other independent auditors,
whose report also is incorporated by reference into the Statement of Additional
Information.
FINANCIAL HIGHLIGHTS
SHORT-TERM TREASURY
ADVISOR CLASS
For a Share Outstanding Throughout the Years Ended March 31
(except as noted)
1999 1998(1)
---------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $9.80
Period numbers not
available
---------------------------
Income From
Investment Operations
Net Investment
Income 0.25
Net Realized and
Unrealized Gain
on Investment Transactions -
---------------------------
Total From
Investment Operations 0.25
---------------------------
Distributions
From Net
Investment (0.25)
Income
---------------------------
Net Asset Value,
End of $9.80
Period
===========================
TOTAL 2.51%
RETURN(2)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.78%(3)
Ratio of Net Investment
Income to Average
Net 5.20%(3)
Assets
Portfolio
Turnover Rate 140%
Net Assets, End
of Period (in $1,460
thousands)
(1) October 6, 1997 (commencement of sale) through March 31, 1998.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
FINANCIAL HIGHLIGHTS
INTERMEDIATE-TERM TREASURY
ADVISOR CLASS
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
1999 1998(1)
-----------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $10.42
Period numbers
not
available
-----------------------
Income From
Investment Operations
Net Investment
Income 0.26
Net Realized and Unrealized
Gain on Investment
Transactions 0.14
-----------------------
Total From
Investment Operations 0.40
-----------------------
Distributions
From Net
Investment (0.26)
Income
From Net Realized
Gains on Investment -
Transactions
-----------------------
Total (0.26)
Distributions
-----------------------
Net Asset Value,
End of $10.56
Period
=======================
TOTAL 3.90%
RETURN(2)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets Audited 0.77%(3)
numbers
not
available
Ratio of Net Investment
Income to Average
Net 5.28%(3)
Assets
Portfolio
Turnover 194%(4)
Rate
Net Assets, End
of Period (in $128
thousands)
(1) October 9, 1997 (commencement of sale) through March 31, 1998.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
(4) Purchases, sales and market value amounts for Benham Intermediate-Term
Government prior to the merger were excluded from the portfolio turnover
calculation. See Note 5 in notes to financial statements.
GNMA
FINANCIAL HIGHLIGHTS
ADVISOR CLASS
For a Share Outstanding Throughout the Years Ended March 31 (except
as noted)
1999 1998(1)
-------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited numbers $10.63
Period not available
-------------------------------
Income From
Investment Operations
Net Investment
Income 0.31
Net Realized and Unrealized
Gain on Investment
Transactions 0.04
-------------------------------
Total From
Investment Operations 0.35
-------------------------------
Distributions
From Net
Investment (0.31)
Income
-------------------------------
Net Asset Value,
End of $10.67
Period
===============================
TOTAL 3.30%
Return(2)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.84%(3)
Ratio of Net Investment
Income to Average
Net 5.92%(3)
Assets
Portfolio
Turnover Rate 133%
Net Assets, End
of Period (in $460
thousands)
(1) October 9, 1997 (commencement of sale) through March 31, 1998.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
FINANCIAL HIGHLIGHTS
LONG-TERM TREASURY
ADVISOR CLASS
For a Share Outstanding Throughout the Years Ended March 31 (except
as noted)
1999 1998(1)
-----------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $10.85
Period numbers
not
available
-----------------------
Income From
Investment Operations
Net Investment
Income 0.12
Net Realized and Unrealized Gain
(Loss) on Investment
Transactions (0.27)
-----------------------
Total From
Investment Operations (0.15)
-----------------------
Distributions
From Net
Investment (0.12)
Income
From Net Realized
Gains on Investment -
Transactions
In Excess of Net Realized
Gains -
-----------------------
Total (0.12)
Distributions
-----------------------
Net Asset Value,
End of $10.58
Period
=======================
TOTAL (1.34)%
RETURN(2)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets Audited 0.77%(3)
numbers
not
available
Ratio of Net Investment
Income to Average
Net 5.42%(3)
Assets
Portfolio
Turnover Rate 57%
Net Assets, End
of Period (in $218
thousands)
(1) January 12, 1998 (commencement of sale) through March 31, 1998.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
INFLATION-ADJUSTED TREASURY
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Period Indicated
ADVISOR CLASS
1999(1)
-------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited numbers
Period not available
-------------------
Income From
Investment Operations
Net Investment Income
Net Realized and Unrealized Gain
on Investment
Transactions
-------------------
Total From Investment
Operations
-------------------
Distributions
From Net
Investment
Income
-------------------
Net Asset Value,
End of Period
===================
TOTAL
RETURN(2)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets
Ratio of Net Investment
Income to Average
Net
Assets
Portfolio Turnover Rate
Net Assets, End
of Period (in thousands)
(1) June 15, 1998 (commencement of sale) through March 31, 1999.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
FINANCIAL HIGHLIGHTS
SHORT-TERM GOVERNMENT
For a Share Outstanding Throughout the Period Indicated
ADVISOR CLASS
1999(1)
-------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited
Period numbers not
available
-------------
Income From
Investment Operations
Net Investment
Income
Net Realized and Unrealized
Gain on Investment
Transactions
-------------
Total From
Investment Operations
-------------
Distributions
From Net
Investment
Income
-------------
Net Asset Value,
End of
Period
-------------
TOTAL
RETURN(2)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets
Ratio of Net Investment Income
to Average Net Assets
Portfolio
Turnover Rate
Net Assets, End
of Period (in
thousands)
(1) July 8, 1998 (commencement of sale) through March 31, 1999.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
PERFORMANCE INFORMATION OF THE OTHER CLASS
The following financial information is provided to show the performance of the
funds' original class of shares. This class, the Investor Class, has a total
expense ratio that is 0.25% lower than the Advisor Class. If the Advisor Class
existed during the periods presented, its performance would have been lower
because of the additional expense.
The tables itemize what contributed to the changes in share price during the
period. They also show the changes in share price for this period in comparison
to changes over the last five fiscal years (or less, if the share class is not
five years old).
On a per-share basis, each table includes:
o share price at the beginning of the period
o investment income and capital gains or losses
o distributions of income and capital gains paid to shareholders
o share price at the end of the period
Each table also includes some key statistics for the period:
o total return--the overall percentage of return of the fund, assuming the
reinvestment of all distributions
o expense ratio--operating expenses as a percentage of average net assets
o net income ratio--net investment income as a percentage of average net
assets
o portfolio turnover--the percentage of the fund's buying and selling
activity
The Financial Highlights for the fiscal years ended March 31, 1998 and 1999 have
been audited by PricewaterhouseCoopers LLP, independent accountants. Their
report is included in the funds' annual reports, which are incorporated by
reference into the Statement of Additional Information, and are available upon
request. Prior years' information was audited by other independent auditors,
whose report also is incorporated by reference into the Statement of Additional
Information.
<TABLE>
Government Agency
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
--------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $1.00 $1.00 $1.00 $1.00
Year numbers not
available
--------------------------------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.05 0.05 0.05 0.04
--------------------------------------------------------------------------
Distributions
From Net
Investment Income (0.05) (0.05) (0.05) (0.04)
--------------------------------------------------------------------------
Net Asset Value,
End of Year $1.00 $1.00 $1.00 $1.00
==========================================================================
TOTAL 5.14% 4.89% 5.35% 4.47%
Return(1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(2) 0.51% 0.57% 0.51% 0.50%
Ratio of Net Investment
Income to Average
Net Assets 5.02% 4.76% 5.20% 4.35%
Net Assets, End
of Year (in thousands) $487,791 $470,759 $503,328 $461,803
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(2) The ratios for years ended March 31, 1997 and March 31, 1996 include
expenses paid through expense offset arrangements.
Investor Class
Short-Term Treasury
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31
1999 1998 1997 1996 1995
---------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $9.68 $9.84 $9.73 $9.86
Year numbers not
available
---------------------------------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.53 0.52 0.53 0.50
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions 0.12 (0.07) 0.11 (0.13)
---------------------------------------------------------------------------
Total From
Investment Operations 0.65 0.45 0.64 0.37
---------------------------------------------------------------------------
Distributions
From Net
Investment (0.53) (0.52) (0.53) (0.50)
Income
From Net Realized
Gains on Investment Transactions - - (0.09) - -
---------------------------------------------------------------------------
Total Distributions (0.53) (0.61) (0.53) (0.50)
---------------------------------------------------------------------------
Net Asset Value,
End of Year $9.80 $9.68 $9.84 $9.73
===========================================================================
TOTAL 6.89% 4.62% 6.71% 3.85%
RETURN(1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.55% 0.61% 0.67% 0.67%
Ratio of Net Investment Income
to Average Net Assets 5.45% 5.26% 5.39% 5.22%
Portfolio Turnover Rate 140% 234% 224% 141%
Net Assets, End
of Year (in thousands) $40,874 $35,854 $35,648 $56,090
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
Investor Class
Intermediate-Term Treasury
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31
1999 1998 1997 1996 1995
----------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $10.06 $10.24 $9.99 $10.18
Year numbers not
available
----------------------------------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.59 0.58 0.58 0.53
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions 0.50 (0.18) 0.25 (0.19)
----------------------------------------------------------------------------
Total From
Investment Operations 1.09 0.40 0.83 0.34
----------------------------------------------------------------------------
Distributions
From Net
Investment (0.59) (0.58) (0.58) (0.53)
Income
From Net Realized
Gains on Investment Transactions - - - -
----------------------------------------------------------------------------
Total Distributions (0.59) (0.58) (0.58) (0.53)
----------------------------------------------------------------------------
Net Asset Value,
End of $10.56 $10.06 $10.24 $9.99
Year
============================================================================
TOTAL 11.04% 4.05% 8.42% 3.54%
RETURN(1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.51% 0.51% 0.53% 0.53%
Ratio of Net Investment Income
to Average Net Assets 5.63% 5.72% 5.65% 5.35%
Portfolio Turnover Rate 194%(2) 110% 168% 92%
Net Assets, End
of Year (in $374,861 $328,784 $311,020 $305,353
thousands)
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(2) Purchases, sales and market value amounts for Benham Intermediate-Term
Government prior to the merger were excluded from the portfolio turnover
calculation. See Note 5 in notes to financial statements.
Investor Class
Long-Term Treasury
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31
1999 1998 1997 1996 1995
----------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $9.32 $9.67 $9.05 $9.38
Year numbers not
available
----------------------------------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.61 0.60 0.60 0.60
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions 1.26 (0.35) 0.62 (0.33)
----------------------------------------------------------------------------
Total From
Investment Operations 1.87 0.25 1.22 0.27
----------------------------------------------------------------------------
Distributions
From Net
Investment (0.61) (0.60) (0.60) (0.60)
Income
From Net Realized
Gains on Investment Transactions - - - -
In Excess of Net Realized
Gains - - - -
----------------------------------------------------------------------------
Total Distributions (0.61) (0.60) (0.60) (0.60)
----------------------------------------------------------------------------
Net Asset Value,
End of Year $10.58 $9.32 $9.67 $9.05
============================================================================
TOTAL 20.48% 2.65% 13.46% 3.25%
RETURN(1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.54% 0.60% 0.67% 0.67%
Ratio of Net Investment Income
to Average Net Assets 6.00% 6.28% 5.93% 6.84%
Portfolio Turnover Rate 57% 40% 112% 147%
Net Assets, End
of Year (in $103,381 $126,570 $110,741 $34,906
thousands)
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
FINANCIAL HIGHLIGHTS
SHORT-TERM GOVERNMENT
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
INVESTOR CLASS
1999 1998(1) 1997 1996 1995
-----------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $9.49 $9.47 $9.51 $9.27
Period numbers
not
available
-----------------------------------------------------------------
Income From
Investment Operations
Net Investment
Income 0.21 0.52 0.51 0.52
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions (0.03) 0.02 (0.04) 0.24
-----------------------------------------------------------------
Total From
Investment Operations 0.18 0.54 0.47 0.76
-----------------------------------------------------------------
Distributions
From Net
Investment (0.21) (0.52) (0.51) (0.52)
Income
-----------------------------------------------------------------
Net Asset Value,
End of $9.46 $9.49 $9.47 $9.51
Period
=================================================================
TOTAL 1.95% 5.86% 5.09% 8.42%
RETURN(2)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.59%(3) 0.68% 0.70% 0.70%
Ratio of Net Investment
Income to Average
Net 5.43%(3) 5.53% 5.39% 5.53%
Assets
Portfolio
Turnover Rate 54% 293%(4) 246% 128%
Net Assets, End
of Period (in $808,464 $519,332 $349,772 $391,331
thousands)
(1) The fund's fiscal year end was changed from October 31 to March 31
resulting in a five month reporting period. For years ended prior to 1998,
the fund's fiscal year end was October 31.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
(4) Purchases, sales, and the market value of securities for Benham Adjustable
Rate Government Securities Fund prior to the merger were excluded from the
portfolio turnover calculation. See Note 5 in the Notes to Financial
Statements.
GNMA Fund
Investor Class
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited $10.33 $10.45 $10.18 $10.35
Year numbers not
available
-------------------------------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.69 0.71 0.74 0.72
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions 0.34 (0.12) 0.27 (0.18)
-------------------------------------------------------------------------
Total From
Investment Operations 1.03 0.59 1.01 0.54
-------------------------------------------------------------------------
Distributions
From Net
Investment (0.69) (0.71) (0.74) (0.71)
Income
-------------------------------------------------------------------------
Net Asset Value,
End of Year $10.67 $10.33 $10.45 $10.18
=========================================================================
TOTAL 10.21% 5.84% 10.08% 5.53%
Return(1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(2) 0.58% 0.55% 0.58% 0.58%
Ratio of Net Investment
Income to Average
Net 6.49% 6.84% 6.98% 7.08%
Assets
Portfolio Turnover Rate 133% 105% 64% 120%
Net Assets, End
of Year (in thousands) $1,285,641 $1,119,165 $1,120,019 $979,670
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(2) The ratios for years ended March 31, 1997 and March 31, 1996, include
expenses paid through expense offset arrangements.
INFLATION-ADJUSTED TREASURY
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
INVESTOR CLASS
1999 1998 1997(1)
---------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Audited numbers $9.74 $10.00
Period not available
---------------------------------------------------
Income From
Investment Operations
Net Investment Income 0.44 0.06
Net Realized and Unrealized Gain (Loss)
on Investment (0.11) (0.26)
Transactions
---------------------------------------------------
Total From Investment 0.33 (0.20)
Operations
---------------------------------------------------
Distributions
From Net
Investment (0.44) (0.06)
Income
---------------------------------------------------
Net Asset Value,
End of $9.63 $9.74
Period
===================================================
TOTAL 3.45% (1.98)%
RETURN(2)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.50% 0.50%(3)
Ratio of Net Investment
Income to Average
Net 4.45% 5.03%(3)
Assets
Portfolio Turnover Rate 69% -
Net Assets, End
of Period (in $5,279 $2,277
thousands)
(1) February 10, 1997 (inception) through March 31, 1997.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
</TABLE>
More information about the funds is contained in these documents
Annual and Semiannual Reports. These reports contain more information about the
funds' investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.
Statement of Additional Information. The SAI contains a more detailed, legal
description of the funds' operations, investment restrictions, policies and
practices. The SAI is incorporated by reference into this Prospectus. This means
that it is legally part of this Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
any questions about the funds or your accounts, by contacting American Century
at the address or telephone numbers listed below.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC).
o In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location and hours.
o On the internet www.sec.gov.
o By mail SEC Public Reference Section
Washington, D.C. 20549-6009
(The SEC will charge a fee for copying the documents
you request.)
American Century Investments
P.O. Box 419200
Kansas City, Missouri 64141-6200
Investment Company Act File No. 811-4363
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------
JULY 6, 1999
AMERICAN CENTURY
GOVERNMENT INCOME TRUST
CAPITAL PRESERVATION
GOVERNMENT AGENCY MONEY MARKET
SHORT-TERM TREASURY
INTERMEDIATE-TERM TREASURY
LONG-TERM TREASURY
INFLATION-ADJUSTED TREASURY
SHORT-TERM GOVERNMENT
GNMA FUND
This Statement of Additional Information adds to the discussion in the funds'
Prospectus, dated July 6, 1999, but is not a prospectus. The Statement of
Additional Information should be read in conjunction with the fund's current
prospectus. If you would like a copy of the Prospectus, please contact us at the
address or telephone numbers listed on the back cover or visit American
Century's Web site at www.americancentury.com.
This Statement of Additional Information incorporates by reference certain
information that appears in the funds' annual and semiannual reports, which are
delivered to all shareholders. You may obtain a free copy of the funds' annual
or semiannual report by calling 1-800-345-2021.
[american century logo (reg.sm)]
American
Century
TABLE OF CONTENTS
================================================================================
THE FUNDS'HISTORY............................................................1
FUND INVESTMENT OUTLINES.....................................................1
The Money Market Funds....................................................1
The U.S. Treasury Funds...................................................2
The Government Agency Funds...............................................3
DETAILED INFORMATION ABOUT THE FUNDS.........................................4
Investment Strategies and Risks...........................................4
Investment Policies......................................................12
Temporary Defensive Measures.............................................13
Portfolio Turnover.......................................................13
MANAGEMENT..................................................................13
The Board of Trustees....................................................13
Officers.................................................................16
THE FUNDS'BIGGEST SHAREHOLDERS..............................................17
SERVICE PROVIDERS...........................................................17
Investment Advisor.......................................................17
Distributor..............................................................19
Transfer Agent and Administrator.........................................20
Other Service Providers..................................................20
BROKERAGE ALLOCATION........................................................21
INFORMATION ABOUT FUND SHARES...............................................21
BUYING AND SELLING FUND SHARES..............................................22
VALUATION OF PORTFOLIO SECURITIES...........................................23
Money Market Funds.......................................................24
Non-Money Market Funds...................................................24
TAXES.......................................................................25
HOW FUND PERFORMANCE INFORMATION IS CALCULATED..............................26
FINANCIAL STATEMENTS........................................................28
THE FUNDS' HISTORY
American Century Government Income Trust is a registered open-end management
investment company that was organized as a Massachusetts business trust from
then until January 1997, it was known as Benham Government Income trust.
Throughout this Statement of Additional Information we refer to American Century
Government Income Trust as the Trust.
Each fund described in this Statement of Additional Information is a separate
series of the Trust and operates for many purposes as if it were an independent
company. Each fund has its own investment objective, strategy, management team,
assets, tax identification and stock registration number. The funds may have
different inception dates.
<TABLE>
INVESTOR CLASS ADVISOR CLASS
- ----------------------------------- ------------------------------ -----------------------------
Ticker Symbol Inception Ticker Symbol Inception
Fund Date Date
- ----------------------------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Capital Preservation CPFXX 10/13/1972 N/A N/A
Government Agency Money Market BGAXX 12/05/1989 N/A 04/12/1999
Short-Term Treasury BSTAX 09/08/1992 BSTTX 10/6/1997
Intermediate-Term Treasury CPTNX 05/16/1980 ABTAX 10/9/1997
Long-Term Treasury BLAGX 09/08/1992 AMLAX 01/12/1998
Inflation-Adjusted Treasury N/A 02/10/1997 N/A 06/15/1998
Short-Term Government TWUSX 12/15/1982 N/A 07/08/1998
GNMA Fund BGNMX 9/23/1985 BGNAX 10/09/1997
- ----------------------------------- --------------- -------------- -------------- --------------
</TABLE>
FUND INVESTMENT OUTLINES
This section explains the extent to which the funds' advisor, American Century
Investment Management, Inc. can use various investment vehicles and strategies
in managing a fund's assets. Descriptions of the investment techniques and risks
associated with each appear in the section, "Investment Strategies and Risks,"
which begins on page 4. In the case of the funds' principal investment
strategies, these descriptions elaborate upon discussion contained in the
Prospectus.
Each fund is a diversified open-end investment company as defined in the
Investment Company Act of 1940 (the Investment Company Act). Diversified means
that, with respect to 75% of its total assets, each fund will not invest more
than 5% of its total assets in the securities of a single issuer.
The fund operates pursuant to Rule 2a-7 under the Investment Company Act. That
rule permits the valuation of portfolio securities on the basis of amortized
cost. To rely on the rule, each fund must be diversified with regard to 100% of
its assets other than U.S. government securities. This operating policy is more
restrictive than the Investment Company Act, which requires a diversified
investment company to be diversified with regard to only 75% of its assets.
To meet federal tax requirements for qualification as a regulated investment
company, each fund must limit its investments so that at the close of each
quarter of its taxable year (1) no more than 25% of its total assets are
invested in the securities of a single issuer (other than the U.S government or
a regulated investment company), and (2) with respect to at least 50% of its
total assets, no more than 5% of its total assets are invested in the securities
of a single issuer.
Each fund (except Short-Term Government and the GNMA Fund) seeks income exempt
from state taxes by investing in U.S. government securities whose interest
payments are state tax-exempt. As a result, these funds' dividend distributions
are expected to be exempt from state income tax. See page 29 for more
information on tax treatment of the funds' distributions.
THE MONEY MARKET FUNDS
Each of the money market funds seeks to maintain a $1.00 share price, although
there is no guarantee they will be able to do so. Shares of the money market
funds are neither insured nor guaranteed by the U.S. government.
Capital Preservation
Capital Preservation seeks maximum safety and liquidity. Its secondary objective
is to seek to pay its shareholders the highest rate of return on their
investment in Capital Preservation consistent with safety and liquidity. Capital
Preservation pursues its investment objectives by investing exclusively in
short-term U.S. Treasury securities guaranteed by the direct full faith and
credit pledge of the U.S. government. Capital Preservation's dollar-weighted
average portfolio maturity will not exceed 90 days.
While the risks associated with investing in short-term U.S. Treasury securities
are very low, an investment in Capital Preservation is not risk-free.
Government Agency
Government Agency seeks to provide the highest rate of current return on its
investments, consistent with safety of principal and maintenance of liquidity,
by investing exclusively in short-term obligations of the U.S. government and
its agencies and instrumentalities, the income from which is exempt from state
taxes. Under normal conditions, at least 65% of the fund's total assets are
invested in securities issued by agencies and instrumentalities of the U.S.
government. Assets not invested in these securities are invested in U.S.
Treasury securities. For temporary defensive purposes, the fund may invest up to
100% of its assets in U.S. Treasury securities. The fund's weighted average
portfolio maturity will not exceed 90 days.
The U.S. government provides varying levels of financial support to its agencies
and instrumentalities.
THE U.S. TREASURY FUNDS
Short-Term Treasury, Intermediate-Term Treasury, Long-Term Treasury
Short-Term Treasury, Intermediate-Term Treasury and Long-Term Treasury are quite
similar to one another but can be differentiated by their dollar-weighted
average maturities. Among these funds, the longer its dollar-weighted average
maturity, the more its share price will fluctuate when interest rates change.
This pattern is due, in part, to the time value of money. A bond's worth is
determined in part by the present value of its future cash flows. Consequently,
changing interest rates have a greater effect on the present value of a
long-term bond than a short-term bond. Because of this interplay between market
interest rates and share price, investors are encouraged to evaluate fund
performance on the basis of total return.
The investment objectives of the funds are as follows: Short-Term Treasury seeks
to earn and distribute the highest level of current income exempt from state
income taxes as is consistent with preservation of capital. Intermediate-Term
Treasury seeks to earn and distribute the highest level of current income
consistent with the conservation of assets and the safety provided by U.S.
Treasury bills, notes and bonds. Long-Term Treasury seeks to provide a
consistent and high level of current income exempt from state taxes.
Short-Term, Intermediate-Term and Long-Term Treasury pursue their investment
objectives by investing primarily in securities issued or guaranteed by the U.S.
Treasury. As a result, each fund may invest in U.S. Treasury bills, bonds, notes
and zero-coupon securities, all of which are also backed by the direct full
faith and credit pledge of the U.S. government. In addition, the funds may
invest up to 35% of their total assets in securities issued by agencies and
instrumentalities of the U.S. government.
Within this framework, the funds differ in the remaining maturities of their
portfolio securities and the dollar-weighted average maturities of their overall
portfolio. Under normal conditions, the funds' maturity characteristics are as
follows: Short-Term Treasury invests primarily in securities with remaining
maturities of 3 years or less, and maintains a weighted average portfolio
maturity ranging from 13 months to three years. Intermediate-Term Treasury's
weighted average portfolio maturity ranges from three to 10 years. Long-Term
Treasury invests primarily in securities with maturities of 10 or more years and
maintains a weighted average portfolio maturity ranging from 20 to 30 years.
Each of the funds is designed to allow investors to seek competitive yields
within their tolerance for share price fluctuations. Thus, Short-Term Treasury
may be appropriate for investors who are seeking higher current yields than
those available from money market funds and who can tolerate some share price
volatility. Similarly, the current yield for Intermediate-Term Treasury will
likely be higher than that of Short-Term Treasury, but the share price
volatility will be greater. By maintaining an average portfolio maturity of 20
to 30 years, Long-Term Treasury offers investors the potential to earn higher
current yields than those typically available from Short-Term Treasury and
Intermediate-Term Treasury. Long-Term Treasury may also offer greater potential
for capital appreciation. However, maintaining a relatively long average
maturity also means that the Long-Term Treasury's share price generally will be
the most volatile of the three funds.
Inflation-Adjusted Treasury
Inflation-Adjusted Treasury pursues its investment objective by investing, under
normal market conditions, at least 65% of its total assets in inflation-indexed
Treasury securities that are backed by the full faith and credit of the U.S.
government and indexed or otherwise structured by the U.S. Treasury to provide
protection against inflation. Inflation-indexed Treasury securities may be
issued by the U.S. Treasury in the form of notes or bonds. Up to 35% of the
fund's total assets may be invested in inflation-indexed securities issued by
U.S. government agencies and government-sponsored organizations.
Inflation-Adjusted Treasury also may invest in U.S. Treasury securities that are
not indexed to inflation for liquidity and total return, or if at any time the
fund managers believe there is an inadequate supply of appropriate
inflation-indexed securities in which to invest or when such investments are
required as a temporary defensive measure. Inflation-Adjusted Treasury's
portfolio may consist of any combination of these securities consistent with
investment strategies employed by the manager. While Inflation-Adjusted Treasury
seeks to provide a measure of inflation protection to its investors, there is no
assurance that the fund will provide less risk than a fund investing in
conventional fixed-principal securities.
There are no maturity or duration restrictions for the securities in which
Inflation-Adjusted Treasury may invest. The U.S. Treasury has issued
inflation-indexed Treasury securities with five-year and 10-year terms to
maturity. It has announced its intention (although there is no guarantee it will
do so) to issue additional securities with a term to maturity as long as 30
years. The managers will buy from among the available issues those securities
that will provide the maximum relative value to the fund.
Inflation-Adjusted Treasury may be appropriate for investors who are seeking to
protect all or a part of their investment portfolio from the effects of
inflation.
Traditional U.S. Treasury fixed-principal notes and bonds pay a stated return or
rate of interest in dollars and are redeemed at their par amount. Inflation
during the period that the securities are outstanding will diminish the future
purchasing power of these dollars. Inflation-Adjusted Treasury is designed to
serve as a vehicle to protect against this diminishing effect.
Inflation-Adjusted Treasury is designed to provide total return consistent with
an investment in inflation-indexed Treasury securities. Inflation-Adjusted
Treasury's yield will reflect both the inflation-adjusted interest income and
the inflation adjustment to principal which are features of inflation-indexed
Treasury securities. The current income generated by Inflation-Adjusted Treasury
will vary with month to month changes in the CPI index and may be substantially
more or substantially less than traditional fixed-principal securities.
Inflation-indexed securities in which the fund may invest are relatively new
securities. There are special investment risks, particularly share price
volatility and potential adverse tax consequences, associated with investment in
inflation-indexed securities. These risks are described in the section titled
"Risk Factors and Investment Techniques". You should read that section carefully
to make sure you understand the nature of Inflation-Adjusted Treasury before you
invest in it.
THE GOVERNMENT AGENCY FUNDS
Short-Term Government
Short-Term Government seeks to provide investors with a high level of current
income, consistent with stability of principal. Short-Term Government pursues
this objective by investing primarily in securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities. Under normal conditions,
the fund managers invest at least 65% of Short-Term Government's total assets in
securities of the U.S. government and its agencies and maintaining a weighted
average duration of three years or less.
GNMA Fund
The GNMA Fund seeks to provide a high level of current income consistent with
safety of principal and maintenance of liquidity by investing primarily in
mortgage-backed Ginnie Mae certificates.
Ginnie Mae certificates represent interests in pools of mortgage loans and in
the cash flows from those loans. These certificates are guaranteed by GNMA and
backed by the full faith and credit of the U.S. government as to the timely
payment of interest and repayment of principal, which means that the GNMA Fund
receives its share of interest and principal payments owed on the underlying
pool of mortgage loans, regardless of whether borrowers make their scheduled
mortgage payments.
Assets not invested in Ginnie Mae certificates, directly or indirectly, are
invested in other U.S. government securities or repurchase agreements
collateralized by U.S. government securities. For temporary defensive purposes,
the GNMA Fund may invest 100% of its assets in these securities.
A unique feature of mortgage-backed securities, such as Ginnie Mae certificates,
is that their principal is scheduled to be paid back gradually for the duration
of the loan rather than in one lump sum at maturity. Investors (such as the GNMA
Fund) receive scheduled monthly payments of principal and interest, but they may
also receive unscheduled prepayments of principal on the underlying mortgages.
See "Mortgage-Backed Securities" on page 16 for a discussion of prepayment risk.
DETAILED INFORMATION ABOUT THE FUNDS
INVESTMENT STRATEGIES AND RISKS
This section describes each of the investment vehicles and strategies that the
fund managers can use in managing a fund's assets. It also details the risks
associated with each, because each technique contributes to a fund's overall
risk profile.
U.S. Government Securities
U.S. Treasury bills, notes, zero-coupon bonds and other bonds are direct
obligations of the U.S. Treasury, which has never failed to pay interest and
repay principal when due. Treasury bills have initial maturities of one year or
less, Treasury notes from two to 10 years, and Treasury bonds more than 10
years. Although U.S. Treasury securities carry little principal risk if held to
maturity, the prices of these securities (like all debt securities) change
between issuance and maturity in response to fluctuating market interest rates.
A number of U.S. government agencies and government-sponsored organizations
issue debt securities. These agencies generally are created by Congress to
fulfill a specific need, such as providing credit to home buyers or farmers.
Among these agencies are the Federal Home Loan Banks, the Federal Farm Credit
Banks, the Student Loan Marketing Association and the Resolution Funding
Corporation.
Some agency securities are backed by the full faith and credit of the U.S.
government, and some are guaranteed only by the issuing agency. Agency
securities typically offer somewhat higher yields than U.S. Treasury securities
with similar maturities. However, these securities may involve greater risk of
default than securities backed by the U.S. Treasury.
Interest rates on agency securities may be fixed for the term of the investment
(fixed-rate agency securities) or tied to prevailing interest rates
(floating-rate agency securities). Interest rate resets on floating-rate agency
securities generally occur at intervals of one year or less, based on changes in
a predetermined interest rate index.
Floating-rate agency securities frequently have caps limiting the extent to
which coupon rates can be raised. The price of a floating-rate agency security
may decline if its capped coupon rate is lower than prevailing market interest
rates. Fixed- and floating-rate agency securities may be issued with a call date
(which permits redemption before the maturity date). The exercise of a call may
reduce an obligation's yield to maturity. Capital Preservation may not invest in
floating-rate agency securities.
o Interest Rate Resets on Floating-Rate U.S. Government Agency Securities
(All Funds Except Capital Preservation)
Interest rate resets on floating-rate U.S. government agency securities
generally occur at intervals of one year or less in response to changes in a
predetermined interest rate index. There are two main categories of indices,
those based on U.S. Treasury securities and those derived from a calculated
measure, such as a cost of funds index. Commonly used indices include the
three-month, six-month, and one-year Treasury bill rate; the two-year Treasury
note yield; the Eleventh District Federal Home Loan Bank Cost of Funds Index
(EDCOFI); and the London Interbank Offered Rate (LIBOR). Fluctuations in the
prices of floating-rate U.S. government agency securities are typically
attributed to differences between the coupon rates on these securities and
prevailing market interest rates between interest rate reset dates.
o Master Demand Notes (Government Agency Only)
Government Agency may acquire variable-rate master demand notes issued by U.S.
government agencies such as the Student Loan Marketing Association. Master
demand notes allow the fund to lend money at varying rates of interest under
direct agreements with borrowers. The fund may adjust the amount of money loaned
under a master demand note daily or weekly up to the full amount specified in
the agreement, and the borrower may prepay up to the full amount of the loan
without penalty. Master demand notes may or may not be backed by bank letters of
credit. Although, as direct agreements between lenders and borrowers, there is
no secondary market for master demand notes, these instruments are redeemable
(immediately repayable by the borrower) at par plus accrued interest at any
time.
o Zero-Coupon Securities (Short-Term Treasury, Intermediate-Term
Treasury, Long-Term Treasury and Inflation-Adjusted Treasury)
Zero-coupon U.S. Treasury securities are the unmatured interest coupons and
underlying principal portions of U.S. Treasury notes and bonds. Originally,
these securities were created by broker-dealers who bought Treasury notes and
bonds and deposited these securities with a custodian bank. The broker-dealers
then sold receipts representing ownership interests in the coupons or principal
portions of the notes and bonds. Some examples of zero-coupon securities sold
through custodial receipt programs are CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts) and generic TRs
(Treasury Receipts).
The U.S. Treasury subsequently introduced a program called Separate Trading of
Registered Interest and Principal of Securities (STRIPS). In this program,
eligible securities may be presented to the U.S. Treasury and exchanged for
their component parts, which are then traded in book-entry form. (Book-entry
trading eliminated the bank credit risks associated with broker-dealer sponsored
custodial receipt programs.) STRIPS are direct obligations of the U.S.
government and have the same credit risks as other U.S. Treasury securities.
Principal and interest on bonds issued by the Resolution Funding Corporation
(REFCORP) have also been separated and issued as stripped securities. The U.S.
government and its agencies may issue securities in zero-coupon form. These
securities are referred to as original issue zero-coupon securities.
Mortgage-Backed Securities
o Background
A mortgage-backed security represents an ownership interest in a pool of
mortgage loans. The loans are made by financial institutions to finance home and
other real estate purchases. As the loans are repaid, investors receive payments
of both interest and principal.
Like fixed-income securities such as U.S. Treasury bonds, mortgage-backed
securities pay a stated rate of interest during the life of the security.
However, unlike a bond, which returns principal to the investor in one lump sum
at maturity, mortgage-backed securities return principal to the investor in
increments during the life of the security.
Because the timing and speed of principal repayments vary, the cash flow on
mortgage securities is irregular. If mortgage holders sell their homes,
refinance their loans, prepay their mortgages or default on their loans, the
principal is distributed pro rata to investors.
As with other fixed-income securities, the prices of mortgage securities
fluctuate in response to changing interest rates; when interest rates fall, the
prices of mortgage securities rise, and vice versa. Changing interest rates have
additional significance for mortgage-backed securities investors, however,
because they influence prepayment rates (the rates at which mortgage holders
prepay their mortgages), which in turn affect the yields on mortgage-backed
securities. When interest rates decline, prepayment rates generally increase.
Mortgage holders take advantage of the opportunity to refinance their mortgages
at lower rates with lower monthly payments. When interest rates rise, mortgage
holders are less inclined to refinance their mortgages. The effect of prepayment
activity on yield depends on whether the mortgage-backed security was purchased
at a premium or at a discount.
A fund may get back principal sooner than it expected because of accelerated
prepayments. Under these circumstances, the fund might have to reinvest returned
principal at rates lower than it would have earned if principal payments were
made on schedule. Conversely, a mortgage-backed security may exceed its
anticipated life if prepayment rates decelerate unexpectedly. Under these
circumstances, a fund might miss an opportunity to earn interest at higher
prevailing rates.
o Ginnie Mae Certificates
The Government National Mortgage Association (GNMA or Ginnie Mae) is a wholly
owned corporate instrumentality of the United States within the Department of
Housing and Urban Development. The National Housing Act of 1934 (Housing Act),
as amended, authorizes Ginnie Mae to guarantee the timely payment of interest
and repayment of principal on certificates that are backed by a pool of mortgage
loans insured by the Federal Housing Administration under the Housing Act, or by
Title V of the Housing Act of 1949 (FHA Loans), or guaranteed by the Veterans'
Affairs under the Servicemen's Readjustment Act of 1944 (VA Loans), as amended,
or by pools of other eligible mortgage loans. The Housing Act provides that the
full faith and credit of the U.S. government is pledged to the payment of all
amounts that may be required to be paid under any guarantee. Ginnie Mae has
unlimited authority to borrow from the U.S. Treasury in order to meet its
obligations under this guarantee.
Ginnie Mae certificates represent a pro rata interest in one or more pools of
the following types of mortgage loans: (a) fixed-rate level payment mortgage
loans; (b) fixed-rate graduated payment mortgage loans (GPMs); (c) fixed-rate
growing equity mortgage loans (GEMs); (d) fixed-rate mortgage loans secured by
manufactured (mobile) homes (MHs); (e) mortgage loans on multifamily residential
properties under construction (CLCs); (f) mortgage loans on completed
multifamily projects (PLCs); (g) fixed-rate mortgage loans that use escrowed
funds to reduce the borrower's monthly payments during the early years of the
mortgage loans (buydown mortgage loans); and (h) mortgage loans that provide for
payment adjustments based on periodic changes in interest rates or in other
payment terms of the mortgage loans.
o Fannie Mae Certificates
The Federal National Mortgage Association (FNMA or Fannie Mae) is a federally
chartered and privately owned corporation established under the Federal National
Mortgage Association Charter Act. Fannie Mae was originally established in 1938
as a U.S. government agency designed to provide supplemental liquidity to the
mortgage market and was reorganized as a stockholder-owned and privately managed
corporation by legislation enacted in 1968. Fannie Mae acquires capital from
investors who would not ordinarily invest in mortgage loans directly and thereby
expands the total amount of funds available for housing. This money is used to
buy home mortgage loans from local lenders, replenishing the supply of capital
available for mortgage lending.
Fannie Mae certificates represent a pro rata interest in one or more pools of
FHA Loans, VA Loans, or, most commonly, conventional mortgage loans (i.e.,
mortgage loans that are not insured or guaranteed by a governmental agency) of
the following types: (a) fixed-rate level payment mortgage loans; (b) fixed-rate
growing equity mortgage loans; (c) fixed-rate graduated payment mortgage loans;
(d) adjustable-rate mortgage loans; and (e) fixed-rate mortgage loans secured by
multifamily projects.
