PROSPECTUS
[American Century Logo]
American Century (sm)
SEPTEMBER 3, 1996
Revised January 1, 1997
BENHAM
GROUP(R)
European Government Bond
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY(R) GROUP
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
European
Government Bond
PROSPECTUS
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997
European Government Bond Fund
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
American Century International Bond Funds is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. One of the funds from our Benham
Group that invests in the highest-quality European government debt securities is
described in this Prospectus. Its investment objective is listed on page 2 of
this Prospectus. The other funds are described in separate prospectuses.
American Century offers investors a full line of no-load funds, investments
that have no sales charges or commissions.
This Prospectus gives you information about the Fund that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated September 3, 1996 and filed with the Securities and Exchange
Commission ("SEC"). It is incorporated into this Prospectus by reference. To
obtain a copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
Investments in the Fund are not insured, nor are they
guaranteed by the U.S. government or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY -- BENHAM EUROPEAN
GOVERNMENT BOND FUND
The Fund seeks over the long term as high a level of total return as is
consistent with investment in the highest-quality European government debt
securities.
There is no assurance that the Fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Transaction and Operating Expense Table ......................4
Financial Highlights .........................................5
INFORMATION REGARDING THE FUND
Investment Policies of the Fund ..............................6
Investment Objective ....................................6
International Subadvisor ................................6
Investment Strategy .....................................6
Currency Management .....................................6
Risk Factors and Investment Techniques .......................7
Issuer Diversification ..................................7
Credit Quality ..........................................8
Currency Diversification ................................8
Dollar-Weighted Average Maturity ........................8
Other Investment Practices, Their Characteristics
and Risks ...............................................8
Portfolio Turnover ......................................8
When-Issued and Forward Commitment
Agreements ..........................................8
Interest Rate Futures Contracts and
Options Thereon .....................................9
Short-Term Instruments ..................................9
Portfolio Lending .......................................9
Other Techniques ........................................10
Performance Advertising ......................................10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments .................................11
Investing in American Century ................................11
How to Open an Account .......................................11
By Mail .............................................11
By Wire .............................................11
By Exchange .........................................12
In Person ...........................................12
Subsequent Investments ..................................12
By Mail .............................................12
By Telephone ........................................12
By Online Access ....................................12
By Wire .............................................12
In Person ...........................................12
Automatic Investment Plan ...............................12
How to Exchange from One Account
to Another ..............................................12
By Mail .............................................13
By Telephone ........................................13
By Online Access ....................................13
How to Redeem Shares .........................................13
By Mail .............................................13
By Telephone ........................................13
By Check-A-Month ....................................13
Other Automatic Redemptions .........................13
Redemption Proceeds .....................................13
By Check ............................................13
By Wire and ACH .....................................13
Redemption of Shares
in Low-Balance Accounts .............................13
Signature Guarantee ..........................................14
Special Shareholder Services .................................14
Automated Information Line ..........................14
By Online Access ....................................14
Open Order Service ..................................14
Tax-Qualified Retirement Plans ......................15
Important Policies Regarding Your Investments ...........15
Reports to Shareholders ......................................15
Employer-Sponsored Retirement Plans
and Institutional Accounts ..............................16
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price ..................................................17
When Share Price is Determined ..........................17
How Share Price is Determined ...........................17
Where to Find Information About Share Price .............17
Distributions ................................................18
Taxes ........................................................18
Tax-Deferred Accounts ...................................18
Taxable Accounts ........................................18
Management ...................................................19
Investment Management ...................................19
Code of Ethics ..........................................20
Transfer and Administrative Services ....................20
Distribution of Fund Shares ..................................21
Expenses .....................................................21
Further Information About American Century ...................21
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
European
Government Bond
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases .............................. none
Maximum Sales Load Imposed on Reinvested Dividends ................... none
Deferred Sales Load .................................................. none
Redemption Fee(1) .................................................... none
Exchange Fee ......................................................... none
ANNUAL FUND OPERATING EXPENSES:(2)
(as a percentage of net assets)
Management Fees . .................................................. .44%
12b-1 Fees ........................................................... none
Other Expenses . .................................................. .40%
Total Fund Operating Expenses . ................................ .84%
EXAMPLE
You would pay the following expenses on a 1 year $9
$1,000 investment, assuming a 5% annual return 3 years 27
and redemption at the end of each time period: 5 years 47
10 years 104
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) Benham Management Corporation (the "Manager") has agreed to limit the
Fund's total operating expenses to a specified percentage of the Fund's
average daily net assets. The agreement provides that the Manager may
recover amounts absorbed on behalf of the Fund during the preceding 11
months if, and to the extent that, for any given month, Fund expenses were
less than the expense limit in effect at that time. The current expense
limitation for the Fund is .90%. This expense limitation is subject to
annual renewal in June.
The Fund pays the Manager advisory fees equal to an annualized percentage
of the Fund's average daily net assets. Other expenses include administrative
and transfer agent fees paid to American Century Services Corporation.
