SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-----
File No. 33-43321:
Pre-Effective Amendment No.____
Post-Effective Amendment No._10_ X
-----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
-----
File No. 811-6441:
Amendment No._11_
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
(Exact Name of Registrant as Specified in Charter)
4500 Main Street, Kansas City, MO 64111
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (816) 531-5575
Douglas A. Paul
Secretary, Vice President
and General Counsel
1665 Charleston Road, Mountain View, CA 94043
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: (first offered 1/7/92)
It is proposed that this filing become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on October 1, 1997 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485
_____ 75 days after filing pursuant to paragraph (a) (2) of Rule 485
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
- --------------------------------------------------------------------------------
Registrant has elected to register an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. On February 27, 1997, the Registrant filed a
Rule 24f-2 Notice on Form 24f-2 with respect to its fiscal year ended December
31, 1996.
<PAGE>
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
1933 Act Post-Effective Amendment No. 10
1940 Act Amendment No. 11
FORM N-1A
CROSS-REFERENCE SHEET
PART A: PROSPECTUS
ITEM PROSPECTUS CAPTION
1 Cover Page
2 Transaction and Operating Expense Table
3 Financial Highlights, Performance Advertising
4 Management, Further Information About American Century, Investment
Objective of the Fund, Investment Policies of the Fund, Risk Factors
and Investment Techniques, Other Investment Practices, Their
Characteristics and Risks
5 Management
5A Not Applicable
6 Further Information About American Century, How to Redeem Shares,
Cover Page, Distributions, Taxes
7 Cover Page, Distribution of Fund Shares, How to Open an Account, Share
Price, Transfer and Administrative Services
8 How to Redeem Shares, Transfer and Administrative Services
9 Not Applicable
PART B: STATEMENT OF ADDITIONAL INFORMATION
ITEM STATEMENT OF ADDITIONAL INFORMATION CAPTION
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Policies, Techniques and Risk Factors, Investment
Restrictions, Portfolio Transactions
14 Trustee and Officers
15 Additional Purchase and Redemption Information, Trustees and Officers
16 Investment Advisory Services, Transfer Agent and Administrative
Services, About the Trust
17 Portfolio Transactions
18 About the Trust
19 Additional Purchase and Redemption Information, Valuation of Portfolio
Securities
20 Taxes
21 Additional Purchase and Redemption Information
22 Performance
23 Cover Page
<PAGE>
PROSPECTUS
[american century logo]
American
Century(reg.sm)
OCTOBER 1, 1997
BENHAM
GROUP(reg.tm)
International Bond
INVESTOR CLASS
[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 TWENTIETH CENTURY(reg. tm)
GROUP GROUP
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- --------------------------------------------------------------------------------
International Bond
PROSPECTUS
OCTOBER 1, 1997
International Bond
INVESTOR CLASS
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 nondollar-denominated government and
corporate 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.
Through its Investor Class of shares, 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 October 1, 1997, and filed with the Securities and Exchange
Commission (SEC). It is incorporated into this Prospectus by reference. To
obtain a copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street * P.O. Box 419200
Kansas City, Missouri 64141-6200 * 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 * In Missouri: 816-444-3485
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
INVESTMENTS IN THE FUND ARE NOT INSURED, NOR ARE THEY GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER AGENCY.
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 INTERNATIONAL BOND FUND
The Fund seeks to provide high current income and capital appreciation by
investing in high-quality, nondollar-denominated government and corporate debt
securities outside the United States. Prior to October 1, 1997, the Fund was
known as "American Century-Benham European Government Bond Fund" and its
investment objective was "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.
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 OBJECTIVE AMERICAN CENTURY INVESTMENTS
TABLE OF CONTENTS
Investment Objective of the Fund .......................................... 2
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
Portfolio Composition .................................................. 7
Currency Management .................................................... 7
Risk Factors .............................................................. 7
Investing in Foreign Securities ........................................ 7
Credit Quality ......................................................... 8
Dollar-Weighted Average Maturity ....................................... 8
Other Investment Practices, Their Characteristics
and Risks .............................................................. 8
Portfolio Turnover ..................................................... 8
When-Issued and Forward Commitment Agreements .......................... 9
Interest Rate Futures Contracts and Options Thereon .................... 9
Short-Term Instruments .................................................10
Securities Lending .....................................................10
Other Techniques .......................................................10
Performance Advertising ...................................................10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments ..............................................12
Investing in American Century .............................................12
How to Open an Account ....................................................12
By Mail .............................................................12
By Wire .............................................................12
By Exchange .........................................................13
In Person ...........................................................13
Subsequent Investments .................................................13
By Mail .............................................................13
By Telephone ........................................................13
By Online Access ....................................................13
By Wire .............................................................13
In Person ...........................................................13
Automatic Investment Plan ..............................................13
How to Exchange from One Account to Another ...............................13
By Mail .............................................................14
By Telephone ........................................................14
By Online Access ....................................................14
How to Redeem Shares ......................................................14
By Mail .............................................................14
By Telephone ........................................................14
By Check-A-Month ....................................................14
Other Automatic Redemptions .........................................14
Redemption Proceeds ....................................................14
By Check ............................................................14
By Wire and ACH .....................................................14
Redemption of Shares in Low-Balance Accounts ...........................15
Signature Guarantee .......................................................15
Special Shareholder Services ..............................................15
Automated Information Line ..........................................15
Online Account Access ...............................................15
Open Order Service ..................................................15
Tax-Qualified Retirement Plans ......................................16
Important Policies Regarding Your Investments .............................16
Reports to Shareholders ...................................................17
Employer-Sponsored Retirement Plans
and Institutional Accounts .............................................17
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price ...............................................................18
When Share Price is Determined .........................................18
How Share Price is Determined ..........................................18
Where to Find Information About Share Price ............................18
Distributions .............................................................19
Taxes .....................................................................19
Tax-Deferred Accounts ..................................................19
Taxable Accounts .......................................................19
Management ................................................................20
Investment Management ..................................................20
Code of Ethics .........................................................21
Transfer and Administrative Services ...................................21
Distribution of Fund Shares ...............................................22
Further Information About American Century ................................22
PROSPECTUS TABLE OF CONTENTS 3
TRANSACTION AND OPERATING EXPENSE TABLE
International 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:
(as a percentage of net assets)
Management Fees(2) .....................................................0.84%
12b-1 Fees ............................................................. none
Other Expenses .........................................................0.03%
Total Fund Operating Expenses ..........................................0.87%
EXAMPLE:
You would pay the following expenses on a 1 year $ 9
$1,000 investment, assuming a 5% annual return and 3 years 28
redemption at the end of each time period: 5 years 48
10 years 107
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) A portion of the management fee may be paid by American Century Investment
Management, Inc. (the "Manager") to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed
by an affiliate of the Manager. See "Management - Transfer and
Administrative Services," page 21.
The purpose of the above table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the American Century
Fund offered by this Prospectus. The example set forth above assumes
reinvestment of all dividends and distributions and uses a 5% annual rate of
return as required by SEC regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Investor Class shares and have no
up-front or deferred sales charges, commissions, or 12b-1 fees. The Fund offers
one other class of shares, primarily to institutional investors, that has a
different fee structure 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 Manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class. A
difference in fees will result in different performance for those classes. For
additional information about the various classes, see "Further Information About
American Century," page 22.
4 TRANSACTION AND OPERATING EXPENSE TABLE AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INTERNATIONAL BOND
The Financial Highlights for each of the periods through December 31, 1996,
have been audited by KPMG Peat Marwick LLP, independent auditors, whose report
thereon appears in the Fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The semiannual and annual reports
contain additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended December 31, except as noted.
1997(1) 1996 1995 1994 1993 1992(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ........................... $11.79 $11.95 $10.36 $10.82 $10.01 $10.00
------ ------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income ....................... 0.27 0.69 0.61 0.78 0.69 0.79
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ........... (1.11) 0.03 1.88 (0.63) 0.49 0.38
------ ------ ------ ------ ------ ------
Total From Investment Operations ............ (0.84) 0.72 2.49 0.15 1.18 1.17
------ ------ ------ ------ ------ ------
Distributions
From Net Investment Income .................. -- (0.71) (0.90) (0.60) (0.37) (0.66)
In Excess of Net Investment Income .......... -- (0.02) -- -- -- --
From Net Realized Gains on
Investment Transactions ..................... -- (0.15) -- (0.01) -- (0.50)
------ ------ ------ ------ ------ ------
Total Distributions ......................... -- (0.88) (0.90) (0.61) (0.37) (1.16)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ................ $10.95 $11.79 $11.95 $10.36 $10.82 $10.01
====== ====== ====== ====== ====== ======
Total Return(3) ............................. (7.12)% 6.38% 24.40% 1.52% 11.79% 7.08%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .........................0.82%(4) 0.83% 0.82% 0.86% 0.85% 0.51%(4)
Ratio of Net Investment Income
to Average Net Assets .........................4.99%(4) 5.48% 6.14% 6.09% 6.27% 7.59%(4)
Portfolio Turnover Rate ....................... 67% 242% 167% 166% 310% 252%
Net Assets, End of Period (in thousands) ......$213,541 $252,456 $252,247 $194,301 $355,615 $337,043
(1) Six months ended June 30, 1997 (unaudited).
(2) January 7, 1992 (inception) through December 31, 1992.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
</TABLE>
PROSPECTUS FINANCIAL HIGHLIGHTS 5
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
The Fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, as well as the
investment objective 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 seeks to provide high current income and capital appreciation by
investing in high-quality, nondollar-denominated government and corporate debt
securities outside the United States. There is no assurance that the Fund will
achieve its investment objective. The Fund is a "non-diversified company" as
defined in the Investment Company Act of 1940 (the "Investment Company Act"),
which means that the proportion of the Fund's assets that may be invested in the
securities of a single issuer is not limited by the Investment Company Act.
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.
The Fund's investments may include but shall not be limited to: (1) Debt
obligations issued or guaranteed by (a) a foreign sovereign government or one of
its agencies, authorities, instrumentalities or political subdivisions including
a foreign state, province or municipality, and (b) supranational organizations
such as the World Bank, Asian Development Bank, European Investment Bank, and
European Economic Community; (2) Debt obligations of (a) foreign banks and bank
holding companies, and (b) domestic banks and corporations issued in foreign
currencies; and (3) Foreign corporate debt securities and commercial paper. All
of these investments must satisfy the credit quality standards (i.e., "AA" or
higher) established by the Trustees of the Fund.