Fannie Mae certificates entitle the registered holder to receive amounts
representing a pro rata interest in scheduled principal and interest payments
(at the certificate's pass-through rate, which is net of any servicing and
guarantee fees on the underlying mortgage loans), any principal prepayments, and
a proportionate interest in the full principal amount of any foreclosed or
otherwise liquidated mortgage loan. The full and timely payment of interest and
repayment of principal on each Fannie Mae certificate is guaranteed by Fannie
Mae; this guarantee is not backed by the full faith and credit of the U.S.
government.
o Freddie Mac Certificates
The Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) is a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970 (FHLMC Act), as amended. Freddie Mac was established
primarily for the purpose of increasing the availability of mortgage credit. Its
principal activity consists of purchasing first-lien conventional residential
mortgage loans (and participation interests in such mortgage loans) and
reselling these loans in the form of mortgage-backed securities, primarily
Freddie Mac certificates.
Freddie Mac certificates represent a pro rata interest in a group of mortgage
loans (a Freddie Mac certificate group) purchased by Freddie Mac. The mortgage
loans underlying Freddie Mac certificates consist of fixed- or adjustable-rate
mortgage loans with original terms to maturity of between 10 and 30 years,
substantially all of which are secured by first-liens on one- to four-family
residential properties or multifamily projects. Each mortgage loan must meet
standards set forth in the FHLMC Act. A Freddie Mac certificate group may
include whole loans, participation interests in whole loans, undivided interests
in whole loans, and participations composing another Freddie Mac certificate
group.
Freddie Mac guarantees to each registered holder of a Freddie Mac certificate
the timely payment of interest at the rate provided for by the certificate.
Freddie Mac also guarantees ultimate collection of all principal on the related
mortgage loans, without any offset or deduction, but generally does not
guarantee the timely repayment of principal. Freddie Mac may remit principal at
any time after default on an underlying mortgage loan, but no later than 30 days
following (a) foreclosure sale, (b) payment of a claim by any mortgage insurer,
or (c) the expiration of any right of redemption, whichever occurs later, and in
any event no later than one year after demand has been made upon the mortgager
for accelerated payment of principal. Obligations guaranteed by Freddie Mac are
not backed by the full faith and credit of the U.S. government.
o Collateralized Mortgage Obligations (CMOs)
A CMO is a multiclass bond backed by a pool of mortgage pass-through
certificates or mortgage loans. CMOs may be collateralized by (a) Ginnie Mae,
Fannie Mae, or Freddie Mac pass-through certificates, (b) unsecured mortgage
loans insured by the Federal Housing Administration or guaranteed by the
Department of Veterans' Affairs, (c) unsecuritized conventional mortgages, or
(d) any combination thereof.
In structuring a CMO, an issuer distributes cash flow from the underlying
collateral over a series of classes called tranches. Each CMO is a set of two or
more tranches, with average lives and cash flow patterns designed to meet
specific investment objectives. The average life expectancies of the different
tranches in a four-part deal, for example, might be two, five, seven, and 20
years.
As payments on the underlying mortgage loans are collected, the CMO issuer pays
the coupon rate of interest to the bondholders in each tranche. At the outset,
scheduled and unscheduled principal payments go to investors in the first
tranches. Investors in later tranches do not begin receiving principal payments
until the prior tranches are paid off. This basic type of CMO is known as a
sequential pay or plain vanilla CMO.
Some CMOs are structured so that the prepayment or market risks are transferred
from one tranche to another. Prepayment stability is improved in some tranches
if other tranches absorb more prepayment variability.
The final tranche of a CMO often takes the form of a Z-bond, also known as an
accrual bond or accretion bond. Holders of these securities receive no cash
until the earlier tranches are paid in full. During the period that the other
tranches are outstanding, periodic interest payments are added to the initial
face amount of the Z-bond but are not paid to investors. When the prior tranches
are retired, the Z-bond receives coupon payments on its higher principal balance
plus any principal prepayments from the underlying mortgage loans. The existence
of a Z-bond tranche helps stabilize cash flow patterns in the other tranches. In
a changing interest rate environment, however, the value of the Z-bond tends to
be more volatile.
As CMOs have evolved, some classes of CMO bonds have become more prevalent. The
planned amortization class (PAC) and targeted amortization class (TAC), for
example, were designed to reduce prepayment risk by establishing a sinking-fund
structure. PAC and TAC bonds assure to varying degrees that investors will
receive payments over a predetermined period under various prepayment scenarios.
Although PAC and TAC bonds are similar, PAC bonds are better able to provide
stable cash flows under various prepayment scenarios than TAC bonds because of
the order in which these tranches are paid.
The existence of a PAC or TAC tranche can create higher levels of risk for other
tranches in the CMO because the stability of the PAC or TAC tranche is achieved
by creating at least one other tranche-known as a companion bond, support, or
non-PAC bond--that absorbs the variability of principal cash flows. Because
companion bonds have a high degree of average life variability, they generally
pay a higher yield. A TAC bond can have some of the prepayment variability of a
companion bond if there is also a PAC bond in the CMO issue.
Floating-rate CMO tranches (floaters) pay a variable rate of interest that is
usually tied to the London Interbank Offered Rate (LIBOR). Institutional
investors with short-term liabilities, such as commercial banks, often find
floating-rate CMOs attractive investments. "Super floaters" (which float a
certain percentage above LIBOR) and "inverse floaters" (which float inversely to
LIBOR) are variations on the floater structure that have highly variable cash
flows.
o Stripped Mortgage-Backed Securities (Short-Term Government only)
Stripped mortgage securities are created by segregating the cash flows from
underlying mortgage loans or mortgage securities to create two or more new
securities, each with a specified percentage of the underlying security's
principal or interest payments. Mortgage securities may be partially stripped so
that each investor class receives some interest and some principal. When
securities are completely stripped, however, all of the interest is distributed
to holders of one type of security, known as an interest-only security, or IO,
and all of the principal is distributed to holders of another type of security
known as a principal-only security, or PO. Strips can be created in a
pass-through structure or as tranches of a CMO.
The market values of IOs and POs are very sensitive to interest rate and
prepayment rate fluctuations. POs, for example, increase (or decrease) in value
as interest rates decline (or rise). The price behavior of these securities also
depends on whether the mortgage collateral was purchased at a premium or
discount to its par value. Prepayments on discount coupon POs generally are much
lower than prepayments on premium coupon POs. IOs may be used to hedge a fund's
other investments because prepayments cause the value of an IO strip to move in
the opposite direction from other mortgage-backed securities.
o Adjustable-Rate Mortgage Loans (ARMS)
ARMs eligible for inclusion in a mortgage pool will generally provide for a
fixed initial mortgage interest rate for a specified period of time, generally
for either the first three, six, 12, 13, 36, or 60 scheduled monthly payments.
Thereafter, the interest rates are subject to periodic adjustment based on
changes in an index.
ARMs have minimum and maximum rates beyond which the mortgage interest rate may
not vary over the lifetime of the loan. Certain ARMs provide for additional
limitations on the maximum amount by which the mortgage interest rate may adjust
for any single adjustment period. Negatively amortizing ARMs may provide
limitations on changes in the required monthly payment. Limitations on monthly
payments can result in monthly payments that are greater or less than the amount
necessary to amortize a negatively amortizing ARM by its maturity at the
interest rate in effect during any particular month.
There are two types of indices that provide the basis for ARM rate adjustments:
those based on market rates and those based on a calculated measure, such as a
cost of funds index or a moving average of mortgage rates. Commonly utilized
indices include the one-year, three-year, and five-year constant maturity U.S.
Treasury rates (as reported by the Federal Reserve Board) ; the three-month
Treasury bill rate; the 180-day Treasury bill rate; rates on longer-term
Treasury securities; the Eleventh District Federal Home Loan Bank Cost of Funds
Index (EDCOFI); the National Median Cost of Funds Index; the one-month,
three-month, six-month, or one-year London Interbank Offered Rate (LIBOR); or
six-month CD rates. Some indices, such as the one-year constant maturity
Treasury rate or three-month LIBOR, are highly correlated with changes in market
interest rates. Other indexes, such as the EDCOFI, tend to lag behind changes in
market rates and be somewhat less volatile over short periods of time.
The EDCOFI reflects the monthly weighted average cost of funds of savings and
loan associations and savings banks whose home offices are located in Arizona,
California, and Nevada (the Federal Home Loan Bank Eleventh District) and who
are member institutions of the Federal Home Loan Bank of San Francisco (the FHLB
of San Francisco), as computed from statistics tabulated and published by the
FHLB of San Francisco. The FHLB of San Francisco normally announces the Cost of
Funds Index on the last working day of the month following the month in which
the cost of funds was incurred.
One-year and three-year Constant Maturity Treasury (CMT) rates are calculated by
the Federal Reserve Bank of New York, based on daily closing bid yields on
actively traded Treasury securities submitted by five leading broker-dealers.
The median bid yields are used to construct a daily yield curve.
The National Median Cost of Funds Index, similar to the EDCOFI, is calculated
monthly by the Federal Home Loan Bank Board (FHLBB) and represents the average
monthly interest expenses on liabilities of member institutions. A median,
rather than an arithmetic mean, is used to reduce the effect of extreme numbers.
The London Interbank Offered Rate Index (LIBOR) is the rate at which banks in
London offer Eurodollars in trades between banks. LIBOR has become a key rate in
the U.S. domestic money market because it is perceived to reflect the true
global cost of money.The manager may invest in ARMs whose periodic interest rate
adjustments are based on new indices as these indices become available.
Inflation-Indexed Treasury Securities
Inflation-indexed Treasury securities are Treasury securities with a final value
and interest payment stream linked to the inflation rate. Inflation-indexed
Treasury securities may be issued in either note or bond form. Inflation-indexed
Treasury notes have maturities of at least one year, but not more than 10 years.
Inflation-indexed Treasury bonds have maturities of more than 10 years.
Inflation-indexed Treasury securities may be attractive to investors seeking an
investment backed by the full faith and credit of the U.S. government that
provides a return in excess of the rate of inflation. These securities are new
to the U.S. market, having first been sold in January 1997. There is uncertainty
as to how these securities will be treated by the marketplace. See "Development
of Inflation-Indexed Securities Market" on page 18. Inflation-indexed Treasury
securities are auctioned and issued on a quarterly basis.
o Structure And Inflation Index
The principal value of inflation-indexed Treasury securities will be adjusted to
reflect changes in the level of inflation. The index for measuring the inflation
rate for inflation-indexed Treasury securities is the non-seasonally adjusted
U.S. City Average All Items Consumer Price Index for All Urban Consumers
published monthly by the U.S. Department of Labor's Bureau of Labor Statistics.
Semiannual coupon interest payments are made at a fixed percentage of the
inflation-indexed principal value. The coupon rate for the semiannual interest
rate of each issuance of inflation-indexed Treasury securities is determined at
the time the securities are sold to the public (i.e., by competitive bids in the
auction). The coupon rate will likely reflect "real yields" available in the
Treasury market; "real yields" are the prevailing yields on similar maturity
Treasury securities less then-prevailing inflation expectations. While a
reduction in inflation will cause a reduction in the interest payment made on
the securities, the repayment of principal at the maturity of the security is
guaranteed by the Treasury to be not less than the original face or par amount
of the security at issuance.
o Indexing Methodology
The principal value of inflation-indexed Treasury securities will be indexed, or
adjusted, to account for changes in the Consumer Price Index. Semiannual coupon
interest payment amounts will be determined by multiplying the inflation-indexed
principal amount by one-half the stated rate of interest on each interest
payment date.
o Taxation
Taxation applicable to inflation-indexed Treasury securities is similar to
conventional bonds. Both interest payments and the difference between original
principal and the inflation-adjusted principal will be treated as interest
income subject to taxation. Interest payments are taxable when received or
accrued. The inflation adjustment to the principal is subject to tax in the year
adjustment is made, not at maturity of the security when the cash from the
repayment of principal is received. If an upward adjustment has been made (which
typically should happen), investors in non-tax deferred accounts will pay taxes
on this amount currently. Decreases in the indexed principal can only be
deducted from current or previous interest payments reported as income.
Inflation-indexed Treasury securities therefore have a potential cash flow
mismatch to an investor, since investors must pay taxes on the
inflation-adjusted principal before the repayment of principal is received. It
is possible that, particularly for high income tax bracket investors,
inflation-indexed Treasury securities would not generate enough income in a
given year to cover the tax liability it could create. This is similar to the
current tax treatment for zero coupon bonds and other discount securities. If
inflation-indexed Treasury securities are sold prior to maturity, capital losses
or gains are realized in the same manner as traditional bonds.
Inflation-Adjusted Treasury, however, distributes all income on a monthly basis.
Investors in Inflation-Adjusted Treasury will receive dividends which represent
both the interest payments and the principal adjustments of the
inflation-indexed securities held in its portfolio. An investment in
Inflation-Adjusted Treasury may therefore be a means to avoid the cash flow
mismatch associated with a direct investment in inflation-indexed securities.
For more information about taxes and their effect on you as an investor in the
fund, see "Taxes," on page 29.
o U.S Government Agencies
A number of U.S. government agencies and government-sponsored organizations may
issue inflation-indexed securities. Some U.S. government agencies have issued
inflation-indexed securities whose design mirrors that of the inflation-indexed
Treasury securities described on the previous page.
o Development of Inflation-Indexed Securities Market
The Treasury securities market is the largest and most liquid securities market
in the world. The marketability of inflation-indexed Treasury securities and
inflation-indexed securities generally may be enhanced over time as additional
inflation-indexed securities are issued and more investors participate in the
market.
Inflation-Adjusted Treasury will purchase inflation- indexed securities at
auction or in the secondary market as the managers deem appropriate. The
secondary market for inflation-indexed securities may not be as active as the
secondary market for Treasury and U.S. government agency fixed-principal notes
and bonds. In addition, inflation-indexed securities may not be as widely traded
or as well understood as fixed-principal securities, nor is it known at this
time exactly how the secondary market will develop.
If the number of inflation-indexed securities market participants is limited, it
may result in larger spreads between bid and asked prices for inflation-indexed
securities than the bid-asked spreads for fixed-principal notes and bonds with
similar terms to maturity. Such larger bid-ask spreads normally result in higher
transactions costs and/or lower returns. If the market does not develop
sufficient liquidity, large buyers or sellers of these securities may have a
disproportionately negative impact on the value of the securities and, hence,
Inflation-Adjusted Treasury's net asset value.
The managers currently believe that the market for inflation-indexed securities
will be sufficient to permit Inflation-Adjusted Treasury to pursue its
investment objective. However, should the market for inflation-indexed
securities prove less active than anticipated by the managers, the managers are
authorized to treat such an environment as an abnormal market condition. During
such a period, Inflation-Adjusted Treasury will not be fully pursuing its
investment objective.
o Share Price Volatility
Inflation-indexed securities are designed to offer a return linked to inflation,
thereby protecting future purchasing power of the money invested in them.
However, inflation-indexed securities provide this protected return only if held
to maturity. In addition, inflation-indexed securities may not trade at par
value. Real interest rates (the market rate of interest less the anticipated
rate of inflation) change over time, as a result of many factors, such as what
investors are demanding as a true value for money. When real rates do change,
inflation-indexed securities prices will be more sensitive to these changes than
conventional bonds, since these securities were sold originally based upon a
real interest rate that is no longer prevailing. Should market expectations for
real interest rates rise, the price of inflation-indexed securities and the
share price of Inflation-Adjusted Treasury will fall. Investors in the fund
should be prepared to accept not only this share price volatility but also the
possible adverse tax consequences it may cause.
An investment in securities featuring inflation-adjusted principal and/or
interest involves factors not associated with more traditional fixed-principal
securities. Such factors include the possibility that the inflation index may be
subject to significant changes in interest rates, that changes in the index may
or may not correlate to changes in interest rates generally or changes in other
indices, that the resulting interest may be greater or less than that payable on
other securities of similar maturities. In the event of sustained deflation, it
is possible that the amount of semiannual interest payments, the
inflation-adjusted principal of the security and the value of the stripped
components, will decrease. If any of these possibilities are realized,
Inflation-Adjusted Treasury's net asset value could be negatively affected.
Repurchase Agreements
Each fund, with the exception of Capital Preservation and Government Agency, may
invest in repurchase agreements when such transactions present an attractive
short-term return on cash that is not otherwise committed to the purchase of
securities pursuant to the investment policies of that fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Because the security purchased constitutes collateral for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.
Each of the funds, with the exception of Capital Preservation and Government
Agency, may invest in repurchase agreements with respect to any security in
which that fund is authorized to invest, even if the remaining maturity of the
underlying security would make that security ineligible for purchase by such
fund.
When-Issued and Forward Commitment Agreements
The funds may sometimes purchase new issues of securities on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date (typically 15 to 45 days later).
When purchasing securities on a when-issued or forward commitment basis, a fund
assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. While the fund will make commitments to purchase or sell
securities with the intention of actually receiving or delivering them, it may
sell the securities before the settlement date if doing so is deemed advisable
as a matter of investment strategy.
In purchasing securities on a when-issued or forward commitment basis, a fund
will establish and maintain until the settlement date a segregated account
consisting of cash, cash equivalents or other appropriate liquid securities in
an amount sufficient to meet the purchase price. When the time comes to pay for
the when-issued securities, the fund will meet its obligations with available
cash, through the sale of securities, or, although it would not normally expect
to do so, by selling the when-issued securities themselves (which may have a
market value greater or less than the fund's payment obligation). Selling
securities to meet when-issued or forward commitment obligations may generate
taxable capital gains or losses.
As an operating policy, no fund will commit more than 50% of its total assets to
when-issued or forward commitment agreements. If fluctuations in the value of
securities held cause more than 50% of a fund's total assets to be committed
under when-issued or forward commitment agreements, the advisor need not sell
such agreements, but it will be restricted from entering into further agreements
on behalf of the fund until the percentage of assets committed to such
agreements is below 50% of total assets.
Roll Transactions
A fund may sell a security and at the same time make a commitment to purchase
the same or a comparable security at a future date and specified price.
Conversely, a fund may purchase a security and at the same time make a
commitment to sell the same or a comparable security at a future date and
specified price. These types of transactions are executed simultaneously in what
are known as dollar-rolls, cash and carry, or financing transactions. For
example, a broker-dealer may seek to purchase a particular security that a fund
owns. The fund will sell that security to the broker-dealer and simultaneously
enter into a forward commitment agreement to buy it back at a future date. This
type of transaction generates income for the fund if the dealer is willing to
execute the transaction at a favorable price in order to acquire a specific
security. As an operating policy, the advisor limits forward commitment
transactions (including roll transactions) to 35% of a fund's total assets and
will not enter into when-issued or forward commitment transactions with
settlement dates that exceed 120 days.
When engaging in roll transactions, the fund will maintain until the settlement
date a segregated account consisting of cash or appropriate liquid securities in
an amount sufficient to meet the purchase price, as described above.
Short-Term Securities
Under certain circumstances, the non-money market funds may invest in short-term
municipal or U.S. government securities, including money market instruments
(short-term securities). If a fund invests in U.S. government securities, a
portion of dividends paid to shareholders will be taxable at the federal level,
and may be taxable at the state level, as ordinary income. However, the advisor
intends to minimize such investments and, when suitable short-term municipal
securities are unavailable, may allow the funds to hold cash to avoid generating
taxable dividends.
Except as otherwise required for temporary defensive purposes, the advisor does
not expect the non-money market funds to invest more than 35% of total assets in
short-term securities.
Other Investment Companies
Pursuant to an exemptive order from the Securities and Exchange Commission
(SEC), each non-money market fund may invest in shares of the money market funds
to facilitate cash management provided that the investment is consistent with
the funds' investment policies and restrictions.
The non-money market funds may invest up to 5% of their total assets in shares
of the money market funds.
INVESTMENT POLICIES
Unless otherwise indicated, with the exception of the percentage limitations on
borrowing, the restrictions apply at the time transactions are entered into.
Accordingly, any later increase or decrease beyond the specified limitation
resulting from a change in a fund's net assets will not be considered in
determining whether it has complied with its investment restrictions.
For purposes of the funds' investment restrictions, the party identified as the
"issuer" of a municipal security depends on the form and conditions of the
security. When the assets and revenues of a political subdivision are separate
from those of the government that created the subdivision and the security is
backed only by the assets and revenues of the subdivision, the subdivision is
deemed the sole issuer. Similarly, in the case of an Industrial Development
Bond, if the bond were backed only by the assets and revenues of a
non-governmental user, the non-governmental user would be deemed the sole
issuer. If, in either case, the creating government or some other entity were to
guarantee the security, the guarantee would be considered a separate security
and treated as an issue of the guaranteeing entity.
Fundamental Investment Policies
The funds' investment restrictions are set forth below. These investment
restrictions are fundamental and may not be changed without approval of a
majority of the outstanding votes of shareholders of a fund, as determined in
accordance with the Investment Company Act.
For purposes of the investment restriction relating to concentration, a fund
shall not purchase any securities that would cause 25% or more of the value of
the fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions and
repurchase agreements secured by such instruments, (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of the parents, (c)
utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will each be considered a
separate industry, and (d) personal credit and business credit businesses will
be considered separate industries.
- ----------------- --------------------------------------------------------------
Subject Policies
- ----------------- --------------------------------------------------------------
Senior Securities A fund may not issue senior securities, except as permitted
under the Investment Company Act.
- ----------------- --------------------------------------------------------------
Borrowing A fund may not borrow money, except
that the fund may borrow money for temporary or emergency
purposes (not for leveraging or investment) in an amount not
exceeding 33-1/3% of the fund's total assets (including the
amount borrowed) less liabilities (other than borrowings).
- ----------------- --------------------------------------------------------------
Lending A fund may not lend any security or make any other loan if, as
a result, more than 33-1/3% of the fund's total assets would
be lent to other parties, except, (i) through the purchase of
debt securities in accordance with its investment objective,
policies and limitations or (ii) by engaging in repurchase
agreements with respect to portfolio securities.
- ----------------- --------------------------------------------------------------
Real Estate A fund may not purchase or sell real estate unless
acquired as a result of ownership of securities or other
instruments. This policy shall not prevent the fund from
investment in securities or other instruments backed by real
estate or securities of companies that deal in real estate or
are engaged in the real estate business.
- ----------------- --------------------------------------------------------------
Concentration A fund may not concentrate its investments in securities of
issuers in a particular industry (other than securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities).
- ----------------- --------------------------------------------------------------
Underwriting A fund may 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 A fund may 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.
- ----------------- --------------------------------------------------------------
Control A fund may not invest for purposes of exercising control over
management.
- ----------------- --------------------------------------------------------------
Nonfundamental Investment Policies
In addition, the funds are subject to the following additional investment
restrictions that are not fundamental and may be changed by the Board of
Trustees.
<TABLE>
- ----------------- -----------------------------------------------------------------------------------------------
Subject Policies
- ----------------- -----------------------------------------------------------------------------------------------
<S> <C>
Diversification A fund may not purchase additional investment securities at any time during which outstanding
borrowings exceed 5% of the total assets of the fund.
- ----------------- -----------------------------------------------------------------------------------------------
Futures and The money market funds may not purchase or sell futures contracts or call options. This
options [money limitation does not apply to options attached to, or acquired or traded together with, their
market funds underlying securities, and does not apply to securities that incorporate features similar to
only] options or futures contracts.
- ----------------- -----------------------------------------------------------------------------------------------
Liquidity A fund may not purchase any security or enter into a repurchase agreement if, as a result,
more than 15% of its net assets (10% for the money market funds) would be invested in
repurchase agreements not entitling the holder to payment of principal and interest within
seven days and in securities that are illiquid by virtue of legal or contractual restrictions
on resale or the absence of a readily available market.
- ----------------- -----------------------------------------------------------------------------------------------
Short Sales A fund may not sell securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided that transactions in
futures contracts and options are not deemed to constitute selling securities short.
- ----------------- -----------------------------------------------------------------------------------------------
Margin A fund may not purchase securities on margin, except that the fund may obtain such short-term
credits as are necessary for the clearance of transactions, and provided that margin payments
in connection with futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
- ----------------- -----------------------------------------------------------------------------------------------
</TABLE>
TEMPORARY DEFENSIVE MEASURES
For temporary defensive purposes, a fund may invest in securities that may not
fit its investment objective or its stated market. During a temporary defensive
period, a fund may direct its assets to the following investment vehicles:
>> interest-bearing bank accounts or Certificates of Deposit
>> U.S. government securities and repurchase agreements collateralized by
U.S. government securities
>> money market funds
PORTFOLIO TURNOVER
Under normal conditions, the funds' annual portfolio turnover rates are not
expected to exceed 100%. Because a higher turnover rate increases transaction
costs and may increase taxable capital gains, the managers carefully weigh the
potential benefits of short-term investing against these considerations.
The funds' portfolio turnover rates (except those of the money market funds) are
listed in the Financial Highlights table in the Prospectus. Because of the
short-term nature of the money market funds' investments, portfolio turnover
rates are not generally used to evaluate their trading activities.
MANAGEMENT
THE BOARD OF TRUSTEES
The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired the advisor to do so.
Two-thirds of the trustees are independent of the funds' advisor; that is, they
are not employed by and have no financial interest in the advisor.
The individuals listed in the following table whose names are marked by an
asterisk (*) are interested persons of the funds (as defined in the Investment
Company Act) by virtue of, among other considerations, their affiliation with
either the funds; the advisor, American Century Investment Management, Inc.; the
funds' agent for transfer and administrative services, American Century Services
Corporation (ACSC); the parent corporation, American Century Companies, Inc.
(ACC) or ACC's subsidiaries; the funds' distribution agent and co-administrator,
Funds Distributor, Inc. (FDI); or other funds advised by the advisor. Each
trustee listed below serves as a trustee or director of seven registered
investment companies in the American Century family of funds, which are also
advised by the advisor.
<TABLE>
- --------------------------- ---------- --------------------------------------------------------------------------
Position(s)
Name (Age) Held Principal Occupation(s)
Address With Fund During Past 5 Years
- --------------------------- ---------- --------------------------------------------------------------------------
<S> <C> <C>
Albert A. Eisenstat (69) Trustee General Partner, Discovery Venturers (venture capital firm, 1996 to
1665 Charleston Road present)
Mountain View, CA 94043 Independent Director, Commercial Metals Co. (1982 to present)
Independent Director, Sungard Data
Systems (1991 to present) Independent
Director, Business Objects S/A (software
& programming, 1994 to present)
- --------------------------- ---------- --------------------------------------------------------------------------
Ronald J. Gilson (52) Trustee Charles J. Meyers Professor of Law and Business, Stanford Law School
1665 Charleston Road (since 1979)
Mountain View, CA 94043 Mark and Eva Stern Professor of Law and Business, Columbia University
School of Law (since 1992);
Counsel, Marron, Reid & Sheehy (a San Francisco law firm, since 1984)
- --------------------------- ---------- --------------------------------------------------------------------------
William M. Lyons* (43) Trustee President, Chief Operating Officer and Assistant Secretary, ACC
4500 Main Street Executive Vice President, Chief Operating Officer and Secretary, ACSC
Kansas City, MO 64111 and ACIS
- --------------------------- ---------- --------------------------------------------------------------------------
Myron S. Scholes (58) Trustee Limited Partner, Long-Term Capital Management (since February 1999)
1665 Charleston Road Principal, Long-Term Capital Management (investment advisor, 1993 to
Mountain View, CA 94043 January 1999)
Frank E. Buck Professor of Finance, Stanford Graduate School of Business
(since 1981)
Director, Dimensional Fund Advisors (investment advisor, since 1982)
Director, Smith Breeden Family of Funds (since 1992)
Managing Director, Salomon Brothers Inc. (securities brokerage, 1991
to 1993)
- --------------------------- ---------- --------------------------------------------------------------------------
Kenneth E. Scott (70) Trustee Ralph M. Parsons Professor of Law and Business, Stanford Law School
1665 Charleston Road (since 1972)
Mountain View, CA 94043 Director, RCM Capital Funds, Inc. (since 1994)
- --------------------------- ---------- --------------------------------------------------------------------------
Isaac Stein (52) Trustee Director, Raychem Corporation (electrical equipment, since 1993)
1665 Charleston Road President, Waverley Associates, Inc. (private investment firm, since
Mountain View, CA 94043 1983)
Director, ALZA Corporation (pharmaceuticals, since 1987).
Trustee, Stanford University (since 1994)
Chairman, Stanford Health Services (since 1994)
- --------------------------- ---------- --------------------------------------------------------------------------
James E. Stowers III* (40) Trustee, Chief Executive Officer and Director, ACC
4500 Main Street Chairman President, Chief Executive Officer and Director, ACSC and ACIS
Kansas City, MO 64111 of the Son of James E. Stowers, Jr. (founder)
Board
- --------------------------- ---------- --------------------------------------------------------------------------
Jeanne D. Wohlers (54) Trustee Director and Partner, Windy Hill Productions, LP (educational software,
1665 Charleston Road 1994 to present)
Mountain View, CA 94043 Director, Quintus Corporation (automation solutions, 1995 to present)
Vice President and Chief Financial Officer, Sybase, Inc. (software
company, 1988 to 1992)
- --------------------------- ---------- --------------------------------------------------------------------------
Committees
The Board has four committees to oversee specific functions of the Trust's
operations. Information about these committees appears in the table below. The
trustee listed first acts as chairman of the committee:
- ------------------ ------------------- --------------------------------------------------------------------------
Committee Members Function of Committee
- ------------------ ------------------- --------------------------------------------------------------------------
Audit Jeanne D. Wohlers The Audit Committee selects and oversees the activities of the Trust's
Albert A. independent auditor. The Committee receives reports from the advisor's
Eisenstat Internal Audit Department, which is accountable solely to the Committee.
Kenneth E. Scott The Committee also receives reporting about compliance matters affecting
the Trust.
- ------------------ ------------------- --------------------------------------------------------------------------
Nominating Kenneth E. Scott The Nominating Committee primarily considers and recommends individuals
Myron S. Scholes for nomination as trustees. The names of potential trustee candidates
Albert A. are drawn from a number of sources, including recommendations from
Eisenstat members of the Board, management and shareholders. This committee also
Ronald J. Gilson reviews and makes recommendations to the Board with respect to the
Isaac Stein composition of Board committees and other Board-related matters,
Jeanne D. Wohlers including its organization, size, composition, responsibilities,
functions and compensation.
- ------------------ ------------------- --------------------------------------------------------------------------
Portfolio Myron S. Scholes The Portfolio Committee reviews quarterly the investment activities and
Ronald J. Gilson strategies used to manage fund assets. The Committee regularly receives
Isaac Stein reports from portfolio managers, credit analysts and other investment
personnel concerning the funds' investments.
- ------------------ ------------------- --------------------------------------------------------------------------
Quality of William Lyons The Quality of Service Committee reviews the level and quality of
Service Ronald J. Gilson transfer agent and administrative services provided to the funds and
Myron S. Scholes their shareholders. It receives and reviews reports comparing those
Isaac Stein services to fund competitors and seeks to improve such services where
feasible and appropriate.
- ------------------ ------------------- --------------------------------------------------------------------------
</TABLE>
Compensation of Trustees
The trustees also serve as trustees for six American Century investment
companies other than American Century Government Income Trust. Each trustee who
is not an interested person as defined in the Investment Company Act receives
compensation for service as a member of the Board of all seven such companies
based on a schedule that is based on the number of meetings attended and the
assets of the funds for which the meetings are held. These fees and expenses are
divided among the seven investment companies based, in part, upon their relative
net assets. Under the terms of the management agreement with the advisor, the
funds are responsible for paying such fees and expenses.
The table presented shows the aggregate compensation paid for the periods
indicated by the Trust and by the American Century family of funds as a whole to
each trustee who is not an interested person as defined in the Investment
Company Act.
AGGREGATE TRUSTEE COMPENSATION FOR FISCAL YEAR ENDED MARCH 31, 1999
- ---------------------------- ---------------------- ---------------------
Total Compensation
from the
Total Compensation American Century
Name of Trustee from Family of Funds(2)
the Funds(1)
- ---------------------------- ---------------------- ---------------------
Albert A. Eisenstat $info not yet $info not yet
available available
Ronald J. Gilson $ $
Myron S. Scholes $ $
Kenneth E. Scott $ $
Isaac Stein $ $
Jeanne D. Wohlers $ $
- ---------------------------- ---------------------- ---------------------
(1) Includes compensation paid to the trustees during the fiscal year ended
March 31, 1999, and also includes amounts deferred at the election of the
trustees under the American Century Mutual Funds Deferred Compensation Plan
for Non-Interested Directors and Trustees. The total amount deferred
compensation included in the preceding table is as follows: info not yet
available
(2) Includes compensation paid by the seven investment company members of the
American Century family of funds served by this Board.
The Trust has adopted the American Century Deferred Compensation Plan for
Non-Interested Directors and Trustees. Under the plan, the independent trustees
may defer receipt of all or any part of the fees to be paid to them for serving
as trustees.
Under the plan, all deferred fees are credited to an account established in the
name of the trustees. The amounts credited to the account then increase or
decrease, as the case may be, in accordance with the performance of one or more
of the American Century funds that are selected by the trustee. The account
balance continues to fluctuate in accordance with the performance of the
selected fund or funds until final payment of all amounts credited to the
account. Trustees are allowed to change their designation of mutual funds from
time to time.
No deferred fees are payable until such time as a trustee resigns, retires or
otherwise ceases to be a member of the Board of Trustees. Trustees may receive
deferred fee account balances either in a lump sum payment or in substantially
equal installment payments to be made over a period not to exceed 10 years. Upon
the death of a trustee, all remaining deferred fee account balances are paid to
the trustee's beneficiary or, if none, to the trustee's estate.
The plan is an unfunded plan and, accordingly, the Trust has no obligation to
segregate assets to secure or fund the deferred fees. The rights of trustees to
receive their deferred fee account balances are the same as the rights of a
general unsecured creditor of the Trust. The plan may be terminated at any time
by the administrative committee of the plan. If terminated, all deferred fee
account balances will be paid in a lump sum.
No deferred fees were paid to any trustee under the plan during the fiscal year
ended March 31, 1999.
OFFICERS
Background information for the officers of the Trust is provided below. All
persons named as officers of the Trust also serve in similar capacities for the
12 other investment companies advised by ACIM. Not all officers of the Trust are
listed; only those officers with policy-making functions for the Trust are
listed. No officer is compensated for his or her service as an officer of the
Trust. The individuals listed in the table below are interested persons of the
funds (as defined in the Investment Company Act) by virtue of, among other
considerations, their affiliation with either the funds, ACC or ACC's
subsidiaries (including ACIM and ACSC) or the funds' distributor, FDI, as
specified in the table.
<TABLE>
- --------------------------- ---------- ---------------------------------------------------------------------------
Position(s)
Name (Age) Held Principal Occupation(s)
Address With Fund During Past 5 Years
- --------------------------- ---------- ---------------------------------------------------------------------------
<S> <C> <C>
George A. Rio (44) President Executive Vice President and Director of Client Services, FDI (March 1998
4500 Main Street to present).
Kansas City, Missouri Senior Vice President and Senior Key Account Manager, Putnam Mutual Funds
64111 (June 1995 to March 1998)
Director Business Development, First Data Corporation (May 1994 to June 1995)
Senior Vice President and Manager of Client Services and Director of Internal
Audit, The Boston Company, Inc. (September 1983 to May 1994)
- --------------------------- ---------- ---------------------------------------------------------------------------
Christopher J. Kelley (34) Vice Vice President and Associate General Counsel, FDI (since July 1996)
4500 Main Street President Assistant Counsel, Forum Financial Group (April 1994 to July 1996)
Kansas City, MO 64111 Compliance Officer, Putnam Investments (1992 to April 1994)
- --------------------------- ---------- ---------------------------------------------------------------------------
Mary A. Nelson (35) Vice Vice President and Manager of Treasury Services and Administration, FDI,
4500 Main Street President (1994 to present)
Kansas City, Missouri Assistant Vice President and Client Manager, The Boston Company, Inc.
64111 (1989 to 1994)
- --------------------------- ---------- ---------------------------------------------------------------------------
David C. Tucker (41) Vice Sr. Vice President and General Counsel, ACSC and ACIM (June 1998 to
4500 Main Street President present)
Kansas City, MO 64111 General Counsel, ACC (June 1998 to present)
Consultant to mutual fund industry (May 1997 to April 1998)
Vice President and General Counsel, Janus Companies (1990 to 1997)
- --------------------------- ---------- ---------------------------------------------------------------------------
Maryanne Roepke, CPA (43) Vice Senior Vice President, Treasurer and Principal Accounting Officer, ACSC
4500 Main Street President
Kansas City, Missouri and
64111 Treasurer
- --------------------------- ---------- ---------------------------------------------------------------------------
Douglas A. Paul (52) Secretary Vice President and Associate General Counsel, ACSC
1665 Charleston Road and Vice
Mountain View, CA 94043 President
- --------------------------- ---------- ---------------------------------------------------------------------------
C. Jean Wade (35) Controller Controller--Fund Accounting, ACSC
4500 Main Street
Kansas City, MO 64111
- --------------------------- ---------- ---------------------------------------------------------------------------
</TABLE>
THE FUNDS' PRINCIPAL SHAREHOLDERS
As of June 30, 1999, the following companies were the record owners of more than
5% of a fund's outstanding shares:
- ------------------- ------------------------------ ---------------- -----------
% of
Shares
Fund Shareholder # of Shares Out-standing
Held
- ------------------- ------------------------------ ---------------- -----------
- ------------------- ------------------------------ ---------------- -----------
The funds are unaware of any other shareholders, beneficial or of record, who
own more than 5% of a fund's outstanding shares. As of June 30, 1999, the
officers and trustees of the funds, as a group, own less than 1% of any fund's
outstanding shares.
SERVICE PROVIDERS
The funds have no employees. To conduct its day-to-day activities, the Trust has
hired a number of service providers. Each service provider has a specific
function to fill on behalf of the Trust and is described below.
ACIM and ACSC are both wholly owned by ACC. James E. Stowers Jr., Chairman of
ACC, controls ACC by virtue of his ownership of a majority of its voting stock.
INVESTMENT ADVISOR
The Trust has an investment management agreement with the advisor, American
Century Investment Management, Inc., dated August 1, 1997. This agreement was
approved by the shareholders of each of the funds on July 30, 1997.
A description of the responsibilities of the advisor appears in the Prospectus
under the caption "Management."