The purpose of the above table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the shares of the Fund. The example set forth
above assumes reinvestment of all dividends and distributions and uses a 5%
annual rate of return as required by SEC regulations.
Neither the 5% rate of return nor the expenses shown above should be
considered indications of past or future returns and expenses. Actual returns
and expenses may be greater or less than those shown.
4 Transaction and Operating Expense Table American Century Investments
FINANCIAL HIGHLIGHTS
EUROPEAN GOVERNMENT BOND
The Financial Highlights for each of the periods presented have been
audited by KPMG Peat Marwick LLP, independent auditors (except as noted), whose
report thereon appears in the Fund's annual report, which is incorporated by
reference into the Statement of Additional Information. The semiannual and
annual reports contain additional performance information and will be made
available upon request and without charge. The information presented is for a
share outstanding throughout the years ended December 31, except as noted.
<TABLE>
1996(1) 1995 1994 1993 1992(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C>
Beginning of Period ............................... $11.95 $10.36 $10.82 $10.01 10.00
----------- ----------- ----------- ----------- -----------
Income from Investment Operations
Net Investment Income .......................... .32 .61 .78 .69 .79
Net Realized and Unrealized Gains
(Losses) on Investments and
Foreign Currency Transactions .................. (.51) 1.88 (.63) .49 .38
----------- ----------- ----------- ----------- -----------
Total Income from Investment Operations ........ (.19) 2.49 .15 1.18 1.17
----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ..................... (.39) (.90) (.60) (.37) (.66)
From Net Realized Gains on Investments
and Foreign Currency Transactions .............. -- -- (.01) -- (.50)
----------- ----------- ----------- ----------- -----------
Total Distributions ............................ (.39) (.90) (.61) (.37) (1.16)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period .................... $11.37 $11.95 $10.36 $10.82 $10.01
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total Return(3) ................................ (1.56)% 24.40% 1.52% 11.79% 7.08%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(4) ....................... .84%(4) .82% .86% .85% .51%(5)
Ratio of Net Investment Income
to Average Net Assets .......................... 5.60%(4) 6.14% 6.09% 6.27% 7.59(5)
Portfolio Turnover Rate ........................ 146% 167% 166% 310% 252%
Net Assets, End of Period
(in thousands of dollars) ..................... $236,815 $252,247 $194,301 $355,615 $337,043
</TABLE>
(1) Six month period ended June 30, 1996 (unaudited).
(2) From January 7, 1992 (commencement of operations) to December 31, 1992.
(3) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.
(4) The ratios for the periods beginning with the year ended December 31,
1995 include expenses paid through expense offset arrangements.
(5) Annualized.
Prospectus Financial Highlights 5
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
The Fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, as well as the
investment objectives of the Fund identified on page 2 of this Prospectus and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The Fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objective. These policies and practices, which are described throughout this
Prospectus, are not designated as fundamental policies and may be changed
without shareholder approval.
For an explanation of the securities ratings referred to in the following
discussion, see "Other Information" in the Statement of Additional Information.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek over the long term as high a
level of total return as is consistent with investment in the highest-quality
European government debt securities. There is no assurance that the Fund will
achieve its investment objective.
The Fund may be appropriate for U.S. investors who:
o Want to protect their income against a decline in the purchasing power of
the U.S. dollar relative to that of foreign currencies.
o Want to diversify their investments beyond U.S. dollar-denominated
securities and interest rate exposure.
As market conditions change (i.e., interest rate, political, and economic
changes occur), the Fund's value will vary. The Fund's performance will be
affected by currency values, foreign economies, and other foreign investment
factors.
INTERNATIONAL SUBADVISOR
J.P. Morgan Investment Management Inc. ("JPMIM") is the Fund's subadvisor
and is responsible for its day-to-day operations. JPMIM is headquartered in
New York and maintains offices in most of the world's financial centers,
including London and Frankfurt.
INVESTMENT STRATEGY
JPMIM selects the Fund's investments by using a combination of fundamental
research and bond and currency valuation models. The following is a brief
summary of factors considered by JPMIM in selecting the Fund's investments:
o Economic/Political Fundamentals: JPMIM evaluates each country's economic
climate and political discipline for controlling deficits and inflation.
o Expected Return: Using economic forecasts, JPMIM projects the expected
return for each country.
o Relative Value: By contrasting expected risks and returns for investments
in each country, JPMIM selects those countries expected to produce the best
return at reasonable risk.
CURRENCY MANAGEMENT
The rate of exchange between U.S. dollars and European currencies
fluctuates, which results in gains and losses to the Fund. Even if the Fund's
foreign security holdings perform well, an increase in the value of the dollar
relative to the currencies in which portfolio securities are denominated can
offset security gains.
Because the Fund is designed for U.S. investors seeking currency and
interest rate diversification, JPMIM limits its use of hedging strategies
intended to minimize the effect of currency fluctuations. Although hedging
strategies (if they are successful) reduce exchange rate risk, they also reduce
the potential for share price appreciation when European currencies increase in
value relative to the U.S. dollar.