6 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
Such securities may take a variety of forms including those issued in the
local currency of the issuer, Euro bonds, and bonds denominated in the European
currencies or ECUs. ECUs are a composite currency consisting of fixed amounts of
currency of European Economic Community member countries. Normally, the Fund
will only purchase bonds denominated in foreign currencies.
PORTFOLIO COMPOSITION
Under normal market conditions, the Fund will invest at least 65% of its
total assets in bonds issued or guaranteed by foreign governments or their
agencies and by foreign authorities, provinces and municipalities. The Fund may
invest up to 35% of its total assets in high-quality (i.e., rated "AA" or
higher) foreign corporate debt securities.
The Fund's credit quality requirements effectively limit the countries in
which the Fund may invest. As of the date of this Prospectus, the Fund expects
to invest in the securities of issuers located in and governments of the
following countries: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Japan, Liechtenstein, Luxembourg, Netherlands, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, Taiwan, and United Kingdom. To
limit the possibility that the Fund will become unduly concentrated in Japan,
the Fund currently limits its investment in issuers located in Japan to no more
than 15% of total assets.
CURRENCY MANAGEMENT
The rate of exchange between U.S. dollars and foreign 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 net
investment income.
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 foreign currencies increase in
value relative to the U.S. dollar.
When JPMIM considers the U.S. dollar to be attractive relative to foreign
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 may also use futures and options for
currency management purposes. The Fund will not use futures and options for
speculative purposes. For more information on futures and options, please see
"Interest Rate Futures Contracts and Options Thereon" on page 9.
RISK FACTORS
INVESTING IN FOREIGN SECURITIES
Investing in securities of foreign issuers generally involves greater risks
than investing in the securities of domestic companies. As with any investment
in securities, the value of an investment in the Fund can decrease as well as
increase, depending upon a variety of factors which may affect the values and
income generated by the Fund's portfolio securities. Investments in the Fund
should not be considered a complete investment program and may not be
appropriate for an individual with limited investment resources or who is unable
to tolerate fluctuations in the value of the investment. Potential investors
should carefully consider the following factors:
Currency Risk. The value of the foreign investments held by the Fund may be
significantly affected by changes in currency exchange rates. The dollar value
of a foreign security generally decreases when the value of the dollar rises
against the foreign cur-
PROSPECTUS INFORMATION REGARDING THE FUND 7
rency in which the security is denominated and tends to increase when the value
of the dollar falls against such currency. In addition, the value of Fund assets
may be affected by losses and other expenses incurred in converting between
various currencies in order to purchase and sell foreign securities and by
currency restrictions, exchange control regulation, currency devaluations and
political developments.
Political and Economic Risk. The economies of many of the countries in which
the Fund invests are not as developed as the economy of the United States and
may be subject to significantly different forces. Political or social
instability, expropriation, nationalization, or confiscatory taxation, and
limitations on the removal of funds or other assets, could also adversely affect
the value of investments. Further, the Fund may encounter difficulties or be
unable to pursue legal remedies or obtain judgments in foreign courts.
Regulatory Risk. Foreign companies are generally not subject to the
regulatory controls imposed on U.S. issuers and, in general, there is less
publicly available information about foreign securities than is available about
domestic securities. Many foreign companies are not subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies. Income from
foreign securities owned by the Fund may be reduced by a withholding tax at the
source which would reduce dividend income payable to shareholders. See "TAXES,"
page 19.
Market And Trading Risk. Brokerage commission rates in foreign countries,
which are generally fixed rather than subject to negotiation as in the United
States, are likely to be higher. The securities markets in many of the countries
in which the Fund invest will have substantially less trading volume than the
principal U.S. markets. As a result, the securities of some companies in these
countries may be less liquid and more volatile than comparable U.S. securities.
Furthermore, one securities broker may represent all or a significant part of
the trading volume in a particular country, resulting in higher trading costs
and decreased liquidity due to a lack of alternative trading partners. There is
generally less government regulation and supervision of foreign stock exchanges,
brokers and issuers which may make it difficult to enforce contractual
obligations.
Clearance and Settlement Risk. Foreign securities markets also have
different clearance and settlement procedures, and in certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in clearance and settlement could result in temporary periods when assets
of the Fund are uninvested and no return is earned thereon. The inability of the
Fund to make intended security purchases due to clearance and settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to clearance and settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, liability to the purchaser.
CREDIT QUALITY
Under normal circumstances, the Fund invests exclusively in securities of
issuers rated high quality, nondollar-denominated government and corporate debt
securities outside the United States. "High quality" means that the security
must be rated AA or higher, at the time of purchase, by a nationally recognized
statistical rating agency or considered by JPMIM to be of comparable quality. If
a rating agency downgrades a security held by the Fund or judges a security to
be less than AA quality, the security would be sold as quickly as possible
without unnecessarily destabilizing the Fund's share price or yield.
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 rates of the Fund are 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 secu-
8 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
rity 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 accurately predicted.
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 objective of the Fund. The price of when-issued
securities is established at the time the commitment to purchase is made.
Delivery of and payment for these securities typically occurs 15 to 45 days
after the commitment to purchase. Market rates of interest on debt securities at
the time of delivery may be higher or lower than those contracted for on the
security. Accordingly, the value of the security may decline prior to delivery,
which could result in a loss to the Fund.
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 appropriate liquid assets
including equity securities and debt securities of any grade equal to the value
of securities underlying the option unless the option is otherwise covered.
The Fund will deposit cash or appropriate liquid assets in a segregated
custodial account 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
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 the Manager may still not result in a successful transaction. The
Manager 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.
PROSPECTUS INFORMATION REGARDING THE FUND 9
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 nondollar-denominated obligations of foreign governments, foreign
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.
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.
SECURITIES 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 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. This practice
could result in a loss or a delay in recovering the Fund's securities.
The 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 in
the manner described above.
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 its 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. Performance data may be quoted separately for the Investor Class and for
the other class offered by the Fund.
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 earned by the
investment is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect on the assumed
reinvestment.
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.
10 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules. Because yield accounting methods differ from the
methods used for other accounting purposes, a Fund's yield may not equal the
income paid on its shares or the income reported in the Fund's financial
statements.
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.
PROSPECTUS INFORMATION REGARDING THE FUND 11
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.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will eliminate duplicate copies of most
financial reports and prospectuses to most households and deliver account
statements to most households in a single envelope, even if they have more than
one account. If additional copies of financial reports and prospectuses or
separate mailing of account statements is desired, please call us at the
above-referenced number.
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 17.
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.
12 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
o Taxpayer identification or Social Security number
o If more than one account, account numbers and amount to be invested in
each account.
o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA, SARSEP-IRA, SIMPLE Employer or SIMPLE
Employee.
BY EXCHANGE
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information on
opening an account by exchanging from another American Century account. See this
page for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of
our Investor Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
4917 Town Center Drive
Leawood, Kansas 66211
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the investment slip portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.
BY MAIL
When making subsequent investments, enclose your check with the investment
slip portion of the confirmation of a previous investment. If the investment
slip is not available, indicate your name, address and account number on your
check or a separate piece of paper. (Please be aware that the investment minimum
for subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account. You may call an Investor Services Representative or use our
Automated Information Line.
BY ONLINE ACCESS
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 12 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investor
Centers. The locations of our four Investor Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange
your Fund shares to our other funds up to six times per year per account. An
exchange request will be processed the same day it is received if it is received
before the Fund's net asset values are calculated, which is one hour prior to
the close of the New York Stock Exchange for the
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 13
funds issued by American Century Target Maturities Trust, and at the close of
the Exchange for all of our other funds. See "When Share Price is Determined,"
page 18.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
BY TELEPHONE
You can make exchanges over the telephone (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 get the appropriate form.
BY ONLINE ACCESS
You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-2021 to get the
appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received.
Please note that a request to redeem shares in an IRA or 403(b) plan must be
accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a
redemption form, which we will send to you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 15.
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 a check in an amount you choose (minimum
$50). To set up a Check-A-Month plan, please call to 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 note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank
14 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
wire charges, which is deducted from redemption proceeds. Once the funds are
transmitted, the time of receipt and the funds' availability are not under our
control.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity to bring
the value of the shares held in the account up to the minimum. If action is not
taken within 90 days of the letter's date, 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 funds' 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
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 15
your behalf. If you close or re-register the account from which the shares are
to be redeemed, your open order will be canceled.
Because of their time-sensitive nature, open order transactions are accepted
only by telephone or in person. These transactions are subject to exchange
limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
TAX-QUALIFIED RETIREMENT PLANS
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 Investor Centers. You may also use our Automated Information
Line if you have requested and received an access code and are not
attempting to redeem shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us
16 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
for failure to report your correct taxpayer identification number on
information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may request a statement of your account activity
at any time.
With the exception of most automatic transactions, 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.
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 17
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by American
Century Target Maturities Trust, net asset value is determined 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 values for Target Maturities funds are determined
one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the share
price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the time as of which
the net asset value of the fund is determined, are effective on, and will
receive the price determined, that day. Investment, redemption and exchange
requests received thereafter are effective on, and receive the price determined
as of the close of the Exchange on, the next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which the net asset value is
determined.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value is determined will
receive that day's price. Investments and instructions received after that time
will receive the price determined on the next business day.
If you invest in Fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the 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 values of the Investor Class of the fund are published in
leading newspapers daily. The net asset value, as well as yield information on
the Fund and all 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.
18 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
DISTRIBUTIONS
The Fund expects to declare and pay distributions from net investment income
quarterly, although it may elect not to do so in any given quarter. The Fund may
forego a dividend if, for example, net currency losses exceed investment income.
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 Investment
Company Act.
You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price is Determined," page 18. 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
Investment Company 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 59-1/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.
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.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 19
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a capital gain distribution, you must pay income
taxes on the distribution, even though the value of your investment (plus cash
received, if any) will not have increased. In addition, the share price at the
time you purchase shares may include unrealized gains in the securities held in
the investment portfolio of the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a distribution of capital gains and
will be taxable to you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or a
substantial part of such distribution are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to Fund shareholders when 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 the sole nondiversified open-end series of the American Century
International Bond Funds (the "Trust"). Under the laws of the Commonwealth of
Massachusetts, the Board of Trustees is responsible for managing the business
and affairs of the Trust. Acting pursuant to an investment management agreement
entered into with the Fund, American Century Investment Management, Inc. serves
as the investment manager of the Fund. Its principal place of business American
Century Tower, 4500 Main Street, Kansas City, Missouri 64111. The Manager has
been providing investment advisory services to investment companies and
institutional clients since it was founded in 1958.
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 Manager and the Board of Trustees.
JPMIM is a wholly owned subsidiary of J.P. Morgan & Co. Incorporated.