For the services provided to the funds, the advisor receives a monthly fee based
on a percentage of the average net assets of the fund. The annual rate at which
this fee is assessed is determined monthly in a two-step process: First, a fee
rate schedule is applied to the assets of all of the funds of its investment
category managed by the advisor (the Investment Category Fee). For example, when
calculating the fee for a money market fund, all of the assets of the money
market funds managed by the advisor are aggregated. The three investment
categories are money market funds, bond funds and equity funds. Second, a
separate fee rate schedule is applied to the assets of all of the funds managed
by the advisor (the Complex Fee). The Investment Category Fee and the Complex
Fee are then added to determine the unified management fee payable by the fund
to the advisor.
The schedules by which the Investment Category Fees are determined are as
follows:
------------------- -------------
INVESTMENT CATEGORY FEE SCHEDULE FOR Category Assets Fee Rate
------------------- -------------
>> Capital Preservation First $1 billion 0.2500%
>> Government Agency Money Market Next $1 billion 0.2070%
Next $3 billion 0.1660%
Next $5 billion 0.1490%
Next $15 billion 0.1380%
Next $25 billion 0.1375%
Thereafter 0.1370%
------------------- -------------
------------------- -------------
INVESTMENT CATEGORY FEE SCHEDULE FOR Category Assets Fee Rate
------------------- -------------
>> Short-Term Treasury First $1 billion 0.2800%
>> Intermediate-Term Treasury Next $1 billion 0.2280%
>> Long-Term Treasury Next $3 billion 0.1980%
>> Inflation-Adjusted Treasury Next $5 billion 0.1780%
Next $15 billion 0.1650%
Next $25 billion 0.1630%
Thereafter 0.1625%
------------------- -------------
------------------- -------------
INVESTMENT CATEGORY FEE SCHEDULE FOR Category Assets Fee Rate
------------------- -------------
>> Short-Term Government First $1 billion 0.3600%
>> GNMA Fund Next $1 billion 0.2880%
Next $3 billion 0.2780%
Next $5 billion 0.2580%
Next $15 billion 0.2450%
Next $25 billion 0.2430%
Thereafter 0.2425%
------------------- -------------
The Complex Fee is determined according to the schedule below.
COMPLEX FEE SCHEDULE
Investor Class Advisor Class
Complex Assets Fee Rate Fee Rate
- --------------------------------- ------------------- -------------------
First $2.5 billion 0.3100% 0.0600%
Next $7.5 billion 0.3000% 0.0500%
Next $15.0 billion 0.2985% 0.0485%
Next $25.0 billion 0.2970% 0.0470%
Next $50.0 billion 0.2960% 0.0460%
Next $100.0 billion 0.2950% 0.0450%
Next $100.0 billion 0.2940% 0.0440%
Next $200.0 billion 0.2930% 0.0430%
Next $250.0 billion 0.2920% 0.0420%
Next $500.0 billion 0.2910% 0.0410%
Thereafter 0.2900% 0.0400%
- --------------------------------- ------------------- -------------------
On the first business day of each month, the funds pay a management fee to the
advisor for the previous month at the specified rate. The fee for the previous
month is calculated by multiplying the applicable fee for the fund by the
aggregate average daily closing value of a fund's net assets during the previous
month by a fraction, the numerator of which is the number of days in the
previous month and the denominator of which is 365 (366 in leap years).
The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution or until the first
meeting of shareholders following such execution and for as long thereafter as
its continuance is specifically approved at least annually by (1) the funds'
Board of Trustees, or by the vote of a majority of outstanding votes (as defined
in the Investment Company Act) and (2) by the vote of a majority of the trustees
of the funds who are not parties to the agreement or interested persons of the
advisor, cast in person at a meeting called for the purpose of voting on such
approval.
The management agreement provides that it may be terminated at any time without
payment of any penalty by the funds' Board of Trustees, or by a vote of a
majority of outstanding votes, on 60 days' written notice to the advisor, and
that it shall be automatically terminated if it is assigned.
The management agreement provides that the advisor shall not be liable to the
funds or its shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
The management agreement also provides that the advisor and its officers,
trustees and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.
Certain investments may be appropriate for the funds and also for other clients
advised by the advisor. Investment decisions for the funds and other clients are
made with a view to achieving their respective investment objectives after
consideration of such factors as their current holdings, availability of cash
for investment and the size of their investment generally. A particular security
may be bought or sold for only one client or fund, or in different amounts and
at different times for more than one but less than all clients or fund. In
addition, purchases or sales of the same security may be made for two or more
clients or fund on the same date. Such transactions will be allocated among
clients in a manner believed by the advisor to be equitable to each. In some
cases this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a fund.
The advisor may aggregate purchase and sale orders of the funds with purchase
and sale orders of its other clients when the advisor believes that such
aggregation provides the best execution for the funds. The funds' Board of
Trustees has approved the policy of the advisor with respect to the aggregation
of portfolio transactions. Where portfolio transactions have been aggregated,
the funds participate at the average share price for all transactions in that
security on a given day and share transaction costs on a pro rata basis. The
advisor will not aggregate portfolio transactions of the funds unless it
believes such aggregation is consistent with its duty to seek best execution on
behalf of the funds and the terms of the management agreement. The advisor
receives no additional compensation or remuneration as a result of such
aggregation.
Prior to August 1, 1997, Benham Management Corporation served as the investment
advisor to the funds. Benham Management Corporation was merged into the advisor
in late 1997.
Unified management fees paid by each fund for the fiscal periods ended March 31,
1999, 1998 and 1997, are indicated in the following table. Fee amounts are net
of amounts reimbursed or recouped under the funds' previous investment advisory
agreement with Benham Management Corporation.
UNIFIED MANAGEMENT FEES (INVESTOR CLASS)
- -------------------------------------------- ---------------- ----------------
Fund 1999 1998
- -------------------------------------------- ---------------- ----------------
Capital Preservation Data not yet available
Government Agency Money Market
Short-Term Treasury
Intermediate-Term Treasury
Long-Term Treasury
Inflation-Adjusted Treasury
Short-Term Government
GNMA Fund
- -------------------------------------------- ---------------- ----------------
UNIFIED MANAGEMENT FEES (ADVISOR CLASS)
- -------------------------------------------- ---------------------
Fund 1998
- -------------------------------------------- ---------------------
Government Agency Money Market Data not yet available
Short-Term Treasury
Intermediate-Term Treasury
Long-Term Treasury
Inflation-Adjusted Treasury
Short-Term Government
GNMA Fund
- --------------------------------------------- ---------------------
INVESTMENT ADVISORY FEES
- --------------------------------------------- ----------------- ----------------
Fund 1998 1997
- --------------------------------------------- ----------------- ----------------
Capital Preservation 11,994,029 $8,107,075
Government Agency Money Market 1,929,073 1,441,378
Short-Term Treasury 153,812 77,935
Intermediate-Term Treasury 1,520,464 881,647
Long-Term Treasury 522,531 339,340
Inflation-Adjusted Treasury 0 0
Short-Term Government 1,623,040 2,460,469
GNMA Fund 5,898,043 3,115,478
- --------------------------------------------- ----------------- ----------------
1 Net of Reimbursements.
2 The fees for the period April 1, 1997, to July 31, 1997, which were paid
under the Investment Advisory Agreement with Benham Management Corporation,
include Administrative and Transfer Agent Fees.
3 Short-Term Governments fiscal year end was changed from October 31 to March
31 resulting in a five month annual reporting period.
Other Advisory Relationships
In addition to managing the funds, the advisor also acts as an investment
advisor to 12 institutional accounts and to the following registered investment
companies:
>> American Century Mutual Funds, Inc.
>> American Century World Mutual Funds, Inc.
>> American Century Premium Reserves, Inc.
>> American Century Variable Portfolios, Inc.
>> American Century Capital Portfolios, Inc.
>> American Century Strategic Asset Allocations, Inc.
>> American Century Municipal Trust
>> American Century California Tax-Free and Municipal Funds
>> American Century Investment Trust
>> American Century Target Maturities Trust
>> American Century Quantitative Equity Funds
>> American Century International Bond Funds.
TRANSFER AGENT AND ADMINISTRATOR
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend paying agent for the funds. It
provides physical facilities, computer hardware and software and personnel, for
the day-to-day administration of the funds and of the advisor. The advisor pays
American Century Services Corporation for such services.
Prior to August 1, 1997, the funds paid American Century Services Corporation
directly for its services as transfer agent and administrative services agent.
Administrative service and transfer agent fees paid by each fund for the fiscal
years ended March 31, 1998 and 1997, are indicated in the table below. Fee
amounts are net of expense limitations.
ADMINISTRATIVE FEES
- ------------------------------------------ ------------------ -----------------
Fund Fiscal 1998 Fiscal 1997
- ------------------------------------------ ------------------ -----------------
Capital Preservation $1,146,326 $2,871,948
Government Agency Money Market 144,980 459,802
Short-Term Treasury 11,573 33,371
Intermediate-Term Treasury 101,989 300,336
Long-Term Treasury 41,622 112,936
Inflation-Adjusted Treasury 0 0
Short-Term Government N/A N/A
GNMA Fund 359,302 1,059,314
- ------------------------------------------ ------------------ -----------------
TRANSFER AGENT FEES
- ------------------------------------------ ------------------ -----------------
Fund Fiscal 1998 Fiscal 1997
- ------------------------------------------ ------------------ -----------------
Capital Preservation $933,109 2,449,205
Government Agency Money Market 163,368 553,760
Short-Term Treasury 11,510 34,555
Intermediate-Term Treasury 77,150 258,334
Long-Term Treasury 66,019 181,017
Inflation-Adjusted Treasury 646 0
Short-Term Government N/A N/A
GNMA Fund 381,757 1,150,565
- ------------------------------------------ ------------------ -----------------
DISTRIBUTOR
The funds' shares are distributed by FDI, a registered broker-dealer. The
distributor is a wholly owned, indirect subsidiary of Boston Institutional
Group, Inc. The distributor's principal business address is 60 State Street,
Suite 1300, Boston, Massachusetts 02109.
The distributor is the principal underwriter of the funds' shares. The
distributor makes a continuous, best efforts underwriting of the funds' shares.
This means that the distributor has no liability for unsold shares.
OTHER SERVICE PROVIDERS
Custodian Banks
Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York 10003-9598,
and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105, each serves
as custodian of the assets of the funds. The custodians take no part in
determining the investment policies of the funds or in deciding which securities
are purchased or sold by the funds. The funds, however, may invest in certain
obligations of the custodians and may purchase or sell certain securities from
or to the custodians.
Independent Accountants
PricewaterhouseCoopers LLP is the independent accountant of the funds. The
address of PricewaterhouseCoopers LLP is City Center Square, 1100 Main Street,
Suite 900, Kansas City, Missouri 64105-2140. As the independent accountant of
the funds, PricewaterhouseCoopers provides services including (1) audit of the
annual financial statements for the funds, (2) assistance and consultation in
connection with SEC filings and (3) review of the annual federal income tax
return filed for each fund.
KPMG Peat Marwick LLP, 1000 Walnut, Suite 1600, Kansas City, Missouri 64106,
served as independent accountants for the funds for the fiscal year ended March
31, 1997, and for all prior periods.
BROKERAGE ALLOCATION
Under the management agreement between the funds and the advisor, the advisor
has the responsibility of selecting brokers and dealers to execute portfolio
transactions. In many transactions, the selection of the broker or dealer is
determined by the availability of the desired security and its offering price.
In other transactions, the selection of broker or dealer is a function of the
selection of market and the negotiation of price, as well as the broker's
general execution and operational and financial capabilities in the type of
transaction involved. The advisor will seek to obtain prompt execution of orders
at the most favorable prices or yields. The advisor may choose to purchase and
sell portfolio securities to and from dealers who provide services or research,
statistical and other information to the funds and to the advisor. Such
information or services will be in addition to and not in lieu of the services
required to be performed by the advisor, and the expenses of the advisor will
not necessarily be reduced as a result of the receipt of such supplemental
information.
INFORMATION ABOUT FUND SHARES
The Declaration of Trust permits the Board of Trustees to issue an unlimited
number of full and fractional shares of beneficial interest without par value,
which may be issued in series (or funds). Shares issued are fully paid and
nonassessable and have no preemptive, conversion or similar rights.
Each fund votes separately on matters affecting that fund exclusively. Voting
rights are not cumulative, so that investors holding more than 50% of the
Trust's (i.e., all funds') outstanding shares may be able to elect a Board of
Trustees. The Trust instituted dollar-based voting, meaning that the number of
votes you are entitled to is based upon the dollar amount of your investment.
The election of trustees is determined by the votes received from all Trust
shareholders without regard to whether a majority of shares of any one fund
voted in favor of a particular nominee or all nominees as a group.
Each shareholder has rights to dividends and distributions declared by the fund
he or she owns and to the net assets of such fund upon its liquidation or
dissolution proportionate to his or her share ownership interest in the fund.
Shares of each fund have equal voting rights, although each fund votes
separately on matters affecting that fund exclusively.
Shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust. The Declaration of Trust also provides for
indemnification and reimbursement of expenses of any shareholder held personally
liable for obligations of the Trust. The Declaration of Trust provides that the
Trust will, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. The Declaration of Trust further provides that the Trust may maintain
appropriate insurance (for example, fidelity, bonding and errors and omissions
insurance) for the protection of the Trust, its shareholders, trustees,
officers, employees and agents to cover possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss as a result of
shareholder liability is limited to circumstances in which both inadequate
insurance exists and the Trust is unable to meet its obligations.
MULTIPLE CLASS STRUCTURE
The funds' Board of Trustees has adopted a multiple class plan (the Multiclass
Plan) pursuant to Rule 18f-3 adopted by the SEC. Pursuant to such plan, the
funds may issue up to three classes of funds: an Investor Class, an
Institutional Class and an Advisor Class. Not all funds offer all three classes
The Investor Class is made available to investors directly without any load or
commission, for a single unified management fee. The Institutional and Advisor
Classes are made available to institutional shareholders or through financial
intermediaries that do not require the same level of shareholder and
administrative services from the advisor as Investor Class shareholders. As a
result, the advisor is able to charge these classes a lower unified management
fee. In addition to the management fee, however, the Advisor Class shares are
subject to a Master Distribution and Shareholder Services Plan. The plan has
been adopted by the funds' Board of Trustees and initial shareholder in
accordance with Rule 12b-1 adopted by the SEC under the Investment Company Act.
RULE 12B-1
Rule 12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by the investment
company's Board of Trustees and approved by its shareholders. Pursuant to such
rule, the Board of Trustees and initial shareholder of the funds' Advisor Class
have approved and entered into a Master Distribution and Shareholder Services
Plan (the Plan).
In adopting the Plan, the Board of Trustees [including a majority who are not
interested persons of the funds (as defined in the Investment Company Act),
hereafter referred to as the "independent trustees"] determined that there was a
reasonable likelihood that the Plan would benefit the funds and the shareholders
of the affected class. Pursuant to Rule 12b-1, information with respect to
revenues and expenses under the Plan is presented to the Board of Trustees
quarterly for its consideration in connection with its deliberations as to the
continuance of the Plan. Continuance of the Plan must be approved by the Board
of Trustees (including a majority of the independent trustees) annually. The
Plan may be amended by a vote of the Board of Trustees (including a majority of
the independent trustees), except that the Plan may not be amended to materially
increase the amount to be spent for distribution without majority approval of
the shareholders of the affected class. The Plan terminates automatically in the
event of an assignment and may be terminated upon a vote of a majority of the
independent trustees or by vote of a majority of the outstanding voting
securities of the affected class.
All fees paid under the Plan will be made in accordance with Section 26 of the
Rules of Fair Practice of the National Association of Securities Dealers (NASD).
MASTER DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
As described in the Prospectuses, the funds' Advisor Class of shares are made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through financial intermediaries, such as banks,
broker-dealers and insurance companies. The distributor enters into contracts
with various banks, broker-dealers, insurance companies and other financial
intermediaries with respect to the sale of the funds' shares and/or the use of
the funds' shares in various investment products or in connection with various
financial services.
Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for shareholders in
the Advisor Class. In addition to such services, the financial intermediaries
provide various distribution services.
To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
investment manager has reduced its management fee by 0.25% per annum with
respect to the Advisor Class shares and the funds' Board of Trustees has adopted
a Master Distribution and Shareholder Services Plan (the Distribution Plan).
Pursuant to such Plan, the Advisor Class shares pay the distributor a fee of
0.50% annually of the aggregate average daily assets of the funds' Advisor Class
shares, 0.25% of which is paid for Shareholder Services (as described below) and
0.25% of which is paid for distribution services.
Payments may be made for a variety of shareholder services, including, but not
limited to, (a) receiving, aggregating and processing purchase, exchange and
redemption requests from beneficial owners (including contract owners of
insurance products that utilize the funds as underlying investment media) of
shares and placing purchase, exchange and redemption orders with the
distributor; (b) providing shareholders with a service that invests the assets
of their accounts in shares pursuant to specific or pre-authorized instructions;
(c) processing dividend payments from a fund on behalf of shareholders and
assisting shareholders in changing dividend options, account designations and
addresses; (d) providing and maintaining elective services such as check writing
and wire transfer services; (e) acting as shareholder of record and nominee for
beneficial owners; (f) maintaining account records for shareholders and/or other
beneficial owners; (g) issuing confirmations of transactions; (h) providing
subaccounting with respect to shares beneficially owned by customers of third
parties or providing the information to a fund as necessary for such
subaccounting, (i) preparing and forwarding shareholder communications from the
funds (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to shareholders and/or
other beneficial owners; (j) providing other similar administrative and
sub-transfer agency services; and (k) paying service fees for the provision of
personal, continuing services to investors, as contemplated by the Rules of Fair
Practice of the NASD (collectively referred to as shareholder services).
Shareholder services do not include those activities and expenses that are
primarily intended to result in the sale of additional shares of the funds.
Distribution services include any activity undertaken or expense incurred that
is primarily intended to result in the sale of Advisor Class shares, which
services may include but are not limited to, (a) the payment of sales
commission, ongoing commissions and other payments to brokers, dealers,
financial institutions or others who sell Advisor Class shares pursuant to
selling agreements; (b) compensation to registered representatives or other
employees of distributor who engage in or support distribution of the funds'
Advisor Class shares; (c) compensation to, and expenses (including overhead and
telephone expenses) of the distributor; (d) the printing of prospectuses,
statements of additional information and reports for other than existing
shareholders; (e) the preparation, printing and distribution of sales literature
and advertising materials provided to the funds' shareholders and prospective
shareholders; (f) receiving and answering correspondence from prospective
shareholders, including distributing prospectuses, statements of additional
information, and shareholder reports; (g) the providing of facilities to answer
questions from prospective investors about fund shares; (h) complying with
federal and state securities laws pertaining to the sale of fund shares; (i)
assisting investors in completing application forms and selecting dividend and
other account options; (j) the providing of other reasonable assistance in
connection with the distribution of fund shares; (k) the organizing and
conducting of sales seminars and payments in the form of transactional
compensation or promotional incentives; (l) profit on the foregoing; (m) the
payment of "service fees" for the provision of personal, continuing services to
investors, as contemplated by the Rules of Fair Practice of the NASD and (n)
such other distribution and services activities as the Manager determines may be
paid for by the funds pursuant to the terms of this Agreement and in accordance
with Rule 12b-1 of the Investment Company Act.
BUYING AND SELLING FUND SHARES
Information about buying, selling and exchanging fund shares is contained in the
American Century Investor Services Guide. The guide is available to investors
without charge and may be obtained by calling us.
VALUATION OF A FUND'S SECURITIES
Each fund's net asset value per share (NAV) is calculated as of the close of
business of the New York Stock Exchange (the Exchange), usually at 3 p.m.
Central time each day the Exchange is open for business. The Exchange typically
observes the following holidays: New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Although the funds expect the same holidays
to be observed in the future, the Exchange may modify its holiday schedule at
any time.
The advisor typically completes its trading on behalf of each fund in various
markets before the Exchange closes for the day. Each fund's share price is
calculated by adding the value of all portfolio securities and other assets,
deducting liabilities and dividing the result by the number of shares
outstanding. Expenses and interest earned on portfolio securities are accrued
daily.
MONEY MARKET FUNDS
Securities held by the money market funds are valued at amortized cost. This
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium paid at the time of
purchase. Although this method provides certainty in valuation, it generally
disregards the effect of fluctuating interest rates on an instrument's market
value. Consequently, the instrument's amortized cost value may be higher or
lower than its market value, and this discrepancy may be reflected in the funds'
yields. During periods of declining interest rates, for example, the daily yield
on fund shares computed as described above may be higher than that of a fund
with identical investments priced at market value. The converse would apply in a
period of rising interest rates.
The money market funds operate pursuant to Investment Company Act Rule 2a-7,
which permits valuation of portfolio securities on the basis of amortized cost.
As required by the Rule, the Board of Trustees has adopted procedures designed
to stabilize, to the extent reasonably possible, a money market fund's price per
share as computed for the purposes of sales and redemptions at $1.00. While the
day-to-day operation of the money market funds has been delegated to the
advisor, the quality requirements established by the procedures limit
investments to certain instruments that the Board of Trustees has determined
present minimal credit risks and that have been rated in one of the two highest
rating categories as determined by a rating agency or, in the case of unrated
securities, of comparable quality. The procedures require review of the money
market fund's portfolio holdings at such intervals as are reasonable in light of
current market conditions to determine whether the money market fund's net asset
value calculated by using available market quotations deviates from the
per-share value based on amortized cost. The procedures also prescribe the
action to be taken if such deviation should occur.
The Board of Trustees monitors the levels of illiquid securities, however if the
levels are exceeded, they will take action to rectify these levels.
Actions the Board of Trustees may consider under these circumstances include (i)
selling portfolio securities prior to maturity, (ii) withholding dividends or
distributions from capital, (iii) authorizing a one-time dividend adjustment,
(iv) discounting share purchases and initiating redemptions in kind, or (v)
valuing portfolio securities at market price for purposes of calculating NAV.
NON-MONEY MARKET FUNDS
Securities held by the non-money market funds normally are priced by an
independent pricing service, provided that such prices are believed by the
advisor to reflect the fair market value of portfolio securities.
Because there are hundreds of thousands of municipal issues outstanding, and the
majority of them do not trade daily, the prices provided by pricing services are
generally determined without regard to bid or last sale prices. In valuing
securities, the pricing services generally take into account institutional
trading activity, trading in similar groups of securities, and any developments
related to specific securities. The methods used by the pricing service and the
valuations so established are reviewed by the advisor under the general
supervision of the Board of Trustees. There are a number of pricing services
available, and the advisor, on the basis of ongoing evaluation of these
services, may use other pricing services or discontinue the use of any pricing
service in whole or in part.
Securities not priced by a pricing service are valued at the mean between the
most recently quoted bid and ask prices provided by broker-dealers. The
municipal bond market is typically a "dealer market"; that is, dealers buy and
sell bonds for their own accounts rather than for customers. As a result, the
spread, or difference between bid and asked prices, for certain municipal bonds
may differ substantially among dealers.
Securities maturing within 60 days of the valuation date may be valued at cost,
plus or minus any amortized discount or premium, unless the trustees determine
that this would not result in fair valuation of a given security. Other assets
and securities for which quotations are not readily available are valued in good
faith at their fair value using methods approved by the Board of Trustees.
TAXES
Federal Income Tax
Each fund intends to qualify annually as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). By so
qualifying, a fund will be exempt from federal and California income taxes to
the extent that it distributes substantially all of its net investment income
and net realized capital gains (if any) to shareholders. If a fund fails to
qualify as a regulated investment company, it will be liable for taxes,
significantly reducing its distributions to shareholders and eliminating
shareholders' ability to treat distributions of the funds in the manner they
were realized by the funds.
Certain of the bonds purchased by the funds may be treated as bonds that were
originally issued at a discount. Original issue discount represents interest for
federal income tax purposes and can generally be defined as the difference
between the price at which a security was issued and its stated redemption price
at maturity. Original issue discount, although no cash is actually received by a
fund until the maturity of the bond, is treated for federal income tax purposes
as income earned by a fund over the term of the bond, and therefore is subject
to the distribution requirements of the Code. The annual amount of income earned
on such a bond by a fund generally is determined on the basis of a constant
yield to maturity that takes into account the semiannual compounding of accrued
interest. Original issue discount on an obligation with interest exempt from
federal income tax will constitute tax-exempt interest income to the fund.
In addition, some of the bonds may be purchased by a fund at a discount that
exceeds the original issue discount on such bonds, if any. This additional
discount represents market discount for federal income tax purposes. The gain
realized on the disposition of any bond having market discount generally will be
treated as taxable ordinary income to the extent it does not exceed the accrued
market discount on such bond (unless a fund elects to include market discount in
income in tax years to which it is attributable). Generally, market discount
accrues on a daily basis for each day the bond is held by a fund on a straight
line basis over the time remaining to the bond's maturity. In the case of any
debt security having a fixed maturity date of not more than one year from date
of issue, the gain realized on disposition generally will be treated as
short-term capital gain. In general, gain realized on disposition of a security
held less than one year is treated as short-term capital gain.
Under the Code, any distribution of a fund's net realized long-term capital
gains designated by the fund as a capital gain dividend is taxable to
shareholders as long-term capital gains, regardless of the length of time shares
are held. If a capital gain dividend is paid with respect to any shares of a
fund sold at a loss after being held for six months or less, the loss will be
treated as a long-term capital loss for tax purposes. The Code also provides
that if a shareholder holds shares of a fund for six months or less, the
deduction of any loss on the sale or exchange of those shares is disallowed to
the extent that the shareholder received exempt-interest dividends with respect
to those shares.
State and Local Taxes
Distributions also may be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
The information above is only a summary of some of the tax considerations
affecting the funds and their shareholders. No attempt has been made to discuss
individual tax consequences. A prospective investor should consult with his or
her tax advisors or state or local tax authorities to determine whether the
funds are suitable investments.
HOW FUND PERFORMANCE INFORMATION IS CALCULATED
The funds may quote performance in various ways. Historical performance
information will be used in advertising and sales literature.
For the money market funds, yield quotations are based on the change in the
value of a hypothetical investment (excluding realized gains and losses from the
sale of securities and unrealized appreciation and depreciation of securities)
over a seven-day period (base period) and stated as a percentage of the
investment at the start of the base period (base-period return). The base-period
return is then annualized by multiplying by 365/7 with the resulting yield
figure carried to at least the nearest hundredth of one percent.
Calculations of effective yield begin with the same base-period return used to
calculate yield, but the return is then annualized to reflect weekly compounding
according to the following formula:
Effective Yield = [(Base-Period Return + 1)365/7] - 1
For the non-money market funds, yield quotations are based on the investment
income per share earned during a particular 30-day period, less expenses accrued
during the period (net investment income), and are computed by dividing the
fund's net investment income by its share price on the last day of the period
according to the following formula:
YIELD = (2 [(a - b + 1)6 - 1])/cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends, and d =
the maximum offering price per share on the last day of the period.
Money Market Fund Yields
(seven-day period ended March 31, 1999)
- ------------------------------- --------- ---------
7-Day Effective
Yield Yield
- ------------------------------- --------- ---------
Capital Preservation 4.17% 4.26%
Government Agency Money Market 4.37% 4/47%
- ------------------------------- --------- ---------
- ------------------------------ ---------- -------- ---------------
Cumulative Average Inception Date
Fund Total Annual
Return Total
Since Return
Inception
- ------------------------------ ---------- -------- ---------------
Capital Preservation Data not yet 10/13/1972
available
Government Agency Money 12/05/1989
Market
Short-Term Treasury 09/08/1992
Intermediate-Term Treasury 05/16/1980
Long-Term Treasury 09/08/1992
Inflation-Adjusted Treasury 02/10/1997
Short-Term Government 12/15/1982
GNMA Fund 09/23/1985
- ------------------------------ ---------- -------- ---------------
Non-Money Market Fund Yields
(30-day period ended March 31, 1999)
- ------------------------------------- -------------
Fund 30-Day Yield
- ------------------------------------- -------------
Short-Term Treasury 4.66%
Intermediate-Term Treasury 4.83%
Long-Term Treasury 5.46%
Inflation-Adjusted Treasury 6.60%
Short-Term Government 5.07%
GNMA Fund 6.14%
- ------------------------------------- -------------
Total returns quoted in advertising and sales literature reflect all aspects of
a fund's return, including the effect of reinvesting dividends and capital gain
distributions (if any) and any change in the fund's NAV during the period.
Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in a fund during a stated
period and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual return of 7.18%, which is the
steady annual rate that would equal 100% growth on a compounded basis in 10
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the funds' performance is
not constant over time, but changes from year-to-year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.
In addition to average annual total returns, each fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as percentages or as dollar amounts and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) to illustrate the
relationship of these factors and their contributions to total return.
ADDITIONAL PERFORMANCE COMPARISONS
The funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indexes of market
performance. This may include comparisons with funds that, unlike the American
Century funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be used for such comparisons may include, but are not
limited to, U.S. Treasury bill, note and bond yields, money market fund yields,
U.S. government debt and percentage held by foreigners, the U.S. money supply,
net free reserves, and yields on current-coupon GNMAs (source: Board of
Governors of the Federal Reserve System); the federal funds and discount rates
(source: Federal Reserve Bank of New York); yield curves for U.S. Treasury
securities and AA/AAA-rated corporate securities (source: Bloomberg Financial
Markets); yield curves for AAA-rated tax-free municipal securities (source:
Telerate); yield curves for foreign government securities (sources: Bloomberg
Financial Markets and Data Resources, Inc.); total returns on foreign bonds
(source: J.P. Morgan Securities Inc.); various U.S. and foreign government
reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper, Inc. or Morningstar, Inc.; mutual fund
rankings published in major, nationally distributed periodicals; data provided
by the Investment Company Institute; Ibbotson Associates, Stocks, Bonds, Bills,
and Inflation; major indexes of stock market performance; and indexes and
historical data supplied by major securities brokerage or investment advisory
firms. The funds also may utilize reprints from newspapers and magazines
furnished by third parties to illustrate historical performance or to provide
general information about the funds.
PERMISSIBLE ADVERTISING INFORMATION
From time to time, the funds may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders: (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost averaging); (2) discussions of general economic
trends; (3) presentations of statistical data to supplement such discussions;
(4) descriptions of past or anticipated portfolio holdings for one or more of
the funds; (5) descriptions of investment strategies for one or more of the
funds; (6) descriptions or comparisons of various savings and investment
products (including, but not limited to, qualified retirement plans and
individual stocks and bonds), which may or may not include the funds; (7)
comparisons of investment products (including the funds) with relevant market or
industry indices or other appropriate benchmarks; (8) discussions of fund
rankings or ratings by recognized rating organizations; and (9) testimonials
describing the experience of persons that have invested in one or more of the
funds. The funds also may include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of any of the funds.
MULTIPLE CLASS PERFORMANCE ADVERTISING
Pursuant to the Multiple Class Plan, the funds may issue additional classes of
existing funds or introduce new funds with multiple classes available for
purchase. To the extent a new class is added to an existing fund, the manager
may, in compliance with SEC and NASD rules, regulations and guidelines, market
the new class of shares using the historical performance information of the
original class of shares. When quoting performance information for the new class
of shares for periods prior to the first full quarter after inception, the
original class' performance will be restated to reflect the expenses of the new
class. For periods after the first full quarter after inception, actual
performance of the new class will be used.
FINANCIAL STATEMENTS
The financial statements of the funds are included in the Annual Reports to
shareholders for the fiscal year ended March 31, 1999. The Annual Reports are
incorporated herein by reference. You may receive copies of the Reports without
charge upon request to American Century at the address and telephone number
shown on the back cover of the Statement of Additional Information.
More information about the funds is contained in the funds' annual and
semiannual reports. These contain more information about the funds' investments
and the market conditions and investment strategies that significantly affected
the funds' performance during the most recent six-month fiscal period. The
annual and semiannual reports are incorporated by reference into this SAI. This
means that it is legally part of this SAI.
>> You can receive free copies of the annual and semiannual reports and ask
any questions about the funds and your accounts by contacting American
Century at the address or telephone numbers listed below.
>> If you own or are considering purchasing fund shares through
o an employer-sponsored retirement plan
o a bank
o a broker-dealer
o an insurance company
o another financial intermediary
you can receive the annual and semiannual reports directly from them.
>> You can also get information about the funds from the Securities and
Exchange Commission.
o In person. SEC Public Reference Room Washington, D.C. Call
1-800-SEC-0330 for location and hours.
o On the internet. www.sec.gov.
o By mail. SEC Public Reference Section Washington, D.C. 20549-6009.
(The SEC will charge a fee for copying the documents you request.)
<TABLE>
- -----------------------------------------------------------------------------------
<S> <C>
American Century Investments Business, Not-For-Profit and Employer-Sponsored
P.O. Box 419200 Retirement Plans
Kansas City, Missouri 64141-6200 1-800-345-3533
www.americancentury.com Telecommunications Device for Deaf
1-800-634-4113 or 816-444-3485
Investor Relations
1-800-345-2021 or 816-531-5575 Fax
816-340-7962
Automated Information Line
1-800-345-8765
- -----------------------------------------------------------------------------------
</TABLE>
Investment Company Act File No. 811-4363
<PAGE>
AMERICAN CENTURY GOVERNMENT INCOME TRUST
PART C OTHER INFORMATION
Item 23 Exhibits (all exhibits not filed herewith are being incorporated
herein by reference).
(a) Amended and Restated Agreement and Declaration of Trust dated
March 9, 1998 and amended March 1, 1999 is included herein.
(b) Amended and Restated Bylaws, dated March 9, 1998 (filed
electronically as Exhibit 2b to Post-Effective Amendment No. 23
to the Registration Statement on Form N-1A of American Century
Municipal Trust, filed March 26, 1998, File No. 2-91229).
(c) Registrant hereby incorporates by reference, as though set forth
fully herein, Article III, Article IV, Article V, Article VI and
Article VIII of Registrant's Amended and Restated Agreement and
Declaration of Trust, appearing as Exhibit (a) to this
Post-Effective Amendment No. 37 to the Registration Statement on
Form N-1A of the Registrant; and Article II, Article III, Article
IV and Article V of Registrant's Amended and Restated Bylaws,
appearing as Exhibit (b) to Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A of American Century
Municipal Trust on March 26, 1998.
(d) (1) Investor Class Management Agreement between American Century
Government Income Trust and American Century Investment
Management, Inc. dated August 1, 1997 (filed electronically as
Exhibit 5 to Post-Effective Amendment No. 33 to the Registration
Statement on Form N-1A, File No. 2-99222, filed July 31, 1997).
(2) Advisor Class Investment Management Agreement between
American Century Government Income Trust and American Century
Investment Management, Inc., dated August 1, 1997 (filed
electronically as Exhibit 5(b) to Post-Effective Amendment No. 27
to the Registration Statement on Form N-1A of American Century
Target Maturities Trust, filed August 29, 1997, File No.
2-94608).
(e) (1) Distribution Agreement between American Century Government
Income Trust and Funds Distributor, Inc., dated January 15, 1998
(filed electronically as Exhibit 6 to Post-Effective Amendment
No. 28 to the Registration Statement on Form N-1A of American
Century Target Maturities Trust, filed January 30, 1998, File No.
2-94608).
(2) Amendment No. 1 to Distribution Agreement between American
Century Government Income Trust and Funds Distributor, Inc.,
dated June 1, 1998 (filed electronically as Exhibit B6b to
Post-Effective Amendment No. 23 to the Registration Statement on
Form N-1A of American Century Quantitative Equity Funds on June
29, 1998, File No. 33-19589).
(3) Amendment No. 2 to Distribution Agreement between American
Century Government Income Trust and Funds Distributor, Inc.,
dated December 1, 1998 (filed electronically as Exhibit B6c to
Post-Effective Amendment No. 12 to the Registration Statement on
Form N-1A of American Century World Mutual Funds, Inc. on
November 13, 1998, File No. 33-39242).
(4) Amendment No. 3 to Distribution Agreement between American
Century Government Income Trust and Funds Distributor, Inc.,
dated January 29, 1999 (filed electronically as Exhibit e4 to
Post-Effective Amendment No. 28 to the Registration Statement on
Form N-1A of American Century California Tax-Free and Municipal
Funds on December 28, 1998, File No. 2-82734).
(f) Not applicable.
(g) Custodian Agreement between American Century Government Income
Trust and The Chase Manhattan Bank, dated August 9, 1996 (filed
electronically as Exhibit 8 to Post-Effective Amendment No. 31 to
the Registration Statement on Form N-1A filed on February 7,
1997, File No. 2-99222).
(h) (1) Transfer Agency Agreement between American Century Government
Income Trust and American Century Services Corporation, dated
August 1, 1997 (filed electronically as Exhibit 9 to
Post-Effective Amendment No. 33 to the Registration Statement on
Form N-1A filed on July 31, 1997, File No. 2-99222).
(2) Credit Agreement between American Century Funds and The Chase
Manhattan Bank, as Administrative Agent dated as of December 18,
1998 is included herein.
(i) Opinion and Consent of counsel included herein.
(j) (1) Consent of PricewaterhouseCoopers LLP, independent
accountants, to be filed by amendment.
(2) Consent of KPMG Peat Marwick, LLP, independent auditors
(filed electronically as Exhibit 11 to Post-Effective Amendment
No. 33 to the Registration Statement on Form N-1A of Registrant,
filed July 31, 1997, File No. 2-99222).
(3) Power of Attorney dated December 18, 1998 is included herein.
(k) Not applicable.
(l) Not applicable.
(m) (1) Master Distribution and Shareholder Services Plan of American
Century Government Income Trust, American Century International
Bond Fund, American Century Target Maturities Trust and American
Century Quantitative Equity Funds (Advisor Class) dated August 1,
1997 (filed electronically as Exhibit 15 of Post-Effective
Amendment No. 27 to the Registration Statement on Form N-1A for
American Century Target Maturities Trust, filed August 29, 1997,
File No. 2-94608).
(2) Amendment No. 1 to Master Distribution and Shareholder
Services Plan of American Century Government Income Trust
(Advisor Class) dated June 29, 1998 (filed electronically as
Exhibit 15b to Post-Effective Amendment No. 23 of the
Registration Statement on Form N-1A of American Century
Quantitative Equity Funds filed on June 29, 1998, File No.
33-19589).
(n) (1) Financial Data Schedule GNMA Fund is included herein.
(2) Financial Data Schedule for Intermediate-Term Treasury Fund
is included herein.
(3) Financial Data Schedule for Government Agency Money Market
Fund is included herein.
(4) Financial Data Schedule for Short-Term Government Fund is
included herein.
(5) Financial Data Schedule for Short-Term Treasury Fund is
included herein.
(6) Financial Data Schedule for Long-Term Treasury Fund is
included herein.
(7) Financial Data Schedule for Inflation-Adjusted Treasury Fund
is included herein.
(8) Financial Data Schedule for Capital Preservation Fund is
included herein.