6 Information Regarding the Funds American Century Investments
When JPMIM considers the U.S. dollar to be attractive relative to European
currencies, as much as 25% of the Fund's total assets may be hedged into
dollars. For temporary defensive purposes and under extraordinary circumstances
(such as significant political events), more than 25% of the Fund's total assets
may be hedged in this manner.
In managing the Fund's currency exposure, JPMIM will buy and sell foreign
currencies regularly, either in the spot (i.e., cash) market or the forward
market. Forward foreign currency exchange contracts ("forward contracts") are
individually negotiated and privately traded between currency traders (usually
large commercial banks) and their customers. In most cases, no deposit
requirements exist, and these contracts are traded at a net price without
commission. Forward contracts involve an obligation to purchase or sell a
specific currency at an agreed-upon price on a future date. Most contracts
expire in less than one year. The Fund will not use futures and options for
speculative purposes.
RISK FACTORS AND INVESTMENT TECHNIQUES
The risks which the Fund faces most frequently are those posed by
fluctuations in currency values. The value of the investments held by the Fund
is calculated in U.S. dollars on each day that the New York Stock Exchange (the
"Exchange") is open for business. As a result, to the extent that the Fund's
assets are invested in instruments denominated in currencies other than the U.S.
dollar and such currencies appreciate relative to the U.S. dollar, the Fund's
net asset value per share as expressed in U.S. dollars (and, therefore, the
value of a shareholder's investment in the Fund as expressed in U.S. dollars)
should increase. If the U.S. dollar appreciates relative to such other
currencies, the converse should occur, except to the extent that losses are
offset by net investment income generated by the U.S. dollar-denominated
instruments in which the Fund invests.
The currency-related gains and losses experienced by the Fund will be based
on changes in the value of portfolio securities attributable to currency
fluctuations only in relation to the original purchase price of such securities
stated in U.S. dollars. An individual shareholder's gains or losses on his or
her shares will be based on changes attributable to fluctuations in the net
asset value of such shares, expressed in U.S. dollars, in relation to the
original U.S. dollar purchase price of such shares. The relative amount of
appreciation or depreciation in the Fund's assets also will be affected by
changes in the value of the securities that are unrelated to changes in currency
exchange rates.
Interest rates paid on instruments denominated in foreign currencies may be
higher or lower than those paid on comparable U.S. dollar instruments.
Consequently, the Fund may have a higher or lower yield than a fund which
invests strictly in U.S. dollar-denominated instruments.
ISSUER DIVERSIFICATION
The Fund invests primarily in bonds issued or guaranteed by European
governments and their political subdivisions. The Fund currently intends to
invest in bonds issued by governments and political subdivisions of Austria,
Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands,
Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Political
subdivisions include states, provinces, and municipalities, as well as federal,
regional, state, and municipal agencies or instrumentalities. The Fund may also
invest in bonds issued by supranational organizations such as the World Bank or
the European Investment Bank.
Typically, the Fund invests more than 25% of its total assets in securities
issued by the German government or its political subdivisions. For temporary
defensive purposes, however, the Fund may invest less than 25% of its total
assets in these securities. The Fund does not expect to invest more than 25% of
its total assets in government debt securities of any one foreign country other
than Germany.
To provide a margin of liquidity for shareholder redemptions and exchanges,
the Fund may invest up to 5% of its total assets in U.S. government securities
held directly or under a repurchase agreement. For temporary defensive purposes,
the Fund may invest more than 5% of its total assets in U.S. government
securities.
The Fund is a "non-diversified company" as defined in the Investment
Company Act of 1940 (the "1940 Act"), which means that the proportion of the
Prospectus Information Regarding the Funds 7
Fund's assets that may be invested in the securities of a single issuer is not
limited by the 1940 Act.
The Fund may invest in AAA-rated corporate bonds denominated in European
currencies or European Currency Units ("ECU"s). However, the Fund will limit its
investments in such corporate bonds to those amounts which will help it satisfy
the diversification requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended.
CREDIT QUALITY
Like U.S. Treasury securities, direct obligations of a European government
are backed by the full faith and credit of that government. European government
agency debt may or may not be backed by government guarantees.
Under normal market conditions, the Fund invests at least 65% of its total
assets in European government bonds which are rated AAA, at the time of
purchase, by a nationally recognized statistical rating agency (a "rating
agency") or considered by the subadvisor to be of comparable quality. If a
rating agency downgrades a security held by the Fund or judges a security to be
less than AAA quality, the security would be sold as quickly as possible without
unnecessarily destabilizing the Fund's share price or yield.
CURRENCY DIVERSIFICATION
Bonds eligible for inclusion in the Fund's portfolio may be denominated in
European currencies or ECUs. ECUs are a composite currency consisting of fixed
amounts of currency of European Economic Community member countries. A
government may issue bonds in domestic currency, ECUs, or the currency of
another sovereign government. In this regard, the Fund may buy Australian or
Canadian bonds issued in European currencies or ECUs. Under normal market
conditions, at least 30% of the Fund's total assets are invested in securities
denominated in German marks.