20 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
The portfolio manager members of the teams managing the Fund described in
this Prospectus and their work experience for the last five years are listed as
follows:
DOMINIC PEGLER, Vice President, is a fixed income Portfolio Manager. He
Joined JPMIM London in 1996 after seven years at the Bank of England, serving as
an economist and in the Reserves Management Department, managing the UK's
foreign exchange reserves. His time at the Bank included a two-year term with
the Directorate of Monetary Affairs. Mr. Pegler holds a Bachelor's degree and
Master's degree in Economics from the London School of Economics.
DAVID SCHROEDER, Vice President, oversees JPMIM's management of the Fund and
has done so since June 1997. Mr. Schroeder is also of the teams that manage
American Century-Benham Inflation-Adjusted Treasury Fund, American
Century-Benham Intermediate-Term Treasury Fund, and the series of American
Century Target Maturities Trust. Mr. Schroeder joined the Manager in 1990 as a
Portfolio Manager and serves as the group leader of the portfolio management
teams which manage American Century's U.S. government and international bond
funds.
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, 1996, the Manager paid JPMIM subadvisory fees equal to 0.19% of the
Fund's average daily net assets.
The activities of the Manager are subject only to directions of the Fund's
Board of Trustees. The Manager pays all the expenses of the Fund except
brokerage, taxes, portfolio insurance, interest, fees and expenses of the
non-interested person Trustees (including counsel fees) and extraordinary
expenses.
For the services provided to the Fund, the Manager receives a monthly fee
based on a percentage of the average net assets of the Fund. The annual rate at
which this fee is assessed is determined monthly in a two-step process: First, a
fee rate schedule is applied to the assets of all of the bond funds managed by
the Manager (the "Investment Category Fee"). Second, a separate fee rate
schedule is applied to the assets of all of the funds managed by the Manager
(the "Complex Fee"). The Investment Category Fee and the Complex Fee are then
added to determine the unified management fee payable by the Fund to the
Manager. Currently, the Investment Category Fee for the Fund is an annual rate
of 0.54% of the average net assets of the Fund. The Complex Fee is currently an
annual rate of 0.30% of the average net assets of the Fund. Further information
about the calculation of the annual management fee is contained in the Statement
of Additional Information.
On the first business day of each month, the Fund pays a management fee to
the Manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for the Fund by
the aggregate average daily closing value of the Fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The Trust and the Manager have adopted a Code of Ethics which restricts
personal investing practices by employees of the Manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the Fund's 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, 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 Manager.
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
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 21
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 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 (or an affiliate) pays all expenses incurred in promoting
and distributing the Investor Class of Fund shares offered by this Prospectus.
The Investor Class of shares 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.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
The Fund is an 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. Currently, the Fund is
the only existing series of the Trust. In the event that additional series of
the Trust are created, the assets belonging to each series of shares are held
separately by the custodian and in effect each series is a separate fund.
American Century International Bond Funds offers two classes of the Fund
offered by this Prospectus: an Investor Class and an Advisor Class. The shares
offered by this Prospectus are Investor Class shares and have no up-front
charges, commissions or 12b-1 fees.
The Advisor Class of shares is primarily offered to institutional investors
or through institutional distributions channels, such as employer-sponsored
retirement plans or through banks, broker-dealers, insurance companies or other
financial intermediaries. This 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 Manager 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 Advisor Class of shares not offered by this Prospectus, call one
of our Investor Services Representatives at 1-800-345-2021.
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.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
for
22 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
those matters which must be voted on separately by the series or class of shares
affected. Matters affecting only one series or class are voted upon only by that
series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of Trustees can elect all of the
Trustees if they choose to do so, and in such event the holders of the remaining
votes will not be able to elect any person or persons to the Board of Trustees.
Unless required by the Investment Company Act, it will not be necessary for
the Trust to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of Trustees or the appointment of auditors.
However, pursuant to the Trust's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request that the Trust hold a
special meeting of shareholders. The Trust 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 23
NOTES
24 NOTES
NOTES
NOTES 25
P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
INVESTOR SERVICES:
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE:
1-800-345-8765
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 OR 816-444-3485
FAX: 816-340-7962
INTERNET: www.americancentury.com
[american century logo]
American
Century(reg.sm)
9709 [recycled logo]
SH-BKT-9855 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(reg.sm)
OCTOBER 1, 1997
BENHAM
GROUP(reg.tm)
International Bond
ADVISOR CLASS
[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 American Century Twentieth Century(reg. tm)
Group Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- -------------------------------------------------------------------------------
International Bond
PROSPECTUS
OCTOBER 1, 1997
International Bond
ADVISOR CLASS
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 and low-load
mutual funds covering a variety of investment opportunities. One of the funds
from our Benham Group that invests in the highest-quality nondollar-denominated
government and corporate 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.
The Fund's shares offered in this Prospectus (the Advisor Class shares) are
sold at their net asset value with no sales charges or commissions. The Advisor
Class shares are subject to a Rule 12b-1 shareholder services fee and
distribution fee as described in this Prospectus.
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.
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 October 1, 1997, and filed with the Securities and Exchange
Commission (SEC). It is incorporated into this Prospectus by reference. To
obtain a copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street * P.O. Box 419385
Kansas City, Missouri 64141-6385 * 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 * In Missouri: 816-444-3038
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 INTERNATIONAL BOND FUND
The Fund seeks to provide high current income and capital appreciation by
investing in high-quality, nondollar-denominated government and corporate debt
securities outside the United States. Prior to October 1, 1997, the Fund was
known as "American Century- Benham European Government Bond Fund" and its
investment objective was "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.
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 OBJECTIVE AMERICAN CENTURY INVESTMENTS
TABLE OF CONTENTS
Investment Objective of the Fund .......................................... 2
Transaction and Operating Expense Table ................................... 4
Performance Information of Other Class .................................... 5
INFORMATION REGARDING THE FUND
Investment Policies of the Fund ........................................... 6
Investment Objective .................................................. 6
International Subadvisor .............................................. 6
Investment Strategy ................................................... 6
Portfolio Composition ................................................. 7
Currency Management ................................................... 7
Risk Factors .............................................................. 7
Investing in Foreign Securities ....................................... 7
Credit Quality ........................................................ 8
Dollar-Weighted Average Maturity ...................................... 8
Other Investment Practices, Their Characteristics
and Risks ............................................................. 8
Portfolio Turnover .................................................... 8
When-Issued and Forward Commitment
Agreements
Interest Rate Futures Contracts and
Options Thereon ............................................... 9
Short-Term Instruments .............................................10
Securities Lending .................................................10
Other Techniques ...................................................10
Performance Advertising .................................................10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
How to Purchase
and Sell American Century Funds .......................................12
How to Exchange from
One American Century Fund to Another ..................................12
How to Redeem Shares ......................................................12
Telephone Services ........................................................12
Investors Line ................................................12
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price ...............................................................13
When Share Price is Determined ........................................13
How Share Price is Determined .........................................13
Where to Find Information About Share Price ...........................13
Distributions .............................................................14
Taxes .....................................................................14
Tax-Deferred Accounts .................................................14
Taxable Accounts ......................................................14
Management ................................................................15
Investment Management .................................................15
Code of Ethics ........................................................16
Transfer and Administrative Services ..................................16
Distribution of Fund Shares ...............................................17
Service and Distribution Fees .........................................17
Further Information About American Century ................................17
PROSPECTUS TABLE OF CONTENTS 3
TRANSACTION AND OPERATING EXPENSE TABLE
International
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 ...................................................... none
Exchange Fee ........................................................ none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees(1) ..................................................0.59%
12b-1 Fees(2) .......................................................0.50%
Other Expenses ......................................................0.03%
Total Fund Operating Expenses .......................................1.12%
EXAMPLE:
You would pay the following expenses on a 1 year $ 11
$1,000 investment, assuming a 5% annual return and 3 years 36
redemption at the end of each time period: 5 years 62
10 years 136
(1) A portion of the management fee may be paid by American Century Investment
Management, Inc. (the "Manager") to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed
by an affiliate of the Manager. See "Management - Transfer and
Administrative Services," page 16.
(2) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other
financial intermediaries. A portion of the fee is used to compensate them
for ongoing recordkeeping and administrative services that would otherwise
be performed by an affiliate of the Manager, and a portion is used to
compensate them for distribution and other shareholder services. See
"Service and Distribution Fees," page 17.
The purpose of the above table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the American Century
Fund offered by this Prospectus. The example set forth above assumes
reinvestment of all dividends and distributions and uses a 5% annual rate of
return as required by SEC regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Advisor Class shares. The Fund
offers one other class of shares, primarily to retail investors, that has a
different fee structure than the Advisor 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 Manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class. A
difference in fees will result in different performance for those classes. For
additional information about the various classes, see "Further Information About
American Century," page 17.
4 TRANSACTION AND OPERATING EXPENSE TABLE AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
INTERNATIONAL BOND
The Advisor Class of the Fund was established October 1, 1997; therefore, no
shares had been issued prior to the Fund's prior fiscal year end. The financial
information in this table regarding selected per share data for the Fund
reflects the performance of the Fund's Investor Class of shares, which has a
total expense ratio that is 0.25% lower than the Advisor Class. Had the Advisor
Class been in existence for the Fund for the time periods presented, the Fund's
performance information would be lower as a result of the higher expenses.
The performance information for each of the periods through December 31, 1996,
have been audited by KPMG Peat Marwick LLP, independent auditors, whose report
thereon appears in the Fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The semiannual and annual reports
contain additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended December 31, except as noted.
1997(1) 1996 1995 1994 1993 1992(2)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net AssetValue,
Beginning of Period ........................... $11.79 $11.95 $10.36 $10.82 $10.01 $10.00
-------- -------- -------- -------- -------- --------
Income From Investment Operations
Net Investment Income ....................... 0.27 0.69 0.61 0.78 0.69 0.79
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ........... (1.11) 0.03 1.88 (0.63) 0.49 0.38
-------- -------- -------- -------- -------- --------
Total From Investment Operations ............ (0.84) 0.72 2.49 0.15 1.18 1.17
-------- -------- -------- -------- -------- --------
Distributions
From Net Investment Income .................. -- (0.71) (0.90) (0.60) (0.37) (0.66)
In Excess of Net Investment Income .......... -- (0.02) -- -- -- --
From Net Realized Gains on
Investment Transactions ..................... -- (0.15) -- (0.01) -- (0.50)
-------- -------- -------- -------- -------- --------
Total Distributions ......................... -- (0.88) (0.90) (0.61) (0.37) (1.16)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period ................ $10.95 $11.79 $11.95 $10.36 $10.82 $10.01
======== ======== ======== ======== ======== ========
Total Return(3) ............................. (7.12)% 6.38% 24.40% 1.52% 11.79% 7.08%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .........................0.82%(4) 0.83% 0.82% 0.86% 0.85% 0.51%(4)
Ratio of Net Investment Income
to Average Net Assets .........................4.99%(4) 5.48% 6.14% 6.09% 6.27% 7.59%(4)
Portfolio Turnover Rate ....................... 67% 242% 167% 166% 310% 252%
Net Assets, End of Period (in thousands) ......$213,541 $252,456 $252,247 $194,301 $355,615 $337,043
(1) Six months ended June 30, 1997 (unaudited).