(o) (1) Multiple Class Plan of American Century California Tax-Free
and Municipal Funds, American Century Government Income Trust,
American Century International Bond Funds, American Century
Investment Trust, American Century Municipal Trust, American
Century Target Maturities Trust and American Century Quantitative
Equity Funds dated August 1, 1997 (filed electronically as
Exhibit 15 to Post-Effective Amendment No. 27 to the Registration
Statement on Form N-1A of American Century Target Maturities
Trust, filed August 29, 1997, File No. 2-94608).
(2) Amendment to Multiple Class Plan of American Century
California Tax-Free and Municipal Funds, American Century
Government Income Trust, American Century International Bond
Funds, American Century Investment Trust, American Century
Municipal Trust, American Century Target Maturities Trust and
American Century Quantitative Equity Funds dated August 1, 1997
(filed electronically as Exhibit o2 to Post-Effective Amendment
No. 23 to the Registration Statement on Form N-1A of American
Century Quantitative Equity Funds, filed June 29, 1998, File No.
33-19589).
Item 24. Persons Controlled by or Under Common Control with Registrant.
Not applicable.
Item 25. Indemnification.
As stated in Article VII, Section 3 of the Declaration of Trust, incorporated
herein by reference to Exhibit 1 to the Registration Statement, "The Trustees
shall be entitled and empowered to the fullest extent permitted by law to
purchase insurance for and to provide by resolution or in the Bylaws for
indemnification out of Trust assets for liability and for all expenses
reasonably incurred or paid or expected to be paid by a Trustee or officer in
connection with any claim, action, suit, or proceeding in which he or she
becomes involved by virtue of his or her capacity or former capacity with the
Trust. The provisions, including any exceptions and limitations concerning
indemnification, may be set forth in detail in the Bylaws or in a resolution
adopted by the Board of Trustees."
Registrant hereby incorporates by reference, as though set forth fully herein,
Article VI of the Registrant's Amended and Restated Bylaws, dated March 9, 1998,
appearing as Exhibit 2b to Post-Effective Amendment No. 23 to the Registration
Statement on Form N-1A of American Century Municipal Trust filed March 26, 1998.
The Registrant has purchased an insurance policy insuring its officers and
directors against certain liabilities which such officers and directors may
incur while acting in such capacities and providing reimbursement to the
Registrant for sums which it may be permitted or required to pay to its officers
and directors by way of indemnification against such liabilities, subject in
either case to clauses respecting deductibility and participation.
Item 26. Business and Other Connections of Investment Advisor.
None.
Item 27. Principal Underwriters.
(a) Funds Distributor, Inc. (the "Distributor") acts as principal
underwriter for the following investment companies.
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Equity Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Kobrick Investment Trust
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.
The Distributor is registered with the Securities and Exchange Commission
as a broker-dealer and is a member of the National Association of Securities
Dealers. The Distributor is located at 60 State Street, Suite 1300, Boston,
Massachusetts 02109. The Distributor is an indirect wholly-owned subsidiary of
Boston Institutional Group, Inc., a holding company all of whose outstanding
shares are owned by key employees.
(b) The following is a list of the executive officers, directors and
partners of the Distributor:
<TABLE>
Name and Principal Business Address* Positions and Offices with Positions and Offices with
Underwriter Registrant
<S> <C> <C>
Marie E. Connolly Director, President and Chief none
Executive Officer
George A. Rio Executive Vice President President, Principal Executive
and Principal Financial Officer
Donald R. Roberson Executive Vice President none
William S. Nichols Executive Vice President none
Margaret W. Chambers Senior Vice President, none
General Counsel, Chief
Compliance Officer,
Secretary and Clerk
Joseph F. Tower, III Director, Senior Vice President, none
Treasurer and Chief Financial
Officer
Paula R. David Senior Vice President none
Gary S. MacDonald Senior Vice President none
Judith K. Benson Senior Vice President none
William J. Nutt Chairman and Director none
- --------------------
* All addresses are 60 State Street, Suite 1300, Boston, Massachusetts 02109
</TABLE>
(c) Not applicable.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act, and the rules promulgated thereunder, are in the
possession of the Registrant, American Century Services Corporation and American
Century Investment Management, Inc., all located at American Century Tower, 4500
Main Street, Kansas City, Missouri 64111.
Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, American Century Investment Trust, the Registrant, has duly
caused this Post-Effective Amendment No. 37/Amendment No. 38 to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Kansas City, State of Missouri, on the 7th day of
May, 1999.
AMERICAN CENTURY GOVERNMENT INCOME TRUST
By: /*/George A. Rio
George A. Rio
President and Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 37/Amendment No. 38 has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Date
<S> <C> <C>
*George A. Rio President, Principal May 7, 1999
- --------------------------------- Executive and Principal
George A. Rio Financial Officer
*Maryanne Roepke Vice President, Treasurer May 7, 1999
- --------------------------------- and Principal Accounting
Maryanne Roepke Officer
*Albert A. Eisenstat Director May 7, 1999
- ---------------------------------
Albert A. Eisenstat
*Ronald J. Gilson Director May 7, 1999
- ---------------------------------
Ronald J. Gilson
*William M. Lyons Director May 7, 1999
- ---------------------------------
William M. Lyons
*Myron S. Scholes Director May 7, 1999
- ---------------------------------
Myron S. Scholes
*Kenneth E. Scott Director May 7, 1999
- ---------------------------------
Kenneth E. Scott
*Isaac Stein Director May 7, 1999
- ---------------------------------
Isaac Stein
*James E. Stowers III Director May 7, 1999
- ---------------------------------
James E. Stowers III
*Jeanne D. Wohlers Director May 7, 1999
- ---------------------------------
Jeanne D. Wohlers
</TABLE>
/s/Charles C.S. Park
*by Charles C.S. Park, Attorney in Fact
(pursuant to a Power of Attorney dated December 18, 1998).
EXHIBIT DESCRIPTION
EX-99.a Amended and Restated Agreement and Declaration of Trust dated March
9, 1998 and amended March 1, 1999 is included herein.
EX-99.b Amended and Restated Bylaws, dated March 9, 1998 (filed as Exhibit
2b of Post-Effective Amendment No. 23 of the Registration Statement
on Form N-1A of American Century Municipal Trust, File No. 2-91229,
filed March 26, 1998 and incorporated herein by reference).
EX-99.d1 Investor Class Management Agreement between American Century
Government Income Trust and American Century Investment Management,
Inc. dated August 1, 1997 (filed as Exhibit 5 of Post-Effective
Amendment No. 33 to the Registration Statement on Form N-1A of
Registrant, File No. 2-99222, filed July 31, 1997 and incorporated
herein by reference).
EX-99.d2 Advisor Class Investment Management Agreement between American
Century Government Income Trust and American Century Investment
Management, Inc., dated August 1, 1997 (filed as Exhibit 5(b) of
Post-Effective Amendment No. 27 to the Registration Statement on
Form N-1A for American Century Target Maturities Trust, File No.
2-94608, filed August 29, 1997 and incorporated herein by
reference).
EX-99.e1 Distribution Agreement between American Century Government Income
Trust and Funds Distributor, Inc., dated January 15, 1998 (filed as
Exhibit 6 of Post-Effective Amendment No. 28 to the Registration
Statement on Form N-1A of American Century Target Maturities Trust,
File No. 2-94608 filed January 30, 1998 and incorporated herein by
reference).
EX-99.e2 Amendment No. 1 to Distribution Agreement between American Century
Government Income Trust and Funds Distributor, Inc., dated June 1,
1998 (filed as Exhibit B6b to of Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A of American Century
Quantitative Equity Funds, File No. 33-19589, filed on June 29,
1998, and incorporated herein by reference).
EX-99.e3 Amendment No. 2 to Distribution Agreement between American Century
Government Income Trust and Funds Distributor, Inc., dated December
1, 1998 (filed as Exhibit B6c to Post-Effective Amendment No. 12 to
the Registration Statement on Form N-1A of American Century World
Mutual Funds, Inc., File No. 33-39242, filed on November 13, 1998,
and incorporated herein by reference).
EX-99.e4 Amendment No. 3 to Distribution Agreement between American Century
Government Income Trust and Funds Distributor, Inc., dated January
29, 1999 (filed as Exhibit e4 to Post-Effective Amendment No. 28 to
the Registration Statement on Form N-1A of American Century
California Tax-Free and Municipal Funds, File No. 2-82734, filed on
December 28, 1998, and incorporated herein by reference).
EX-99.g Custodian Agreement between American Century Government Income Trust
and The Chase Manhattan Bank, dated August 9, 1996 (filed as Exhibit
8 to Post-Effective Amendment No. 31 to the Registration Statement
on Form N-1A of the Registrant, File No. 2-99222, filed on February
7, 1997 and incorporated herein by reference).
EX-99.h1 Transfer Agency Agreement between American Century Government Income
Trust and American Century Services Corporation, dated August 1,
1997 (filed as Exhibit 9 to Post-Effective Amendment No. 33 to the
Registration Statement on Form N-1A of the Registrant, File No.
2-99222, filed on July 31, 1997 and incorporated herein by
reference).
EX-99.h2 Credit Agreement between American Century Funds and The Chase
Manhattan Bank, as administrative Agent dated as of December 18,
1998, included herein.
EX-99.i Opinion and consent of Counsel, included herein.
EX-99.j1 Consent of PricewaterhouseCoopers LLP, independent accountants, to
be filed by amendment.
EX-99.j2 Consent of KPMG Peat Marwick, independent auditors (filed as Exhibit
11 to Post-Effective Amendment No. 33 to the Registration Statement
on Form N-1A of the Registrant, File No. 2-99222, filed July 31,
1997 and incorporated herein by reference).
EX-99.j3 Power of Attorney dated December 18, 1998, included herein.
EX-99.m1 Master Distribution and Shareholder Services Plan of American
Century Government Income Trust, American Century International Bond
Fund, American Century Target Maturities Trust and American Century
Quantitative Equity Funds (Advisor Class) dated August 1, 1997
(filed as Exhibit 15 to Post-Effective Amendment No. 27 to the
Registration Statement on Form N-1A for American Century Target
Maturities Trust, File No. 2-94608, filed August 29, 1997 and
incorporated herein by reference).
EX-99.m2 Amendment No. 1 to Master Distribution and Shareholder Services Plan
of American Century Government Income Trust (Advisor Class) dated
June 29, 1998 (filed as Exhibit 15b to Post-Effective Amendment No.
23 of the Registration Statement on Form N-1A of American Century
Quantitiative Equity Funds, File No. 33-19589, filed on June 29,
1998 and incorporated herein by reference).
EX-99.o1 Multiple Class Plan of American Century California Tax-Free and
Municipal Funds, American Century Government Income Trust, American
Century International Bond Funds, American Century Investment Trust,
American Century Municipal Trust, American Century Target Maturities
Trust and American Century Quantitative Equity Funds dated August 1,
1997 (filed as Exhibit 15 to Post-Effective Amendment No. 27 to the
Registration Statement on Form N-1A for American Century Target
Maturities Trust, File No. 2-94608, filed August 29, 1997 and
incorporated herein by reference).
EX-99.o2 Amendment to Multiple Class Plan of American Century California
Tax-Free and Municipal Funds, American Century Government Income
Trust, American Century International Bond Funds, American Century
Investment Trust, American Century Municipal Trust, American Century
Target Maturities Trust and American Century Quantitative Equity
Funds dated August 1, 1997 (filed as an Exhibit to Post-Effective
Amendment No. 23 to the Registration Statement on Form N-1A of
American Century Quantitative Equity Funds, File No. 33-19589, on
June 29, 1998 and incorporated herein by reference).
EX-27.5.1 Financial Data Schedule for GNMA Fund.
EX-27.5.2 Financial Data Schedule for Intermediate-Term Treasury Fund.
EX-27.4.3 Financial Data Schedule for Government Agency Money Market Fund.
EX-27.5.4 Financial Data Schedule for Short-Term Government Fund.
EX-27.5.5 Financial Data Schedule for Short-Term Treasury Fund.
EX-27.5.6 Financial Data Schedule for Long-Term Treasury Fund.
EX-27.5.7 Financial Data Schedule for Inflation-Adjusted Treasury Fund.
EX-27.4.8 Financial Data Schedule for Capital Preservation Fund.
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
AS AMENDED THROUGH MARCH 1, 1999
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I NAME AND DEFINITIONS....................................................................................1
<S> <C> <C>
Section 1. Name.............................................................................................1
Section 2. Definitions......................................................................................1
ARTICLE II PURPOSE OF TRUST.......................................................................................2
ARTICLE III SHARES................................................................................................2
Section 1. Division of Beneficial Interest..................................................................2
Section 2. Ownership of Shares..............................................................................2
Section 3. Investments in the Trust.........................................................................3
Section 4. Status of Shares and Limitation of Personal Liability............................................3
Section 5. Power of Trustees to Change Provisions Relating to Shares........................................3
Section 6. Establishment and Designation of Series..........................................................4
Section 7. Indemnification of Shareholders..................................................................6
ARTICLE IV THE TRUSTEES...........................................................................................6
Section 1. Number, Election and Tenure......................................................................6
Section 2. Effect of Death, Resignation, etc. of a Trustee..................................................7
Section 3. Powers...........................................................................................7
Section 4. Payment of Expenses by the Trust.................................................................9
Section 5. Payment of Expenses by Shareholders..............................................................9
Section 6. Ownership of Assets of the Trust................................................................10
Section 7. Service Contracts...............................................................................10
ARTICLE V SHAREHOLDERS' VOTING POWERS AND MEETINGS...............................................................11
Section 1. Voting Powers...................................................................................11
Section 2. Voting Power and Meetings.......................................................................11
Section 3. Quorum and Required Vote........................................................................12
Section 4. Action by Written Consent.......................................................................12
Section 5. Record Dates....................................................................................12
Section 6. Additional Provisions...........................................................................13
ARTICLE VI NET ASSET VALUE, DISTRIBUTIONS, AND REDEMPTIONS.......................................................13
Section 1. Determination of Net Asset Value, Net Income, and Distributions.................................13
Section 2. Redemptions and Repurchases.....................................................................13
Section 3. Redemptions at the Option of the Trust..........................................................13
ARTICLE VII COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES.................................................14
Section 1. Compensation....................................................................................14
Section 2. Limitation of Liability.........................................................................14
Section 3. Indemnification.................................................................................14
ARTICLE VIII MISCELLANEOUS.......................................................................................14
Section 1. Trustees, Shareholders, etc. Not Personally Liable; Notice......................................14
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety...................................15
Section 3. Liability of Third Persons Dealing with Trustees................................................15
Section 4. Termination of Trust or Series..................................................................15
Section 5. Merger and Consolidation........................................................................16
Section 6. Filing of Copies, References, Headings..........................................................16
Section 7. Applicable Law..................................................................................16
Section 8. Amendments......................................................................................16
Section 9. Trust Only......................................................................................16
Section 10. Use of the Name "Benham" and "American Century"................................................17
</TABLE>
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
(as amended through March 9, 1998)
AGREEMENT AND DECLARATION OF TRUST made at Palo Alto, California on the
17th day of September, 1985 and amended by the Trustees hereunder.
WHEREAS the Trustees desire and have agreed to manage all property
coming into their hands as trustees of a Massachusetts business trust in
accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby direct that this Agreement and
Declaration of Trust be filed with the Secretary of The Commonwealth of
Massachusetts and do hereby declare that they will hold all cash, securities and
other assets, which they may form time to time acquire in any manner as Trustees
hereunder, IN TRUST, and manage and dispose of the same upon the following terms
and conditions for the pro rata benefit of the holders of Shares in this Trust.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1. NAME
This Trust shall be known as the "American Century Government Income Trust" and
the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.
SECTION 2. DEFINITIONS
Whenever used herein, unless otherwise required by the context or specifically
provided:
(a) The "Trust" refers to the Massachusetts business trust established by
this Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named in Article IV
hereof or elected or appointed in accordance with such Article;
(c) "Shares" means the equal proportionate units of interest into which the
beneficial interest in the Trust property belonging to any Series of
the Trust (as the context may require) shall be divided from time to
time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 Act" refers
to the Investment Company Act of 1940 and the Rules and Regulations
thereunder, all as amended from time to time;
(f) The term "Commission" shall mean the United States Securities and
Exchange Commission;
(g) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust, as amended or restated from time to time;
(h) "Bylaws" shall mean the Bylaws of the Trust as amended from time to
time;
(i) "Series Company" refers to the form of registered open-end investment
company described in Section 18(f)(2) of the 1940 Act or in any
successor statutory provision; and
(j) "Series" refers to each Series of Shares established and designated
under or in accordance with the provisions of Article III. Present and
future separate "Series" in the Trust may be referred to as
"Portfolios" and these terms may be used alternatively in future
publications and communications sent to investors.
(k) "Class" shall have the meaning prescribed in the Multiple Class Plan
dated August 1, 1997 as amended from time to time (the "Multiple Class
Plan").
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to provide investors a managed investment company
registered under the 1940 Act and investing one or more portfolios primarily in
securities and debt instruments.
ARTICLE III
SHARES
SECTION 1. DIVISION OF BENEFICIAL INTEREST
The beneficial interest in the Trust shall at all times be divided into an
unlimited number of Shares, without par value. Subject to the provisions of
Section 6 of this Article III, each Share shall have voting rights as provided
in Article V hereof, and holders of the Shares of any Series shall be entitled
to receive dividends, when and as declared with respect thereto in the manner
provided in Article VI, Section 1 hereof. No Shares shall have any priority or
preference over any other Share of the same Series with respect to dividends or
distributions upon termination of the Trust or of such Series made pursuant to
Article VIII, Section 4 hereof. All dividends and distributions shall be made
ratably among all Shareholders of a particular Series from the assets belonging
to such Series according to the number of Shares of such Series held of record
by each Shareholder on the record date for any dividend or on the date of
termination, as the case my be. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities issued by the
Trust or any Series. The Trustees may from time to time divide or combine the
Shares of any particular Series into a greater or lesser number of Shares of
that Series without thereby changing the proportionate beneficial interest of
the Shares of that Series in the assets belonging to that Series or in any way
affecting the rights of Shares of any other Series.
SECTION 2. OWNERSHIP OF SHARES
The ownership of Shares shall be recorded on the books of the Trust or a
transfer or similar agent for the Trust, which books shall be maintained
separately for the Shares of each Series. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the transfer of Shares of each Series and similar matters. The
record books of the Trust as kept by the Trust or any transfer or similar agent,
as the case may be, shall be conclusive as to who are the Shareholders of each
Series and as to the number of Shares of each Series held from time to time by
each.
SECTION 3. INVESTMENTS IN THE TRUST
The Trustees may accept investments in the Trust from such persons, at such
times, and on such terms and for such consideration as they from time to time
authorize.
SECTION 4. STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the existence of
the Trust shall not operate to terminate the Trust, nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but entitles
such representative only to the right of said deceased Shareholder under this
Trust. Ownership of Shares shall not entitle the Shareholder to any title in or
to the whole or any part of the Trust property or right to call for a partition
or division of the same or for an accounting , nor shall the ownership of Shares
constitute the Shareholders as partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholders, nor, except as specifically provided herein, to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
SECTION 5. POWER OF TRUSTEES TO CHANGE PROVISIONS RELATING TO SHARES
Notwithstanding any other provision of this Declaration of Trust and without
limiting the power of the Trustees to amend the Declaration of Trust as provided
elsewhere herein, the Trustees shall have the power to amend this Declaration of
Trust, at any time and from time to time, in such manner as the Trustees may
determine in their sole discretion, without the need for Shareholder action, so
as to add to, delete, replace or otherwise modify any provisions relating to the
Shares contained in this Declaration of Trust, provided that before adopting any
such amendment without Shareholder approval the Trustees shall determine that it
is consistent with the fair and equitable treatment of all Shareholders or that
Shareholder approval is not otherwise required by the 1940 Act or other
applicable law.
Without limiting the generality of the foregoing, the Trustees may, for the
above-stated purposes, amend the Declaration of Trust to:
(a) create one or more Series of Shares (in addition to any Series already
existing or otherwise) with such rights and preferences and such
eligibility requirements for investment therein as the Trustees shall
determine and reclassify any or all outstanding Shares as shares of
particular Series in accordance with such eligibility requirements;
(b) amend any of the provisions set forth in paragraphs (a) through (i) of
Section 6 of this Article III;
(c) combine one or more Series of Shares into a single Series on such terms
and conditions as the Trustees shall determine;
(d) change or eliminate any eligibility requirements for investment in
Shares of any Series, including without limitation, to provide for the
issue of Shares of any Series in connection with any merger or
consolidation of the Trust with another trust or company or any
acquisition by the Trust of part or all of the assets of another trust
or investment company;
(e) change the designation of any Series of Shares;
(f) change the method of allocating dividends among the various Series of
Shares;
(g) allocate any specific assets or liabilities of the Trust or any
specific items of income or expense of the Trust to one or more Series
of Shares; and
(h) specifically allocate assets to any or all Series of Shares or create
one or more additional Series of Shares which are preferred over all
other Series of Shares in respect of assets specifically allocated
thereto or any dividends paid by the Trust with respect to any net
income, however determined, earned from the investment and reinvestment
of any assets so allocated or otherwise and provide for any special
voting or other rights with respect to such Series.
SECTION 6. ESTABLISHMENT AND DESIGNATION OF SERIES
The establishment and designation of any Series of Shares shall be effective
upon resolution by a majority of the then Trustees, setting forth such
establishment and designation and the relative rights and preferences of such
Series, or as otherwise provided in such resolution. Such establishment and
designation shall be set forth in an amendment to this Declaration of Trust by
execution of a new Schedule A to this Declaration of Trust.
Shares of each Series established pursuant to this Section 6, unless otherwise
provided in the resolution establishing such Series or as modified by the
Multiple Class Plan, shall have the following rights and preferences:
(a) ASSETS BELONGING TO SERIES. All consideration received by the Trust for
the issue or sale of Shares of a particular Series, together with all
assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof from whatever source
derived, including, without limitation, any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to that Series for all purposes,
subject only to the rights of creditors, shall be so recorded upon the
books of account of the Trust, and are herein referred to as "assets
belonging to" that Series. In the event that there are any assets,
income, earnings, profits and proceeds thereof, funds or payments which
are not readily identifiable as belonging to any particular Series
(collectively "General Assets"), the Trustees shall allocate such
General Assets to, between or among any one or more of the Series in
such manner and on such basis as they, in their sole discretion, deem
fair and equitable, and any General Assets to, between or among any one
or more of the Series in such manner and on such basis as they, in
their sole discretion, deem fair and equitable, and any General Asset
so allocated to a particular Series shall belong to that Series. Each
such allocation by the Trustees shall be conclusive and binding upon
the Shareholders of all Series for all purposes.
(b) LIABILITIES BELONGING TO SERIES. The assets belonging to each
particular Series shall be charged with the liabilities of the Trust in
respect to that Series and all expenses, costs, charges and reserves
attributable to that Series, and any general liabilities of the Trust
which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees to and among any
one or more of the Series in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. The
liabilities, expenses, costs, charges, and reserves so charged to a
Series are herein referred to as "liabilities belonging to" that
Series. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustee shall be conclusive and binding upon the
holders of all Series for all purposes. Under no circumstances shall
the assets allocated or belonging to any particular Series be charged
with liabilities attributable to any other Series. All persons who have
extended credit which has been allocated to particular Series, or who
have a claim or contract which has been allocated to any particular
Series, shall look only to the assets of that particular Series for
payment of such credit, claim, or contract.
(c) INCOME, DISTRIBUTIONS, AND REDEMPTIONS. The Trustees shall have full
discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders. Notwithstanding any other provision
of this Declaration, including, without limitation, Article VI, no
dividend or distribution (including, without limitation, Article VI,
any distribution paid upon termination of the Trust or of any Series)
with respect to, nor any redemption or repurchase of, the Shares of any
Series shall be effected by the Trust other than from the assets
belonging to such Series, nor, except as specifically provided in
Section 7 of this Article III, shall any Shareholder of any particular
Series otherwise have any right or claim against the assets belonging
to any other Series except to the extent that such Shareholder has such
a right or claim hereunder as a Shareholder of such other Series.
(d) VOTING. All Shares of the Trust entitled to vote on a matter shall vote
separately by Series. That is, the Shareholders of each Series shall
have the right to approve or disapprove matters affecting the Trust and
each respective Series as if the Series were separate companies. There
are, however, two exceptions to voting by separate Series. First, if
the 1940 Act requires all Shares of the Trust to be voted in the
aggregate without differentiation between the separate Series, then all
Series shall vote together. Second, if any matter affects only the
interests of some but not all Series, then only such affected Series
shall be entitled to vote on the matter.
(e) EQUALITY. All the Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series
(subject to the liabilities belonging to that Series), and each Share
of any particular Series shall be equal to each other Share of that
Series.
(f) FRACTIONS. Any fractional Share of a Series shall carry proportionately
all the rights and obligations of a whole share of that Series,
including rights with respect to voting, receipt of dividends and
distributions, redemption of Shares and termination of the Trust.
(g) EXCHANGE PRIVILEGE. The Trustees shall have the authority to provide
that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series of Shares
in accordance with such requirements and procedures as may be
established by the Trustees.
(h) COMBINATION OF SERIES. The Trustees shall have the authority, without
the approval of the Shareholders of any Series unless otherwise
required by applicable law, to combine the assets and liabilities
belonging to any two or more Series into assets and liabilities
belonging to a single Series.
(i) ELIMINATION OF SERIES. At any time that there are no Shares outstanding
of any particular Series previously established and designated, the
Trustees may amend this Declaration of Trust to abolish that Series and
to rescind the establishment and designation thereof, such amendment to
be effected in the manner provided pursuant to Section 5 of this
Article III.
SECTION 7. INDEMNIFICATION OF SHAREHOLDERS
In case any Shareholder or former Shareholder shall be held to be personally
liable solely by reason of his or her being or having been a Shareholder and not
because of his or her acts or omissions or for some other reasons, the
Shareholder or former Shareholder (or his or her heirs, executors,
administrators, or other legal representatives or in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled out
of the assets of the Trust to be held harmless from and indemnified against all
loss and expense arising from such liability.
ARTICLE IV
THE TRUSTEES
SECTION 1. NUMBER, ELECTION AND TENURE
The number of Trustees shall be such number as shall be fixed from time to time
by a written instrument signed by a majority of the Trustees, provided, however,
that the number of Trustees shall in no event be less than three nor more than
15. The Trustees may by vote of a majority of the remaining Trustees fill
vacancies in the Trustees or remove Trustees with or without cause by vote of a
majority of the Trustees who are "non-interested" persons (as defined in the
1940 Act) if the Trustee to be removed is a "non-interested" Trustee, or by vote
of the Trustees who are "interested persons" if the Trustee to be removed is an
"interested" Trustee. Each Trustee shall serve during the continued lifetime of
the Trust until he dies, resigns or is removed, or, if sooner, until the next
meeting of Shareholders called for the purpose of electing Trustees and until
the election and qualification of his successor, except, that Trustees who are
not "interested persons" or employees of American Century Companies, Inc. and
its affiliates shall retire at the end of the calendar year in which they shall
have reached the age of seventy-five (75) years. Any Trustee may resign at any
time by written instrument signed by him and delivered to any officer of the
Trust or to a meeting of the Trustees. Such resignation shall be effective upon
receipt unless specified to be effective at some other time. Except to the
extent expressly provided in a written agreement with the Trust, no Trustee
resigning and no Trustee removed shall have any right to any compensation for
any period following his resignation or removal, or any right to damages on
account of such removal. The Shareholders may fix the number of Trustees and
elect Trustees at any meeting of Shareholders called by the Trustees for that
purpose.
SECTION 2. EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
The death, declination, resignation, retirement, removal, or incapacity of the
Trustees, or any of them, shall not operate to annual the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration of Trust.
Whenever a vacancy in the number of Trustees shall occur, until such vacancy is
filled as provided in Article IV, Section 1 the Trustees in office, regardless
of their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration of Trust.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees shall be conclusive evidence of such vacancy. In the
event of the death, declination, resignation, retirement, removal, or incapacity
of all the then Trustees within a short period of time and without the
opportunity for at least one disinterested Trustee being able to appoint
additional Trustees to fill vacancies, the Trust's investment advisor or
investment advisors jointly, if there is more than one, are empowered to appoint
new Trustees.
SECTION 3. POWERS
Subject to the provisions of this Declaration of Trust, the business of the
Trust shall be managed by the Trustees, and they shall have all powers necessary
or convenient to carry out that responsibility including the power to engage in
securities transactions of all kinds on behalf of the Trust. Without limiting
the foregoing, the Trustees may adopt Bylaws not inconsistent with this
Declaration of Trust providing for the regulation and management of the affairs
of the Trust any may amend and repeal them to the extent that such Bylaws do not
reserve that right to the Shareholders; they may fill vacancies in or reduce the
number of Trustees, and may elect and remove such officers and appoint and
terminate such agents as they consider appropriate; they may appoint from their
own number and establish and terminate one or more committees consisting of two
or more Trustees which may exercise the powers and authority of the Trustees to
the extent that the Trustees determine; they may employ one or more custodians
of the assets of the Trust and may authorize such custodians to employ
subcustodians and to deposit all or any part of such assets in a system or
systems for the central handling of securities or with a Federal Reserve Bank,
retain a transfer agent or a shareholder servicing agent, or both, provide for
the distribution of Shares by the Trust, through one or more principal
underwriters or otherwise, set record dates for the determination of
Shareholders with respect to various matters, and in general delegate such
authority as they consider desirable to any officer of the Trust, to any
committee of the Trustees and to any agent or employee of the Trust or to any
such custodian, transfer or Shareholder servicing agent, or principal
underwriter. Any determination as to what is in the interests of the Trust made
by the Trustees in good faith shall be conclusive. In construing the provisions
of this Declaration of Trust, the presumption shall be in favor of a grant of
power to the Trustees.
Without limiting the foregoing, the Trustees shall have power and authority:
(a) to invest and reinvest cash, to hold cast uninvested, and to subscribe
for, invest in, reinvest in, purchase or otherwise acquire, own, hold,
pledge, sell, assign, transfer, exchange, distribute, lend or otherwise
deal in or dispose of contracts for the future acquisition or delivery
of fixed income or other securities, and securities of every nature and
kind, including without limitation, all types of bonds, debentures,
stocks, negotiable or non-negotiable instruments, obligations,
evidences of indebtedness, certificates of deposit or indebtedness,
commercial paper, repurchase agreements, bankers acceptances, and other
securities of any kind, issued, created, guaranteed, or sponsored by
any and all persons, including, without limitation, states,
territories, and possessions of the United States and the District of
Columbia and any political subdivision, agency, or instrumentality of
the U.S. Government, any foreign government or any political
subdivision of the U.S. Government or any foreign government, or any
international instrumentality, or by any bank or savings institution,
or by any corporation or organization organized under the laws of the
United States or of any state, territory, or possession thereof, or by
any corporation or organization organized under any foreign law, or in
"when issued" contracts for any such securities, to change the
investments of the assets of the Trust; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of
any and all such investments of every kind and description, including,
without limitation, the right to consent and otherwise act with respect
thereto, with power to designate one or more persons, firms,
associations, or corporations to exercise any of said rights, powers,
and privileges in respect of any of said instruments;
(b) to sell, exchange, lend, pledge, mortgage, hypothecate, lease, or write
options with respect to or otherwise deal in any property rights
relating to any or all of the assets of the Trust;
(c) to vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such
power and discretion with relation to securities or property as the
Trustees shall deem proper;
(d) to exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities;
(e) to hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in its own
name or in the name of a custodian or subcustodian or a nominee or
nominees or otherwise;
(f) to consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security
which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer;
and to pay calls or subscriptions with respect to any security held in
the Trust;
(g) to join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power
and authority with relation to any security (whether or not so
deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and compensation
of such committee, depositary or trustee as the Trustees shall deem
proper;
(h) to compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not
limited to claims for taxes;
(i) to enter into joint ventures, general or limited partnerships and any
other combinations or associations;
(j) to borrow funds or other property;
(k) to endorse or guarantee the payment of any notes or other obligations
of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(l) to purchase and pay for entirely out of Trust property such insurance
as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring
the assets of the Trust or payment of distributions and principal on
its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment
advisors, principal underwriters, or independent contractors of the
Trust, individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or
position, or by reason of any action alleged to have been taken or
omitted by any such person as Trustee, officer, employee, agent,
investment advisor, principal underwriter, or independent contractor,
including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power to
indemnify such person against liability; and
(m) to pay pensions as deemed appropriate by the Trustees and to adopt,
establish and carry out pension, profit-sharing, share bonus, share
purchase, savings, thrift and other retirement, incentive and benefit
plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such retirement
and other benefits, for any or all of the Trustees, officers, employees
and agents of the Trust.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust. The Trustees shall not in any way be
bound or limited by any present or future law or custom in regard to investment
by fiduciaries. The Trustees shall not be required to obtain any court order to
deal with any assets of the Trust or take any other action hereunder.
SECTION 4. PAYMENT OF EXPENSES BY THE TRUST
The Trustees are authorized to pay or cause to be paid out of the principal or
income of the Trust, or partly out of the principal and partly out of income, as
they deem fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees,
investment advisor or manager, principal underwriter, auditors, counsel,
custodian, transfer agent, shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as the Trustees may
deem necessary or proper to incur.
SECTION 5. PAYMENT OF EXPENSES BY SHAREHOLDERS
The Trustees shall have the power, as frequently as they may determine, to cause
each Shareholder, or each Shareholder of any particular Series, to pay directly,
in advance or arrears, for charges of the Trust's custodian or transfer,
Shareholder servicing or similar agent, an amount fixed from time to time by the
Trustees, by setting off such charges due from such Shareholder from declared
but unpaid dividends owed such Shareholder and/or by reducing the number of
shares in the account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of such charges due
from such Shareholder.
SECTION 6. OWNERSHIP OF ASSETS OF THE TRUST
Title to all of the assets of the Trust shall at all times be considered as
vested in the Trustees.
SECTION 7. SERVICE CONTRACTS
(a) Subject to such requirements and restrictions as may be set forth in
the Bylaws, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory and/or management
services for the Trust or for any Series with American Century
Investment Management, Inc. or any other corporation, trust,
association or other organization (the "Advisor"); and any such
contract may contain such other terms as the Trustees may determine,
including without limitation, authority for the Advisor to determine
from time to time without prior consultation with the Trustees what
investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of the Trust shall be held uninvested
and to make changes in the Trust's investments.
(b) The Trustees may also, at any time and from time to time, contract with
any corporation, trust, association, or other organization, appointing
it exclusive or nonexclusive distributor or principal underwriter for
the Shares of any, some, or all of the Series. Every such contract
shall comply with such requirements and restrictions as may be set
forth in the Bylaws; and any such contract may contain such other terms
as the Trustees may determine.
(c) The Trustees are also empowered, at any time and from time to time, to
contract with any corporations, trust, associations, or other
organizations, appointing it or them the transfer agent(s) and/or
shareholders servicing agent(s) for the Trust or one or more of the
Series. Specifically, the Trustees are empowered to contract or join
with other investment companies managed by the Trust's investment
advisor to have transfer agency and/or shareholder servicing activities
performed jointly by such investment companies and their employees with
an appropriate allocation between the investment companies of the costs
and expenses of providing such services. Every such contract shall
comply with such requirements and restrictions as may be set forth in
the Bylaws or stipulated by resolution of the Trustees.
(d) The fact that:
(i) any of the Shareholders, Trustees, or officers of the Trust is
a shareholder, director, officer, partner, trustee, employee,
manager, advisor, principal underwriter, distributor or
affiliate or agent of or for any corporation, trust,
association, or other organization, or for any parent or
affiliate of any organization with which an advisory or
management contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or
other agency contract may have been or may hereafter be made,
or that any such organization, or any parent or affiliate
thereof, is a Shareholder or has an interest in the Trust, or
that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal
underwriter's or distributor's contract, or transfer,
Shareholder servicing or other agency contract may have been
or may hereafter be made also has an advisory or management
contract, or principal underwriter's or distributor's
contract, or transfer, shareholder servicing or other agency
contract with one or more other corporations, trusts,
associations, or other organizations, or has other business or
interests, shall not affect the validity of any such contract
or disqualify any Shareholder, Trustee or officer of the Trust
from voting upon or executing the same or create any liability
or accountability to the Trust or its Shareholders.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 1. VOTING POWERS
Subject to the provisions of Article III, Section 6(d), the Shareholders shall
have power to vote only (i) for the election of Trustees as provided in Article
IV, Section 1, (ii) to the same extent as the stockholders of a California
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Shareholders, (iii) with respect to the
termination of the Trust or any Series to the extent and as provided in Article
VIII, Section 4, and (iv) with respect to such additional matters relating to
the Trust as may be required by this Declaration of Trust, the Bylaws or any
registration of the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable. A Shareholder of
each Series shall be entitled to one vote for each dollar of net asset value per
Share of such Series, on any matter on which such Shareholder is entitled to
vote and each fractional dollar amount shall be entitled to a proportionate
fractional vote. All references in this Declaration of Trust or the Bylaws to a
vote of, or the holders of, a percentage of Shares shall mean a vote of or the
holders of that percentage of total votes representing dollars of net asset
value of a Series or of the Trust, as the case may be. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy. A proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to exercise of
the proxy the Trust receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. At any time when no
Shares of a Series are outstanding, the Trustees may exercise all rights of
Shareholders of that Series with respect to matters affecting that Series, take
any action required by law, this Declaration of Trust or the Bylaws to be taken
by the Shareholders.
SECTION 2. VOTING POWER AND MEETINGS
Meetings of the Shareholders may be called by the Trustees for the purpose of
electing Trustees as provided in Article IV, Section 1 and for such other
purposes as may be prescribed by law, by this Declaration of Trust or by the
Bylaws. Meetings of the Shareholders may also be called by the Trustees from
time to time for the purpose of taking action upon any other matter deemed by
the Trustees to be necessary or desirable. A meeting of Shareholders may be held
at any place designated by the Trustees. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at least seven days before such meeting, postage prepaid, stating
the time and place of the meeting, to each Shareholder at the Shareholder's
address as it appears on the records of the Trust. Whenever notice of a meeting
is required to be given to a Shareholder under this Declaration of Trust or the
Bylaws, a written waiver thereof, executed before or after the meeting by such
Shareholder or his attorney thereunto authorized and filed with the records of
the meeting, shall be deemed equivalent to such notice.