DOLLAR-WEIGHTED AVERAGE MATURITY
The Fund's dollar-weighted average portfolio maturity ranges from two to
ten years.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information regarding the investment practices of the Fund,
see the Statement of Additional Information.
PORTFOLIO TURNOVER
The portfolio turnover rate of the Fund is shown in the Financial
Highlights table on page 5 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the Fund's objectives.
The Manager believes that the rate of portfolio turnover is irrelevant when it
or JPMIM determines a change is in order to achieve those objectives and,
accordingly, the annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of the Fund may be higher than other mutual funds
with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the Fund
pays directly. Portfolio turnover may also affect the character of capital
gains, if any, realized and distributed by the Fund since short-term capital
gains are taxable as ordinary income.
Transaction costs are normally higher for foreign securities than for U.S
securities; therefore, the Fund's anticipated portfolio turnover rate may have a
larger negative impact on total return than it would if the Fund invested
primarily or exclusively in U.S. securities.
WHEN-ISSUED AND FORWARD
COMMITMENT AGREEMENTS
The Fund may sometimes purchase new issues of securities on a when-issued
or forward commitment basis when, in the opinion of the Manager, such purchases
will further the investment objectives of the Fund. The price of when-issued
securities is established at the time the commitment to purchase is made.
Delivery and payment for these securities typically occurs 15 to 45 days after
the commitment to purchase. Market rates of interest on debt securities at the
time of delivery may be higher or lower than those contracted for on the
security. Accordingly, the value of each security may decline prior to delivery,
which could result in a loss to the Fund.
8 Information Regarding the Funds American Century Investments
INTEREST RATE FUTURES CONTRACTS
AND OPTIONS THEREON
The Fund may buy or sell interest rate futures contracts relating to debt
securities ("debt futures," i.e., futures relating to indexes on types or groups
of bonds) and write or buy put and call options relating to interest rate
futures contracts.
For options sold, the Fund will segregate cash or high-quality debt
securities equal to the value of securities underlying the option unless the
option is otherwise covered.
The Fund will deposit in a segregated account with its custodian bank
high-quality debt obligations maturing in one year or less, or cash, in an
amount equal to the fluctuating market value of long futures contracts it has
purchased, less any margin deposited on its long position. It may hold cash or
acquire such debt obligations for the purpose of making these deposits.
The Fund may use futures and options transactions to maintain cash reserves
while remaining fully invested, to facilitate trading, to reduce transaction
costs, or to pursue higher investment returns when a futures contract is priced
more attractively than its underlying security or index.
Since futures contracts and options thereon can replicate movements in the
cash markets for the securities in which the Fund invests without the large cash
investments required for dealing in such markets, they may subject the Fund to
greater and more volatile risks than might otherwise be the case. The principal
risks related to the use of such instruments are (1) the offsetting correlation
between movements in the market price of the portfolio investments (held or
intended) being hedged and in the price of the futures contract or option may be
imperfect; (2) possible lack of a liquid secondary market for closing out
futures or option positions; (3) the need of additional portfolio management
skills and techniques; and (4) losses due to unanticipated market price
movements. For a hedge to be completely effective, the price change of the
hedging instrument should equal the price change of the securities being hedged.
Such equal price changes are not always possible because the investment
underlying the hedging instrument may not be the same investment that is being
hedged.
The ordinary spreads between prices in the cash and futures markets, due to
the differences in the nature of those markets, are subject to distortion. Due
to the possibility of distortion, a correct forecast of general interest rate
trends by management may still not result in a successful transaction.
Management may be incorrect in its expectations as to the extent of various
interest rate movements or the time span within which the movements take place.
See the Statement of Additional Information for further information about
these instruments and their risks.
SHORT-TERM INSTRUMENTS
For liquidity purposes, the Fund may invest in high-quality money market
instruments with remaining maturities of one year or less. Such instruments may
include European-currency-denominated obligations of European governments,
European government agencies, and supranational organizations, as well as
high-quality certificates of deposit.
The Fund may also enter into repurchase agreements, collateralized by U.S.
government securities, with banks or broker-dealers that are deemed to present
minimal credit risk. Credit risk determinations are made by the Manager pursuant
to guidelines established by the Board of Trustees. A repurchase agreement
involves the purchase of a security and a simultaneous agreement to sell the
security back to the seller at a higher price. Delays or losses could result if
the other party to the agreement defaults or becomes bankrupt.
For cash management purposes, the Fund may invest up to 5% of its total
assets in any money market fund advised by the Manager, provided that the
investment is consistent with the Fund's investment policies and restrictions.
PORTFOLIO LENDING
In order to realize additional income, the Fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities
Prospectus Information Regarding the Funds 9
loaned, or by irrevocable letters of credit. During the existence of the loan,
the Fund must continue to receive the equivalent of the interest and dividends
paid by the issuer on the securities loaned and interest on the investment of
the collateral. The Fund must have the right to call the loan and obtain the
securities loaned at any time on five days' notice, including the right to call
the loan to enable the Fund to vote the securities. Such loans may not exceed
one-third of the Fund's total assets taken at market value.