(2) January 7, 1992 (inception) through December 31, 1992.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
</TABLE>
PROSPECTUS PERFORMANCE INFORMATION OF OTHER CLASS 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 objective 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 seeks to provide high current income and capital appreciation by
investing in high-quality, nondollar-denominated government and corporate debt
securities outside the United States. There is no assurance that the Fund will
achieve its investment objective. The Fund is a "non-diversified company" as
defined in the Investment Company Act of 1940 (the "Investment Company Act"),
which means that the proportion of the Fund's assets that may be invested in the
securities of a single issuer is not limited by the Investment Company Act.
The Fund may be appropriate for U.S. investors who:
* Want to protect their income against a decline in the purchasing power
of the U.S. dollar relative to that of foreign currencies.
* 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:
* ECONOMIC/POLITICAL FUNDAMENTALS: JPMIM evaluates each country's
economic climate and political discipline for controlling deficits and
inflation.
* EXPECTED RETURN: Using economic forecasts, JPMIM projects the expected
return for each country.
* 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.
The Fund's investments may include but shall not be limited to: (1) Debt
obligations issued or guaranteed by (a) a foreign sovereign government or one of
its agencies, authorities, instrumentalities or political subdivisions including
a foreign state, province or municipality, and (b) supranational organizations
such as the World Bank, Asian Development Bank, European Investment Bank, and
European Economic Community; (2) Debt obligations of (a) foreign banks and bank
holding companies, and (b) domestic banks and corporations issued in foreign
currencies; and (3) Foreign corporate debt securities and commercial paper. All
of these investments must satisfy the credit quality standards (i.e., "AA" or
higher) established by the Trustees of the Fund.
6 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
Such securities may take a variety of forms including those issued in the
local currency of the issuer, Euro bonds, and bonds denominated in the European
currencies or ECUs. ECUs are a composite currency consisting of fixed amounts of
currency of European Economic Community member countries. Normally, the Fund
will only purchase bonds denominated in foreign currencies.
PORTFOLIO COMPOSITION
Under normal market conditions, the Fund will invest at least 65% of its
total assets in bonds issued or guaranteed by foreign governments or their
agencies and by foreign authorities, provinces and municipalities. The Fund may
invest up to 35% of its total assets in high-quality (i.e., rated "AA" or
higher) foreign corporate debt securities.
The Fund's credit quality requirements effectively limit the countries in
which the Fund may invest. As of the date of this Prospectus, the Fund expects
to invest in the securities of issuers located in and governments of the
following countries: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Japan, Liechtenstein, Luxembourg, Netherlands, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, Taiwan, and United Kingdom. To
limit the possibility that the Fund will become unduly concentrated in Japan,
the Fund currently limits its investment in issuers located in Japan to no more
than 15% of total assets.
CURRENCY MANAGEMENT
The rate of exchange between U.S. dollars and foreign 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 net
investment income.
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 foreign currencies increase in
value relative to the U.S. dollar.
When JPMIM considers the U.S. dollar to be attractive relative to foreign
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 may also use futures and options for
currency management purposes. The Fund will not use futures and options for
speculative purposes. For more information on futures and options, please see
"Interest Rate Futures Contracts and Options Thereon" on page 9.
RISK FACTORS
INVESTING IN FOREIGN SECURITIES
Investing in securities of foreign issuers generally involves greater risks
than investing in the securities of domestic companies. As with any investment
in securities, the value of an investment in the Fund can decrease as well as
increase, depending upon a variety of factors which may affect the values and
income generated by the Fund's portfolio securities. Investments in the Fund
should not be considered a complete investment program and may not be
appropriate for an individual with limited investment resources or who is unable
to tolerate fluctuations in the value of the investment. Potential investors
should carefully consider the following factors:
Currency Risk. The value of the foreign investments held by the Fund may be
significantly affected by changes in currency exchange rates. The dollar value
of a foreign security generally decreases when the value of the dollar rises
against the foreign cur-
PROSPECTUS INFORMATION REGARDING THE FUND 7
rency in which the security is denominated and tends to increase when the value
of the dollar falls against such currency. In addition, the value of Fund assets
may be affected by losses and other expenses incurred in converting between
various currencies in order to purchase and sell foreign securities and by
currency restrictions, exchange control regulation, currency devaluations and
political developments.
Political and Economic Risk. The economies of many of the countries in which
the Fund invests are not as developed as the economy of the United States and
may be subject to significantly different forces. Political or social
instability, expropriation, nationalization, or confiscatory taxation, and
limitations on the removal of funds or other assets, could also adversely affect
the value of investments. Further, the Fund may encounter difficulties or be
unable to pursue legal remedies or obtain judgments in foreign courts.
Regulatory Risk. Foreign companies are generally not subject to the
regulatory controls imposed on U.S. issuers and, in general, there is less
publicly available information about foreign securities than is available about
domestic securities. Many foreign companies are not subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies. Income from
foreign securities owned by the Fund may be reduced by a withholding tax at the
source which would reduce dividend income payable to shareholders. See "Taxes,"
page 14.
Market and Trading Risk. Brokerage commission rates in foreign countries,
which are generally fixed rather than subject to negotiation as in the United
States, are likely to be higher. The securities markets in many of the countries
in which the Fund invest will have substantially less trading volume than the
principal U.S. markets. As a result, the securities of some companies in these
countries may be less liquid and more volatile than comparable U.S. securities.
Furthermore, one securities broker may represent all or a significant part of
the trading volume in a particular country, resulting in higher trading costs
and decreased liquidity due to a lack of alternative trading partners. There is
generally less government regulation and supervision of foreign stock exchanges,
brokers and issuers which may make it difficult to enforce contractual
obligations.
Clearance and Settlement Risk. Foreign securities markets also have
different clearance and settlement procedures, and in certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in clearance and settlement could result in temporary periods when assets
of the Fund are uninvested and no return is earned thereon. The inability of the
Fund to make intended security purchases due to clearance and settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to clearance and settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, liability to the purchaser.
CREDIT QUALITY
Under normal circumstances, the Fund invests exclusively in securities of
issuers rated high quality, nondollar-denominated government and corporate debt
securities outside the United States. "High quality" means that the security
must be rated AA or higher, at the time of purchase, by a nationally recognized
statistical rating agency or considered by JPMIM to be of comparable quality. If
a rating agency downgrades a security held by the Fund or judges a security to
be less than AA quality, the security would be sold as quickly as possible
without unnecessarily destabilizing the Fund's share price or yield.
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 rates of the Fund are shown in the Performance
Information of Other Class table on page 5 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the secu-
8 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
rity 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 accurately predicted.
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 objective of the Fund. The price of when-issued
securities is established at the time the commitment to purchase is made.
Delivery of and payment for these securities typically occurs 15 to 45 days
after the commitment to purchase. Market rates of interest on debt securities at
the time of delivery may be higher or lower than those contracted for on the
security. Accordingly, the value of the security may decline prior to delivery,
which could result in a loss to the Fund.
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 appropriate liquid assets
including equity securities and debt securities of any grade equal to the value
of securities underlying the option unless the option is otherwise covered.
The Fund will deposit cash or appropriate liquid assets in a segregated
custodial account 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
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 the Manager may still not result in a successful transaction. The
Manager 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.
PROSPECTUS INFORMATION REGARDING THE FUND 9
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 nondollar-denominated obligations of foreign governments, foreign
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.
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.
SECURITIES 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 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. This practice
could result in a loss or a delay in recovering the Fund's securities.
The 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 in
the manner described above.
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 its 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. Performance data may be quoted separately for the Advisor Class and for
the other class offered by the Fund.
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 earned by the
investment is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect on the assumed
reinvestment.
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.
10 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules. Because yield accounting methods differ from the
methods used for other accounting purposes, a Fund's yield may not equal the
income paid on its shares or the income reported in the Fund's financial
statements.
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.
PROSPECTUS INFORMATION REGARDING THE FUND 11
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
The following section explains how to purchase, exchange and redeem Advisor
Class shares of the Fund offered by this Prospectus.
HOW TO PURCHASE AND SELL AMERICAN CENTURY FUNDS
The Fund offered by this Prospectus is available as an investment option
under your employer-sponsored retirement or savings plan or through or in
connection with a program, product or service offered by a financial
intermediary, such as a bank, broker-dealer or an insurance company. Since all
records of your share ownership are maintained by your plan sponsor, plan
recordkeeper, or other financial intermediary, all orders to purchase, exchange
and redeem shares must be made through your employer or other financial
intermediary, as applicable.
If you are purchasing through a retirement or savings plan, the
administrator of your plan or your employee benefits office can provide you with
information on how to participate in your plan and how to select American
Century funds as an investment option.
If you are purchasing through a financial intermediary, you should contact
your service representative at the financial intermediary for information about
how to select American Century funds.
If you have questions about the Fund, see "Investment Policies of the Fund,"
page 6, or call one of our Institutional Service Representatives at
1-800-345-3533.
Orders to purchase shares are effective on the day we receive payment. See
"When Share Price Is Determined," page 13.
We may discontinue offering shares generally in the Fund (including any
class of shares of a fund) or in any particular state without notice to
shareholders.
HOW TO EXCHANGE FROM ONE AMERICAN CENTURY FUND TO ANOTHER
Your plan or program may permit you to exchange your investment in the
shares of a Fund for shares of another fund in our family. See your plan
administrator, employee benefits office or financial intermediary for details on
the rules in your plan governing exchanges.
HOW TO REDEEM SHARES
Subject to any restrictions imposed by your employer's plan or financial
intermediary's program, you can sell ("redeem") your shares through the plan or
financial intermediary at their net asset value. Your plan administrator,
trustee, or financial intermediary or other designated person must provide us
with redemption instructions. The shares will be redeemed at the net asset value
next computed after receipt of the instructions in good order. See "When Share
Price Is Determined," page 13. If you have any questions about how to redeem,
contact your plan administrator, employee benefits office, or service
representative at your financial intermediary, as applicable.