SECTION 3. QUORUM AND REQUIRED VOTE
Except when a larger quorum is required by applicable law, by the Bylaws or by
this Declaration of Trust, forty percent (40%) of the Shares entitled to vote
shall constitute a quorum at a Shareholders' meeting. When any one or more
Series is to vote as a single class separate from any other Shares which are to
vote on the same matters as a separate class or classes, forty percent (40%) of
the Shares of each such Series entitled to vote shall constitute a quorum at a
Shareholders' meeting of that Series. Any meeting of Shareholders may be
adjourned from time to time by a majority of the votes properly cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned within a reasonable time after the date set for the original meeting
without further notice. Subject to the provisions of Article III, Section 6(d),
when a quorum is present at any meeting, a majority of the Shares voted shall
decide any questions and a plurality shall elect a Trustee, except when a larger
vote is required by any provision of this Declaration of Trust or the Bylaws or
by applicable law.
SECTION 4. ACTION BY WRITTEN CONSENT
Any action taken by Shareholders may be taken without a meeting if Shareholders
holding a majority of the Shares entitled to vote on the matter (or such larger
proportion thereof as shall be required by any express provision of this
Declaration of Trust or by the Bylaws) and holding a majority (or such larger
proportion as aforesaid) of the Shares of any Series entitled to vote separately
on the matter consent to the action in writing and such written consents are
filed with the records of the meetings of Shareholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
SECTION 5. RECORD DATES
For the purpose of determining the Shareholders of any Series who are entitled
to vote or act at any meeting or any adjournment thereof, the Trustees may from
time to time fix a time, which shall be not more than 75 days before the date of
any meeting of Shareholders, as the record date for determining the Shareholders
of such Series having the right to notice of and to vote at such meeting and any
adjournment thereof, and in such case only Shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares on the books
of the Trust after the record date. For the purpose of determining the
Shareholders of any Series who are entitled to receive payment of any dividend
or of any other distribution, the Trustees may from time to time fix a date,
which shall be before the date for the payment of such dividend or such other
payment, as the record date for determining the Shareholders of such Series
having the right to receive such dividend or distribution. Without fixing a
record date the Trustees may for voting and/or distribution purposes close the
register or transfer books for one or more Series for all or any part of the
period between a record date and a meeting of Shareholders or the payment of a
distribution. Nothing in this section shall be construed as precluding the
Trustees from setting different record dates for different Series.
SECTION 6. ADDITIONAL PROVISIONS
The Bylaws may include further provisions for Shareholders' votes and meetings
and related matters.
ARTICLE VI
NET ASSET VALUE, DISTRIBUTIONS, AND REDEMPTIONS
SECTION 1. DETERMINATION OF NET ASSET VALUE, NET INCOME, AND DISTRIBUTIONS
Subject to Article III, Section 6 hereof, the Trustees, in their absolute
discretion, may prescribe and shall set forth in the Bylaws or in a duly adopted
resolution of the Shares of any Series or net income attributable to the Shares
of any Series, or the declaration and payment of dividends and distributions on
the Shares of any Series, as they may deem necessary or desirable.
SECTION 2. REDEMPTIONS AND REPURCHASES
The Trust shall purchase such Shares as are offered by any Shareholder for
redemption, upon the presentation of a proper instrument of transfer together
with a request directed to the Trust or a person designated by the Trust that
the Trust purchase such Shares or in accordance with such other procedures for
redemption as the Trustees may from time to time authorize; and the Trust will
pay therefor the net asset value thereof, as determined in accordance with the
Bylaws and applicable law, next determined under the 1940 Act. Payment for said
Shares shall be made by the Trust to the Shareholder within seven days after the
date on which the request is made in proper form. The obligation set forth in
this Section 2 is subject to the provision that in the event that any time the
New York Stock Exchange is closed for other than weekends or holidays, or if
permitted by the rules of the Commission, during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable for
the Trust to dispose of the investments of the applicable Series or to determine
fairly the value of the net assets belonging to such Series or during any other
period permitted by order of the Commission for the protection of investors,
such obligation may be suspended or postponed by the Trustees.
SECTION 3. REDEMPTIONS AT THE OPTION OF THE TRUST
The Trust shall have the right at its option and at any time to redeem Shares of
any Shareholder at the net asset value thereof as described in Section 1 of this
Article VI: (i) if at such time such Shareholder owns Shares of any Series
having an aggregate net asset value of less than an amount, not to exceed
$1,000, determined from time to time by the Trustees; or (ii) to the extent that
such Shareholder owns Shares equal to or in excess of a percentage determined
from time to time by the Trustees of the outstanding Shares of the Trust or of
any Series.
ARTICLE VII
COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES
SECTION 1. COMPENSATION
The non-interested Trustees as such shall be entitled to reasonable compensation
from the Trust, and they may fix the amount of such compensation. Nothing herein
shall in any way prevent the employment of any Trustee for advisory, management,
legal, accounting, investment banking or other services and payment for the same
by the Trust.
SECTION 2. LIMITATION OF LIABILITY
The Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, manager or Principal Underwriter of
the Trust, nor shall any Trustee be responsible for the act or omission of any
other Trustee, but nothing herein contained shall protect any Trustee against
any liability to which he would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Every note, bond, contract, instrument, certificate or undertaking and every
other act or thing whatsoever issued, executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
SECTION 3. INDEMNIFICATION
The Trustees shall be entitled and empowered to the fullest extent permitted by
law to purchase insurance for and to provide by resolution or in the Bylaws for
indemnification out of Trust assets for liability and for all expenses
reasonably incurred or paid or expected to be paid by a Trustee or officer in
connection with any claim, action, suit or proceeding in which he becomes
involved by virtue of his capacity or former capacity with the Trust. The
provisions, including any exceptions and limitations concerning indemnification,
may be set forth in detail in the Bylaws or in a resolution of the Trustees.
ARTICLE VIII
MISCELLANEOUS
SECTION 1. TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE
All persons extending credit to, contracting with or having any claim against
the Trust or any Series shall look only to the assets of the Trust, or, to the
extent that the liability of the Trust may have been expressly limited by
contract to the assets of a particular Series, only to the assets belonging to
the relevant Series, for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any Trustee against
any liability to which such Trustee would otherwise be subject by reason or
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made or
issued on behalf of the Trust by the Trustees, by an officer or officers or
otherwise may include a notice that this Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts and may recite that the note,
bond, contract, instrument, certificate, or undertaking was executed or made by
or on behalf of the Trust or by them as Trustee or Trustees or as officer or
officers or otherwise and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust or upon the assets
belonging to the Series for the benefit of which the Trustees have caused the
note, bond, contract instrument, certificate or undertaking to be made or
issued, and may contain such further recital as he or they may deem appropriate,
but the omission of any such recital shall not operate to bind any Trustee or
Trustees or officer or officers or Shareholders or any other person
individually.
SECTION 2. TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust, and shall be under no liability for
any act or omission in accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
SECTION 3. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES
No person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the Trustees or
to see to the application of any payments made or property transferred to the
Trust or upon its order.
SECTION 4. TERMINATION OF TRUST OR SERIES
Unless terminated as provided herein, the Trust shall continue without
limitation of time. The Trust may be terminated at any time by vote of at least
two-thirds (66-2/3%) of the Shares of each Series entitled to vote, voting
separately by Series, or by the Trustees by written notice to the Shareholders.
Any Series may be terminated at any time by vote of at least two-thirds
(66-2/3%) of the Shares of that Series or by the Trustees by written notice to
the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may be), after paying
or otherwise providing for all charges, taxes, expenses and liabilities
belonging, severally, to each Series (or the applicable Series, as the case may
be), whether due or accrued or anticipated as may be determined by the Trustees,
the Trust shall, in accordance with such procedures as the Trustees consider
appropriate, reduce the remaining assets belonging, severally, to each Series
(or the applicable Series, as the case may be), to distributable form in cash or
shares or other securities, or any combination thereof, and distribute the
proceeds belonging to each Series or the applicable Series, as the case may be),
to the Shareholders of that Series, as a Series, ratably according to the number
of Shares of that Series held by the several Shareholders on the date of
termination.
SECTION 5. MERGER AND CONSOLIDATION
The Trustees may cause the Trust or one or more of its Series to be merged into
or consolidated with another Trust or company or the Shares exchanged under or
pursuant to any state or Federal statute, if any, or otherwise to the extent
permitted by law. Such merger or consolidation or share exchange must be
authorized by vote of a majority of the outstanding Shares of the Trust as a
whole or any affected Series, as may be applicable; provided that in all
respects not governed by statute or applicable law, the Trustees shall have
power to prescribe the procedure necessary or appropriate to accomplish a sale
of assets, merger or consolidation.
SECTION 6. FILING OF COPIES, REFERENCES, HEADINGS
The original or a copy of this instrument and of each amendment hereto shall be
kept at the office of the Trust where it may be inspected by any Shareholder. A
copy of this instrument and of each amendment hereto shall be filed by the Trust
with the Secretary of the Commonwealth of Massachusetts and with any other
governmental office where such filing may from time to time be required. Anyone
dealing with the Trust may rely on a certificate by an officer of the Trust as
to whether or not any such amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were the
original, may relay on a copy certified by an officer of the Trust to be a copy
of this instrument, or of any such amendments. In this instrument and in any
such amendment, references to this instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this instrument
as amended or affected by any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or control
or affect the meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original.
SECTION 7. APPLICABLE LAW
This Agreement and Declaration of Trust is created under and is to be governed
by and construed and administered according to the laws of the Commonwealth of
Massachusetts. The Trust shall be of the type commonly called a Massachusetts
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
SECTION 8. AMENDMENTS
This Declaration of Trust may be amended at any time by an instrument in writing
signed by a majority of the then Trustees.
SECTION 9. TRUST ONLY
It is the intention of the Trustees to create only the relationship of Trustee
and beneficiary between the Trustees and each Shareholder from time to time. It
is not the intention of the Trustees to create a general partnership, limited
partnership, joint stock association, corporation, bailment, or any form of
legal relationship other than a trust. Nothing in this Agreement and Declaration
of Trust shall be construed to make the Shareholders, either by themselves or
with the Trustees, partners or members of a joint stock association.
SECTION 10. USE OF THE NAME "BENHAM" AND "AMERICAN CENTURY"
American Century Services Corporation ("ACSC") has consented to the use by the
Trust of the identifying words or names "Benham" and "American Century" in the
names of the Trust and/or its various Series. Such consent is conditioned upon
the employment of ACSC, its successors or any affiliate thereof, as the
Advisor/Investment Manager of the Trust. As between the Trust and itself, ACSC
controls the use of the name of the Trust insofar as such name contains "Benham"
and/or "American Century". The name or identifying words "Benham" and/or
"American Century" may be used from time to time in other connections and for
other purposes by ACSC or its affiliated entities. ACSC may require the Trust to
cease using "Benham" or "American Century" in the name of the Trust if the Trust
ceases to employ, for any reason, ACSC, an affiliate, or any successor as
Advisor/Investment Manager of the Trust.
IN WITNESS WHEREOF, a majority of the Trustees as aforesaid do hereto
set their hands this 9th day of March, 1998, as an amendment and restatement of
that Agreement and Declaration of Trust originally executed on the 17th day of
September, 1985.
TRUSTEES OF THE AMERICAN CENTURY GOVERNMENT INCOME TRUST
/s/ Albert A. Eisenstat 3/9/98 /s/ Kenneth E. Scott 3/9/98
Albert A. Eisenstat Date Kenneth E. Scott Date
/s/ Ronald J. Gilson 3/9/98 /s/ Isaac Stein 3/9/98
Ronald J. Gilson Date Isaac Stein Date
/s/ William M. Lyons 3/9/98 /s/ James E. Stowers III 3/9/98
William M. Lyons Date James E. Stowers III Date
/s/ Myron S. Scholes 3/9/98 /s/ Jeanne D. Wohlers 3/9/98
Myron S. Scholes Date Jeanne D. Wohlers Date
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
(restated as of March 9, 1998)
SCHEDULE A
Pursuant to Article III, Section 6, the Trustees hereby establish and designate
the following Series as Series of the Trust (and the Classes thereof) with the
relative rights and preferences as described in Section 6:
- ------------------------------------------- ------------ -------------------
Date of
Series Class Establishment
- ------------------------------------------- ------------ -------------------
- ------------------------------------------- ------------ -------------------
Capital Preservation Fund Investor 3/16/1997
- ------------------------------------------- ------------ -------------------
Short-Term Treasury Fund Investor 9/8/1992
Advisor 8/1/1997
- ------------------------------------------- ------------ -------------------
Intermediate-Term Treasury Fund Investor 5/16/1980
Advisor 8/1/1997
- ------------------------------------------- ------------ -------------------
Long-Term Treasury Fund Investor 9/8/1992
Advisor 8/1/1997
- ------------------------------------------- ------------ -------------------
Government Agency Money Market Fund Investor 12/5/1989
Advisor 8/1/1997
- ------------------------------------------- ------------ -------------------
Short-Term Government Fund Investor 9/3/1991
Advisor 8/1/1997
- ------------------------------------------- ------------ -------------------
GNMA Fund Investor 9/23/1985
Advisor 8/1/1997
- ------------------------------------------- ------------ -------------------
Inflation-Adjusted Treasury Fund Investor 2/16/1996
Advisor 8/1/1997
- ------------------------------------------- ------------ -------------------
This Schedule A shall supersede any previously adopted Schedule A to the
Declaration of Trust.
TRUSTEES OF THE AMERICAN CENTURY GOVERNMENT INCOME TRUST
/s/ Albert A. Eisenstat 3/1/99 /s/ Kenneth E. Scott 3/1/99
Albert A. Eisenstat Date Kenneth E. Scott Date
/s/ Ronald J. Gilson 3/1/99 /s/ Isaac Stein 3/1/99
Ronald J. Gilson Date Isaac Stein Date
/s/ William M. Lyons 3/1/99 /s/ James E. Stowers III 3/1/99
William M. Lyons Date James E. Stowers III Date
/s/ Myron S. Scholes 3/1/99 /s/ Jeanne D. Wohlers 3/1/99
Myron S. Scholes Date Jeanne D. Wohlers Date
*By/s/ Charles C.S. Park Date: March 1, 1999
Charles C.S. Park, Esq.
Pursuant to Power of Attorney dated December 18, 1998
******************************************************************************
American Century Funds
CREDIT AGREEMENT
Dated as of December 18, 1998
THE CHASE MANHATTAN BANK,
as Administrative Agent
******************************************************************************
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
Section 1. Definitions and Accounting Matters.....................................................................1
Section 1.1 Certain Defined Terms.......................................................................1
Section 1.2 Accounting Terms and Determinations.........................................................7
Section 2. Commitments, Loans, Notes and Prepayments..............................................................7
Section 2.1 Loans.......................................................................................7
Section 2.2 Procedure for Borrowings....................................................................7
Section 2.3 Changes of Commitments......................................................................7
Section 2.4 Commitment Fee..............................................................................8
Section 2.5 Lending Offices.............................................................................8
Section 2.6 Several Obligations; Remedies Independent...................................................8
Section 2.7 Notes.......................................................................................8
Section 2.8 Optional Prepayments........................................................................9
Section 2.9 Mandatory Prepayments.......................................................................9
Section 2.10 Extension of Commitment Termination Date....................................................9
Section 2.11 Designation of Additional Borrower; Amendments to Schedule I...............................10
Section 2.12 Swing Line Commitment......................................................................11
Section 2.13 Procedure for Swing Line Borrowing.........................................................11
Section 2.14 Refunding of Swing Line Loans..............................................................12
Section 3. Payments of Principal and Interest....................................................................13
Section 3.1 Repayment of Loans.........................................................................13
Section 3.2 Interest...................................................................................13
Section 4. Payments; Pro Rata Treatment; Computations; Etc.......................................................14
Section 4.1 Payments...................................................................................14
Section 4.2 Pro Rata Treatment.........................................................................14
Section 4.3 Computations...............................................................................15
Section 4.4 Minimum Amounts............................................................................15
Section 4.5 Certain Notices............................................................................15
Section 4.6 Non-Receipt of Funds by the Administrative Agent...........................................16
Section 4.7 Sharing of Payments, Etc...................................................................17
Section 4.8 Requirements of Law........................................................................18
Section 5. U.S. Taxes............................................................................................18
Section 6. Conditions Precedent..................................................................................20
Section 6.1 Initial Loan...............................................................................20
Section 6.2 Initial and Subsequent Loans...............................................................21
Section 7. Representations and Warranties........................................................................22
Section 7.1 Corporate Existence; Compliance with Law...................................................22
Section 7.2 Investment Company.........................................................................22
Section 7.3 Permission to Borrow.......................................................................23
Section 7.4 Financial Condition........................................................................23
Section 7.5 Litigation.................................................................................23
Section 7.6 No Default.................................................................................23
Section 7.7 No Breach..................................................................................23
Section 7.8 Action.....................................................................................23
Section 7.9 Approvals..................................................................................24
Section 7.10 Use of Credit..............................................................................24
Section 7.11 ERISA......................................................................................24
Section 7.12 Taxes......................................................................................24
Section 7.13 True and Complete Disclosure...............................................................24
Section 7.14 Accuracy of Information....................................................................24
Section 7.15 Indebtedness...............................................................................25
Section 7.16 Property and Liens.........................................................................25
Section 7.17 Blue Sky Registrations.....................................................................25
Section 7.18 Federal Regulations........................................................................25
Section 7.19 Apportionment Among Funds..................................................................25
Section 7.20 No Material Adverse Change.................................................................25
Section 7.21 Year 2000..................................................................................25
Section 8. Covenants of the Funds................................................................................25
Section 8.1 Financial Statements.......................................................................26
Section 8.2 Certificates; Other Information............................................................26
Section 8.3 Notices....................................................................................27
Section 8.4 Existence, Etc.............................................................................28
Section 8.5 Use of Proceeds............................................................................29
Section 8.6 Insurance..................................................................................29
Section 8.7 Prohibition of Fundamental Changes.........................................................29
Section 8.8 Limitations on Liens.......................................................................30
Section 8.9 Indebtedness...............................................................................30
Section 8.10 Dividend Payments..........................................................................31
Section 8.11 Asset Coverage; Borrowing Limits...........................................................31
Section 8.12 Lines of Business..........................................................................31
Section 8.13 Modifications of Certain Documents.........................................................31
Section 9. Events of Default.....................................................................................31
Section 10. The Administrative Agent.............................................................................34
Section 10.1 Appointment, Powers and Immunities.........................................................34
Section 10.2 Reliance by Administrative Agent...........................................................35
Section 10.3 Defaults...................................................................................35
Section 10.4 Rights as a Bank...........................................................................35
Section 10.5 Indemnification............................................................................36
Section 10.6 Non-Reliance on Administrative Agents and Other Banks......................................36
Section 10.7 Failure to Act.............................................................................36
Section 10.8 Resignation or Removal of Administrative Agent.............................................36
Section 11. Miscellaneous........................................................................................37
Section 11.1 Waiver.....................................................................................37
Section 11.2 Notices....................................................................................37
Section 11.3 Expenses, Etc..............................................................................37
Section 11.4 Amendments, Etc............................................................................38
Section 11.5 Successors and Assigns.....................................................................39
Section 11.6 Assignments and Participations.............................................................39
Section 11.7 Survival...................................................................................40
Section 11.8 Caption....................................................................................41
Section 11.9 Counterparts...............................................................................41
Section 11.10 Governing Law; Submission to Jurisdiction.................................................41
Section 11.11 Waiver of Jury Trial......................................................................41
Section 11.12 Treatment of Certain Information; Confidentiality.........................................41
Section 11.13 Limited Recourse..........................................................................42
SCHEDULE I - Borrowers & Allocations
SCHEDULE II - Commitments
SCHEDULE III - Custody Agreements
SCHEDULE IV - Distribution Agreements
SCHEDULE V - Investment Management Agreements
SCHEDULE VI - Shareholder Services Agreements
SCHEDULE VII - Specified Existing Affiliates
EXHIBIT 2.7(a) - Form of Note
EXHIBIT 2.11(a) - Form of Designation of New Borrowers
EXHIBIT 6.1(b) - Form of Opinion
EXHIBIT 11.6(b) - Form of Assignment and Acceptance
EXHIBIT 11.12(b) - Form of Confidentiality Agreement
</TABLE>
CREDIT AGREEMENT, dated as of December 18, 1998 (this "Agreement")
among (i) each fund signatory hereto (each a "Fund" and, collectively, the
"Funds") on behalf of itself or on behalf of the series or portfolios of a Fund,
which series and portfolios are listed on Schedule I beside the name of the Fund
of which each series or portfolio is a series or portfolio (each such Fund
acting on behalf of itself and each such series or portfolio, a "Borrower" and,
collectively, the "Borrowers"); (ii) each of the lenders that is a signatory
hereto identified under the caption "BANKS" on the signature pages hereto and
each other lender that becomes a "Bank" after the date hereof pursuant to
Section 11.6(b) hereof (individually a "Bank" and, collectively, the "Banks");
and (iii) THE CHASE MANHATTAN BANK, a New York banking corporation, as agent for
the Banks (in such capacity, together with its successors in such capacity, the
"Administrative Agent").
WHEREAS, each Fund is an open-end registered investment company under
the Investment Company Act of 1940 for which the Investment Adviser (as defined
below) acts as an investment manager;
WHEREAS, each Borrower has requested the Banks to make Loans (as
defined below) severally and not jointly to each Borrower and to make available
to it a credit facility for the purposes and on the terms and conditions set
forth herein;
WHEREAS, each Bank acknowledges that each Borrower shall be liable
hereunder only for the Loans made to such Borrower hereunder and interest
thereon and for the fees and expenses associated therewith and as otherwise set
forth herein, and that, notwithstanding anything to the contrary herein, each
Borrower's obligations hereunder are several and not joint;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
Section 1. Definitions and Accounting Matters.
Section 1.1 Certain Defined Terms. As used herein, the
following terms shall have the following meanings (all terms defined in this
Section 1.1 or in other provisions of this Agreement in the singular to have the
same meanings when used in the plural and vice versa):
"Advisers Act" shall mean the Investment Advisers Act of 1940,
as amended.
"Applicable Lending Office" shall mean, for each Bank, the
"Lending Office" of such Bank (or of an affiliate of such Bank) on the signature
pages hereof or such other office of such Bank (or of an affiliate of such Bank)
as such Bank may from time to time specify to the Administrative Agent and the
Borrowers as the office by which its Loans are to be made and maintained.
"Applicable Margin" shall mean 0.40% per annum.
"Asset Coverage" shall mean, with respect to any Borrower, the
ratio that the value of the Total Assets of such Borrower bears to the aggregate
amount of Indebtedness of such Borrower.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of
1978, as amended from time to time.
"Business Day" shall mean any day on which commercial banks
are not authorized or required to close in New York City.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Chase" shall mean The Chase Manhattan Bank, together with its
successors.
"Closing Date" shall mean the first date upon which each of
the conditions precedent set forth in Section 6.1 hereof are satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Commission" shall mean the Securities and Exchange Commission
and any other similar or successor agency of the United States government
administering the Investment Company Act.
"Commitment" shall mean, as to each Bank, the obligation of
such Bank to make Loans in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount set opposite the name of such
Bank on Schedule II or, in the case of a Person that becomes a Bank pursuant to
an assignment permitted under Section 11.6(b) hereof, as specified in the
respective instrument of assignment pursuant to which such assignment is
effected (as the same may be reduced at any time or from time to time pursuant
to Section 2.3 hereof).
"Commitment Termination Date" shall mean the date which is 364
days following the date hereof or such earlier date on which the Commitments
shall terminate as provided herein, subject to extension as provided in Section
2.10 hereof.
"Contractual Obligation" shall mean, as to any Person, any
provision of any security issued by such Person or of any agreement, instrument
or other undertaking to which such Person is a party or by which it or any of
its property is bound.
"Custody Agreement" shall mean, as to any Fund or each
Borrower, as applicable, the Custody Agreement(s) set forth in Schedule III.
"Default" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"Distribution Agreement" shall mean, as to any Fund or each
Borrower, as applicable, the Distribution Agreements set forth on Schedule IV
hereto.
"Dividend Payment" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of a Borrower or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market or equity value of the Borrower), but excluding dividends payable solely
in shares of such Borrower.
"Dollars" and "$" shall mean lawful money of the United States
of America.
"Eligible Lender" shall mean an entity that is a "bank" (as
defined in the Investment Company Act) but not an "affiliated person" or a
"principal underwriter" (each as defined in the Investment Company Act) of any
Borrower or any "affiliated person" of any such Person, including, without
limitation, the Investment Adviser.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or
business that is a member of any group of organizations (i) described in Section
414(b) or (c) of the Code of which a Fund is a member and (ii) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of
which a Fund is a member.
"Event of Default" shall have the meaning assigned to such
term in Section 9 hereof.
"Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by the Administrative Agent.
"Financial Contracts" shall mean option contracts, options on
futures contracts, futures contracts, forward foreign currency exchange
contracts, options on foreign currencies, repurchase agreements, reverse
repurchase agreements, securities lending agreements, when-issued securities,
interest rate swap, cap, or collar agreements or similar arrangements between a
Fund for account of any Borrower and one or more financial institutions
providing for the transfer or mitigation of interest risks either generally or
under specific contingencies, and other similar arrangements entered into by a
Fund for account of any Borrower in the ordinary course of its business in
accordance with the investment objectives, policies, restrictions and
limitations of such Borrower then in effect.
"Fund Affiliate" shall mean an "affiliated person" of a Fund
as that term is used in the Investment Company Act. Notwithstanding the
foregoing, (a) no individual shall be a Fund Affiliate solely by reason of his
or her being a director, officer or employee of the Fund and (b) neither the
Administrative Agent nor any Bank shall be a Fund Affiliate.
"GAAP" shall mean generally accepted accounting principles, as
in effect from time to time.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory, or administrative functions of or
pertaining to government.
"Guarantee" shall mean a guarantee, an endorsement, a
contingent agreement to purchase or to furnish funds for the payment or
maintenance of, or otherwise to be or become contingently liable under or with
respect to, the Indebtedness, other obligations, net worth, working capital or
earnings of any Person, or a guarantee of the payment of dividends or other
distributions upon the stock or equity interests of any Person, or an agreement
to purchase, sell or lease (as lessee or lessor) Property, products, materials,
supplies or services primarily for the purpose of enabling a debtor to make
payment of such debtor's obligations or an agreement to assure a creditor
against loss, and including, without limitation, causing a bank or other
financial institution to issue a letter of credit or other similar instrument
for the benefit of another Person, but excluding endorsements for collection or
deposit in the ordinary course of business. The terms "Guarantee" and
"Guaranteed" used as a verb shall have a correlative meaning.
"Indebtedness" shall mean, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
the issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for account of such Person; (e)
Capital Lease Obligations of such Person; and (f) Indebtedness of others
Guaranteed by such Person.
"Investment Adviser" shall mean American Century Investment
Management, Inc.
"Investment Adviser Affiliate" shall mean an "affiliated
person" of the Investment Adviser as that term is used in the Investment Company
Act. Notwithstanding the foregoing, (a) no individual shall be an Investment
Adviser Affiliate solely by reason of his or her being a director, officer or
employee of the Investment Adviser and (b) neither the Administrative Agent nor
any Bank shall be an Investment Adviser Affiliate.
"Investment Company Act" shall mean the Investment Company Act
of 1940, as amended.
"Investment Management Agreement" shall mean, as to each Fund
and each Borrower, the Investment Management Agreements set forth on Schedule V
hereto.
"Lien" shall mean, with respect to any Property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such Property. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such Property.
"Loans" shall mean the loans provided for in Section 2.1
hereof.
"Majority Banks" shall mean Banks having more than 51% of the
aggregate amount of the Commitments or, if the Commitments shall have
terminated, Banks holding more than 51% of the aggregate unpaid principal amount
of the Loans.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of a Fund or any Borrower, (b) the ability of a
Fund or any Borrower to perform its obligations hereunder and under the Notes,
(c) the validity or enforceability of this Agreement or of the Notes or (d) the
rights and remedies of the Banks and the Administrative Agent hereunder and
under the Notes.
"Multiemployer Plan" shall mean a multiemployer plan defined
as such in Section 3(37) of ERISA to which contributions have been made by a
Fund or any Borrower or any ERISA Affiliate and that is covered by Title IV of
ERISA.
"Net Asset Value" shall mean, with respect to any Borrower,
the total assets of such Borrower less the total liabilities of such Borrower,
all as determined in accordance with the methods used by such Borrower in
determining the net asset value of its shares and described in the Prospectus.
"Notes" shall have the meaning assigned to such term in
Section 2.7(a).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Person" shall mean any Borrower, any individual, corporation,
company, voluntary association, partnership, limited liability company, joint
venture, trust, unincorporated organization or government (or any agency,
instrumentality or political subdivision thereof).
"Plan" shall mean an employee benefit or other plan
established or maintained by a Fund or any ERISA Affiliate and that is covered
by Title IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum equal to, in
the case of a Borrower, 2% plus the aggregate of the Federal Funds Rate and the
Applicable Margin as in effect from time to time, and, in the case of a Bank, 1%
plus the Federal Funds Rate.
"Property" shall mean any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Prospectus" shall mean each Borrower's Prospectus and
Statement of Additional Information, as amended or supplemented from time to
time, filed with the Commission pursuant to Rule 497 under the Securities Act of
1933, as amended.
"Regulations A, T, U and X" shall mean, respectively,
Regulations A, T, U and X of the Board of Governors of the Federal Reserve
System (or any successor), as the same may be modified and supplemented and in
effect from time to time.
"Responsible Officer" shall mean the chairman, vice chairman,
president, vice president, treasurer, secretary, or assistant secretary of each
Fund, or, with respect to financial matters, the treasurer or assistant
treasurer of such Fund.
"Shareholder Services Agreement" shall mean, as to each Fund
or each Borrower, as applicable, the Shareholder Services Agreements set forth
on Schedule VI hereto.
"Specified Existing Fund Affiliate" shall mean each Person
that is a Fund Affiliate on the date hereof and is listed on Schedule VII hereto
under the caption "Specified Existing Fund Affiliates."
"Specified Existing Investment Adviser Affiliate" shall mean
each Person that is an Investment Adviser Affiliate on the date hereof and is
listed on Schedule VII hereto under the caption "Specified Existing Investment
Adviser Affiliates."
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
"Swing Line Commitment" shall mean the obligation of the Swing
Line Lender to make Swing Line Loans pursuant to Section 2.12 hereof in the
aggregate principal amount at any one time outstanding not to exceed $5,000,000.
"Swing Line Lender" shall have the meaning assigned to such
term in Section 2.12 hereof.
"Swing Line Loans" shall have the meaning assigned to such
term in Section 2.12 hereof.
"Swing Line Participation Amount" shall have the meaning
assigned to such term in Section 2.14(c) hereof.
"Total Assets" shall mean, at any time and with respect to any
Fund, all assets of such Borrower at such time that, in accordance with GAAP,
would be classified as assets on a balance sheet of such Borrower.
Section 1.2 Accounting Terms and Determinations. Except as
otherwise expressly provided herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Bank hereunder shall be
prepared, in accordance with GAAP and the Investment Company Act.
Section 2. Commitments, Loans, Notes and Prepayments.
Section 2.1 Loans. Each Bank severally agrees, on the terms
and conditions of this Agreement, to make loans to the Funds in Dollars on
behalf of any Borrower (as designated in the applicable notice of borrowing by a
Fund) during the period from and including the Closing Date to but not including
the Commitment Termination Date in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount of the Commitment of such Bank as
in effect from time to time. Subject to the terms and conditions of this
Agreement, during such period a Fund may, on behalf of a Borrower, borrow, repay
and reborrow the amount of the Commitments by means of Loans.
Section 2.2 Procedure for Borrowings. A Fund on behalf of a
Borrower may borrow under the Commitments on any Business Day provided that such
Fund shall give the Administrative Agent notice of each borrowing hereunder as
provided in Section 4.5(a) hereof. Each borrowing must be in an amount as set
forth in Section 4.4 hereof. Not later than 3:00 p.m. New York time on the date
specified for each borrowing hereunder, each Bank shall make available the
amount of the Loan or Loans to be made by it on such date to the Administrative
Agent, at any account designated by the Administrative Agent, in immediately
available funds, for account of the relevant Fund. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the relevant Fund for the benefit of such
Borrower by depositing the same, in immediately available funds, in an account
of the relevant Fund designated by the relevant Fund and maintained with Chase
at its principal office.
Section 2.3 Changes of Commitments.
(a) The aggregate amount of the Commitments shall be
automatically reduced to zero on the Commitment Termination Date.
(b) The Funds shall have the right at any time or from time to
time upon three Business Days' notice (i) so long as no Loans are outstanding,
to terminate the Commitments and (ii) to reduce the aggregate unused amount of
the Commitments; provided that (x) the Funds shall give notice of each such
termination or reduction as provided in Section 4.5(b) hereof and (y) each
partial reduction shall be in an aggregate amount at least equal to $5,000,000
(or a larger integral multiple of $1,000,000).
(c) The Commitments once terminated or reduced may not be
reinstated.
Section 2.4 Commitment Fee. The Funds shall pay to the
Administrative Agent for account of each Bank a commitment fee on the daily
average unused amount of such Bank's Commitment, for the period from and
including the date hereof to but not including the earlier of the date such
Commitment is terminated and the Commitment Termination Date, at a rate per
annum equal to 0.055%. Solely for the purpose of calculating the commitment fee,
Swing Line Loans will not be deemed a utilization of the aggregate Commitments
of all Banks. Accrued commitment fee shall be payable on each March 31, June 30,
September 30 and December 31 (beginning on the first of such dates to occur
after the date hereof) and on the earlier of the date the Commitments are
terminated and the Commitment Termination Date. The Funds shall allocate such
commitment fee among the Borrowers pro rata based on their respective Net Asset
Values as at the respective dates on which such commitment fee is due or
otherwise not in violation of applicable law.
Section 2.5 Lending Offices. The Loans made by each Bank shall
be made and maintained at such Bank's Applicable Lending Office.
Section 2.6 Several Obligations; Remedies Independent. The
failure of any Bank to make any Loan to be made by it on the date specified
therefor shall not relieve any other Bank of its obligation to make its Loan on
such date, but neither any Bank nor the Administrative Agent shall be
responsible for the failure of any other Bank to make a Loan to be made by such
other Bank, and (except as otherwise provided in Section 4.6 hereof) no Bank
shall have any obligation to the Administrative Agent or any other Bank for the
failure by such Bank to make any Loan required to be made by such Bank. The
amounts payable by the Borrowers at any time hereunder and under the Notes to
each Bank shall be a separate and independent debt and each Bank shall be
entitled to protect and enforce its rights arising out of this Agreement and the
Notes (subject, in the case of the right to accelerate, to Section 9 hereof),
and it shall not be necessary for any other Bank, or the Administrative Agent to
consent to, or be joined as an additional party in, any proceedings for such
purposes.
Section 2.7 Notes.
(a) Each Fund agrees that, upon the request of any Bank to the
Administrative Agent, each Fund will, at such Fund's expense, execute and
deliver to such Bank a promissory note of each Borrower evidencing the Loans of
such Bank to such Borrower, substantially in the form if Exhibit 2.7(a) with
appropriate insertions as to date and principal amount (a "Note").
(b) The date and amount of each Loan made by each Bank to a
Borrower, and each payment made on account of the principal thereof, shall be
recorded by such Bank on its books and, prior to any transfer of the applicable
Note, endorsed by such Bank on the schedule attached to such Note or any
continuation thereof; provided that the failure of such Bank to make any such
recordation (or any error in making any such recordation) or endorsement shall
not affect the obligations of a Borrower to make a payment when due of any
amount owing hereunder or under such Note in respect of the Loans evidenced
thereby.
(c) No Bank shall be entitled to have its Notes substituted or
exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any
portion of such Bank's Commitment, Loans and Notes pursuant to Section 11.6
hereof (and, if requested by any Bank, the Funds agree to so exchange any
Notes).
Section 2.8 Optional Prepayments. Subject to Section 4.4
hereof, a Borrower shall have the right to prepay Loans at any time or from time
to time, provided that such Borrower shall give the Administrative Agent notice
of each such prepayment as provided in Section 4.5(a) hereof (and, upon the date
specified in any such notice of prepayment, the amount to be prepaid shall
become due and payable hereunder).
Section 2.9 Mandatory Prepayments. If, at any time, (i) the
Asset Coverage of any Borrower shall fall below 300% or (ii) the aggregate
amount of Loans made to a Borrower exceed the limits provided in such Borrower's
Prospectus, then, within three Business Days thereafter, such Borrower shall
prepay Loans made to such Borrower to the extent necessary to ensure that (x)
the Asset Coverage is equal to or greater than 300% or (y) the aggregate amount
of Loans made to such Borrower then outstanding does not after such payments
exceed such limits as set forth in such Borrower's Prospectus or the Investment
Company Act, as the case may be.
Section 2.10 Extension of Commitment Termination Date.
(a) The Funds may, by notice to the Administrative Agent
(which shall promptly notify the Banks) given not less than 60 days and not more
the 90 days prior to the Commitment Termination Date then in effect (the
"Existing Commitment Termination Date"), request that the Banks extend the
Commitment Termination Date for an additional 364 days from the Existing
Commitment Termination Date. Each Bank, acting in its sole discretion, shall, by
notice (which shall be irrevocable) to the Funds and the Administrative Agent
given no earlier than the date that is 30 days prior to the Existing Commitment
Termination Date (herein, the "Consent Date") and no later than the date that is
three Business Days after the Consent Date, advise the Funds whether or not such
Bank agrees to such extension; provided that each Bank that determines not to
extend the Commitment Termination Date (a "Non-Extending Bank") shall notify the
Administrative Agent (which shall notify the Banks) of such fact promptly after
such determination (but in any event no later than the date three Business Days
after the Consent Date) and any Bank that does not advise the Funds on or prior
to the date three Business Days after the Consent Date that such Bank agrees to
such extension shall be deemed to be a Non-Extending Bank. The election of any
Bank to agree to such extension shall not obligate any other Bank to so agree.
(b) The Funds shall have the right on or before the Existing
Commitment Termination Date to request that the Administrative Agent and/or
Chase, in good faith, seek to replace each Non-Extending Bank with, and
otherwise add to this Agreement, one or more other banks (which may include any
Bank, each prior to the Existing Commitment Termination Date, an "Additional
Commitment Bank"), each of which Additional Commitment Banks shall have entered
into an agreement in form and substance satisfactory to the Funds and the
Administrative Agent pursuant to which such Additional Commitment Bank shall,
effective as of the Existing Commitment Termination Date, undertake a Commitment
specified therein and otherwise become obligated as a Bank hereunder (and, if
any such Additional Commitment Bank is already a Bank, its Commitment shall be
in addition to such Bank's Commitment hereunder on such date). The Funds shall
also have the right to replace each Non-Extending Bank in the same manner
described herein, except that any bank selected by the Funds must be approved by
the Administrative Agent (which approval shall not be unreasonably withheld).