OTHER TECHNIQUES
JPMIM may buy other types of securities or employ other portfolio
management techniques on behalf of the Fund. When SEC guidelines require it to
do so, the Fund will set aside cash or appropriate liquid assets in a segregated
account to cover the Fund's obligations. See the Statement of Additional
Information for a more detailed discussion of these investments and some of the
risks associated with them.
PERFORMANCE ADVERTISING
From time to time, the Fund may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return, yield and
effective yield.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the Fund's cumulative total return over the same period if the
Fund's performance had remained constant throughout.
A quotation of yield reflects the Fund's income over a stated period
expressed as a percentage of the Fund's share price. The effective yield is
calculated in a similar manner, but, when annualized, the income from the
investment is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect on the assumed
reinvestment.
Yield is calculated by adding over a 30-day (or one-month) period all
interest and dividend income (net of fund expenses) calculated on each day's
market values, dividing this sum by the average number of fund shares
outstanding during the period, and expressing the result as a percentage of the
fund's share price on the last day of the 30-day (or one month) period. The
percentage is then annualized. Capital gains and losses are not included in the
calculation.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules. The SEC yield should be regarded as an estimate of
the Fund's rate of investment income, and it may not equal the Fund's actual
income distribution rate, the income paid to a shareholder's account, or the
income reported in the Fund's financial statements.
The Fund may also include in advertisements data comparing performance with
the performance of non-related investment media, published editorial comments
and performance rankings compiled by independent organizations (such as Lipper
Analytical Services) and publications that monitor the performance of mutual
funds. Performance information may be quoted numerically or may be presented in
a table, graph or other illustration. In addition, Fund performance may be
compared to well-known indices of market performance. Fund performance may also
be compared, on a relative basis, to the other funds in our fund family. This
relative comparison, which may be based upon historical or expected fund
performance, volatility or other fund characteristics, may be presented
numerically, graphically or in text. Fund performance may also be combined or
blended with other funds in our fund family, and that combined or blended
performance may be compared to the same indices to which individual funds may be
compared.
All performance information advertised by the Fund is historical in nature
and is not intended to represent or guarantee future results. The value of Fund
shares when redeemed may be more or less than their original cost.
10 Information Regarding the Funds American Century Investments
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The Fund offered by this Prospectus is a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-2021 for a brochure or prospectuses for the other funds in the
American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing Fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 16.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You must also certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.
The minimum investment is $2,500 ($1,000 for IRA accounts).
The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on our retirement plans, which are available for individual
investors or for those investing through their employers.
Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants), you must provide us with specific authorization on
your application in order for us to accept written or telephone instructions
from a single owner. Otherwise, all owners will have to agree to any
transactions that involve the account (whether the transaction request is in
writing or over the telephone).
You may invest in the following ways:
By Mail
Send a completed application and check or money order
payable in U.S. dollars to American Century Investments.
By Wire
You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:
o Receiving bank and routing number:
Commerce Bank, N.A. (101000019)
o Beneficiary (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o Beneficiary account number (BNF ACCT):
2804918
o Reference for Beneficiary (RFB):
American Century account number into which you are investing. If more
than one, leave blank and see Bank to Bank Information below.
o Originator to Beneficiary (OBI):
Name and address of owner of account into which you are investing.
o Bank to Bank Information
(BBI or Free Form Text):
o Taxpayer identification or Social Security number
o If more than one account, account numbers and amount to be invested
in each account.
o Current tax year, previous tax year or rollover designation if an
IRA. Specify whether IRA, SEP-IRA or SARSEP-IRA.
Prospectus How to Invest with American Century Investments 11
By Exchange
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information
on opening an account by exchanging from another American Century account. See
this page for more information on exchanges.
In Person
If you prefer to work with a representative in person, please visit one of
our Investors Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222.
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the remittance portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.
By Mail
When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
By Telephone
Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw on
your bank account. You may call an Investor Services Representative or use our
Automated Information Line.
By Online Access
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
By Wire
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 11 and indicate your account number.
In Person
You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange
your Fund shares to our other funds up to six times per year per account. An
exchange request will be processed the same day it is received if it is received
before the Fund's net asset values are calculated, which is one hour prior to
the close of the New York Stock Exchange for the American Century Target
Maturities Trust, and at the close of the Exchange for all of our other funds.
See "When Share Price is Determined," page 17.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
12 How to Invest with American Century Investments American Century Investments
By Mail
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
By Telephone
You can make exchanges over the phone (either with an Investor Services
Representative or using our Automated Information Line--see page 14) if you have
authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to receive the appropriate form.
By Online Access
You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-2021 to get the
appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received.
Please note that a request to redeem shares in an IRA or 403(b) plan must
be accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
By Mail
Your written instructions to redeem shares may be made either by a
redemption form, which we will send to you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 14.
By Telephone
If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Investor Services Representative.
By Check-A-Month
If you have at least a $10,000 balance in your account, you may redeem
shares by Check-A-Month. A Check-A-Month plan automatically redeems enough
shares each month to provide you with redemption proceeds in an amount you
choose (minimum $50). To set up a Check-A-Month plan, please call and request
our Check-A-Month brochure.