TELEPHONE SERVICES
INVESTORS LINE
To request information about our funds and a current Prospectus, or get
answers to any questions that you may have about the funds and the services we
offer, call one of our Institutional Service Representatives at 1-800-345-3533.
12 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by American
Century Target Maturities Trust, net asset value is determined 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 values for Target Maturities funds are determined
one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the share
price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the time as of which
the net asset value of the fund is determined, are effective on, and will
receive the price determined, that day. Investment, redemption and exchange
requests received thereafter are effective on, and receive the price determined
as of the close of the Exchange on, the next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which the net asset value is
determined.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value is determined will
receive that day's price. Investments and instructions received after that time
will receive the price determined on the next business day.
If you invest in Fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the 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 values of the Investor Class of the fund are published in
leading newspapers daily. Because the total expense ratio for the Advisor Class
shares is 0.25% higher than the Investor Class, their net asset values will be
lower than the Investor Class. The net asset values of the Advisor Class may be
obtained by calling us.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 13
DISTRIBUTIONS
The Fund expects to declare and pay distributions from net investment income
quarterly, although it may elect not to do so in any given quarter. The Fund may
forego a dividend if, for example, net currency losses exceed investment income.
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 Investment
Company Act.
You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price is Determined," page 13. 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
Investment Company 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 59 1/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.
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
14 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
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
purchase shares shortly before a capital gain distribution, you must pay income
taxes on the distribution, even though the value of your investment (plus cash
received, if any) will not have increased. In addition, the share price at the
time you purchase shares may include unrealized gains in the securities held in
the investment portfolio of the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a distribution of capital gains and
will be taxable to you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or a
substantial part of such distribution are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to Fund shareholders when 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, either we or your financial intermediary is 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 the sole nondiversified open-end series of the American Century
International Bond Funds (the "Trust"). Under the laws of the Commonwealth of
Massachusetts, the Board of Trustees is responsible for managing the business
and affairs of the Trust. Acting pursuant to an investment management agreement
entered into with the Fund, American Century Investment Management, Inc. serves
as the investment manager of the Fund. Its principal place of business American
Century Tower, 4500 Main Street, Kansas City, Missouri 64111. The Manager has
been providing investment advisory services to investment companies and
institutional clients since it was founded in 1958.
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
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 15
accordance with the Fund's investment objective, policies, and restrictions
under the supervision of the 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 Fund described in
this Prospectus and their work experience for the last five years are listed as
follows:
DOMINIC PEGLER, Vice President, is a fixed income Portfolio Manager. He
Joined JPMIM London in 1996 after seven years at the Bank of England, serving as
an economist and in the Reserves Management Department, managing the UK's
foreign exchange reserves. His time at the Bank included a two-year term with
the Directorate of Monetary Affairs. Mr. Pegler holds a Bachelor's degree and
Master's degree in Economics from the London School of Economics.
DAVID SCHROEDER, Vice President, oversees JPMIM's management of the Fund and
has done so since June 1997. Mr. Schroeder is also of the teams that manage
American Century-Benham Inflation-Adjusted Treasury Fund, American
Century-Benham Intermediate-Term Treasury Fund, and the series of American
Century Target Maturities Trust. Mr. Schroeder joined the Manager in 1990 as a
Portfolio Manager and serves as the group leader of the portfolio management
teams which manage American Century's U.S. government and international bond
funds.
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, 1996, the Manager paid JPMIM subadvisory fees equal to 0.19% of the
Fund's average daily net assets.
The activities of the Manager are subject only to directions of the Fund's
Board of Trustees. The Manager pays all the expenses of the Fund except
brokerage, taxes, portfolio insurance, interest, fees and expenses of the
non-interested person Trustees (including counsel fees) and extraordinary
expenses.
For the services provided to the Fund, the Manager receives a monthly fee
based on a percentage of the average net assets of the Fund. The annual rate at
which this fee is assessed is determined monthly in a two-step process: First, a
fee rate schedule is applied to the assets of all of the bond funds managed by
the Manager (the "Investment Category Fee"). Second, a separate fee rate
schedule is applied to the assets of all of the funds managed by the Manager
(the "Complex Fee"). The Investment Category Fee and the Complex Fee are then
added to determine the unified management fee payable by the Fund to the
Manager. Currently, the Investment Category Fee for the Fund is an annual rate
of 0.29% of the average net assets of the Fund. The Complex Fee is currently an
annual rate of 0.30% of the average net assets of the Fund. Further information
about the calculation of the annual management fee is contained in the Statement
of Additional Information.
On the first business day of each month, the Fund pays a management fee to
the Manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for the Fund by
the aggregate average daily closing value of the Fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The Trust and the Manager have adopted a Code of Ethics which restricts
personal investing practices by employees of the Manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the Fund's 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, acts as transfer agent and dividend-paying agent for the Fund.
16 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
It provides facilities, equipment and personnel to the Fund and is paid for
such services by the Manager.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the Manager
or its affiliates.
The Manager and the transfer agent are both wholly owned by ACC. James E.
Stowers Jr., Chairman of the Board of Directors of ACC, controls ACC by virtue
of his ownership of a majority of its common stock.
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. As agent for the Fund and the Manager, the Distributor enters into
contracts with various banks, broker-dealers, insurance companies and other
financial intermediaries with respect to the sale of the Fund's shares and/or
the use of the Fund's shares in various financial services. The Manager (or an
affiliate) pays all expenses incurred in promoting sales of, and distributing
the Advisor Class and in securing such services out of the Rule 12b-1 fees
described in the section that follows.
SERVICE AND DISTRIBUTION FEES
Rule 12b-1 adopted by the SEC under the Investment Company Act permits
investment companies that adopt a written plan to pay certain expenses
associated with the distribution of their shares. Pursuant to that rule, the
Fund's Board of Trustees and the initial shareholder of the Fund's Advisor Class
shares have approved and adopted a Master Distribution and Shareholder Services
Plan (the "Plan"). Pursuant to the Plan, each Fund pays the Manager a
shareholder services fee and a distribution fee, each equal to 0.25% (for a
total of 0.50%) per annum of the average daily net assets of the shares of the
Fund's Advisor Class. The shareholder services fee is paid for the purpose of
paying the costs of securing certain shareholder and administrative services,
and the distribution fee is paid for the purpose of paying the costs of
providing various distribution services. All or a portion of such fees are paid
by the Manager to the banks, broker-dealers, insurance companies or other
financial intermediaries through which such shares are made available.
The Plan has been adopted and will be administered in accordance with the
requirements of Rule 12b-1 under the Investment Company Act. For additional
information about the Plan and its terms, see "Master Distribution and
Shareholder Services Plan" in the Statement of Additional Information. Fees paid
pursuant to the Plan may be paid for shareholder services and the maintenance of
accounts and therefore may constitute "service fees" for purposes of applicable
rules of the National Association of Securities Dealers.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
The Fund is an 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 419385, Kansas City, Missouri 64141-6385. All inquiries may be
made by mail to that address, or by telephone to 1-800-345-3533 (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. Currently, the Fund is
the only existing series of the Trust. In the event that additional series of
the Trust are created, the assets belonging to each series of shares are held
separately by the custodian and in effect each series is a separate fund.
American Century International Bond Funds offers two classes of the Fund
offered by this Prospectus: an Investor Class and an Advisor Class. The shares
offered by this Prospectus are Advisor Class shares.
The Investor Class of shares is primarily made available to retail
investors. This other class has different fees, expenses, and/or minimum
investment requirements than the Advisor 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 Manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 17
Different fees and expenses will affect performance. For additional
information concerning the Investor class of shares, call one of our Investor
Services Representatives at 1-800-345-2021.
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.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
for those matters which must be voted on separately by the series or class of
shares affected. Matters affecting only one series or class are voted upon only
by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of Trustees can elect all of the
Trustees if they choose to do so, and in such event the holders of the remaining
votes will not be able to elect any person or persons to the Board of Trustees.
Unless required by the Investment Company Act, it will not be necessary for
the Trust to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of Trustees or the appointment of auditors.
However, pursuant to the Trust's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request that the Trust hold a
special meeting of shareholders. The Trust 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.
18 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
NOTES
NOTES 19
NOTES
20 NOTES
NOTES
NOTES 21
P.O. BOX 419385
KANSAS CITY, MISSOURI
64141-6385
INVESTOR SERVICES:
1-800-345-3533 OR 816-531-5575
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-345-1833 OR 816-444-3038
FAX: 816-340-4655
INTERNET: www.americancentury.com
[american century logo]
American
Century(reg.sm)
9709 [recycled logo]
SH-BKT-9856 Recycled
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[american century logo]
American
Century(reg.sm)
OCTOBER 1, 1997
BENHAM
GROUP(reg.tm)
International Bond
[front cover]
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 1, 1997
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
This Statement is not a prospectus but should be read in conjunction with the
Fund's current Prospectus dated October 1, 1997. The Fund's annual report for
the fiscal year ended December 31, 1996, and semiannual report for the period
ended June 30, 1997, are incorporated herein by reference. Please retain this
document for future reference. To obtain the Prospectus, call American Century
Investments toll-free at 1-800-345-2021 (international calls: 816-531-5575) or
write P.O. Box 419200, Kansas City, Missouri 64141-6200.
TABLE OF CONTENTS
Investment Policies, Techniques and Risk Factors ............................ 2
Investment Restrictions ..................................................... 7
Portfolio Transactions ...................................................... 9
Valuation of Portfolio Securities ...........................................10
Performance .................................................................10
Taxes .......................................................................12
About the Trust .............................................................14
Multiple Class Structure ....................................................15
Trustees and Officers .......................................................16
Management ..................................................................18
Transfer and Administrative Services ........................................20
Distribution of Fund Shares .................................................20
Additional Purchase and Redemption Information ..............................20
Other Information ...........................................................20
STATEMENT OF ADDITIONAL INFORMATION 1
INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS
The following pages provide a more detailed description of securities and
investment practices identified in the Prospectus and the risks associated with
these practices. Unless otherwise noted, the policies described in this
Statement of Additional Information are not fundamental and may be changed by
the Board of Trustees.
U.S. GOVERNMENT SECURITIES
U.S. government securities include bills, notes, and bonds issued by the
U.S. Treasury and securities issued or guaranteed by agencies or
instrumentalities of the U.S. government.