(c) If (and only if) the total of the Commitments of the Banks
that have agreed so to extend the Commitment Termination Date and the additional
Commitments of the Additional Commitment Banks shall be at least 100% of the
aggregate amount of the Commitments in effect immediately prior to the date that
is three Business Days after the Consent Date, then, effective as of the
Existing Commitment Termination Date, (i) the Existing Commitment Termination
Date shall be extended to the date falling 364 days after the Existing
Commitment Termination Date (except that, if such date is not a Business Day,
such Commitment Termination Date as so extended shall be the next preceding
Business Day), (ii) each Additional Commitment Bank shall thereupon become a
"Bank" for all purposes of this Agreement and (iii) the Commitment of each
Non-Extending Bank shall terminate.
(d) Notwithstanding the foregoing clauses (a) through (c), the
extension of the Existing Commitment Termination Date shall not be effective
with respect to any Bank unless:
(i) no Default shall have occurred and be continuing
on each of the date of the notice requesting such extension, on the
Consent Date and on the Existing Commitment Termination Date;
(ii) each of the representations and warranties made
by the Funds and Borrowers in Section 7 hereof shall be true and
complete on and as of each of the date of the notice requesting such
extension, the Consent Date and the Existing Commitment Termination
Date with the same force and effect as if made on and as of such date
(or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date); and
(iii) each Non-Extending Bank shall have been paid in
full by the Funds all amounts due to such Bank hereunder on or before
the Existing Termination Date.
Section 2.11 Designation of Additional Borrower; Amendments to
Schedule I.
(a) Other series of each Fund and other investment companies
registered under the Investment Company Act, in either case (a) which have at
least $2,000,000 in Total Assets, (b) are (I) equity funds, (II) fixed income
funds, or (III) any combination thereof, in each case whether investing in
domestic or foreign securities or any combination thereof, and (c) for which the
Investment Adviser or an Investment Adviser Affiliate acts as the investment
manager, may, with the prior written consent of the Administrative Agent and
each Bank, become parties to this agreement in addition to those Borrowers
listed in Schedule I, and be deemed Borrowers for all purposes of this Agreement
by executing an instrument substantially in the form of Exhibit 2.11(a) (with
such changes therein as may be approved by the Administrative Agent and the
Banks), which instrument shall (x) have attached to it a copy of this Agreement
(as the same may have been amended) with a revised Schedule I reflecting the
participation of such additional series or investment company and any prior
revisions to Schedule I effected in accordance with the terms hereof and (y) be
accompanied by the documents and instruments required to be delivered by the
Borrowers pursuant to Section 6 hereof, including, without limitation, an
opinion of counsel for the Funds substantially in the form of Exhibit 6.1(b).
(b) No series of any Fund or investment company shall be
admitted as a party to this Agreement as a Borrower unless at the time of such
admission and after giving effect thereto: (i) the representations and
warranties set forth in Section 7 hereof shall be true and correct with respect
to such Borrower; (ii) such Borrower shall be in compliance in all material
respects with all of the terms and provisions set forth herein on its part to be
observed or performed at the time of the admission and after giving effect
thereto; and (iii) no Default or Event of Default with respect to such Borrower,
nor any event which with the giving of notice or expiration of any applicable
grace period or both would constitute such a Default or Event of Default with
respect to such Borrower, shall have occurred and be continuing.
Section 2.12 Swing Line Commitment. Subject to the terms and
conditions hereof, Chase (in such capacity, the "Swing Line Lender") agrees to
make available to the Borrowers a portion of the credit otherwise available
under the Commitments from time to time by making swing line loans ("Swing Line
Loans") to the Borrowers in an aggregate principal amount not to exceed at any
one time outstanding the Swing Line Commitment (notwithstanding that the Swing
Line Loans outstanding at any time, when aggregated with the Swing Line Lender's
other outstanding Loans hereunder, may exceed the Swing Line Lender's Commitment
then in effect); provided, however, that on the date of the making of any Swing
Line Loan and while any such Swing Line Loans are outstanding, the sum of the
aggregate principal amount of all outstanding Loans and Swing Line Loans shall
not exceed the total Commitments. During the Commitment Period applicable to the
Borrower, the Borrower may use the Swing Line Commitment by borrowing, repaying
and reborrowing, all in accordance with the terms and conditions hereof.
Section 2.13 Procedure for Swing Line Borrowing. Whenever a
Borrower desires that the Swing Line Lender make Swing Line Loans under Section
2.12 hereof, the Borrower shall give the Swing Line Lender irrevocable
telephonic notice confirmed promptly in writing (which telephonic notice must be
received by the Swing Line Lender not later than 3:00 P.M., New York City time,
on the proposed date specified for such borrowing), specifying the amount of
each requested Swing Line Loan. Each borrowing under the Swing Line Commitment
shall be in an amount equal to $50,000 or an integral multiple of $50,000 in
excess thereof. Not later than 5:00 P.M., New York City time, on the date
specified in a notice by the Borrower in respect of Swing Line Loans, the Swing
Line Lender shall make available to the Administrative Agent for the account of
the Borrower at the office of the Administrative Agent specified in Section 11.2
hereof an amount in immediately available funds equal to the amount of the Swing
Line Loan to be made by the Swing Line Lender. The proceeds of such Swing Line
Loan will then be made available to the Borrower on such date specified for such
borrowing by the Administrative Agent transferring by wire to the custodian of
and for the account of the Borrower the aggregate of the amounts made available
to the Administrative Agent by the Swing Line Lender in immediately available
funds.
Section 2.14 Refunding of Swing Line Loans.
(a) The Swing Line Lender, at any time in its sole and
absolute discretion may, and on the seventh day (or if such day is not a
Business Day, the next Business Day) after the date of such borrowing with
respect to any Swing Line Loans to the Borrower shall, on behalf of the Borrower
(and the Borrower hereby irrevocably directs the Swing Line Lender to so act on
its behalf), upon notice given by the Swing Line Lender no later than 10:00
A.M., New York City time, on the relevant refunding date, request each Bank to
make, and each Bank hereby agrees to make, a Loan to the Borrower, at the rate
set forth in Section 3.2 hereof, in the pro rata amount determined pursuant to
Section 4.2. hereof equal to the amount of such Swing Line Loans of the Borrower
(the "Refunded Swing Line Loans") outstanding on the date of such notice, to
repay the Swing Line Lender. Each Bank shall make the amount of such Loan
available to the administrative Agent at its office set forth in Section 11.2
hereof in immediately available funds, no later than 1:00 P.M., New York City
time, on the date of such notice. The proceeds of such Loans shall be
distributed by the Administrative Agent to the Swing Line Lender and immediately
applied by the Swing Line Lender to repay the Refunded Swing Line Loans.
Effective on the date such Loans are made, the portion of the Swing Line Loans
so paid shall no longer be outstanding as Swing Line Loans.
(b) The making of any Swing Line Loan hereunder shall be
subject to the satisfaction of the applicable conditions precedent thereto set
forth in Section 6 hereof (unless otherwise waived in accordance with Section
11.4 hereof).
(c) If prior to the making of a Loan to the Borrower pursuant
to Section 2.14(a) hereof one of the events described in Sections 9(f) or 9(g)
hereof shall have occurred with respect to the Borrower, each Bank severally,
unconditionally and irrevocably agrees that it shall purchase a participating
interest in the applicable Swing Line Loans ("Unrefunded Swing Line Loans") in
an amount equal to the amount of Loans which would otherwise have been made by
such Bank pursuant to Section 2.14(a) hereof. Each Bank will immediately
transfer to the Administrative Agent, in immediately available funds, the amount
of its participation (the "Swing Line Participation Amount"), and the proceeds
of such participation shall be distributed by the Administrative Agent to the
Swing Line Lender in such amount as will reduce the amount of the participating
interest retained by the Swing Line in its Swing Line Loans to the amount of the
Loans which were to have been made by it pursuant to Section 2.14(a) hereof.
(d) Whenever, at any time after the Swing Line Lender has
received from any Bank such Lender's Swing Line Participation amount, the Swing
Line Lender receives any payment on account of the Swing Line Loans, the Swing
Line Lender will distribute to such Bank its Swing Line Participation Amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such participating interest was outstanding and funded and,
in the case of principal and interest payments, to reflect such Bank's pro rata
portion of such payment if such payment is not sufficient to pay the principal
of and interest on all Swing Line Loans then due); provided, however, that in
the event that such payment received by the Swing Line Lender is required to be
returned, such Bank will return to the Swing Line Lender any portion thereof
previously distributed to it by the Swing Line Lender.
(e) Each Bank's obligation to make the Loans referred to in
Section 2.14(a) hereof and to purchase participating interests pursuant to
Section 2.14(c) hereof shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which such Bank may have
against the Swing Line Lender or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of a Default or an Event of Default or the
failure to satisfy any of the other conditions specified in Section 6 hereof,
(iii) any adverse change in the condition (financial or otherwise) of the
Borrower; (iv) any breach of this Agreement or any Note by the Borrower or the
Bank, or (v) any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing.
Section 3. Payments of Principal and Interest.
Section 3.1 Repayment of Loans. Each Borrower hereby severally
and unconditionally, but neither jointly nor jointly and severally promises to
pay to the Administrative Agent for account of each Bank the principal of each
Loan made by such Bank to such Borrower, and each Loan shall mature, on the
earlier of (a) the date that is 30 calendar days after the date such Loan was
made and (b) the Commitment Termination Date.
Section 3.2 Interest.
(a) Each Borrower hereby promises severally and
unconditionally, but neither jointly nor jointly and severally, to pay to the
Administrative Agent for account of each Bank interest on the unpaid principal
amount of each Loan (which, for purposes of this Section 3.2, shall include each
Swing Line Loan) made by such Bank to such Borrower, for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at a rate equal to the Federal Funds Rate (as in effect from time
to time) plus the Applicable Margin.
(b) Notwithstanding the foregoing, each Borrower hereby
promises to pay to the Administrative Agent for the account of each Bank
interest at the Post-Default Rate on any principal of any Loan made by such Bank
to such Borrower and on any other amount payable by such Borrower in respect of
such Loan hereunder or under the applicable Note held by such Bank to or for
account of such Bank, that shall not be paid to the Administrative Agent for the
benefit of the Banks in full when due (whether at stated maturity, by
acceleration, by mandatory prepayment or otherwise), for the period from and
including the due date thereof to but excluding the date the same is paid in
full.
(c) Accrued interest on each Loan shall be payable in arrears
upon the payment or prepayment thereof (but only on the principal amount so paid
or prepaid); except that interest payable at the Post-Default Rate pursuant to
Section 3.2(b) hereof shall be payable from time to time on demand. Promptly
after the determination of any interest rate provided for herein or any change
therein, the Administrative Agent shall give notice thereof to the Banks.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
Section 4.1 Payments.
(a) Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by a Borrower under
this Agreement and the Notes, shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Administrative Agent
(Account No. 323-525369, or any other account designated by the Administrative
Agent), not later than 2:00 p.m. New York time on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day), provided that if
a new Loan to a Borrower is to be made by any Bank on a date such Borrower is to
repay any principal of an outstanding Loan made by such Bank to such Borrower,
such Bank shall apply the proceeds of such new Loan to the payment of the
principal to be repaid and only an amount equal to the difference between the
principal to be borrowed and the principal to be repaid shall be made available
by such Bank to the Administrative Agent as provided in Section 2.2 hereof or
paid by such Borrower to the Administrative Agent pursuant to this Section 4.1,
as the case may be.
(b) Each Borrower shall, at the time of making each payment
under this Agreement or any Note for the account of any Bank, specify to the
Administrative Agent (which shall so notify the intended recipient(s) thereof)
the identity of such Borrower, the Loans or other amounts payable by such
Borrower hereunder to which such payment is to be applied (and in the event that
such Borrower fails to so specify, or if an Event of Default has occurred and is
continuing, the Administrative Agent may distribute such payment for account of
such Borrower to the Banks for application in such manner as it or the Majority
Banks, subject to Section 4.2 hereof, may determine to be appropriate).
(c) Each payment received by the Administrative Agent under
this Agreement or any Note for account of any Bank shall be paid by the
Administrative Agent promptly to such Bank, in immediately available funds, for
account of such Bank's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
(d) If the due date of any payment under this Agreement or any
Note would otherwise fall on a day that is not a Business Day, such date shall
be extended to the next succeeding Business Day, and interest shall be payable
for any principal so extended for the period of such extension.
Section 4.2 Pro Rata Treatment. Except to the extent otherwise
provided herein:
(a) each borrowing from the Banks under Section 2.1 hereof
shall be made from the Banks, each payment of commitment fee under Section 2.4
hereof shall be made for account of the Banks, and each termination or reduction
of the amount of the Commitments under Section 2.3 hereof shall be applied to
the respective Commitments of the Banks, pro rata according to the amounts of
their respective Commitments;
(b) each payment or prepayment of principal of Loans by a
Borrower shall be made for account of the Banks pro rata in accordance with the
respective unpaid principal amounts of the Loans held by them; and
(c) each payment of interest on Loans by a Borrower shall be
made for account of the Banks pro rata in accordance with the amounts of
interest on such Loans then due and payable to the respective Banks.
Section 4.3 Computations.
(a) Interest on Loans and commitment fees shall be computed on
the basis of a 360-day year for the actual days elapsed. Any change in the
interest rate on a Loan resulting from a change in the Federal Funds Rate shall
become effective as of the opening of business on the day on which such change
becomes effective. The Administrative Agent shall as soon as practicable notify
the Borrower and the Banks of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on each Borrower and the Banks in the absence of manifest
error. The Administrative Agent shall, at the request of a Borrower, deliver to
such Borrower a statement showing the quotations used by the Administrative
Agent in determining any interest rate pursuant to Section 3.2 hereof.
Section 4.4 Minimum Amounts. Each borrowing shall be in an
aggregate amount at least equal to $500,000 or a larger integral multiple of
$100,000. Each partial prepayment of principal of Loans shall be in an aggregate
amount at least equal to $100,000 or a larger integral multiple of $100,000.
Section 4.5 Certain Notices.
(a) Notices by a Borrower to the Administrative Agent of
borrowings and optional prepayments of Loans shall be irrevocable and shall be
effective only if received by the Administrative Agent not later than 12:00 noon
New York time on the date of the relevant borrowing or prepayment. Each such
notice of borrowing or optional prepayment shall specify the Borrower for whose
benefit such borrowing or prepayment, or on whose behalf such borrowing or
prepayment is to be made, the Loans to be borrowed or prepaid and the amount
(subject to Section 4.4 hereof) of each Loan to be borrowed or prepaid and the
date of borrowing or optional prepayment (which shall be a Business Day).
(b) Notices by a Borrower to the Administrative Agent of
terminations or reductions of the Commitments shall be irrevocable and shall be
effective only if received in a timely manner, as set forth in Section 2.3(b)
hereof, by the Administrative Agent. Each such notice of termination or
reduction shall specify the amount of the Commitments to be terminated or
reduced.
(c) The Administrative Agent shall promptly notify the Banks
of the contents of each such notice.
Section 4.6 Non-Receipt of Funds by the Administrative Agent.
Unless the Administrative Agent shall have been notified by a Bank or a Borrower
(the "Payor") prior to the date on which the Payor is to make payment to the
Administrative Agent of (in the case of a Bank) the proceeds of a Loan to be
made by such Bank hereunder or (in the case of a Borrower) a payment to the
Administrative Agent for account of one or more of the Banks hereunder (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon (such interest to be, in the case of a Bank, the
Federal Funds Rate and, in the case of a Borrower, as set forth in Section
3.2(a) hereof) in respect of each day during the period commencing on the date
(the "Advance Date") such amount was so made available by the Administrative
Agent until the date the Administrative Agent recovers such amount at a rate per
annum equal to the Federal Funds Rate for such day and, if such recipient(s)
shall fail promptly to make such payment, the Administrative Agent shall be
entitled to recover such amount, on demand, from the Payor, together with
interest as aforesaid, provided that if neither the recipient(s) nor the Payor
shall return the Required Payment to the Administrative Agent within three
Business Days of the Advance Date, then, retroactively to the Advance Date, the
Payor and the recipient(s) shall each be obligated to pay interest on the
Required Payment as follows:
(a) if the Required Payment shall represent a payment to be
made by a Borrower to the Banks, such Borrower and the recipient(s) shall each
be obligated retroactively to the Advance Date to pay interest in respect of the
Required Payment at the Post-Default Rate (without duplication of the obligation
of such Borrower under Section 3.2 hereof to pay interest on the Required
Payment at the Post-Default Rate), it being understood that the return by the
recipient(s) of the Required Payment to the Administrative Agent shall not limit
such obligation of such Borrower under said Section 3.2 to pay interest at the
Post-Default Rate in respect of the Required Payment; and
(b) if the Required Payment shall represent proceeds of a Loan
to be made by the Banks to a Borrower, such Borrower and the Payor shall each be
obligated retroactively to the Advance Date to pay interest in respect of the
Required Payment pursuant to the rate specified in Section 3.2 hereof (without
duplication of the obligation of such Borrower under Section 3.2 hereof to pay
interest on the Required Payment), it being understood that the return by such
Borrower of the Required Payment to the Administrative Agent shall not limit any
claim such Borrower may have against the Payor in respect of such Required
Payment.
Section 4.7 Sharing of Payments, Etc.
(a) Each Fund agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Bank may
otherwise have, each Bank shall be entitled, at its option (to the fullest
extent permitted by law), to set off and apply any deposit (general or special,
time or demand, provisional or final), or other indebtedness, held by it for the
credit or account of a Borrower at any of its offices, in Dollars or in any
other currency, against any principal of or interest on any of such Bank's Loans
to such Borrower or any other amount payable by such Borrower to such Bank
hereunder, that is not paid when due (regardless of whether such deposit or
other indebtedness are then due to such Borrower), in which case it shall
promptly notify such Borrower and the Administrative Agent thereof, provided
that such Bank's failure to give such notice shall not affect the validity
thereof.
(b) If any Bank shall obtain from a Borrower payment of any
principal of or interest on any Loan owing to it or payment of any other amount
under this Agreement through the exercise of any right of set-off, banker's lien
or counterclaim or similar right or otherwise (other than from the
Administrative Agent as provided herein), and, as a result of such payment, such
Bank shall have received a greater percentage of the principal of or Interest on
the Loans made to such Borrower or such other amounts then due to such Bank
hereunder by such Borrower than the percentage received by any other Bank, it
shall promptly purchase from such other Banks participations in (or, if and to
the extent specified by such Bank, direct interests in) such Loans or such other
amounts, respectively, owing to such other Banks (or in interest due thereon, as
the case may be) in such amounts, and make such other adjustments from time to
time as shall be equitable, to the end that all the Banks shall share the
benefit of such excess payment (net of any expenses that may be incurred by such
Bank in obtaining or preserving such excess payment) pro rata in accordance with
the unpaid principal of and/or interest on such Loans or such other amounts,
respectively, owing to each of the Banks. To such end all the Banks shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored.
(c) Each Fund agrees that any Bank so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Bank were a direct holder of Loans or other amounts (as the case may
be) owing to such Bank in the amount of such participation (or direct interest).
(d) Nothing contained herein shall require any Bank to
exercise any such right or shall affect the right of any Bank to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of a Borrower. If, under any applicable bankruptcy,
insolvency or other similar law, any Bank receives a secured claim in lieu of a
set-off to which this Section 4.7 applies, such Bank shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Banks entitled under this Section 4.7 to share
in the benefits of any recovery on such secured claim.
Section 4.8 Requirements of Law.
(a) If any Bank shall have determined that the adoption of or
any change in any applicable law, rule, or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
compliance by such Bank or any corporation controlling such Bank with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any such authority, central bank, or comparable authority made
subsequent to the date hereof shall have the effect of reducing the rate of
return on such Bank's or such corporation's capital as a consequence of its
obligations hereunder to a level below that which such Bank or such corporation
could have achieved but for such adoption, change, or compliance (taking into
consideration such Bank's or such corporation's policies with respect to capital
adequacy) by an amount determined by such Bank, in its reasonable discretion, to
be material, then from time to time, each Borrower shall promptly pay to such
Bank such additional amount or amounts as will compensate such Bank for such
reduction.
(b) If any Bank becomes entitled to claim any additional
amounts pursuant to this Section 4.8, it shall promptly notify the Borrowers
(with a copy to the Administrative Agent) of the event by reason of which it has
become so entitled by providing a certificate setting forth in reasonable detail
the basis for the claim for additional amounts, the amounts required to be paid
by the Borrowers to such Bank, and the computations made by such Bank to
determine the amounts; provided that such Bank shall not be required to disclose
any confidential information. Such certificate as to any additional amounts
payable pursuant to this Section 4.8(b) submitted by such Bank to the Borrowers
(with a copy to the Administrative Agent) shall be conclusive in the absence of
manifest error. The agreements in this Section 4.8 shall survive the termination
of this Agreement and the payment of the Loans and all other amounts payable
hereunder. No Borrower shall be responsible to compensate such Bank for
additional amounts attributable to another Borrower's Loans.
(c) Failure or delay on the part of any Bank to demand
compensation pursuant to this Section 4.8 shall not constitute a waiver of such
Bank's right to demand such compensation; provided that the Borrowers shall not
be required to compensate a Bank pursuant to this Section 4.8 for any increased
costs or reductions incurred more than 270 days prior to the date that such Bank
notifies the Borrower of the change in the applicable law, rule, or regulation
giving rise to such increased costs or reductions and of such Bank's intention
to claim compensation therefore; provided further that, if the change in the
applicable law, rule, or regulation giving rise to such increased costs or
reductions is retroactive, then the 270-day period referred to above shall be
extended to include the period of retroactive effect thereof.
Section 5. U.S. Taxes.
(a) All payments made by any Borrower under this Agreement or
any Note shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding all present and future income taxes and franchise taxes
(imposed in lieu of net income taxes) imposed on the Administrative Agent or any
Bank as a result of a present or former connection between the Administrative
Agent or such Bank and the jurisdiction of the Governmental Authority imposing
such tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from the Administrative Agent or
such Bank having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any Note). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Administrative Agent or any Bank hereunder or under any Note, the
amounts so payable to the Administrative Agent or such Bank shall be increased
to the extent necessary to yield to the Administrative Agent or such Bank (after
payment of all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified on this Agreement, provided,
however, that a Borrower shall not be required to increase any such amounts
payable to any Bank that is not organized under the laws of the U.S. or a state
thereof if such Bank fails to comply with the requirements of paragraph (b) of
this Section. Whenever any Non-Excluded Taxes are payable by a Borrower, as
promptly as possible thereafter, such Borrower shall send to the Administrative
Agent for its own account or for the account of such Bank, as the case may be, a
certified copy of an original official receipt received by such Borrower showing
payment thereof. If a Borrower fails to pay any Non-Excluded Taxes when due to
the appropriate taxing authority or fails to remit to the Administrative agent
the required receipts or other required documentary evidence, such Borrower
shall indemnify the Administrative Agent and the Banks for any incremental
taxes, interest or penalties that may become payable by the Administrative Agent
or any Bank as a result of any such failure. The agreements in this Section
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
(b) Each Bank that is not incorporated under the laws of the
U.S. or a state thereof shall:
(i) deliver to the Investment Adviser and the
Administrative Agent (A) two duly completed copies of U.S. Internal
Revenue Service Form 1001 or 4224, or successor applicable form, as the
case may be, and (B) and Internal Revenue Service From W-8 or W-9, or
successor applicable form, as the case may be;
(ii) deliver to the Investment Adviser and the
Administrative Agent two further copies of any such form or
certification on or before the date that any such form or certification
expires or becomes obsolete and after the occurrence of any event
requiring a change in the most recent form previously delivered by it
to the Investment Adviser; and
(iii) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be requested by
the Investment Adviser or the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank so advises the Investment Adviser and the
Administrative Agent. Such Bank shall certify (A) in the case of a Form 1001 or
4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any U.S. federal income taxes and (B) in the case of
a Form W-8 or W-9, that it is entitled to an exemption from U.S. backup
withholding tax. Each Person that shall be subject to an assignment or
participation pursuant to Section 11.6 hereof shall, upon the effectiveness of
the related transfer, be required to provide all of the forms and statements
required pursuant to this Section 5, provided that in the case of a Person
subject to a participation, such Person shall furnish all required forms and
statements to the Bank from which the related participation shall have been
purchased.
(c) If any Bank shall receive a credit or refund from a taxing
authority with respect to, and actually resulting from, an amount of
Non-Excluded Taxes actually paid to or on behalf of such Bank by a Borrower (a
"Tax Credit"), such Bank shall promptly pay to such Borrower the amount so
received with respect to the Tax Credit. If such Tax Credit is not received by
such Bank in the form of cash, such Bank shall pay the amount of such Tax Credit
not later than the time prescribed by applicable law for filing the return
(including extensions of time) for such Bank's taxable period which includes the
period in which such Bank receives the economic benefit of such Tax Credit. In
any event, the amount of any Tax Credit payable by a Bank to a Borrower pursuant
to this clause (c) shall not exceed the actual amount of cash refunded to, or
credits received and usable (in accordance with the actual practices then in use
by such Bank) by, such Bank from a taxing authority. In determining the amount
of any Tax Credit, a Bank may use such apportionments and attribution rules as
such bank customarily employs in allocating taxes among its various operations
and income sources and such determination shall be conclusive absent manifest
error. Each Borrower further agrees promptly to return to a Bank the amount paid
to such Borrower with respect to a Tax Credit by such Bank if such Bank is
caused to repay, or is determined to be ineligible for, a Tax Credit for such
amount. Notwithstanding anything to the contrary contained herein, each Borrower
hereby acknowledges and agrees that (i) neither the Administrative Agent nor any
Bank shall be obligated to provide such Borrower with details of the tax
position of the Administrative Agent or such Bank (as the case may be) and (ii)
such Borrower shall have no right to inspect any records (including tax returns)
of the Administrative Agent or such Bank (as the case may be).
Section 6. Conditions Precedent.
Section 6.1 Initial Loan. The obligation of any Bank to make
its initial Loan hereunder is subject to the conditions precedent (which
conditions precedent apply to and shall be satisfied by the Borrowers severally)
that the Administrative Agent shall have received the following documents (with,
in the case of clauses (a), (b), (c), (d), and (e) below, sufficient
counterparts or copies, as the case may be, for each Bank), each of which shall
be satisfactory to the Administrative Agent (and to the extent specified below,
to each Bank) in form and substance:
(a) Related Agreements. True and correct copies, certified as
to authenticity by each Fund, of the most recent Prospectus for each Borrower,
the Shareholder Services Agreement for each Borrower, the Custody Agreement for
each Borrower, the Distribution Agreement for each Borrower, the Investment
Management Agreement of each Fund in which the assets of each Borrower are
invested, the current registration statement for each Borrower, the most recent
annual and semi-annual financial reports for each Borrower and such other
documents or instruments as may be reasonably requested by the Administrative
Agent, including, without limitation, a copy of any debt instrument, security
agreement or other material contract to which any Borrower may be a party.
(b) Corporate Documents. Certified copies of the charter and
by-laws (or equivalent documents) of each Fund and of all corporate authority
for each Fund (including, without limitation, board of director resolutions)
with respect to the execution, delivery and performance of this Agreement and
the Notes and each other document to be delivered by each Fund from time to time
in connection herewith and the Loans hereunder (and the Administrative Agent and
each Bank may conclusively rely on such certificate until it receives notice in
writing from each Fund to the contrary).
(c) Incumbency Certificate. A certificate of each Fund, dated
the Closing Date, as to the incumbency and signature of the officers of such
Fund executing this Agreement or any Notes executed by the Secretary or any
Assistant Secretary of such Fund, satisfactory in form and substance to the
Administrative Agent.
(d) Opinion of Counsel to the Funds. An opinion, dated the
date hereof, of Charles C.S. Park, Assistant General Counsel of American Century
Investment Management, Inc., counsel to the Funds and each Borrower,
substantially in the form of Exhibit 6.1(b) (and the Funds and each Borrower
hereby instruct such counsel to deliver such opinion to the Banks and the
Administrative Agent).
(e) Credit Agreement. Executed copies of this Agreement and
all related documents in form and substance reasonably satisfactory to each
Bank.
(f) Notes. If requested pursuant to Section 2.7(a) hereof, the
Notes, duly completed and executed for each Bank.
(g) Other Documents. Such other documents as the
Administrative Agent or any Bank or special New York counsel to Chase may
reasonably request.
The obligation of any Bank to make its initial Loan hereunder is also subject to
the payment by the Funds of such fees as the Funds shall have agreed to pay or
deliver to any Bank or the Administrative Agent in connection herewith,
including, without limitation, the reasonable fees and expenses of Dechert Price
& Rhoads, special New York counsel to Chase, in connection with the negotiation,
preparation, execution and delivery of this Agreement and the Notes and the
making of the Loans hereunder (to the extent that statements for such fees and
expenses have been delivered to the Funds). The Funds shall allocate such fees
and expenses among the Borrowers pro rata according to their respective Net
Asset Values as at the date on which such fees and expenses are paid or
otherwise in compliance with law.
Section 6.2 Initial and Subsequent Loans. The obligation of
the Banks to make any Loan to a Borrower upon the occasion of each borrowing
hereunder (including the initial borrowing) is subject to the further conditions
precedent that both immediately prior to the making of such Loan and also after
giving effect thereto and to the intended use thereof:
(a) no Default shall have occurred and be continuing;
(b) the representations and warranties made by each Fund on
behalf of itself and each Borrower in Section 7 hereof shall be true and
complete on and as of the date of the making of such Loan with the same force
and effect as if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date as of such
specific date);
(c) the Banks shall be satisfied that the Loans and the use of
proceeds thereof in respect of each Borrower comply in all respects with
Regulation U. To the extent required by Regulation U, the Administrative Agent
shall have received a copy of either (i) FR Form U-1, duly executed and
delivered by each Fund on behalf of each Borrower and completed for delivery to
each Bank, in form acceptable to the Administrative Agent, or (ii) a current
list of "margin stock" (as defined in Regulation U) from each Borrower, in form
acceptable to the Administrative Agent and in compliance with Section
221.3(c)(2) of Regulation U; and
(d) (i) Asset Coverage of at least 300% of any Borrower as
provided by and in accordance with the Investment Company Act (provided that
"total assets," as used in the Investment Company Act, shall not include any
encumbered assets of a Borrower) and (ii) borrowing limits in such Borrower's
Prospectus are not exceeded.
Each notice of borrowing by a Fund on behalf of itself or a Borrower hereunder
shall constitute a certification by such Fund to the effect set forth in the
preceding sentence (both as of the date of such notice and, unless such Fund
otherwise notifies the Administrative Agent prior to the date of such borrowing,
as of the date of such borrowing).
Section 7. Representations and Warranties.
Each Fund, on behalf of itself and each Borrower, hereby
represents and warrants to the Administrative Agent and the Banks that (it being
agreed that each Fund represents and warrants only to matters with respect to
itself and each Borrower that is a part of such Fund, and each Borrower
represents only to matters with respect to itself):
Section 7.1 Corporate Existence; Compliance with Law. Each
Fund: (a) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization; (b) has all requisite
corporate or other power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; (c) is qualified to do
business and is in good standing in all jurisdictions where failure so to
qualify could (either individually or in the aggregate) have a Material Adverse
Effect; (d) has no Subsidiaries; and (e) is in compliance of all laws,
including, but not limited to, the Investment Company Act and the Securities Act
of 1933, as amended.
Section 7.2 Investment Company.
(a) Each Fund is registered with the Commission under the
Investment Company Act as an open-end management investment company, and no
order of suspension or revocation of such registration has been issued or
proceedings therefor initiated or threatened by the Commission.
(b) Each Borrower is in substantial compliance with all
investment objectives, policies, restrictions and limitations set forth or
incorporated by reference in the Prospectus and applicable to such Borrower.
(c) The Investment Adviser is the primary investment adviser
to each Borrower and Fund and, to the best knowledge of each Fund, the
Investment Adviser is duly registered as an investment adviser under the
Advisers Act.
Section 7.3 Permission to Borrow. Each Borrower is permitted
to borrow hereunder pursuant to the limits and restrictions set forth in its
Prospectus.
Section 7.4 Financial Condition. For each Borrower, the
statement of assets and liabilities as of such Borrower's most recently ended
fiscal year for which annual reports have been prepared and the related
statements of operations and of changes in net assets for the fiscal year ended
on such date, copies of which financial statements, certified by the independent
public accountants for each Borrower, or the Fund acting on behalf of each such
Borrower, as the case may be, have heretofore been delivered to each Bank,
fairly present, in all material respects, the financial position of such
Borrower as of such date and the results of its operations for such period, in
conformity with GAAP (as consistently applied).
Section 7.5 Litigation. There are no legal or arbitral
proceedings, or any proceedings by or before any governmental or regulatory
authority or agency, now pending or (to the knowledge of any Fund or any
Borrower) threatened against that Fund or Borrower (a) with respect to this
Agreement and each of the Notes or any of the transactions contemplated hereby
or thereby, or (b) that, if adversely determined could (either individually or
in the aggregate) have a Material Adverse Effect.
Section 7.6 No Default. No Default or Event of Default has
occurred and is continuing.
Section 7.7 No Breach. None of the execution and delivery of
this Agreement and the Notes, the consummation of the transactions herein
contemplated or compliance with the terms and provisions hereof will conflict
with or result in a breach of, or require any consent under, the charter or
by-laws of any Fund, or any applicable law or regulation, or any order, writ,
injunction or decree of any court or governmental authority or agency, or any
material agreement or instrument to which any Fund is a party or by which it or
any of its or any Borrower's Property is bound or to which it is subject, or
constitute a default under any such agreement or instrument.
Section 7.8 Action. Each Fund has all necessary corporate
power, authority and legal right to execute, deliver and perform its obligations
under this Agreement and the Notes and to borrow hereunder; the execution,
delivery and performance by each Fund of this Agreement and the Notes and the
ability to borrow hereunder have been duly authorized by all necessary corporate
action on its part (including, without limitation, any required shareholder
approvals); and this Agreement has been duly and validly executed and delivered
by each Fund and constitutes, and each of the Notes when executed and delivered
for value will constitute, its legal, valid and binding obligation, enforceable
against each Fund in accordance with its terms, except as such enforceability
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
similar laws of general applicability affecting the enforcement of creditors'
rights and (b) the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 7.9 Approvals. No authorizations, approvals or
consents of, and no filings or registrations with, any governmental or
regulatory authority or agency, or any securities exchange, are necessary for
the execution, delivery or performance by each Fund of this Agreement or the
Notes or for the legality, validity or enforceability hereof or thereof.
Section 7.10 Use of Credit. No part of the proceeds of any
Loan hereunder will be used in a manner that violates Regulation U.
Section 7.11 ERISA. No Fund has any ERISA Affiliates or has
had any ERISA Affiliates at any time. No Fund maintains, contributes to or
participates in, nor at any time has any Fund maintained, contributed to or
participated in, any Plan or Multiemployer Plan.
Section 7.12 Taxes. Each Fund and each Borrower have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by a Fund or any such Borrower. The charges,
accruals and reserves on the books of each Fund in respect of taxes and other
governmental charges are, in the opinion of each Fund, adequate. No Fund has
given or been requested to give a waiver of the statute of limitations relating
to the payment of any Federal, state, local and foreign taxes or other
impositions.
Section 7.13 True and Complete Disclosure. No Prospectus, as
of the date thereof, contains any untrue statement of material fact or omits to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. Since the date of
each such Prospectus, there has not been any change that would require a Fund to
supplement or amend its Prospectus.
Section 7.14 Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of each Fund and each
Borrower in writing to the Administrative Agent or any Bank for purposes of or
in connection with this Agreement or any transaction contemplated hereby (in
each case, as amended, superseded, supplemented or otherwise modified with the
knowledge of the Administrative Agent or such Bank) is, and all other such
factual information hereafter furnished by or on behalf of each Fund and each
Borrower to the Administrative Agent or any Bank (in each case, as amended,
superseded, supplemented or otherwise modified with the knowledge of the
Administrative Agent or such Bank) will be, true and accurate in every material
respect on the date as of which such information is dated or certified, and to
the extent such information was furnished to the Administrative Agent or such
Bank heretofore or contemporaneously, as of the date of execution and delivery
of this Agreement by the Administrative Agent or such Bank, and such information
is not, or shall not be, as the case may be, incomplete by omitting to state any
material fact necessary to make such information not misleading.
Section 7.15 Indebtedness. As of the date hereof, neither any
Fund nor any Borrower has any Indebtedness other than (a) current liabilities
consisting of expenses payable and payables for securities purchased and (b)
obligations under Financial Contracts.
Section 7.16 Property and Liens. No Lien exists upon any
Property of any Fund except for Liens permitted by Section 8.6 hereof.
Section 7.17 Blue Sky Registrations. There are in full force
and effect orders of effective securities registration for the securities of
each Borrower in each state in which such securities are sold or are offered for
sale and required to be so registered.
Section 7.18 Federal Regulations. If requested by any Bank or
the Administrative Agent from time to time, each of the Funds and each Borrower
will furnish to the Administrative Agent and each Bank a statement and current
list of the assets of each Borrower in conformity with the requirements of FR
Form U-1 referred to in said Regulation U. Other than the furnishing of such
statement and such list, no filing or other action is required under the
provision of Regulations T, U or X in connection with the execution and delivery
of the Agreement and the making of the Loans hereunder.
Section 7.19 Apportionment Among Funds. Borrowings of Loans by
a Fund for the benefit of any Borrower will be allocated by such Fund among the
Borrowers on a fair and equitable basis not in violation of applicable law and
in accordance with the procedures established prior to the date of this
Agreement by the board of directors of the Fund, as such procedures may be
amended from time to time.
Section 7.20 No Material Adverse Change. For each Borrower,
since the date of the statement of assets and liabilities for the most recently
ended fiscal year for which annual reports have been prepared for such Borrower,
there has been no development or event which has had or could reasonably be
expected to have a Material Adverse Effect with respect to such Borrower.
Section 7.21 Year 2000. The Investment Adviser has developed a
project plan and is taking appropriate steps to address the risk that, from and
after January 1, 2000, the computer system utilized by the Borrowers, or by the
Funds on the Borrower's behalf, and the computer systems of others with which
the Investment Adviser's computer systems interface may be unable to process
properly and calculate date-related information and data, and may experience
date-logic failures (such risk being the "Year 2000 Problem"). Each Borrower
reasonably expects that the Investment Adviser shall have performed any required
reprogramming and testing of hardware and software systems to resolve the Year
2000 Problem on or before June 30, 1999. Each Borrower reasonably expects that
the effects of the Year 2000 Problem should not result in a Default or a
Material Adverse Effect.