Other Automatic Redemptions
If you have at least a $10,000 balance in your account, you may elect to
make redemptions automatically by authorizing us to send funds directly to you
or to your account at a bank or other financial institution. To set up automatic
redemptions, call one of our Investor Services Representatives.
REDEMPTION PROCEEDS
Please not that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
By Check
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
By Wire and ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank wire charges, which is
deducted from redemption proceeds. Once the funds are transmitted, the time of
receipt and the funds' availability are not under our control.
REDEMPTION OF SHARES
IN LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity to bring
the
Prospectus How to Invest with American Century Investments 13
value of the shares held in the account up to the minimum. If action is not
taken within 90 days of the letter's date, the shares held in the account will
be redeemed and proceeds from the redemption will be sent by check to your
address of record. We reserve the right to increase the investment minimums.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee will
depend on which service options you elect when you open your account. For
example, if you choose "In Writing Only," a signature guarantee will be required
when:
o redeeming more than $25,000; or
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You may obtain a signature guarantee from a bank or trust company, credit
union, broker-dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction,
or to change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these options
and elect the ones that are appropriate for you. Be aware that the "Full
Services" option offers you the most flexibility. You will find more information
about each of these service options in our Investor Services Guide.
Our special shareholder services include:
Automated Information Line
We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions.
If you have authorized us to accept telephone instructions, you also may
exchange shares from one fund to another via the Automated Information Line.
Redemption instructions cannot be given via the Automated Information Line.
Online Account Access
You may contact us 24 hours a day, seven days a week at
www.americancentury.com to access your fund's daily share price, receive updates
on major market indexes and view historical performance of your funds. If you
select "Full Services" on your application, you can use your personal access
code and Social Security number to view your account balances and account
activity, make subsequent investments from your bank account or exchange shares
from one fund to another.
Open Order Service
Through our open order service, you may designate a price at which to buy shares
of a variable-priced fund by exchange from one of our money market funds, or a
price at which to sell shares of a variable-priced fund by exchange to one of
our money market funds. The designated purchase price must be equal to or lower,
or the designated sale price equal to or higher, than the variable-priced fund's
net asset value at the time the order is placed. If the designated price is met
within 90 calendar days, we will execute your exchange order automatically at
that price (or better). Open orders not executed within 90 days will be
canceled.
If the fund you have selected deducts a distribution from its share price, your
order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are accepted
only by telephone or in person. These transactions are subject to exchange
limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
14 How to Invest with American Century Investments American Century Investments
Tax-Qualified Retirement Plans
The Fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:
o Individual Retirement Accounts ("IRA"s);
o 403(b) plans for employees of public school systems and non-profit
organizations; or
o Profit sharing plans and pension plans for corporations and other
employers.
If your IRA and 403(b) accounts do not total $10,000, each account is
subject to an annual $10 fee, up to a total of $30 per year.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares for a
period of time, or to reject any specific purchase order (including
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the manager, they are of a size that would disrupt the
management of the Fund.
(2) We reserve the right to make changes to any stated investment requirements,
including those that relate to purchases, transfers and redemptions. In
addition, we may also alter, add to or terminate any investor services and
privileges. Any changes may affect all shareholders or only certain series
or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open orders,
will be refused. Once you have mailed or otherwise transmitted your
transaction instructions to us, they may not be modified or canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These procedures
are designed to protect shareholders from unauthorized or fraudulent
instructions. If we do not employ reasonable procedures to confirm the
genuineness of instructions, then we may be liable for losses due to
unauthorized or fraudulent instructions. The company, its transfer agent
and investment advisor will not be responsible for any loss due to
instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an increase in
the number of shareholder telephone calls. If you experience difficulty in
reaching us during such periods, you may send your transaction instructions
by mail, express mail or courier service, or you may visit one of our
Investors Centers. You may also use our Automated Information Line if you
have requested and received an access code and are not attempting to redeem
shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may
Prospectus How to Invest with American Century Investments 15
request a statement of your account activity at any time.
With the exception of most automatic transactions, each time you invest,
redeem, transfer or exchange shares, we will send you a confirmation of the
transactions. See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.
No later than January 31st of each year, we will send you reports that
you may use in completing your U.S. income tax return. See the Investor
Services Guide for more information.
Each year, we will send you an annual and a semiannual report relating to
your fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.
EMPLOYER-SPONSORED RETIREMENT PLANS AND
INSTITUTIONAL ACCOUNTS
Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.
If you own or are considering purchasing Fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the
funds, exchange them for shares of other American Century funds, and redeem them
will depend on the terms of your plan.
If you own or are considering purchasing Fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.
16 How to Invest with American Century Investments American Century Investments
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except the American Century Target
Maturities Trust, net asset value is determined at the close of regular trading
on each day that the New York Stock Exchange is open, usually 3 p.m. Central
time. Net asset value for the Target Maturities is determined one hour prior to
the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the net asset value
of the fund is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined on, the next day
the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before net asset value is determined.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail before the net asset value is determined will receive that day's price.