Some U.S. government securities are supported by the direct full faith and
credit pledge of the U.S. government; others are supported by the right of the
issuer to borrow from the U.S. Treasury; others, such as securities issued by
the Federal National Mortgage Association (FNMA), are supported by the
discretionary authority of the U.S. government to purchase the agencies'
obligations; and others are supported only by the credit of the issuing or
guaranteeing instrumentality. There is no assurance that the U.S. government
will provide financial support to an instrumentality it sponsors when it is not
obligated by law to do so.
REPURCHASE AGREEMENTS
In a repurchase agreement (a "repo"), the Fund buys a security at one price
and simultaneously agrees to sell it back to the seller at an agreed upon price
on a specified date (usually within seven days from the date of purchase) or on
demand. The repurchase price exceeds the purchase price by an amount that
reflects an agreed-upon rate of return and that is unrelated to the interest
rate on the underlying security. Delay or losses could result if the other party
to the agreement defaults or becomes bankrupt.
American Century Investment Management, Inc. (the "Manager") attempts to
minimize the risks associated with repurchase agreements by adhering to written
guidelines which govern repurchase agreements. These guidelines strictly govern
(1) the type of securities which may be acquired and held under repurchase
agreements; (2) collateral requirements for sellers under repurchase agreements;
(3) the amount of the Fund's net assets that may be committed to repurchase
agreements that mature in more than seven days; and (4) the manner in which the
Fund must take delivery of securities subject to repurchase agreements.
Moreover, the Board of Trustees reviews and approves, on a quarterly basis, the
creditworthiness of brokers, dealers and banks with whom the Fund may enter into
repurchase agreements. The Fund may enter into a repurchase agreement only with
an entity that appears on a list of those which have been approved by the Board
as sufficiently creditworthy.
The Fund has received permission from the SEC to participate in joint
repurchase agreements collateralized by U.S. government securities with other
mutual funds advised by the Manager or its affiliates. Joint repos are expected
to increase the income the Fund can earn from repo transactions without
increasing the risks associated with these transactions.
Under the Investment Company Act of 1940 (the "Investment Company Act"),
repurchase agreements are considered loans.
WHEN-ISSUED AND FORWARD COMMITMENT AGREEMENTS
The Fund may engage in securities transactions on a when-issued or forward
commitment basis, in which the transaction price and yield are each fixed at the
time the commitment is made, but payment and delivery occur at a future date
(typically 15 to 45 days later).
When purchasing securities on a when-issued or forward commitment basis, the
Fund assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. Although 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, the
Fund will establish and maintain until the settlement date a segregated account
consisting of cash or appropriate liquid assets including equity securities and
debt securities of any grade 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 securi-
2 AMERICAN CENTURY INVESTMENTS
ties, 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.
SECURITIES LENDING
The Fund may lend its portfolio securities to earn additional income. If a
borrower defaulted on a securities loan, the Fund could experience delays in
recovering the securities it loaned; if the value of the loaned securities
increased over the value of the collateral, the Fund could suffer a loss.
To minimize the risk of default on securities loans, the Manager adheres to
guidelines prescribed by the Board of Trustees governing lending of securities.
These guidelines strictly govern (1) the type and amount of collateral that must
be received by the Fund; (2) the circumstances under which additions to that
collateral must be made by borrowers; (3) the return received by the Fund on the
loaned securities; (4) the limitations on the percentage of Fund assets on loan;
and (5) the credit standards applied in evaluating potential borrowers of
portfolio securities. In addition, the guidelines require that the Fund have the
option to terminate any loan of a portfolio security at any time and set
requirements for recovery of securities from borrowers.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
The Fund expects to exchange dollars for the Fund's underlying currencies,
and vice versa, in the normal course of managing the Fund's underlying
investments. JPMIM does not expect that the Fund will hold currency that is not
earning income on a regular basis, although the Fund may do so temporarily when
suitable investments are not available. The Fund may exchange currencies on a
"spot" basis (i.e., for prompt delivery and settlement), or by entering into
forward currency exchange contracts (also called forward contracts) or other
contracts to purchase and sell currencies for settlement at a future date. The
Fund will incur costs in converting assets from one currency to another. Foreign
exchange dealers may charge a fee for conversion; in addition, they also realize
a profit based on the difference (i.e., the spread) between the prices at which
they buy and sell various currencies in the spot and forward markets. Thus, a
dealer may offer to sell a foreign currency to the Fund at one rate, and
repurchase it at a lesser rate should the fund desire to resell the currency to
the dealer.
Forward contracts are agreements to exchange a specific amount of one
currency for a specified amount of another at a future date. The date may be any
agreed fixed number of days in the future. The amount of currency to be
exchanged, the price at which the exchange will take place, and the date of the
exchange are negotiated when the Fund enters into the contract and are fixed for
the term of the contract. Forward contracts are traded in an interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement and is
consummated without payment of any commission. However, the Fund may enter into
forward contracts with deposit requirements or commissions.
At the maturity of a forward contract, the Fund may complete the contract by
paying for and receiving the underlying currency, may seek to roll forward its
contractual obligation by entering into an "offsetting" transaction with the
same currency trader and paying or receiving the difference between the
contractual exchange rate and the current exchange rate. The Fund may also be
able to enter into an offsetting contract prior to the maturity of the
underlying contract. This practice is sometimes referred to as "cross hedging"
and may be employed if, for example, JPMIM believes that one foreign currency
(in which a portion of the Fund's foreign currency holdings are denominated)
will change in value relative to the U.S. dollar differently than another
foreign currency. There is no assurance that offsetting transactions, or new
forward contracts, will always be available to the Fund.
Investors should realize that the use of forward contracts does not
eliminate fluctuations in the underlying prices of the securities. Such
contracts simply establish a rate of exchange that the Fund can achieve at some
future point in time. Additionally, although such contracts tend to minimize the
risk of loss due to fluctuations in the value of the hedged currency when used
as a hedge against foreign currency declines, at the same time they tend to
limit any potential gain which might result from the
STATEMENT OF ADDITIONAL INFORMATION 3
change in the value of such currency.
Because investments in, and redemptions from, the Fund will be in U.S.
dollars, JPMIM expects that the Fund's normal investment activity will involve a
significant amount of currency exchange. For example, the Fund may exchange
dollars for its underlying foreign currencies for dollars in order to meet
shareholder redemption requests or to pay expenses. These transactions may be
executed in the spot or forward markets.
In addition, the Fund may combine forward transactions in its underlying
currency with investments in U.S. dollar-denominated instruments, in an attempt
to construct an investment position whose overall performance will be similar to
that of a security denominated in its underlying currency. If the amount of
dollars to be exchanged is properly matched with the anticipated value of the
dollar-denominated securities, the Fund should be able to "lock in" the foreign
currency value of the securities, and the Fund's overall investment return from
the combined position should be similar to the return from purchasing a foreign
currency-denominated instrument. This is sometimes referred to as a "synthetic"
investment position or a "position hedge."
The execution of a synthetic investment position may not be successful. It
is impossible to forecast with absolute precision what the dollar value of a
particular security will be at any given time. If the value of a
dollar-denominated security is not exactly matched with the Fund's obligation
under the forward contract on the contract's maturity date, the Fund may be
exposed to some risk of loss from fluctuation of the dollar. Although JPMIM will
attempt to hold such mismatchings to a minimum, there can be no assurance that
JPMIM will be successful in doing so.
FUTURES AND OPTIONS TRANSACTIONS
FUTURES CONTRACTS provide for the sale by one party and purchase by another
party of a specific security at a specified future time and price. Futures
contracts are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission (CFTC), a U.S. government agency.
Although futures contracts, by their terms, call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date. Closing out a futures position is done by taking
an opposite position in an identical contract (i.e., buying a contract that has
previously been sold, or selling a contract that has previously been bought).
To initiate and maintain open positions in futures contracts, the Fund is
required to make a good faith margin deposit in cash or government securities
with a broker or custodian. A margin deposit is intended to assure completion of
the contract (delivery or acceptance of the underlying security) if it is not
terminated prior to the specified delivery date. Minimum initial margin
requirements are established by the futures exchanges and may be revised. In
addition, brokers may establish deposit requirements that are higher than the
exchange minimums.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, the contract holder
is required to pay additional "variation" margin. Conversely, changes in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to or
from the futures broker as long as the contract remains open and do not
constitute margin transactions for purposes of the Fund's investment
restrictions.
Those who trade futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers, such as the Fund, use the futures markets
primarily to offset unfavorable changes in the value of securities they hold or
expect to acquire for investment purposes. Speculators are less likely to own
the securities underlying the futures contracts they trade and are more likely
to use futures contracts with the expectation of realizing profits from
fluctuations in the prices of the underlying securities. The Fund will not
utilize futures contracts for speculative purposes.
Although techniques other than trading futures contracts can be used to
control the Fund's exposure to market fluctuations, the use of futures contracts
may be a more effective means of hedging this exposure. While the Fund pays
brokerage commissions in connection with opening and closing out futures
4 AMERICAN CENTURY INVESTMENTS
positions, these costs are lower than the transaction costs incurred in the
purchase and sale of the underlying securities.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the Fund pays the
current market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities, indexes
of securities prices, and futures contracts. The Fund may terminate its position
in a put option it has purchased by allowing it to expire or by exercising the
option. If the option is allowed to expire, the Fund will lose the entire
premium it paid. If the Fund exercises the option, it completes the sale of the
underlying instrument at the strike price. The Fund may also terminate a put
option position by closing it out in the secondary market at its current price
if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to suffer
a loss if security prices do not rise sufficiently to offset the cost of the
option.
WRITING PUT AND CALL OPTIONS. If the Fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party chooses to exercise
the option. When writing an option on a futures contract, the Fund will be
required to make margin payments to a broker or custodian as described above for
futures contracts. The Fund may seek to terminate its position in a put option
it writes before exercise by closing out the option in the secondary market at
its current price. However, if the secondary market is not liquid for a put
option the Fund has written, the Fund must continue to be prepared to pay the
strike price while the option is outstanding, regardless of price changes, and
must continue to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although the gain would be limited to the amount of the premium received. If
security prices remain the same over time, the writer would likely also profit
by being able to close out the option at a lower price. If security prices fall,
the put writer would expect to suffer a loss. This loss should be less than the
loss from purchasing the underlying instrument directly, however, because the
premium received for writing the option should mitigate the effects of the
decline.
Writing a call option obligates the Fund to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
COMBINED POSITIONS. The Fund may purchase and write options in combination
with one another, or in combination with futures or forward contracts, to adjust
the risk and return characteristics of the overall position. For example, the
Fund may purchase a put option and write a call option on the same underlying
instrument to construct a combined position whose risk and return
characteristics are similar to selling a futures contract. Another possible
combined position would involve writing a call option at one strike price and
buying a call option at a lower price to reduce the risk of the written call
option in the event of a substantial price increase. Because combined options
positions involve multiple trades, they result in higher transaction costs and
may be more difficult to open
STATEMENT OF ADDITIONAL INFORMATION 5
and close out.