Section 8. Covenants of the Funds.
Each Fund for itself and each Borrower for itself hereby
covenants and agrees with the Banks and the Administrative Agent that, so long
as any Commitment or Loan is outstanding to it or (in the case of any Fund) any
Borrower that is a part of such Fund and until payment in full of all amounts
payable by it or (in the case of any Fund) any Borrower that is a part of such
Fund hereunder (it being agreed that each Fund covenants only to matters with
respect to itself and each Borrower that is a part of such Fund, and each
Borrower covenants only to matters with respect to itself):
Section 8.1 Financial Statements. Each Fund or Borrower, as
applicable, shall deliver to the Administrative Agent (with copies for each
Bank):
(a) as soon as available and in any event within 75 days after
the end of each fiscal year of such Borrower, a statement of assets and
liabilities of that Borrower as of the end of such fiscal year, a statement of
operations for such fiscal year, a statement of changes in net assets for such
fiscal year and the preceding fiscal year, a portfolio of investments as of the
end of such fiscal year and the per share and other data for such fiscal year
prepared in accordance with GAAP (as consistently applied) and all regulatory
requirements, and all presented in a manner acceptable to the Securities and
Exchange Commission or any successor or analogous Governmental Authority and
acceptable to PricewaterhouseCoopers, Deloitte & Touche LLP, or any other
independent certified public accountants of recognized standing;
(b) as soon as available and in any event within 60 days after
the close of the first six-month period of each fiscal year of such Borrower, a
statement of assets and liabilities as of the end of such six-month period, a
statement of operations for such six-month period, a statement of changes in net
assets for such six-month period and a portfolio of investments as of the end of
such six-month period, all prepared in accordance with regulatory requirements
and all certified (subject to normal year-end adjustments) as to fairness of
presentation, GAAP (as consistently applied) and consistency by a Responsible
Officer; and
(c) as soon as available, but in any event not later than 10
days after the end of each fiscal quarter of each Borrower, the net asset value
sheet of such Borrower as of the end of such quarter, in the form and detail
similar to those customarily prepared by each of the Fund's management for
internal use and reasonably satisfactory to the Administrative Agent, certified
by a Responsible Officer as being fairly stated in all material respects;
provided, however, that if any Borrower has Loans outstanding, such Borrower
shall provide each Bank with (i) such net asset value sheet described above in
this Section 8.1 and (ii) a certificate of a Responsible Officer showing in
reasonable detail the calculations supporting such Borrower's compliance with
Section 6.2(d) hereof, within three Business Days after the end of each calendar
week so long as any Loans to such Borrower remain outstanding;
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
Section 8.2 Certificates; Other Information. Each Fund or
Borrower, as applicable, shall deliver to the Administrative Agent (with copies
for each Bank):
(a) concurrently with the delivery of the financial statements
referred to in Sections 8.1(a), (b), and (c) hereto and the quarterly report in
Section 8.2(c) hereof, a certificate of a Responsible Officer stating that (i)
to the best of such Responsible Officer's knowledge, such Borrower during such
period has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement and the Notes to be
observed, performed or satisfied by it, and (ii) no Default or Event of Default
has occurred and is continuing except as specified in such certificate;
(b) within five days after the same are sent, copies of all
financial statements and reports which each Borrower generally sends to its
investors, and within five Business Days after the same are filed, copies of all
financial statements and material reports which each Borrower may make to, or
file with, the Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(c) as soon as available, but in any event not later than 10
days after the end of each fiscal quarter, a certificate of a Responsible
Officer (i) stating that the list of each Borrower's portfolio securities
attached to such certificate is true and correct and (ii) showing in reasonable
detail the calculations supporting such Borrower's compliance with Section
6.2(d) hereof; and
(d) promptly, such additional financial and other information
as any Bank may from time to time reasonably request, including, but not limited
to, copies of all changes to the Prospectus and registration statement.
Section 8.3 Notices. Each Fund or Borrower, as the case may
be, shall promptly give notice to the Administrative Agent and each Bank of
(a) the occurrence of any Default or Event of Default with
respect to such Borrower;
(b) any (i) default or event of default under any Contractual
Obligation of such Borrower or such Fund or (ii) litigation, investigation or
proceeding which may exist at any time between any Fund and/or any Borrower and
any Governmental Authority, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a Material
Adverse Effect;
(c) any litigation or proceeding affecting such Borrower in
which the amount reasonably determined to be at risk is $1,000,000 or more and
not covered by insurance or in which injunctive or similar relief is sought;
(d) any material change in such Borrower's Prospectus or
registration statement; and
(e) any development or event which could reasonably be
expected to have a Material Adverse Effect on any such Borrower.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action such Fund or such Borrower proposes to take with respect
thereto.
Section 8.4 Existence, Etc. Each Fund will:
(a) preserve and maintain its legal existence and all of its
(and each Borrower's) material rights, privileges, licenses and franchises;
(b) comply with the requirements of all applicable laws,
rules, regulations and orders of governmental or regulatory authorities
(including, without limitation, the Investment Company Act and all rules and
regulations promulgated thereunder, and Regulations U and X and other applicable
regulations of the Board of Governors of the Federal Reserve System) if failure
to comply with such requirements could reasonably be expected to have a Material
Adverse Effect;
(c) pay and discharge, on its own behalf and on behalf of each
Borrower, all material taxes, assessments and governmental charges or levies
imposed on the income, profits or Property of it or of such Borrower prior to
the date on which penalties attach thereto, except for any such tax, assessment,
charge or levy the payment of which is being contested in good faith and by
proper proceedings and against which adequate reserves are being maintained;
(d) pay and discharge, on its own behalf and on the behalf of
each Borrower, at or before maturity or before they become delinquent, as the
case may be, all its obligations of whatever nature, except where (i) the amount
or validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of such Borrower, as the case may be, or (ii) the lack of
timely payment thereof could not reasonably be expected to have a Material
Adverse Effect;
(e) preserve and maintain its status as a registered, open-end
management investment company under the Investment Company Act;
(f) maintain at all times its current primary custodians
responsible for the safekeeping of portfolio securities, unless the prior
written consent of the Banks has been obtained, provided, that such consent is
not required (i) of any Bank which is also such primary custodian, or (ii) for a
Borrower to change its primary custodian to a bank or trust company organized
under the laws of the United States or a political subdivision thereof having
assets of at least $10,000,000,000 and a long-term debt or deposit rating of at
least A from Standard & Poor's Ratings Group or A2 from Moody's Investor
Services, Inc.;
(g) keep, and cause each of the Borrowers to keep, adequate
records and books of account, in which complete entries will be made in
accordance with GAAP and the Investment Company Act and regulations promulgated
thereunder reflecting all financial transactions of each Fund and each Borrower;
(h) cause each Borrower to comply in all material respects
with all investment objectives, policies, restrictions and limitations set forth
or incorporated by reference in the Prospectus and applicable to such Borrower;
and
(i) permit representatives of (i) the Administrative Agent,
upon its own discretion or at the reasonable request of any Bank, and (ii) upon
the occurrence and during the continuance of an Event of Default, any Bank to
visit and inspect any of such Borrower's properties and examine and make
abstracts from any of its books and records during normal business hours and to
discuss the business, operations, properties, and financial and other condition
of such Borrower with officers and employees of such Borrower and with its
independent certified public accountants; provided, that, unless a Default or an
Event of Default shall have occurred and be continuing, the Administrative Agent
shall provide the Borrowers with five Business Days' prior notice of such visit
and shall only conduct such visit once a year.
Section 8.5 Use of Proceeds. A Fund will use the proceeds of
the Loans made hereunder for the benefit of any Borrower solely to finance
temporarily the repurchase or redemption of shares of such Borrower at the
request of the holders of such shares, pending the orderly sale of portfolio
securities held by such Borrower, in compliance with all applicable legal and
regulatory requirements, including, without limitation, Regulations U and X, the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, and the respective rules and regulations promulgated thereunder;
provided that neither the Administrative Agent nor any Bank shall have any
responsibility as to the use of any of such proceeds.
Section 8.6 Insurance. Each Fund will keep insured by
financially sound and reputable insurers all Property of a character usually
insured by investment companies engaged in the same or similar business against
loss or damage of the kinds and in the amounts required to be maintained by the
Funds pursuant to Section 17(g) of the Investment Company Act and Rule 17g-1
promulgated thereunder.
Section 8.7 Prohibition of Fundamental Changes. Each Fund will
not and will not permit any Borrower to:
(a) enter into any transaction of merger or consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution) (a "Merger");
(b) acquire any business or Property from, or capital stock
of, or be a party to any acquisition of, any Person (an "Acquisition") except
for purchases of Property in the ordinary course of business and securities
purchased for account of the Borrowers and not in violation of the terms and
conditions of this Agreement (including, without limitation, Section 8.4(f)
hereof);
(c) convey, sell, lease, transfer or otherwise dispose of, in
one transaction or a series of transactions (a "Transfer"), all or a substantial
part of its business or Property, whether now owned or hereafter acquired except
for assets and securities sold or disposed of in the ordinary course of
business, including purchase and sale transactions performed under rule 17a-7 of
the Investment Company Act;
(d) have any Subsidiaries;
(e) maintain, contribute to or participate in any Plan or
Multiemployer Plan; or
(f) change or modify in any material respect any fundamental
investment objective, policy or investment restriction or limitation of such
Borrower described in its Prospectus.
Notwithstanding the foregoing clauses (a), (b) and (c) of this Section 8.7, a
Fund may consummate a Merger, an Acquisition or a Transfer with a Specified
Existing Fund Affiliate provided that:
(i) no Default shall have occurred and be continuing
at the time of such Merger, Acquisition or Transfer or would result
therefrom,
(ii) in connection with such Merger, Acquisition or
Transfer, such Fund shall deliver to the Administrative Agent a
certificate of a senior officer of such Fund stating that the Asset
Coverage of each Borrower shall not be reduced as a result thereof,
(iii) the Merger, Acquisition or Transfer is with
another Borrower and the Investment Adviser is the investment manager
to the entity surviving such Merger, Acquisition or Transfer, and
(iv) the Administrative Agent shall have received an
opinion of counsel for such Fund, satisfactory to the Administrative
Agent in form and substance, as to such Merger, Acquisition or Transfer
being in compliance with the terms of this Agreement.
Section 8.8 Limitations on Liens. No Fund will, nor will a
Fund permit any Borrower to, create, incur, assume or suffer to exist any Lien
upon any of its Property, whether now owned or hereafter acquired, except:
(a) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good faith and
by appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of such Borrower in accordance with GAAP;
(b) Liens created pursuant to a Custody Agreement; and
(c) Liens securing indebtedness permitted under Section 8.9
hereof and any other Liens created, incurred, assumed or suffered to exist in
compliance with the Prospectus of such Borrower which are not otherwise
prohibited, and for which the Administrative Agent has been given prior written
notice.
Section 8.9 Indebtedness. A Fund will not, nor will it permit
any Borrower to, create, incur or suffer to exist any Indebtedness except (a)
Indebtedness to the Banks hereunder and (b) obligations under Financial
Contracts.
Section 8.10 Dividend Payments. A Fund will not, and will not
permit any Borrower to, declare or make any Dividend Payment at any time if,
either before or after giving effect thereto, (a) a Default shall have occurred
and be continuing (provided that, unless any amounts payable hereunder have been
declared due and payable pursuant to Section 9 hereof, nothing contained in this
clause (a) shall limit the ability of any Borrower to distribute each year all
of its net investment income (including net realized capital gains) so that it
will not be subject to tax (including corporate and/or excise taxes) under the
Code) or (b) such Dividend Payment would be in violation of the Investment
Company Act.
Section 8.11 Asset Coverage; Borrowing Limits. A Fund will not
permit (i) the Asset Coverage for any Borrower to be less than 300% at any time,
provided, that "total assets," as used in the definition of "asset coverage" in
the Investment Company Act, shall not include any encumbered assets of such
Borrower, or (ii) any Borrower to violate the limits on borrowing as set forth
in such Borrower's Prospectus.
Section 8.12 Lines of Business. No Fund will engage in any
line or lines of business activity other than that of an open-end management
investment company.
Section 8.13 Modifications of Certain Documents. Unless as
otherwise required by law, without the prior consent of the Administrative Agent
(with the approval of the Majority Banks), such consent and approval not to be
unreasonably withheld, no Borrower will consent to any modification, supplement
or waiver of any of the provisions of (a) its Articles of Incorporation, (b) its
By-Laws or (c) its Custody Agreement.
Section 9. Events of Default.
If one or more of the following events (herein called "Events
of Default") shall occur and be continuing:
(a) A Fund or Borrower shall (i) default in the payment when
due (whether at stated maturity or upon mandatory or optional prepayment) of any
principal of any Loan or (b) default in the payment when due of any interest on
any Loan, any fee or any other amount payable by it hereunder and such default
shall have continued unremedied for three or more days; or
(b) A Fund or Borrower shall default in the payment when due
(after any applicable grace period) of any amount aggregating $1,000,000 or more
under any Financial Contract; or any event specified in any Financial Contract
shall occur if the effect of such event is to cause, or (with the giving of any
notice or the lapse of time or both) to permit, termination or liquidation
payment or payments aggregating $1,000,000 or more to become due; or
(c) Any representation, warranty or certification made or
deemed made herein (or in any modification or supplement hereto) by a Borrower,
or any certificate furnished to any Bank or the Administrative Agent pursuant to
the provisions hereof, shall prove to have been false or misleading as of the
time made or furnished in any material respect; or
(d) A Fund or Borrower shall default in the performance of any
of its obligations under any of Sections 8.3(a) and 8.7 through 8.13 hereof; or
such Fund or Borrower shall default in the performance of any of its other
obligations in this Agreement and such default shall continue unremedied for a
period of thirty or more days after notice thereof to such Fund or Borrower by
the Administrative Agent or any Bank (through the Administrative Agent); or
(e) A Fund or a Borrower shall admit in writing its inability
to, or be generally unable to, pay its debts as such debts become due; or
(f) A Fund or a Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of itself or of all or a substantial part of its
Property, (ii) make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the Bankruptcy Code, (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(g) A proceeding of law shall be commenced, without the
application or consent of a Fund or a Borrower, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a receiver, custodian, trustee, examiner, liquidator or the
like of such Borrower or of all or any substantial part of its Property or (iii)
similar relief in respect of such Fund or Borrower under any law relating to
bankruptcy, insolvency, reorganization, winding up, or composition or adjustment
of debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be entered
and continue unstayed and in effect, for a period of 60 or more days; or an
order for relief against such Fund or Borrower shall be entered in an
involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money of
$250,000 or more in the aggregate shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against a Borrower
and the same shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured within 60 days
from the date of entry thereof and such Borrower shall not, within said period
of 60 days, or such longer period during which execution of the same shall have
been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(i) Except as expressly permitted by Section 8.7 hereof, any
Person, or related Persons constituting a "group" for purposes of Section 13(d)
of the Securities Exchange Act of 1934, as amended, (other than a Specified
Existing Fund Affiliate) shall have acquired beneficial ownership, directly or
indirectly, of more than 33% of the outstanding voting stock of a Fund or a
Borrower; or
(j) Any Person, or related Persons constituting a "group" for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended,
(other than a Specified Existing Investment Adviser Affiliate) shall have
acquired beneficial ownership, directly or indirectly, of more than 33% of the
outstanding voting stock or other ownership interests of the Investment Adviser;
or
(k) A Fund or a Borrower's registration under the Investment
Company Act shall lapse or be suspended (or proceedings for such purpose shall
have been instituted); or
(l) A Fund or a Borrower shall fail to comply with the
Investment Company Act in a manner which could be reasonably expected to have a
Material Adverse Effect; or
(m) A Borrower shall fail to comply with its investment
policies and restrictions as set forth in its Prospectus in a manner which could
be reasonably expected to have a Material Adverse Effect; or
(n) unless consented to by the Banks, the Investment Adviser
or an Investment Adviser Affiliate shall cease to act as the sole investment
adviser to a Fund or a Borrower, or the Investment Adviser shall cease to be
registered as an investment adviser under the Advisers Act; or
(o) since the date of the statement of assets and liabilities
for the most recently ended fiscal year for which such annual reports have been
prepared for a Borrower, there has been a development or event which has had or
could reasonably be expected to have a Material Adverse Effect with respect to
such Borrower;
THEREUPON: (i) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to a Borrower, the
Administrative Agent may and, upon request of the Majority Banks, will, by
notice to such Borrower, terminate the Commitments and/or declare the principal
amount then outstanding of, and the accrued interest on, the Loans and all other
amounts payable by such Borrower hereunder and under the Notes to be forthwith
due and payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by such Borrower; and (ii) in the case of the
occurrence of an Event of Default referred to in clause (f) or (g) of this
Section 9 with respect to a Borrower, the Commitments shall automatically be
terminated and the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by such Borrower hereunder
and under the Notes shall automatically become immediately due and payable
without presentment demand, protest or other formalities of any kind, all of
which are hereby expressly waived by such Borrower.
Notwithstanding any other provision herein to the contrary, Defaults and Events
of Default shall have the following results:
(i) a Default or Event of Default with respect to one
Borrower shall not constitute a Default or Event of
Default to any other Borrower;
(ii) except as set forth in clause (iii) below, a Default
or Event of Default with respect to a Fund acting on
behalf of one or more Borrowers shall constitute a
Default or Event of Default, as the case may be, only
to the Borrower or Borrowers implicated in, or
affected by, the act or omission causing such Default
or Event of Default;
(iii) a Fund Default or Fund Event of Default with respect
to a Fund acting on behalf of one or more Borrowers
shall constitute a Default or Event of Default, as
the case may be, to each Borrower issued by such Fund
for which such Fund Default or Fund Event of Default
may in the reasonable discretion of the
Administrative Agreement be reasonably expected to
have a Material Adverse Effect on each such
Borrower's ability to perform its obligations under
this Agreement and the Notes; and
(iv) an Event of Default of the type described in
paragraph (n) of this Section 9 shall constitute an
Event of Default to all Borrowers.
"Fund Event of Default" shall mean an Event of Default with respect to a Fund
(A) of any of the types described in paragraphs (b), (f), (g), (h) or (k) of
this Section 9, or (B) arising from such Fund's failure to comply with the
covenants set forth in Sections 8.3, 8.4 and 8.5 hereof. "Fund Default" shall
mean any of the covenants giving rise to Fund Events of Default, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
Section 10. The Administrative Agent
Section 10.1 Appointment, Powers and Immunities. Each Bank
hereby appoints and authorizes the Administrative Agent to act as its agent
hereunder with such powers as are specifically delegated to the Administrative
Agent by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto. The Administrative Agent (which term as used in
this sentence and in Section 10.5 and the first sentence of Section 10.6 hereof
shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents):
(a) shall have no duties or responsibilities except those
expressly set forth in this Agreement, and shall not by reason of this Agreement
be a trustee for any Bank;
(b) shall not be responsible to the Banks for any recitals,
statements, representations or warranties contained in this Agreement, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, any Note or any
other document referred to or provided for herein or for any failure by a
Borrower or any other Person to perform any of its obligations hereunder or
thereunder;
(c) shall not be required to initiate or conduct any
litigation or collection proceedings hereunder; and
(d) shall not be responsible for any action taken or omitted
to be taken by it hereunder or under any other document or instrument referred
to or provided for herein or in connection herewith, except for its own gross
negligence or willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee of a Note as the holder thereof for all purposes hereof
unless and until a notice of the assignment or transfer thereof shall have been
filed with the Administrative Agent, together with the consent of the Funds to
such assignment or transfer (to the extent required by Section 11.6(b) hereof),
Section 10.2 Reliance by Administrative Agent. The
Administrative Agent shall be entitled to rely upon any certification, notice or
other communication (including, without limitation, any thereof by telephone,
telecopy, telegram or cable) reasonably believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Administrative Agent. As to any matters not
expressly provided for by this Agreement, the Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions given by the Majority Banks, and such instructions
of the Majority Banks and any action taken or failure to act pursuant thereto
shall be binding on all of the Banks.
Section 10.3 Defaults. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of a Default unless the
Administrative Agent has received notice from a Bank or a Borrower specifying
such Default and stating that such notice is a "Notice of Default". In the event
that the Administrative Agent receives such a notice of the occurrence of a
Default, the Administrative Agent shall give prompt notice thereof to the Banks.
The Administrative Agent shall (subject to Section 10.7 hereof) take such action
with respect to such Default as shall be directed by the Majority Banks,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interest of the Banks except to
the extent that this Agreement expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of the Majority
Banks or all of the Banks.
Section 10.4 Rights as a Bank. With respect to its Commitment
and the Loans made by it, Chase (and any successor acting as Administrative
Agent) in its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Bank" or "Banks" shall, unless
the context otherwise indicates, include the Administrative Agent in its
individual capacity. Chase (and any successor acting as Administrative Agent)
and its affiliates may (without having to account therefor to any Bank) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Funds (and any of their
affiliates) as if it were not acting as the Administrative Agent, and Chase (and
any such successor) and its affiliates may accept fees and other consideration
from the Funds for services in connection with this Agreement or otherwise
without having to account for the same to the Banks.
Section 10.5 Indemnification. The Banks agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 11.3 hereof,
but without limiting the obligations of the Funds under said Section 11.3)
ratably in accordance with the aggregate principal amount of the Loans held by
the Banks (or, if no Loans are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be imposed on, incurred
by or asserted against the Administrative Agent arising out of or by reason of
any investigation in or in any way relating to or arising out of this Agreement
or any other documents contemplated by or referred to herein or the transactions
contemplated hereby or the enforcement of any of the terms hereof or of any such
other documents, provided that no Bank shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of the
party to be indemnified.
Section 10.6 Non-Reliance on Administrative Agents and Other
Banks. Each Bank agrees that it has, independently and without reliance on the
Administrative Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrowers and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement. The Administrative Agent shall not be
required to keep itself informed as to the performance or observance by the
Borrowers of this Agreement or any other document referred to or provided for
herein or to inspect the Properties or books of the Borrowers. Except for
notices, reports and other documents and information expressly required to be
furnished to the Banks by the Administrative Agent hereunder, the Administrative
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the affairs, financial condition or
business of the Borrowers (or any of their affiliates) that may come into the
possession of the Administrative Agent or any of its affiliates.
Section 10.7 Failure to Act. Except for action expressly
required of the Administrative Agent hereunder, the Administrative Agent shall
in all cases be fully justified in failing or refusing to act hereunder unless
it shall receive further assurances to its satisfaction from the Banks of their
indemnification obligations under Section 10.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
Section 10.8 Resignation or Removal of Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative Agent as
provided below, the Administrative Agent may resign at any time by giving notice
thereof to the Banks and the Funds, and the Administrative Agent may be removed
at any time with or without cause by the Majority Banks. Upon any such
resignation or removal, the Majority Banks shall have the right to appoint a
successor Administrative Agent with the consent of the Funds, which consent
shall not be unreasonably withheld or delayed. If no successor Administrative
Agent shall have been so appointed by the Majority Banks and shall have accepted
such appointment within 30 days after the retiring Administrative Agent's giving
of notice of resignation or the Majority Banks' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Banks and with the consent of the Funds, which consent shall not be
unreasonably withheld or delayed, appoint a successor Administrative Agent, that
shall be a bank that has an office in New York, New York with a combined capital
and surplus of at least $500,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. After any retiring Administrative Agent's resignation
or removal hereunder as Administrative Agent, the provisions of this Section 10
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Administrative Agent.
Section 11. Miscellaneous.
Section 11.1 Waiver. No failure on the part of the
Administrative Agent or any Bank to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power or privilege under this
Agreement or any Note shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this Agreement or any
Note preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
Section 11.2 Notices. All notices, requests and other
communications provided for herein (including, without limitation, any
modifications of, or waivers, requests or consents under, this Agreement) shall
be given or made in writing (including, without limitation, by telecopy)
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof; or, as to any party, at such other
address as shall be designated by such party in a notice to each other party.
Except as otherwise provided in this Agreement, all such communication shall be
deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
Section 11.3 Expenses, Etc.
(a) Each Borrower agrees severally (pro rata based on their
respective Net Asset Values) (i) to reimburse the Administrative Agent for its
reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and any Notes and any other documents prepared
in connection herewith or therewith, and the consummation and administration of
the transactions contemplated hereby and thereby, including, without limitation,
the reasonable fees and disbursements of counsel to the Administrative Agent,
(ii) to reimburse each Bank and the Administrative Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement with respect to such Borrower, the Notes, and any
such other documents, including, without limitation, the fees and disbursements
of counsel to each Bank and of counsel to the Administrative Agent, (iii) to
indemnify and hold each Bank and the Administrative Agent harmless from any and
all recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, any Notes, and any such other
documents with respect to such Borrower, and (iv) to indemnify and hold each
Bank and the Administrative Agent (and their respective affiliates, directors,
officers, agents and employees (collectively with the Administrative Agent and
the Banks, the "Indemnified Parties")) harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, out-of-pocket expenses or disbursements of any kind or nature
whatsoever arising from or in connection with the execution, delivery,
enforcement, performance and administration of this Agreement, any Notes, and
any such other documents (all the foregoing in this clause (iv), collectively,
the "indemnified liabilities"), provided, that each Borrower shall have no
obligation hereunder to the Administrative Agent or any Bank with respect to the
indemnified liabilities arising from (A) the gross negligence or willful
misconduct of the Administrative Agent or any such Bank, as the case may be, (B)
disputes arising solely between or among the Banks or solely between any Bank
and the Administrative Agent, (C) the Administrative Agent or any Bank's failure
to comply with any requirement imposed by applicable law, unless such failure is
attributable to a breach by a Borrower of any representation, warranty, or
covenant under this Agreement, or (D) any such indemnified liabilities that
relate to or arise from litigation commenced by any Borrower against the Banks
or the Administrative Agent which seeks enforcement of any of the rights of any
Borrower hereunder or under any Note and is determined adversely to the Banks or
the Administrative Agent in a final, non-appealable judgment.
(b) Notwithstanding any other provision in this Agreement to
the contrary, to the extent any obligation to reimburse or indemnify any
Indemnified Party that arises pursuant to Section 11.3(a) hereto is not
attributable to any particular Borrower, then such reimbursement or
indemnification shall be made by each Borrower (pro rata based on their
respective Net Asset Values). To the extent any such obligation to reimburse or
indemnify any Indemnified Party is attributable to one or more Borrowers, then
such reimbursement or indemnification shall be made ratably by each such
Borrower.
Section 11.4 Amendments, Etc. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be modified or
supplemented only by an instrument in writing signed by the Funds and the
Majority Banks, or by the Funds and the Administrative Agent acting with the
consent of the Majority Banks, and any provision of this Agreement may be waived
by the Majority Banks or by the Administrative Agent acting with the consent of
the Majority Banks; provided, that: (a) no modification, supplement or waiver
shall, unless by an instrument signed by all of the Banks or by the
Administrative Agent acting with the consent of all of the Banks: (i) increase,
or extend the term of the Commitments, or extend the time or waive any
requirement for the reduction or termination of the Commitments, (ii) extend the
date fixed for the payment of principal of or interest on any Loan or any fee
hereunder, (iii) reduce the amount of any such payment of principal, (iv) reduce
the rate at which interest is payable thereon or any fee is payable hereunder,
(v) alter the rights or obligations of a Borrower to prepay Loans, (vi) alter
the manner in which payments or prepayments of principal interest or other
amounts hereunder shall be applied as between the Banks, (vii) alter the
required Asset Coverage as set forth in Section 6.2(d) hereof, (viii) alter the
terms of this Section 11.4, (ix) amend Schedule I pursuant to Section 2.11(a)
hereof, or (x) modify the definition of the term "Majority Banks" or modify in
any other manner the number or percentage of the Banks required to make any
determinations or waive any rights hereunder or to modify any provision hereof,
and (b) any modification or supplement of Section 10 hereof, or of any of the
rights or duties of the Administrative Agent hereunder, shall require the
consent of the Administrative Agent.
Section 11.5 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 11.6 Assignments and Participations.
(a) The Funds may not assign any of their rights or
obligations hereunder or under the Notes without the prior consent of all of the
Banks and the Administrative Agent.
(b) Each Bank may assign any of its Loans, its Notes, and its
Commitment (but only with the consent of the Administrative Agent and, if no
Default exists and is continuing, the Funds) to an Eligible Lender; provided
that
(i) no such consent by the Funds or the
Administrative Agent shall be required in the case of any assignment to
another Bank;
(ii) except to the extent the Funds and the
Administrative Agent shall otherwise consent, any such partial
assignment (other than to another Bank) shall be in an amount at least
equal to $2,000,000,
(iii) each such assignment by a Bank of its Loans,
Notes or Commitment shall be made in such manner so that the same
portion of its Loans, Notes and Commitment is assigned to the
respective assignee; and
(iv) each such assignment shall be effected pursuant
to an Assignment and Acceptance in substantially the form of Exhibit
11.6(b) hereto and the assignor and assignee shall deliver to the Funds
and the Administrative Agent a fully executed copy thereof.
Upon execution and delivery by the assignor and the assignee to the Funds and
the Administrative Agent of such Assignment and Acceptance, and upon consent
thereto by the Funds and the Administrative Agent to the extent required above
and acceptance thereof by the Administrative Agent, the assignee shall have, to
the extent of such assignment (unless otherwise consented to by the Funds and
the Administrative Agent), the obligations, rights and benefits of a Bank
hereunder holding the Commitment and Loans (or portions thereof) assigned to it
and specified in such Assignment and Acceptance (in addition to the Commitment
and Loans, if any, theretofore held by such assignee) and the assigning Bank
shall, to the extent of such assignment, be released from the Commitment (or
portion thereof) so assigned. Upon each such assignment the assigning or
assignee Bank shall pay the Administrative Agent an assignment fee of $3,000.
(c) A Bank may sell or agree to sell to one or more other
Eligible Lenders (each a "Participant") a participation in all or any part of
any Loans held by it, or in its Commitment, provided that such Participant shall
not have any rights or obligations under this Agreement or any Note (the
Participant's rights against such Bank in respect of such participation to be
solely those set forth in the agreements executed by such Bank in favor of the
Participant). All amounts payable by the Funds to any Bank under Section 5
hereof in respect of Loans held by it, and its Commitment, shall be determined
as if such Bank had not sold or agreed to sell any participations in such Loans
and Commitment, and as if such Bank were funding each of such Loan and
Commitment in the same way that it is funding the portion of such Loan and
Commitment in which no participations have been sold. In no event shall a Bank
that sells a participation agree with the Participant to take or refrain from
taking any action hereunder except that such Bank may agree with the Participant
that it will not, without the consent of the Participant, agree to (i) increase
or extend the term of such Bank's Commitment, (ii) extend the date fixed for the
payment of principal of or interest on the related Loan or Loans or any portion
of any fee hereunder payable to the Participant, (iii) reduce the amount of any
such payment of principal, (iv) reduce the rate at which interest is payable
thereon, or any fee hereunder payable to the Participant, to a level below the
rate at which the Participant is entitled to receive such interest or fee or (v)
consent to any modification, supplement or waiver hereof to the extent that the
same, under Section 11.4 hereof, requires the consent of each Bank.
(d) In addition to the assignments and participations
permitted under the foregoing provisions of this Section 11.6, any Bank may
(without notice to the Funds, the Administrative Agent or any other Bank and
without payment of any fee) (i) assign and pledge all or any portion of its
Loans and its Note to any Federal Reserve Bank as collateral security pursuant
to Regulation A and any Operating Circular issued by such Federal Reserve Bank
and (ii) assign all or any portion of its rights under this Agreement and its
Loans and its Note to an affiliate. No such assignment shall release the
assigning Bank from its obligations hereunder.
(e) A Bank may furnish any information concerning any Borrower
in the possession of such Bank from time to time to assignees and participants
(including prospective assignees and participants), subject however, to the
provisions of Section 11.12(b) hereof.
Section 11.7 Survival. The obligations of the Funds under
Section 11.3 hereof, and the obligations of the Banks under Section 10.5 hereof,
shall survive the repayment of the Loans and the termination of the Commitments
(including, with respect to any Bank that does not agree to the extension of the
Commitment Termination Date in accordance with Section 2.10 hereof, the
repayment of the Loans made by such Bank and the termination of the Commitment
of such Bank on the Commitment Termination in effect before giving effect to
such extension) and, in the case of any Bank that may assign any interest in its
Commitment or Loans hereunder, shall survive the making of such assignment,
notwithstanding that such assigning Bank may cease to be a "Bank" hereunder. In
addition, each representation and warranty made, or deemed to be made by a
notice of any Loan, herein or pursuant hereto, shall survive the making of such
representation and warranty, and no Bank shall be deemed to have waived, by
reason of making any Loan, any Default that may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that such Bank or the Administrative Agent may have had notice
or knowledge or reason to believe that such representation or warranty was false
or misleading at the time such Loan was made.
Section 11.8 Caption. The table of contents and captions and
section headings appearing herein are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
Section 11.9 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 11.10 Governing Law; Submission to Jurisdiction. This
Agreement and the Notes shall be governed by, and construed in accordance with,
the law of the State of New York. Each Fund hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of the Supreme Court of the State of New York sitting in New York
County (including its Appellate Division), and of any other appellate court in
the State of New York, for the purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby. Each Fund
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any objection that it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
Section 11.11 Waiver of Jury Trial. EACH OF THE FUNDS, THE
ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.12 Treatment of Certain Information;
Confidentiality.
(a) The Funds acknowledge that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Funds (in connection with this Agreement or otherwise) by any Bank or by one
or more subsidiaries or affiliates of such Bank and the Funds hereby authorize
such Bank to share any information delivered to such Bank by the Funds pursuant
to this Agreement, or in connection with the decision of such Bank to enter into
this Agreement, to any such subsidiary or affiliate, it being understood that
any such subsidiary or affiliate receiving such information shall be bound by
the provisions of paragraph (b) below as if it were a Bank hereunder. Such
authorization shall survive the repayment of the Loans and the termination of
the Commitments.
(b) Each Bank and the Administrative Agent agrees (on behalf
of itself and each of its affiliates, directors, officers, members, employees
and representatives) to use reasonable precautions to keep confidential in
accordance with its customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Funds pursuant to this Agreement
that is identified by the Funds as being confidential at the time the same is
delivered to the Banks and the Administrative Agent, provided that nothing
herein shall limit the disclosure of any such information (i) if such
information is when so supplied, or thereafter shall have become, public (other
than through a violation of this Section 11.12, (ii) to the extent required by
statute, rule, regulation or judicial process, (iii) to counsel for any of the
Banks or the Administrative Agent, (iv) to bank examiners (or any other
regulatory authority having jurisdiction over any Bank or the Administrative
Agent), or to auditors or accountants, (v) to the Administrative Agent or any
other Bank (or to Chase Securities Inc.), (vi) in connection with any litigation
to which any one or more of the Banks or the Administrative Agent is a party, or
in connection with the enforcement of rights or remedies hereunder, (vii) to a
subsidiary or affiliate of such Bank as provided in paragraph (a) above or
(viii) to any assignee or participant (or prospective assignee or participant)
so long as such assignee or participant (or prospective assignee or participant)
first executes and delivers to the respective Bank a Confidentiality Agreement
substantially in the form of Exhibit 11.12(b) hereto (or executes and delivers
to such Bank an acknowledgment to the effect that it is bound by the provisions
of this Section 11.12(b), which acknowledgment may be included as part of the
respective assignment or participation agreement pursuant to which such assignee
or participant acquires an interest in the Loans hereunder); provided further,
that (x) unless specifically prohibited by applicable law or court order, each
Bank and the Administrative Agent shall, prior to the disclosure thereof, notify
the Funds of any request for disclosure of any such information (A) by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Bank by such
governmental agency) or (B) pursuant to legal process and (y) in no event shall
any Bank or the Administrative Agent be obligated or required to return any
materials furnished by the Funds. The obligations of each Bank under this
Section 11.12 shall supersede and replace the obligations of such Bank under the
confidentiality letter in respect of this financing signed and delivered by such
Bank to the Funds prior to the date hereof; in addition, the obligations of any
assignee that has executed a Confidentiality Agreement in the form of Exhibit
11.12(b) hereto shall be superseded by this Section 11.12 upon the date upon
which such assignee becomes a Bank hereunder pursuant to Section 11.6(b) hereof.
Section 11.13 Limited Recourse. Anything in this Agreement to
the contrary notwithstanding, it is understood and agreed that the sole recourse
of the Administrative Agent or any Bank in respect of the obligations of any
Borrower with respect to (a) any Loan made to such Borrower (including, without
limitation, the obligations of such Borrower to pay the principal of, interest
on and other amounts in respect of, such Loan) and (b) the portion of the
commitment fee and any amount payable pursuant to Sections 7 and 11.3 hereof
allocated to such Borrower shall be limited to the assets of such Borrower and
that neither the Administrative Agent nor any Bank shall have any right to look
to any other Borrower or the assets thereof for the satisfaction of such
obligations.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
AMERICAN CENTURY FUNDS
On behalf of each Fund listed on Schedule I hereto
/s/ Charles C.S. Park
By: Charles C.S. Park
Title: Assistant Secretary to each Fund listed on
Schedule I hereto
Address for Notices:
4500 Main Street
Kansas City, MO 64111
Attention: Maryanne Roepke
Senior Vice President
Fund Accounting
Telecopier No. 816-340-4042
Telephone No. 816-340-4221
Credit Agreement
Signature Page
THE CHASE MANHATTAN BANK, as Administrative Agent
and as a Bank
/s/ Gail Weiss
By: GailWeiss
Title: Vice President
Lending Office for all Loans:
The Chase Manhattan Bank
Loan and Agency Services Group
Eighth Floor
One Chase Manhattan Plaza
New York, New York 10081
Address for Notices:
The Chase Manhattan Bank
270 Park Avenue
Thirty-Sixth Floor
New York, New York 10017
Attention: Gail Weiss
Telecopier No.: 212-270-1789
With a Copy to:
The Chase Manhattan Bank
Loan and Agency Services Group
Eighth Floor
One Chase Manhattan Plaza
New York, New York 10081
Attention: Laura Rebecca
Telecopier No.: 212-552-7490
Credit Agreement
Signature Page
CREDIT LYONNAIS NEW YORK BRANCH
/s/ Sebastian Rocco
By: Sebastian Rocco
Title: Senior Vice President
Lending Office for all Loans:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Address for Notices:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Attention: Kathleen Bowers
Telecopier No.: 212-261-7367
Credit Agreement
Signature Page
COMMERZBANK AG, NEW YORK BRANCH
/s/ Michael P. McCarthy
By: Michael P. McCarthy
Title: Assistant Vice President
/s/ Joseph J. Hayes
By: Joseph J. Hayes
Title: Assistant Vice President
Lending Office for all Loans:
Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281
Address for Notices:
Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281
Attention: Joseph Hayes
Telecopier No.: 212-266-7524
Credit Agreement
Signature Page
THE BANK OF NEW YORK
/s/ Scott H. Buitekant
By: Scott H. Buitekant
Title: Assistant Vice President
Lending Office for all Loans:
The Bank of New York
One Wall Street
New York, New York 10286
Address for Notices:
The Bank of New York
One Wall Street
New York, New York 10286
Attention: Scott Buitekant
Telecopier No.: 212-635-6348
Credit Agreement
Signature Page
BANQUE NATIONALE DE PARIS
/s/ Marguerite L. Lebon
By: Marguerite L. Lebon
Title: Assistant Vice President
/s/ Laurent Vanderzyppe
By: Laurent Vanderzyppe
Title: Vice President
Lending Office for all Loans:
Banque Nationale de Paris
499 Park Avenue, 3rd Floor
New York, New York 10022
Address for Notices:
Banque Nationale de Paris
499 Park Avenue, 3rd Floor
New York, New York 10022
Attention: Laurent Vanderzyppe
Telecopier No.: 212-415-9707
Credit Agreement
Signature Page
DEN DANSKE BANK AKTIESELSKAB
/s/ John A. O'Neill
By: John A. O'Neill
Title: Vice President
DEN DANSKE BANK AKTIESELSKAB
/s/ Petri Luukkane
By: Petri Luukkane
Title: Vice President
Lending Office for all Loans:
Den Danske Bank Aktieselskab
280 Park Avenue, 4th Floor East
New York, New York 10017
Address for Notices:
Den Danske Bank Aktieselskab
280 Park Avenue, 4th Floor East
New York, New York 10017
Attention: Sonia Kataria
Telecopier No.: 212-984-8473
Credit Agreement
Signature Page
STATE STREET BANK AND TRUST COMPANY
/s/ F. Omar Hazoury
By: F. Omar Hazoury
Title: Vice President
Lending Office for all Loans:
State Street Bank & Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Address for Notices:
State Street Bank & Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Attention: Omar Hazoury
Telecopier No.: 617-537-5194
Credit Agreement
Signature Page
UMB BANK, N.A.