Investments and instructions received after that time will receive the price
determined on the next business day.
If you invest in Fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the Fund's transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the Fund's procedures or any contractual arrangement with the
Fund or the Fund's distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
Portfolio securities of the Fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Trustees.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Trustees.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset value of the Fund is published in leading newspapers daily.
The net asset value, as well as yield information on the Fund and other funds in
the American Century family of funds, may be obtained by calling us or by
accessing our Web site at www.americancentury.com.
Prospectus Additional Information You Should Know 17
DISTRIBUTIONS
Distributions from net investment income are declared and paid quarterly.
Distributions from net realized securities gains, if any, generally are declared
and paid once a year, but the Fund may make distributions on a more frequent
basis to comply with the distribution requirements of the Internal Revenue Code,
in all events in a manner consistent with the provisions of the 1940 Act.
You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price is Determined," page 17. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed, the distribution on the redeemed shares
will be included with your redemption proceeds.
Distributions from net realized securities gains, if any, generally are
declared and paid once a year, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code, in all events in a manner consistent with the provisions of the
1940 Act.
Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.
A distribution of shares of the Fund does not increase the value of your
shares of your total return. At any given time the value of your shares includes
the undistributed net gains, if any, realized by the Fund on the sale of
portfolio securities, and undistributed dividends and interest received, less
fund expenses.
Because undistributed gains and dividends are included in the value of your
shares prior to distribution, when they are distributed the value of your shares
will be reduced by the amount of the distribution. If you buy your shares
through a taxable account just before the distribution, you will pay the full
price for your shares, and then receive a portion of the purchase price back as
a taxable distribution. See "Taxes," this page.
TAXES
The Fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders,
it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If Fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the Fund will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If Fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income of the
Fund do not qualify for the 70% dividends-received deduction for corporations
since they are derived from interest income. Distributions from net long-term
capital gains are taxable as long-term capital gains regardless of the length of
time you have held the shares on which such distributions are paid. However, you
should note that any loss realized upon the sale or redemption of shares held
for six months or less will be treated as a long-term capital loss to the extent
of any distribution of long-term capital gain to you with respect to such
shares.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
pur-
18 Additional Information You Should Know American Century Investments
chase shares shortly before a capital gain distribution, you must pay income
taxes on the distribution, even though the value of your investment (plus cash
received, if any) will not have increased. In addition, the share price at the
time you purchase shares may include unrealized gains in the securities held in
the investment portfolio of the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a distribution of capital gains and
will be taxable to you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distribution are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to Fund shareholders when the Fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code, we are required by federal law to withhold and remit to the IRS 31% of
reportable payments (which may include dividends, capital gains distributions
and redemptions). Those regulations require you to certify that the Social
Security number or tax identification number you provide is correct and that you
are not subject to 31% withholding for previous under-reporting to the IRS. You
will be asked to make the appropriate certification on your application.
Payments reported by us that omit your Social Security number or tax
identification number will subject us to a penalty of $50, which will be charged
against your account if you fail to provide the certification by the time the
report is filed, and is not refundable.
Redemption of shares of the Fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize a gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of Fund shares, the reinvestment in additional Fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Internal Revenue Code, resulting in a postponement of the recognition of
such loss for federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
The Fund is a series of the American Century International Bond Funds (the
"Trust") organized as a Massachusetts business trust on August 28, 1991. Under
the laws of the Commonwealth of Massachusetts, the Board of Trustees is
responsible for managing the business and affairs of the Trust. Acting pursuant
to an investment advisory agreement entered into with the Trust, Benham
Management Corporation (the "Manager") serves as the investment advisor of the
Fund. Its principal place of business is 1665 Charleston Road, Mountain View,
California 94043. The Manager has been providing investment advisory services to
investment companies and institutional clients since 1971.
In June 1995, American Century Companies, Inc. ("ACC") acquired Benham
Management International, Inc., the then-parent company of the Manager. In the
acquisition, the Manager became a wholly owned subsidiary of ACC.
The Manager supervises and manages the investment portfolio of the Fund and
directs the purchase and sale of their investment securities. It utilizes teams
of portfolio managers, assistant portfolio managers and analysts acting together
to supervise the management of the Fund's assets.
JPMIM is the Fund's investment subadvisor. JPMIM is a leading manager of
pension funds, institutional accounts, and private accounts, with approximately
$112 billion in assets under management. JPMIM makes investment decisions for
the Fund in accordance with the Fund's investment objective, policies, and
restrictions under the supervision of the
Prospectus Additional Information You Should Know 19
Manager and the Board of Trustees. JPMIM is a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated.
The portfolio manager members of the teams managing the Funds described in
this Prospectus and their work experience for the last five years are listed as
follows:
Robert P. Browne, Portfolio Manager, JPMIM, has primary responsibility
for the day-to-day operations of the Fund. Mr. Browne transferred to the
Fixed-Income Group in London in 1994. He was previously located in the Tokyo
office and managed domestic and foreign fixed income as well as overall
currency exposure for J.P. Morgan Trust Bank's international portfolios. Mr.