OVER-THE-COUNTER OPTIONS. Unlike exchange-traded options, which are
standardized with respect to the underlying instrument, expiration date,
contract size, and strike price, the terms of over-the-counter ("OTC") options
(options not traded on exchanges) generally are established through negotiation
with the other party to the option contract. While this type of arrangement
allows the Fund greater flexibility to tailor an option to its needs, OTC
options generally involve greater credit risk than exchange-traded options,
which are guaranteed by the clearing organizations of the exchanges where they
are traded. The risk of illiquidity is also greater with OTC options because
these options generally can be closed out only by negotiation with the other
party to the option.
OPTIONS ON FUTURES. By purchasing an option on a futures contract, the Fund
obtains the right, but not the obligation, to sell the futures contract (a put
option) or to buy the contract (a call option) at a fixed "strike" price. The
Fund can terminate its position in a put option by allowing it to expire or by
exercising the option. If the option is exercised, the Fund completes the sale
of the underlying security at the strike price. Purchasing an option on a
futures contract does not require the Fund to make margin payments unless the
option is exercised.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types of
exchange-traded futures and options contracts, it is likely that the
standardized contracts available will not match the Fund's current or
anticipated investments exactly. The Fund may invest in futures and options
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests (for example,
by hedging intermediate-term securities with a futures contract based on an
index of long-term bond prices); this involves a risk that the futures position
will not track the performance of the Fund's other investments.
Options and futures prices can diverge from the prices of their underlying
instruments even if the underlying instruments correlate well with the Fund's
investments. Options and futures prices are affected by factors such as current
and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and securities markets, from structural differences in how options and futures
and securities are traded, or from the imposition of daily price fluctuation
limits or trading halts. The Fund may purchase or sell options and futures
contracts with a greater or lesser value than the securities it wishes to hedge
or intends to purchase in an effort to compensate for differences in volatility
between the contract and the securities, although this may not be successful in
all cases. If price changes in the Fund's options or futures positions are
poorly correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.
FUTURES AND OPTIONS CONTRACTS RELATING TO FOREIGN CURRENCIES. The Fund may
purchase and sell currency futures and purchase and write currency options to
increase or decrease its exposure to different foreign currencies. A Fund may
also purchase and write currency options in connection with currency futures or
forward contracts.
Currency futures contracts are similar to forward currency exchange
contracts, except that they are traded on exchanges and have standard contract
sizes and delivery dates. Most currency futures contracts call for payment or
delivery in U.S. dollars.
The uses and risks of currency futures are similar to those of futures
relating to securities or indexes, as described above. Currency futures values
can be expected to correlate with exchange rates, but may not reflect other
factors that affect the value of the Fund's investments. A currency hedge, for
example, should protect a German-mark-denominated security from a decline in the
German mark, but it will not protect the Fund against a price decline resulting
from a deterioration in the issuer's creditworthiness.
LIQUIDITY OF FUTURES CONTRACTS AND OPTIONS. There is no assurance that a
liquid secondary market will exist for any particular futures contract or option
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying instrument's
current price. In addition, exchanges may establish daily price fluctuation
limits for futures contracts and options
6 AMERICAN CENTURY INVESTMENTS
and may halt trading if a contract's price moves upward or downward more than
the limit on a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for the Fund
to enter into new positions or close out existing positions. If the secondary
market for a contract was not liquid, because of price fluctuation limits or
otherwise, prompt liquidation of unfavorable positions could be difficult or
impossible, and the Fund could be required to continue holding a position until
delivery or expiration regardless of changes in its value. Under these
circumstances, the Fund's access to assets held to cover its future positions
could also be impaired.
Futures and options trading on foreign exchanges may not be regulated as
effectively as similar transactions in the U.S. and may not involve clearing
mechanisms or guarantees similar to those available in the U.S. The value of a
futures contract or option traded on a foreign exchange may be adversely
affected by the imposition of different exercise and settlement terms, trading
procedures, and margin requirements, and lesser trading volume.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS. The Fund has filed
a notice of eligibility for exclusion as a "commodity pool operator" with the
Commodity Futures Trading Commission (CFTC) and the National Futures
Association, which regulates trading in the futures markets. The Fund intends to
comply with Section 4.5 of the regulations under the Commodity Exchange Act,
which limits the extent to which the Fund can commit assets to initial margin
deposits and options premiums.
The Fund may enter into futures transactions (including related options) for
hedging purposes without regard to the percentage of assets committed to initial
margin and for other than hedging purposes provided that assets committed to
initial margin deposits on such instruments, plus premiums paid for open futures
options positions, less the amount by which any such positions are
"in-the-money," do not exceed 5% of the Fund's total assets. To the extent
required by law, the Fund will set aside cash and appropriate liquid assets in a
segregated account to cover its obligations related to futures contracts and
options.
Financial futures or options purchased or sold by the Fund will be
standardized and traded through the facilities of a U.S. or foreign securities
association or listed on a U.S. or foreign securities or commodities exchange,
board of trade, or similar entity, or quoted on an automatic quotation system,
except that the Fund may effect transactions in over-the-counter options with
primary U.S. government securities dealers recognized by the Federal Reserve
Bank of New York. In addition, the Fund has undertaken to limit aggregate
premiums paid on all options purchased by the Fund to no more than 20% of the
Fund's total assets.
The Fund intends to comply with tax rules applicable to regulated investment
companies, including a requirement that capital gains from the sale of
securities held less than three months constitute less than 30% of a Fund's
gross income for each fiscal year. Gains on some futures contracts and options
are included in this 30% calculation, which may limit the Fund's investments in
these instruments.
INVESTMENT RESTRICTIONS
The Fund's 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 the Fund, as determined in
accordance with the Investment Company Act.
AS A FUNDAMENTAL POLICY, THE FUND SHALL NOT:
1) issue senior securities, except as permitted under the Investment
Company Act of 1940.
2) borrow money, except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33-1/3% of the Fund's total assets (including the amount
borrowed) less liabilities (other than borrowings).
3) lend any security or make any other loan if, as a result, more than
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.
STATEMENT OF ADDITIONAL INFORMATION 7
4) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments. This policy shall not prevent the
Fund from investment in securities or other instruments backed by real
estate or securities of companies that deal in real estate or are
engaged in the real estate business.
5) concentrate its investments in securities of issuers in a particular
industry (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities).
6) act as an underwriter of securities issued by others, except to the
extent that the Fund may be considered an underwriter within the
meaning of the Securities Act of 1933 in the disposition of restricted
securities.
7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments; provided that this
limitation shall not prohibit the Fund from purchasing or selling
options and futures contracts or from investing in securities or other
instruments backed by physical commodities.
8) invest for purposes of exercising control over management.
In addition, the Fund is subject to the following additional investment
restrictions which are not fundamental and may be changed by the Board of
Trustees.
AS AN OPERATING POLICY, THE FUND:
a) to meet federal tax requirements for qualification as a "regulated
investment company," limits its investment so that at the close of each
quarter of its taxable year: (i) with regard to at least 50% of total
assets, no more than 5% of total assets are invested in the securities
of a single issuer, and (ii) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (i) and (ii)
do not apply to "Government securities" as defined for federal tax
purposes. The Fund does not, with respect to 75% of its total assets,
currently intend to purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result thereof, the Fund would
own more than 10% or the outstanding voting securities of such issuer.
b) shall not purchase additional investment securities at any time during
which outstanding borrowings exceed 5% of the total assets of the Fund.
c) shall not purchase any security or enter into a repurchase agreement
if, as a result, more than 15% of its net assets 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.
d) shall not sell securities short, unless it owns or has the right to
obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in futures contracts and options
are not deemed to constitute selling securities short.
e) shall not purchase securities on margin, except that the Fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
For purposes of the investment restriction (5), relating to concentration, a
Fund shall not purchase any securities which would cause 25% or more of the
value of the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (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 consid-
8 AMERICAN CENTURY INVESTMENTS
ered a separate industry, and (d) personal credit and business credit businesses
will be considered separate industries.
Unless otherwise indicated, percentage limitations included in 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 the Fund's net assets will not be considered in determining whether it
has complied with its investment restrictions.
PORTFOLIO TRANSACTIONS
In selecting broker-dealers to execute transactions on behalf of the Fund,
JPMIM seeks the best net price and execution available. In assessing the best
net price and execution available for any Fund transaction, JPMIM will consider
all factors it deems relevant including, but not limited to, (i) the breadth of
the market for the security, (ii) the price of the security, (iii) the financial
condition and execution capability of the broker-dealer, and (iv) the
reasonableness of any commission for the specific transaction. When the
execution and price offered by two or more broker-dealers are comparable, JPMIM
may, with discretion, in recognition of the value of brokerage or research
services provided by the broker-dealer, purchase and sell portfolio securities
to and from broker-dealers who provide the Fund with research and other services
provided, however, that in all instances best net price and execution shall be
the controlling factor, and in no event may JPMIM pay to a broker-dealer a
commission in excess of that which another broker-dealer would have charged for
effecting the same transaction.
When JPMIM deems the purchase or sale of a security to be in the best
interest of the Fund as well as its other clients, it may, to the extent
permitted by applicable law, aggregate the securities to be sold or purchased
with those of its other clients. In such an event, the allocation of securities
so purchased or sold will be made by JPMIM in a manner it considers to be the
most equitable and consistent with its fiduciary obligations to the Fund and its
other clients.
JPMIM is authorized to execute such documents as may be required to affect
forward foreign currency exchange contracts on behalf of the Fund. In selecting
counterparties for such contracts, JPMIM seeks the best overall terms available
and executes or directs the execution of all such transactions as permitted by
law and consistent with the best interest of the Fund.
The Fund's portfolio turnover rates are listed in the Financial Highlights
in the Prospectus.
TRANSACTIONS WITH JPMIM AFFILIATES
As described in further detail under the section titled "Investment Advisory
Services," JPMIM is subadvisor to the Fund pursuant to an agreement with Benham
Management Corporation.
JPMIM, Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), J.P.
Morgan Securities Inc., and J.P. Morgan Securities Limited are wholly owned
subsidiaries of J.P. Morgan & Co. Incorporated, hereafter referred to
collectively as "Morgan affiliates."
J. P. Morgan Securities Inc. is a broker-dealer registered with the
Securities and Exchange Commission and is a member of the National Association
of Securities Dealers. It is active as a dealer in U.S. government securities
and an underwriter of and dealer in U.S. government agency securities and money
market instruments.