/s/ David A. Proffitt
By: David A. Proffitt
Title: Senior Vice President
Lending Office for all Loans:
UMB Bank, N.A.
1010 Grand Boulevard
Kansas City, Missouri 64106
Address for Notices:
UMB Bank, N.A.
1010 Grand Boulevard
Kansas City, Missouri 64106
Attention: David Proffitt
Telecopier No.: 816-860-7935
<TABLE>
SCHEDULE I
BORROWERS AND ALLOCATIONS
PRO RATA
AMERICAN CENTURY FUND ALLOCATION
- -------------------------------------------------------------------------- ------------
<S> <C>
Balanced Fund 0.9632%
Benham Arizona Intermediate-Term Municipal Fund 0.0378%
Benham Bond Fund 0.1388%
Benham California High-Yield Muni Fund 0.2627%
Benham California Insured Tax-Free Fund 0.1977%
Benham California Intermediate-Term Tax-Free Fund 0.4291%
Benham California Limited-Term Tax-Free Fund 0.1202%
Benham California Long-Term Tax-Free Fund 0.2995%
Benham Florida Intermediate-Term Municipal Fund 0.0284%
Benham GNMA Fund 1.2400%
Benham High-Yield Fund 0.0323%
Benham High-Yield Municipal Fund 0.0237%
Benham Inflation-Adjusted Treasury Fund 0.0055%
Benham Intermediate-Term Bond Fund 0.0234%
Benham Intermediate-Term Tax-Free Fund 0.1309%
Benham Intermediate-Term Treasury Fund 0.2475%
Benham International Bond Fund 0.1347%
Benham Limited-Term Bond Fund 0.0176%
Benham Limited-Term Tax-Free Fund 0.0371%
Benham Long-Term Tax-Free Fund 0.1076%
Benham Long-Term Treasury Fund 0.0687%
Benham Premium Bond 0.0833%
Benham Short-Term Government Fund 0.5178%
Benham Short-Term Treasury Fund 0.0287%
Benham Target Maturity Trust: 2000 0.1477%
Benham Target Maturity Trust: 2005 0.2716%
Benham Target Maturity Trust: 2010 0.1290%
Benham Target Maturity Trust: 2015 0.0942%
Benham Target Maturity Trust: 2020 0.3565%
Benham Target Maturity Trust: 2025 0.1550%
Equity Growth Fund 2.4616%
Equity Income Fund 0.3187%
Global Gold Fund 0.3750%
Global Natural Resources Fund 0.0703%
Income & Growth Fund 5.0904%
Strategic Allocation: Aggressive Fund 0.2413%
Strategic Allocation: Conservative Fund 0.1675%
Strategic Allocation: Moderate Fund 0.2516%
Twentieth Century Emerging Markets Fund 0.0517%
Twentieth Century Giftrust Fund 1.6423%
Twentieth Century Growth Fund 9.8795%
Twentieth Century Heritage Fund 2.0980%
Twentieth Century International Discovery Fund 2.3033%
Twentieth Century International Growth Fund 6.5131%
Twentieth Century New Opportunities Fund 0.4234%
Twentieth Century Real Estate Fund 0.2395%
Twentieth Century Select Fund 9.2098%
Twentieth Century Ultra Fund 3.4593%
Twentieth Century Vista Fund 2.1739%
Utilities Fund 0.3487%
Value Fund 4.0810%
VP Advantage Fund 0.2917%
VP Balanced Fund 0.1896%
VP Capital Appreciation Fund 0.5833%
VP Income & Growth Fund 0.2431%
VP International Fund 0.4278%
VP Value Fund 0.5347%
TOTAL FOR AMERICAN CENTURY FUNDS: 100.0000%
- -------------------------------------------------------------------------- ------------
</TABLE>
SCHEDULE II
COMMITMENTS
Amount of
Name and Address of Bank Title Commitment
THE CHASE MANHATTAN BANK Administrative $100,000,000
270 Park Avenue, 36th Floor Agent
New York, New York 10017
Attention: Gail Weiss
Telephone: (212) 270-5049
Facsimile: (212) 270-1789
CREDIT LYONNAIS NEW YORK BRANCH Syndication $100,000,000
1301 Avenue of the Americas Agent
New York, New York 10019
Attention: Kathleen Bowers
Telephone: (212) 261-7367
Facsimile: (212) 261-3401
COMMERZBANK AG, NEW YORK BRANCH Documentation $100,000,000
2 World Financial Center Agent
New York, New York 10281
Attention: Joseph Hayes
Telephone: (212) 266-7518
Facsimile: (212) 266-7524
THE BANK OF NEW YORK Participant $100,000,000
One Wall Street
New York, New York 10286
Attention: Scott Buitekant
Telephone: (212) 635-6958
Facsimile: (212) 635-6348
BANQUE NATIONALE DE PARIS Participant $50,000,000
499 Park Avenue, 3rd Floor
New York, New York 10022
Attention: Laurent Vanderzyppe
Telephone: (212) 415-9406
Facsimile: (212) 415-9707
DEN DANSKE BANK AKTIESELSKAB Participant $50,000,000
280 Park Avenue, 4th Floor East
New York, New York 10017
Attention: Sonia Kataria
Telephone: (212) 984-8473
Facsimile: (212) 370-1682
STATE STREET BANK & TRUST COMPANY Participant $50,000,000
1776 Heritage Drive
North Quincy, Massachusetts 02171
Attention: Omar Hazoury
Telephone: (617) 985-0629
Facsimile: (617) 537-5194
UMB BANK, N.A. Participant $20,000,000
1010 Grand Boulevard
Kansas City, Missouri 64106
Attention: David Proffitt
Telephone: (816) 860-7935
Facsimile: (816) 860-7143
-----------
TOTAL: $570,000,000
SCHEDULE III
CUSTODY AGREEMENTS
SCHEDULE IV
DISTRIBUTION AGREEMENTS
SCHEDULE V
INVESTMENT MANAGEMENT AGREEMENTS
SCHEDULE VI
SHAREHOLDER SERVICES AGREEMENTS
SCHEDULE VII
SPECIFIED EXISTING AFFILIATES
EXHIBIT 2.7(A)
FORM OF NOTE
PROMISSORY NOTE
$_________________ ______ __, 199_
New, York, New York
FOR VALUE RECEIVED, [Name of Fund], a ___________ corporation
(the "Fund"), on behalf of [Borrower], hereby promises to pay to
_________________ (the "Bank"), for account of its respective Applicable Lending
Offices provided for by the Credit Agreement referred to below, at the principal
office of The Chase Manhattan Bank at 270 Park Avenue, New York, New York 10017,
the principal sum of _____________ Dollars (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Loans made by the Bank to the Fund
for the benefit of [Borrower] under the Credit Agreement), in lawful money of
the United States of America and in immediately available funds, on the dates
and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Loan, at such office, in
like money and funds, for the period commencing on the date of such Loan until
but excluding the date such Loan shall be paid in full, at the rates per annum
and on the dates provided in the Credit Agreement. The sole recourse of the Bank
in respect of the obligations of the Fund on behalf of [Borrower] evidenced by
this Note shall be limited to the assets held in such Fund and nothing contained
herein or in the Credit Agreement shall create any right of the Bank to look to
the assets held in any other Fund for the satisfaction of such obligations.
The date, amount, and interest rate of each Loan made by the
Bank to the Fund for the benefit of [Borrower], and each payment made on account
of the principal thereof, shall be recorded by the bank on its books and, prior
to any transfer of this Note, endorsed by the Bank on the schedule attached.
hereto or any continuation thereof, provided that the failure of the Bank to
make any such recordation (or any error in making any such recordation) or
endorsement shall not affect the obligations of the Fund to make a payment when
due of any amount owing under the Credit Agreement or hereunder in respect of
the Loans made by the Bank to the Fund for the benefit of [Borrower].
This Note is one of the [Borrower] Notes referred to in the
Credit Agreement dated as of December 18, 1998 (as modified and supplemented and
in effect from time to time, the "Credit Agreement") between each Fund signatory
thereto, the lenders party thereto (including the Bank) and The Chase Manhattan
Bank, as Administrative Agent, and evidences Loans made thereunder by the Bank
to the Fund for the benefit of [Borrower]. Terms used but not defined in this
Note have the respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of Loans upon the terms and conditions specified therein.
Except as permitted by Section 11.6 of the Credit Agreement,
this Note may not be assigned by the Bank to any other Person.
This Note shall be governed by, and construed in accordance
with, the law of the State of New York.
[Fund]
By _______________________
Name:
Title:
SCHEDULE OF LOANS
This Note evidences Loans made under the within-described Credit
Agreement to the fund for the benefit of [Borrower], on the dates, in the
principal amounts and bearing interest at the rates set forth below, subject to
the payments and prepayments of principal set forth below.
Date Principal Maturity Amount Unpaid
of Amount Interest Date of Paid or Principal Notation
Loan of Loan Rate Loan Prepaid Amount Made by
- ---- ------- ---- ---- ------- ------ -------
EXHIBIT 2.11(A)
FORM OF DESIGNATION OF NEW BORROWERS
[Date]
The Chase Manhattan Bank, as Administrative Agent
[List of Lenders]
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of December
18, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") between and among each of (i) the Funds that is a signatory
thereto, on behalf of itself and each series of portfolio of the Fund named
therein (each, a "Borrower" and collectively, the "Borrowers"), (ii) the several
Banks from time to time party thereto, and (iii) The Chase Manhattan Bank, as
Administrative Agent. Capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Credit Agreement.
[NAME OF FUND] (the "Fund") on behalf of itself and [NAME OF BORROWER]
(the "Series") hereby requests pursuant to Section 2.11 of the Credit Agreement
that the Series be admitted as an additional Borrower under the Credit
Agreement. Furthermore, the Fund requests that Schedule I of the Credit
Agreement be replace with the form of Schedule I attached hereto.
The Fund, on behalf of itself and the Series, hereby represents and
warrants to the Administrative Agent and each Bank that as of the date hereof
and after giving effect to the admission of the Series as an additional Borrower
under the Credit Agreement: (i) the representations and warranties set forth in
Section 7 of the Credit Agreement are true and correct with respect to the
Series; (ii) the Series is in compliance in all material respects with all the
terms and provisions set forth in the Credit Agreement on its part to be
observed or performed as of the date hereof and after giving effect to the
admission; and (iii) no Default or Event of Default with respect to the Series,
nor any event which with the giving of notice or the expiration of any
applicable grace period or both would constitute such a Default or Event of
Default with respect to the Series has occurred and is continuing.
The Series agrees to be bound by the terms and conditions of the Credit
Agreement in all respects as a Borrower thereunder and hereby assumes all of the
obligations of a Borrower thereunder.
Please indicate your assent to the admission of each Series as an
additional Borrower under the Credit Agreement and the replacement of Schedule I
to the Credit Agreement by signing below where indicated.
[FUND, for itself and on behalf of each
Borrower related to a series issued by it]
By: _______________________________
Name:
Title:
AGREED AND ACCEPTED:
THE CHASE MANHATTAN BANK
as Administrative Agent and as a Bank
By: ___________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
as Syndication Agent and as a Bank
By: ____________________________
Name:
Title:
COMMERZBANK AG, NEW YORK BRANCH
as Documentation Agent and as a Bank
By: ____________________________
Name:
Title:
THE BANK OF NEW YORK
as a Bank
By: _____________________________
Name:
Title:
BANQUE NATIONALE DE PARIS
By: _____________________________
Name:
Title:
By: _____________________________
Name:
Title:
DEN DANSKE BANK AKTIESELSKAB
as a Bank
By: ______________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
as a Bank
By: ______________________________
Name:
Title:
UMB BANK, N.A.
as a Bank
By: ______________________________
Name:
Title:
EXHIBIT 6.1(B)
FORM OF OPINION
[To be supplied]
EXHIBIT 11.6(B)
FORM OF ASSIGNMENT AND ACCEPTANCE
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of
December 18, 1998 (as modified and supplemented and in effect from time to time,
the "Credit Agreement"), between each Fund signatory thereto, the Banks named
therein, and The Chase Manhattan Bank, as administrative agent for such Banks.
Terms defined in the Credit Agreement are used herein as defined therein.
_______________ (the "Assignor") and _____________ (the
"Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby irrevocably
purchases and assumes from the Assignor without recourse to the Assignor, as of
the Effective Date as set forth in Schedule I hereto (the "Effective Date"), an
interest (the "Assigned Interest") in and to the Assignor's rights and
obligations under the Credit Agreement with respect to the Commitment and the
Loans, in a principal amount and percentage for each Assigned Interest as set
forth on Schedule 1.
2. The Assignor (i) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or any other
instrument or document furnished pursuant thereto, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any Note or any other instrument or document furnished pursuant
thereto, other than that it has not created any adverse claim upon the interest
being assigned by it hereunder and that such interest is free and clear of any
such adverse claim; (ii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Fund, any Borrower
or any other obligation or the performance or observance by any Fund (whether on
its own behalf or on behalf of any Borrower) of any of its obligations under the
Credit Agreement or any Note or any other instrument or document furnished
pursuant hereto or thereto; and (iii) attaches the Note(s), if any, held by it
evidencing the Assigned Interests and requests that the Administrative Agent
exchange such Note(s), if any, for a new Note or Notes payable to the Assignor
(if the Assignor has retained any interest in the Commitment) and a new Note or
Notes payable to the Assignee in the respective amounts which reflect the
assignment being made hereby (and after giving effect to any other assignments
which have become effective on the Effective Date).
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements delivered pursuant to Section 8.1 thereof, if any, and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance; (iii)
agrees that it will, independently and without reliance upon the Assignor, the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement, the
Notes or any other instrument or document furnished pursuant hereto or thereto;
and (iv) appoints and authorizes the Administrative Agent to take such action as
administrative agent on its behalf and to exercise such powers and discretion
under the Credit Agreement, the Notes or any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Administrative
Agent by the terms thereof, together with such powers as are incidental thereto.
4. Following the execution of this Assignment and Acceptance,
it will be delivered to the Administrative Agent for acceptance by the
Administrative Agent pursuant to Section 11.6 of the Credit Agreement, effective
as of the Effective Date (which date shall not, unless otherwise agreed to by
the Administrative Agent, be earlier than five Business Days after the date of
such acceptance by the Administrative Agent).
5. Upon such acceptance, from and after the Effective Date,
the Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignee which accrue subsequent to the Effective Date.
6. From and after the Effective Date, (i) the Assignee shall
be a party to the Credit Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Bank thereunder
and under the Notes and shall be bound by the provisions thereof and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement except as provided in Section 11.7 of the Credit Agreement.
7. This Assignment and Acceptance shall be governed by and
construed in accordance with the law of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Assignment and
Acceptance by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed as of the date first above written by
their respective duly authorized officers on Schedule I hereto.
Schedule I to
Assignment and Acceptance
relating to the Credit Agreement,
dated as of December 18, 1998,
between each Fund signatory thereto,
the Banks named therein and
The Chase Manhattan Bank, as administrative agent for the Banks
(in such capacity, the "Administrative Agent")
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Principal Percentage
Amount Assigned Assigned
[ASSIGNEE] [ASSIGNOR]
By:_______________________ By:_______________________
Title: Title:
Consented to and Accepted:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By:_______________________
Title:
[Funds]
By:_______________________
Title:
EXHIBIT 11.12(B)
FORM OF CONFIDENTIALITY AGREEMENT
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Credit Agreement dated as of December 18, 1998 (as
modified and supplemented and in effect from time to
time, the "Credit Agreement"), between each Fund
signatory thereto, the Banks party thereto, and The
Chase Manhattan Bank, as Administrative Agent.
Dear Ladies and Gentlemen:
As a Bank party to the Credit Agreement, we have agreed with
the Funds pursuant to Section 11.12 of the Credit Agreement to use reasonable
precautions to keep confidential, except as otherwise provided therein, all
non-public information identified by the Funds as being confidential at the time
the same is delivered to us pursuant to the Credit Agreement.
As provided in said Section 11.12, we are permitted to provide
you, as a prospective [holder of a participation in the Loans (as defined in the
Credit Agreement)] [assignee Bank], with certain non-public information subject
to the execution and delivery by you, prior to receiving such non-public
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on
behalf of yourself and each of your affiliates, directors, officers, members,
employees and representatives and for the benefit of us and the Funds) that (A)
such information will not be used by you except in connection with the proposed
[participation][assignment] mentioned above and (B) you shall use reasonable
precautions, in accordance with your customary procedures for handling
confidential information and in accordance with safe and sound banking
practices, to keep such information confidential,, provided that nothing herein
shall limit the disclosure of any such information (i) if such information is or
hereafter shall have become public (other than through a violation of Section
11.12 of the Credit Agreement), (ii) to the extent required by statute, rule,
regulation or judicial process, (iii) to your counsel or to counsel for any of
the Banks or the Administrative Agent, (iv) to bank examiners (or any other
regulatory authority having jurisdiction over any Bank or the Administrative
Agent), or to auditors or accountants, (v) to the Administrative Agent or any
other Bank (or to Chase Securities Inc.), (vi) in connection with any litigation
to which you or any one or more of the Banks or the Administrative Agent are a
party, or in connection with the enforcement of rights or remedies under the
Credit Agreement, (vii) to a subsidiary or affiliate of any Bank as provided in
Section 11.12(a) of the Credit Agreement or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to you a Confidentiality Agreement substantially in the form hereof; provided,
further, that (x) unless specifically prohibited by applicable law or court
order, you agree, prior to the disclosure thereof, to notify the Company of any
request for disclosure of any such information (A) by any governmental agency or
representative thereof (other than any such request in connection with an
examination of your financial condition by such governmental agency) or (B)
pursuant to legal process and (y) that in no event shall you be obligated to
return any materials furnished to you pursuant to this Confidentiality
Agreement.
If you are a prospective assignee, your obligations under this
Confidentiality Agreement shall be superseded by Section 11.12 of the Credit
Agreement on the date upon which you become a Bank under the Credit Agreement
pursuant to Section 11.6(b) thereof.
Please indicate your agreement to the foregoing by signing as
provided below the enclosed copy of this Confidentiality Agreement and returning
the same to us.
Very truly yours,
[INSERT NAME OF BANK]
By ______________________
The foregoing is agreed to
as of the date of this letter.
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By ________________________
CHARLES C.S. PARK
ATTORNEY AT LAW
1665 CHARLESTON ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
TELEPHONE (650)965-8300
TELECOPIER (650)964-9591
May 7, 1999
American Century Government Income Trust
American Century Tower
4500 Main Street
Kansas City, Missouri 64111
Ladies and Gentlemen:
As counsel to American Century Government Income Trust (the "Trust"), I
am generally familiar with its affairs. Based upon this familiarity, and upon
the examination of such documents as I deemed relevant, it is my opinion that
the shares of the Trust described in 1933 Act Post-Effective Amendment No. 37
and 1940 Act Amendment No. 38 to its Registration Statement on Form N-1A, to be
filed with the Securities and Exchange Commission on May 7, 1999, will, when
issued, be validly issued, fully paid and nonassessable.
For the record, it should be stated that I am an employee of American
Century Services Corporation, an affiliated corporation of American Century
Government Income Trust, Inc., the investment advisor of the Trust.
I hereby consent to the use of this opinion as an exhibit to
Post-Effective Amendment No. 37 and Amendment No. 38, referenced above.
Very truly yours,
/s/Charles C.S. Park
Charles C.S. Park
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, American Century
Government Income Trust, hereinafter called the "Trust", and certain trustees
and officers of the Trust, do hereby constitute and appoint George A. Rio, David
C. Tucker, Douglas A. Paul, Charles A. Etherington, and Charles C.S. Park, and
each of them individually, their true and lawful attorneys and agents to take
any and all action and execute any and all instruments which said attorneys and
agents may deem necessary or advisable to enable the Trust to comply with the
Securities Act of 1933 and/or the Investment Company Act of 1940, as amended,
and any rules, regulations, orders, or other requirements of the United States
Securities and Exchange Commission thereunder, in connection with the
registration under the Securities Act of 1933 and/or the Investment Company Act
of 1940, as amended, including specifically, but without limitation of the
foregoing, power and authority to sign the name of the Trust in its behalf and
to affix its seal, and to sign the names of each of such trustees and officers
in their capacities as indicated, to any amendment or supplement to the
Registration Statement filed with the Securities and Exchange Commission under
the Securities Act of 1933 and/or the Investment Company Act of 1940, as
amended, and to any instruments or documents filed or to be filed as a part of
or in connection with such Registration Statement; and each of the undersigned
hereby ratifies and confirms all that said attorneys and agents shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the Trust has caused this Power to be executed by
its duly authorized officers on this the 18th day of December, 1998.
AMERICAN CENTURY GOVERNMENT INCOME TRUST
By: /s/ George A. Rio
GEORGE A. RIO, President
SIGNATURE AND TITLE
/s/ George A. Rio /s/ Ronald J. Gilson
GEORGE A. RIO RONALD J. GILSON
President, Principal Executive and Principal Trustee
Financial Officer
/s/ Maryanne Roepke /s/ Myron S. Scholes
MARYANNE ROEPKE MYRON S. SCHOLES
Vice President and Treasurer Trustee
/s/ James E. Stowers, III /s/ Kenneth E. Scott
JAMES E. STOWERS, III KENNETH E. SCOTT
Trustee Trustee
/s/ William M. Lyons /s/ Isaac Stein
WILLIAM M. LYONS ISAAC STEIN
Trustee Trustee
/s/ Albert A. Eisenstat /s/ Jeanne D. Wohlers
ALBERT A. EISENSTAT JEANNE D. WOHLERS
Trustee Trustee
Attest:
By: s/s Douglas A. Paul, Secretary
Douglas A. Paul, Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY GOVERNMENT INCOME TRUST AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL
CLASSES, EXCEPT WHERE SUCH PRESENTATION IS NOT POSSIBLE(SUCH AS PER SHARE DATA).
IN THOSE CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<CIK> 0000773674
<NAME> AMERICAN CENTURY GOVERNMENT INCOME TRUST
<SERIES>
<NUMBER> 1
<NAME> GNMA FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 1,396,335,475 <F1>
<INVESTMENTS-AT-VALUE> 1,413,340,718
<RECEIVABLES> 47,467,492
<ASSETS-OTHER> 4,574,474
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,465,382,684
<PAYABLE-FOR-SECURITIES> 40,145,104
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,720,859
<TOTAL-LIABILITIES> 42,865,963
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,427,068,233
<SHARES-COMMON-STOCK> 133,959,027
<SHARES-COMMON-PRIOR> 120,579,109
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (21,556,755)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17,005,243
<NET-ASSETS> 1,422,516,721
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 88,813,632
<OTHER-INCOME> 0
<EXPENSES-NET> 7,970,112
<NET-INVESTMENT-INCOME> 80,843,520
<REALIZED-GAINS-CURRENT> 2,433,855
<APPREC-INCREASE-CURRENT> (9,003,273)
<NET-CHANGE-FROM-OPS> 74,274,102
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 80,915,698
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,126,700
<NUMBER-OF-SHARES-REDEEMED> 46,825,765
<SHARES-REINVESTED> 6,078,983
<NET-CHANGE-IN-ASSETS> 136,416,333
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (23,990,610)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,912,932
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,970,112
<AVERAGE-NET-ASSETS> 1,333,766,806
<PER-SHARE-NAV-BEGIN> 10.67 <F2>
<PER-SHARE-NII> 0.64 <F2>
<PER-SHARE-GAIN-APPREC> (0.05)<F2>
<PER-SHARE-DIVIDEND> 0.64 <F2>
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.62 <F2>
<EXPENSE-RATIO> 0.59 <F2>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<FN>
<F1> SCHEDULE REFLECTS THE TOTAL FOR ALL CLASSES, EXCEPT WHERE INDICATED.
<F2> INVESTOR CLASS INFORMATION ONLY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY GOVERNMENT INCOME TRUST AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL
CLASSES, EXCEPT WHERE SUCH PRESENTATION IF NOT POSSIBLE(SUCH AS PER SHARE DATA).
IN THOSE CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<CIK> 0000773674
<NAME> AMERICAN CENTURY GOVERNMENT INCOME TRUST
<SERIES>
<NUMBER> 2
<NAME> INTERMEDIATE-TERM TREASURY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 441,026,526 <F1>
<INVESTMENTS-AT-VALUE> 434,809,130
<RECEIVABLES> 6,506,984
<ASSETS-OTHER> 927,368
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 442,243,482
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 631,828
<TOTAL-LIABILITIES> 631,828
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 446,062,648
<SHARES-COMMON-STOCK> 42,262,982
<SHARES-COMMON-PRIOR> 35,497,574
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,766,402
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6,217,396)
<NET-ASSETS> 441,611,654
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,135,883
<OTHER-INCOME> 0
<EXPENSES-NET> 2,140,496
<NET-INVESTMENT-INCOME> 20,995,387
<REALIZED-GAINS-CURRENT> 9,269,222
<APPREC-INCREASE-CURRENT> (7,602,642)
<NET-CHANGE-FROM-OPS> 22,661,967
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20,995,387
<DISTRIBUTIONS-OF-GAINS> 8,580,973
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,769,095
<NUMBER-OF-SHARES-REDEEMED> 25,444,515
<SHARES-REINVESTED> 2,444,828
<NET-CHANGE-IN-ASSETS> 66,622,858
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,078,153
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,114,983
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,140,496
<AVERAGE-NET-ASSETS> 418,828,862
<PER-SHARE-NAV-BEGIN> 10.56 <F2>
<PER-SHARE-NII> 0.51 <F2>
<PER-SHARE-GAIN-APPREC> 0.05 <F2>
<PER-SHARE-DIVIDEND> 0.51 <F2>
<PER-SHARE-DISTRIBUTIONS> 0.21
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.45 <F2>
<EXPENSE-RATIO> 0.76 <F2>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<FN>
<F1> SCHEDULE REFLECTS THE TOTAL FOR ALL CLASSES, EXCEPT WHERE INDICATED.
<F2> INVESTOR CLASS INFORMATION ONLY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY GOVERNMENT INCOME TRUST AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000773674
<NAME> AMERICAN CENTURY GOVERNMENT INCOME TRUST
<SERIES>
<NUMBER> 3
<NAME> GOVERNMENT AGENCY MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 504,046,064
<INVESTMENTS-AT-VALUE> 504,046,064
<RECEIVABLES> 28,675,633
<ASSETS-OTHER> 968,809
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 533,690,506
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,848,505
<TOTAL-LIABILITIES> 5,848,505
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 527,842,001
<SHARES-COMMON-STOCK> 527,842,001
<SHARES-COMMON-PRIOR> 487,813,820
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 527,842,001
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,447,798
<OTHER-INCOME> 0
<EXPENSES-NET> 2,396,976
<NET-INVESTMENT-INCOME> 24,050,822
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 24,084,404
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 24,050,822
<DISTRIBUTIONS-OF-GAINS> 11,109
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 431,797,001
<NUMBER-OF-SHARES-REDEEMED> 414,936,146
<SHARES-REINVESTED> 23,167,326
<NET-CHANGE-IN-ASSETS> 40,050,654
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (22,473)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,573,911
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,848,505
<AVERAGE-NET-ASSETS> 502,517,948
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY GOVERNMENT INCOME TRUST AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL
CLASSES, EXCEPT WHERE SUCH PRESENTATION IF NOT POSSIBLE(SUCH AS PER SHARE DATA).
IN THOSE CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<CIK> 0000773674
<NAME> AMERICAN CENTURY GOVERNMENT INCOME TRUST
<SERIES>
<NUMBER> 9
<NAME> SHORT-TERM GOVERNMENT FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 826,716 <F1>
<INVESTMENTS-AT-VALUE> 826,555
<RECEIVABLES> 7,344
<ASSETS-OTHER> 242
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 834,141
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,703
<TOTAL-LIABILITIES> 1,703
<SENIOR-EQUITY> 879
<PAID-IN-CAPITAL-COMMON> 911,258
<SHARES-COMMON-STOCK> 87,900
<SHARES-COMMON-PRIOR> 85,460
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (79,538)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (161)
<NET-ASSETS> 832,438
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 47,250
<OTHER-INCOME> 0
<EXPENSES-NET> 4,849
<NET-INVESTMENT-INCOME> 42,401
<REALIZED-GAINS-CURRENT> 586
<APPREC-INCREASE-CURRENT> 287
<NET-CHANGE-FROM-OPS> 43,274
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 42,401
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,567
<NUMBER-OF-SHARES-REDEEMED> 20,286
<SHARES-REINVESTED> 4,159
<NET-CHANGE-IN-ASSETS> 23,101
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (80,124)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,822
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,849
<AVERAGE-NET-ASSETS> 822,870
<PER-SHARE-NAV-BEGIN> 9.46 <F2>
<PER-SHARE-NII> 0.49 <F2>
<PER-SHARE-GAIN-APPREC> 0.01 <F2>
<PER-SHARE-DIVIDEND> 0.49 <F2>
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.47 <F2>
<EXPENSE-RATIO> 0.59 <F2>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<FN>
<F1> SCHEDULE REFLECTS THE TOTAL FOR ALL CLASSES, EXCEPT WHERE INDICATED.
<F2> INVESTOR CLASS INFORMATION ONLY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY GOVERNMENT INCOME TRUST AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL
CLASSES, EXCEPT WHERE SUCH PRESENTATION IS NOT POSSIBLE(SUCH AS PER SHARE DATA).
IN THOSE CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<CIK> 0000773674
<NAME> AMERICAN CENTURY GOVERNMENT INCOME TRUST
<SERIES>
<NUMBER> 5
<NAME> SHORT-TERM TREASURY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 64,886,167 <F1>
<INVESTMENTS-AT-VALUE> 64,988,948
<RECEIVABLES> 9,877,413
<ASSETS-OTHER> 998,015
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 75,864,376
<PAYABLE-FOR-SECURITIES> 10,860,402
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 118,943
<TOTAL-LIABILITIES> 10,979,345
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64,761,277
<SHARES-COMMON-STOCK> 6,590,378
<SHARES-COMMON-PRIOR> 4,320,297
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,973
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 102,781
<NET-ASSETS> 64,885,031
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,853,682
<OTHER-INCOME> 0
<EXPENSES-NET> 274,670
<NET-INVESTMENT-INCOME> 2,579,012
<REALIZED-GAINS-CURRENT> 211,046
<APPREC-INCREASE-CURRENT> (65,450)
<NET-CHANGE-FROM-OPS> 2,724,608
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,579,012
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,655,452
<NUMBER-OF-SHARES-REDEEMED> 2,590,381
<SHARES-REINVESTED> 205,010
<NET-CHANGE-IN-ASSETS> 22,550,302
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (190,073)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 259,763
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 274,670
<AVERAGE-NET-ASSETS> 52,572,533
<PER-SHARE-NAV-BEGIN> 9.80 <F2>
<PER-SHARE-NII> 0.49 <F2>
<PER-SHARE-GAIN-APPREC> 0.05 <F2>
<PER-SHARE-DIVIDEND> 0.49 <F2>
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.85 <F2>
<EXPENSE-RATIO> 0.51 <F2>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<FN>
<F1> SCHEDULE REFLECTS THE TOTAL FOR ALL CLASSES, EXCEPT WHERE INDICATED.
<F2> INVESTOR CLASS INFORMATION ONLY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY GOVERNMENT INCOME TRUST AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL
CLASSES, EXCEPT WHERE SUCH PRESENTATION IS NOT POSSIBLE(SUCH AS PER SHARE DATA).
IN THOSE CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<CIK> 0000773674
<NAME> AMERICAN CENTURY GOVERNMENT INCOME TRUST
<SERIES>
<NUMBER> 6
<NAME> LONG-TERM TREASURY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 136,985,955 <F1>
<INVESTMENTS-AT-VALUE> 138,836,231
<RECEIVABLES> 1,679,271
<ASSETS-OTHER> 339,363
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 140,854,865
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 715,536
<TOTAL-LIABILITIES> 715,536
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 139,113,017
<SHARES-COMMON-STOCK> 13,851,824
<SHARES-COMMON-PRIOR> 9,795,492
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (823,964)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,850,276
<NET-ASSETS> 140,139,329
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,912,413
<OTHER-INCOME> 0
<EXPENSES-NET> 689,644
<NET-INVESTMENT-INCOME> 7,222,769
<REALIZED-GAINS-CURRENT> 5,981,743
<APPREC-INCREASE-CURRENT> (7,972,679)
<NET-CHANGE-FROM-OPS> 5,231,833
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,222,769
<DISTRIBUTIONS-OF-GAINS> 7,521,137
<DISTRIBUTIONS-OTHER> 823,964
<NUMBER-OF-SHARES-SOLD> 18,348,193
<NUMBER-OF-SHARES-REDEEMED> 15,634,997
<SHARES-REINVESTED> 1,343,136
<NET-CHANGE-IN-ASSETS> 36,540,003
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,539,394
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 677,423
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 689,644
<AVERAGE-NET-ASSETS> 134,493,852
<PER-SHARE-NAV-BEGIN> 10.58 <F2>
<PER-SHARE-NII> 0.58 <F2>
<PER-SHARE-GAIN-APPREC> 0.11 <F2>
<PER-SHARE-DIVIDEND> 0.58 <F2>
<PER-SHARE-DISTRIBUTIONS> 0.52 <F2>
<RETURNS-OF-CAPITAL> 0.05 <F2>
<PER-SHARE-NAV-END> 10.12 <F2>
<EXPENSE-RATIO> 0.51 <F2>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>SCHEDULE REFLECTS THE TOTAL FOR ALL CLASSES, EXCEPT WHERE INDICATED.
<F2>INVESTOR CLASS INFORMATION ONLY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY GOVERNMENT INCOME TRUST AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000773674
<NAME> AMERICAN CENTURY GOVERNMENT INCOME TRUST
<SERIES>
<NUMBER> 7
<NAME> INFLATION-ADJUSTED TREASURY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 8,900,315
<INVESTMENTS-AT-VALUE> 8,736,683
<RECEIVABLES> 78,140
<ASSETS-OTHER> 198,245
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,013,068
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,407
<TOTAL-LIABILITIES> 22,407
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,224,890
<SHARES-COMMON-STOCK> 948,596
<SHARES-COMMON-PRIOR> 548,332
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (70,597)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (163,632)
<NET-ASSETS> 8,990,661
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 373,125
<OTHER-INCOME> 0
<EXPENSES-NET> 34,624
<NET-INVESTMENT-INCOME> 338,501
<REALIZED-GAINS-CURRENT> (20,024)
<APPREC-INCREASE-CURRENT> (111,410)
<NET-CHANGE-FROM-OPS> 207,067
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 338,501
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 664,711
<NUMBER-OF-SHARES-REDEEMED> 295,763
<SHARES-REINVESTED> 31,316
<NET-CHANGE-IN-ASSETS> 3,711,283
<ACCUMULATED-NII-PRIOR> (50,573)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 34,333
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 34,624
<AVERAGE-NET-ASSETS> 6,793,427
<PER-SHARE-NAV-BEGIN> 9.63
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> (0.15)
<PER-SHARE-DIVIDEND> 0.47
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.48
<EXPENSE-RATIO> 0.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY GOVERNMENT INCOME TRUST AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000773674
<NAME> AMERICAN CENTURY GOVERNMENT INCOME TRUST
<SERIES>
<NUMBER> 8
<NAME> CAPITAL PRESERVATION FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 3,206,612,185
<INVESTMENTS-AT-VALUE> 3,206,612,185
<RECEIVABLES> 785,730,015
<ASSETS-OTHER> 6,874,313
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,999,216,513
<PAYABLE-FOR-SECURITIES> 670,800,357
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,611,216
<TOTAL-LIABILITIES> 674,411,573
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,324,804,940
<SHARES-COMMON-STOCK> 3,324,804,940
<SHARES-COMMON-PRIOR> 3,144,640,390
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,324,804,940
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 159,797,409
<OTHER-INCOME> 0
<EXPENSES-NET> 15,177,913
<NET-INVESTMENT-INCOME> 144,619,496
<REALIZED-GAINS-CURRENT> 2,730,059
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 147,349,555
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 144,619,496
<DISTRIBUTIONS-OF-GAINS> 2,673,276
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,907,552,494
<NUMBER-OF-SHARES-REDEEMED> 2,867,779,879
<SHARES-REINVESTED> 140,391,935
<NET-CHANGE-IN-ASSETS> 180,221,333
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,124,623
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15,177,913
<AVERAGE-NET-ASSETS> 3,195,926,315
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