Browne joined JPMIM in 1989. He holds a B.A. in Economics from Holy Cross
College and a Masters of International Business Studies from the University of
South Carolina.
Jeffrey R. Tyler, Senior Vice President, oversees the portfolio manager's
operation of the Fund.
The activities of the Manager are subject only to directions of the Trust's
Board of Trustees. For the services provided to the Funds, the Manager receives
an annual fee which cannot exceed 0.45% of average daily net assets, and it
drops to a marginal rate of 0.29% of average daily net assets as the Fund's
assets increase.
For subadvisory services, the Manager pays JPMIM a monthly fee at the
annual rate of 0.20% of average daily net assets up to $200 million and 0.15% of
average daily net assets in excess of $200 million. For the fiscal year ended
December 31, 1995, the Manager paid JPMIM subadvisory fees equal to 0.19% of the
Fund's average daily net assets.
CODE OF ETHICS
The Trust and the Manager have adopted a Code of Ethics that restricts
personal investing practices by employees of the Manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the Fund's portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of the Fund
shareholders come before the interests of the people who manage the Fund.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, (the "transfer agent") acts as transfer agent and
dividend-paying agent for the Fund. It provides facilities, equipment and
personnel to the Fund and is paid for such services by the Fund. For
administrative services, the Fund pays the transfer agent a monthly fee equal to
its pro rata share of the dollar amount derived from applying the average daily
net assets of all of the Funds managed by the Manager. The administrative fee
rate ranges from 0.11% to 0.08% of average daily net assets, dropping as assets
managed by the Manager increase. For transfer agent services, the Fund pays the
transfer agent a monthly fee for each shareholder account maintained and for
each shareholder transaction executed during that month.
The Fund charges no sales commissions, or "loads," of any kind. However,
investors who do not choose to purchase or sell Fund shares directly from the
transfer agent may purchase or sell Fund shares through registered
broker-dealers and other qualified service providers, who may charge investors
fees for their services. These broker-dealers and service providers generally
provide shareholder, administrative and/or accounting services which would
otherwise be provided by the transfer agent. To accommodate these investors, the
Manager and its affiliates have entered into agreements with some broker-dealers
and service providers to provide these services. Fees for such services are
borne normally by the Fund at the rates normally paid to the transfer agent,
which would otherwise provide the services. Any distribution expenses associated
with these arrangements are borne by the Manager.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services
20 Additional Information You Should Know American Century Investments
will be paid by the Manager or its affiliates.
The Manager and the transfer agent are both wholly owned by ACC. James E.
Stowers Jr., Chairman of the Board of Directors of ACC, controls ACC by virtue
of his ownership of a majority of its common stock.
DISTRIBUTION OF FUND SHARES
The Fund's shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
Manager. The Manager pays all expenses for promoting and distributing the Fund
shares offered by this Prospectus. The Fund does not pay any commissions or
other fees to the Distributor or to any other broker-dealers or financial
intermediaries in connection with the distribution of Fund shares.
EXPENSES
The Fund pays certain operating expenses directly, including, but not
limited to: custodian, audit, and legal fees; fees of the independent trustees;
costs of printing and mailing prospectuses, statements of additional
information, proxy statements, notices, and reports to shareholders; insurance
expenses; and costs of registering the Fund's shares for sale under federal and
state securities laws. See the Statements of Additional Information for a more
detailed discussion of independent trustee compensation.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
The Trust is a diversified, open-end management investment company. Its
business and affairs are managed by its officers under the direction of its
Board of Trustees.
The principal office of the Trust is American Century Tower, 4500 Main
Street, P. O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may be
made by mail to that address, or by telephone to 1-800-345-2021 (international
calls: 816-531-5575).
The Fund is an individual series of the Trust which issues shares with no
par value. Each series is commonly referred to as a fund. The assets belonging
to each series of shares are held separately by the custodian and in effect each
series is a separate fund.
Each share, irrespective of series, is entitled to one vote for each dollar
of net asset value applicable to such share on all questions, except those
matters which must be voted on separately by the series of shares affected.
Matters affecting only one fund are voted upon only by that fund.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of trustees can elect all of the
trustees if they choose to do so, and in such event the holders of the remaining
votes will not be able to elect any person or persons to the Board of Trustees.
Unless required by the 1940 Act, it will not be necessary for the Trust to
hold annual meetings of shareholders. As a result, shareholders may not vote
each year on the election of trustees or the appointment of auditors. However,
pursuant to the Trust's by-laws, the holders of shares representing at least 10%
of the votes entitled to be cast may request that the Trust hold a special
meeting of shareholders. We will assist in the communication with other
shareholders.
We reserve the right to change any of our policies, practices and
procedures described in this Prospectus, including the Statement of Additional
Information, without shareholder approval except in those instances where
shareholder approval is expressly required.
This Prospectus constitutes an offer to sell securities of the Fund only in
those states where the Fund's shares have been registered or otherwise qualified
for sale. The Fund will not accept applications from persons residing in states
where the Fund's shares are not registered.
Prospectus Additional Information You Should Know 21
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
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