J.P. Morgan Securities Limited underwrites, distributes, and trades
international securities, including Eurobonds, commercial paper, and foreign
government bonds. J.P. Morgan & Co. Incorporated issues commercial paper and
long-term debt securities. Morgan Guaranty and some of its affiliates issue
certificates of deposit and create bankers' acceptances.
To the extent that the Fund invests a portion of its assets in such
obligations, it will not invest in securities issued or created by Morgan
affiliates.
Certain activities of Morgan affiliates may affect the Fund's portfolio or
the markets for securities in which the Fund invests. In particular, activities
of Morgan affiliates may affect the prices of securities held by the Fund and
the supply of issues available for purchase by the Fund. Where a Morgan
affiliate holds a large portion of a given issue, the price at which that issue
is traded may influence the price of similar securities the Fund holds or is
considering purchasing.
The Fund will not purchase securities directly from Morgan affiliates, and
the size of Morgan affiliates' holdings may limit the selection of available
securities in a particular maturity, yield, or price
STATEMENT OF ADDITIONAL INFORMATION 9
range. The Fund will not execute any transactions with Morgan affiliates and
will use only unaffiliated broker-dealers. In addition, the Fund will not
purchase any securities of U.S. government agencies during the existence of an
underwriting or selling group of which a Morgan affiliate is a member, except to
the extent permitted by law.
The Fund's ability to engage in transactions with Morgan affiliates is
restricted by the SEC and the Federal Reserve Board. In JPMIM's opinion, these
limitations should not significantly impair the Fund's ability to pursue its
investment objectives. However, there may be circumstances in which the Fund is
disadvantaged by these limitations compared to other funds with similar
investment objectives that are not subject to these limitations.
In acting for its fiduciary accounts, including the Fund, JPMIM will not
discuss its investment decisions or positions with the personnel of any Morgan
affiliate. JPMIM has informed the Fund that, in making investment decisions, it
will not obtain or use material, non-public information in the possession of any
division or department of JPMIM or other Morgan affiliates.
The commercial banking divisions of Morgan Guaranty and its affiliates may
have deposit, loan, and other commercial banking relationships with issuers of
securities the Fund purchases, including loans that may be repaid in whole or in
part with the proceeds of securities purchased by the Fund. Except as may be
permitted by applicable law, the Fund will not purchase securities in any
primary public offering when the prospectus discloses that the proceeds will be
used to repay a loan from Morgan Guaranty. JPMIM will not cause the Fund to make
investments for the direct purpose of benefitting other commercial interests of
Morgan affiliates at the Fund's expense.
VALUATION OF PORTFOLIO SECURITIES
The 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 has
designated the following holiday closings for 1997: New Year's Day (observed),
Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day (observed).
Although the Fund expects the same holiday schedule to be observed in the
future, the Exchange may modify its holiday schedule at any time.
Securities are valued at market, depending upon the market or exchange on
which they trade. Price quotations for exchange-listed securities are taken from
the primary exchanges on which these securities trade. Securities traded on
exchanges will be valued at their last sale prices. If no sale is reported, the
mean between the latest bid and asked prices is used. Securities traded
over-the-counter will be valued at the mean between the latest bid and asked
prices. Fixed-income securities are priced at market value on the basis of
market quotations supplied by independent pricing services. Trading of
securities in foreign markets may not take place on every day the Exchange is
open, and trading takes place in various foreign markets on days on which the
Exchange and the Fund's offices are not open and the Fund's net asset value is
not calculated. The Fund's net asset value may be significantly affected on days
when shareholders have no access to the Fund. Securities for which market
quotations are not readily available, or which may change in value due to events
occurring after their primary exchange has closed for the day, are valued at
fair market value as determined in good faith under the direction of the Board
of Trustees.
JPMIM typically completes its trading on behalf of the Fund in various
markets before the Exchange closes for the day, and the value of portfolio
securities is determined when the primary market for those securities closes for
the day. Foreign currency exchange rates are also determined prior to the close
of the Exchange. However, if extraordinary events occur that are expected to
affect the value of a portfolio security after the close of the primary exchange
on which it is traded, the security will be valued at fair market value as
determined in good faith under the direction of the Board of Trustees.
PERFORMANCE
The Fund's yield and total return may be quoted in advertising and sales
literature. These figures, as well as the Fund's share price, will vary. Past
performance should not be considered an indication of future results.
10 AMERICAN CENTURY INVESTMENTS
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.
For the 30-day period ended June 30, 1997, the Fund's yield was 4.72%.
Total returns quoted in advertising and sales literature reflect all aspects
of the Fund's return, including the effect of reinvesting dividends and capital
gain distributions and any change in the Fund's NAV per share during the period.
Average annual total returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in the Fund over a
stated period, and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant throughout the period. For example, a cumulative total return
of 100% over 10 years would produce an average annual return of 7.18%, which is
the steady annual rate that would result in 100% growth on a compounded basis in
10 years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the Fund's 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, the Fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total returns may
be quoted as a percentage or as a dollar amount and may be calculated for a
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. The
Fund's one year, three year, five year and life of fund average annual total
return through June 30, 1997, are indicated in the following table:
Average Annual Total Return
- --------------------------------------------------------------------
One Year 0.37%
Three Year 7.65%
Five Year 6.84%
Life of Fund 7.60%
- --------------------------------------------------------------------
The Fund commenced operations on January 7, 1992. Performance information
may be quoted numerically or in a table, graph, or similar illustration.
The Fund's performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indexes of market
performance. This may include comparisons with funds that, unlike American
Century funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be used for such comparisons may include, but are not
limited to, U.S. Treasury bill, note, and bond yields, money market fund yields,
U.S. government debt and percentage held by foreigners, the U.S. money supply,
net free reserves, and yields on current-coupon Government National Mortgage
Association securities (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
STATEMENT OF ADDITIONAL INFORMATION 11
fund or mutual fund category tracked by Lipper Analytical Services, Inc. or
Morningstar, Inc.; mutual fund rankings published in major, nationally
distributed periodicals; data provided by the Investment Company Institute;
Ibbotson Associates, Stocks, Bonds, Bills, and Inflation; major indexes of stock
market performance; and indexes and historical data supplied by major securities
brokerage or investment advisory firms. The Fund may also utilize reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance.
The Fund's shares are sold without a sale charge (a load). No-load funds
offer an advantage to investors when compared to load funds with comparable
investment objectives and strategies.
The advisor may obtain ratings on the safety of Fund shares from one or more
rating agencies and may publish such ratings in advertisements and sales
literature.
TAXES
The Fund will be treated as a separate corporation for federal income tax
purposes and 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, the Fund will not incur federal or state income taxes
on its net investment income or net realized capital gains distributed to
shareholders.
The Fund may be subject to a 4% excise tax on a portion of its undistributed
income. To avoid the tax, the Fund must distribute annually at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year and at least 98% of its capital gain net income for the 12-month
period ending on October 31st of the calendar year. Any dividend declared by the
Fund in October, November, or December of any year and payable to shareholders
of record on a specified date in such a month shall be deemed to have been
received by each shareholder on December 31st of such year and to have been paid
by the Fund not later than December 31st of such year, provided that such
dividend is actually paid by the Fund during January of the following year.
The Fund's transactions in foreign currencies, forward contracts, options
and futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by the Fund (i.e.,
may affect whether gains or losses are ordinary or capital), accelerate
recognition of income to the Fund, defer Fund losses, and affect the
determination of whether capital gains and losses are characterized as long-term
or short-term capital gains or losses. These rules could therefore affect the
character, amount and timing of distributions to shareholders. These provisions
also may require the Fund to mark to market certain types of the positions in
its portfolio (i.e., treat them as if they were sold), which may cause the Fund
to recognize income without receiving cash with which to make distributions in
amounts necessary to satisfy the 90% and 98% distribution requirements for
relief from income and excise taxes, respectively. The Fund will monitor its
transactions and may make such tax elections as Fund management deems
appropriate with respect to foreign currency, options, futures contracts or
forward contracts. The Fund's status as a regulated investment company may limit
its transactions involving foreign currency, futures, options and forward
contracts.
Under the Code, gains or losses attributable to fluctuations in exchange
rates that occur between the time the Fund accrues income or other receivables
or accrues expenses or other liabilities denominated in a foreign currency and
the time the Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or loss. Similarly, in disposing of
debt securities denominated in foreign currencies, certain forward currency
contracts, or other instruments, gains or losses attributable to fluctuations in
the value of a foreign currency between the date the security, contract, or
other instrument is acquired and the date it is disposed of are also usually
treated as ordinary income or loss. Under Section 988 of the Code, these gains
or losses may increase or decrease the amount of the Fund's investment company
taxable income distributed to shareholders as ordinary income.
Earnings derived by the Fund from sources outside the U.S. may be subject to
non-U.S. withholding and possibly other taxes. Such taxes may be reduced or
eliminated under the terms of a U.S. income tax treaty, and the Fund intends to
undertake any proce-
12 AMERICAN CENTURY INVESTMENTS
dural steps required to claim the benefits of such a treaty. With respect to any
non-U.S. taxes actually paid by the Fund, if more than 50% in value of the
Fund's total assets at the close of any taxable year consists of securities of
foreign corporations, the Fund will elect to treat any non-U.S. income and
similar taxes it pays as though the taxes were paid by its shareholders.
Some of the debt securities that may be acquired by the Fund may be treated
as debt securities originally issued at a discount. Generally, the amount of the
original issue discount (OID) is treated as interest income and is included in
income over the term of the debt security even though payment of that amount is
not received until a later time, usually when the debt security matures.
Some of the debt securities may be purchased by the Fund at a discount that
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount will be treated as ordinary income to the extent it does not exceed the
accrued market discount on such debt security if such market discount was not
previously included in taxable income. Generally, market discount accrues on a
daily basis for each day the debt security is held by the Fund at a constant
rate over the time remaining to the debt security's maturity or, at the election
of the Fund, at a constant yield to maturity that takes into account the
semiannual compounding of interest.
Exchange control regulations that may restrict repatriation of investment
income, capital, or the proceeds of securities sales by foreign investors may
limit the Fund's ability to make sufficient distributions to satisfy the 90% and
excise tax distribution requirements.
TAXATION OF U.S. SHAREHOLDERS
Upon redeeming, selling, or exchanging shares of the Fund, a shareholder
will realize a taxable gain or loss depending upon his or her basis in the
shares liquidated. The gain or loss generally will be a capital gain or loss, if
the shares are capital assets in the shareholder's hands, and will be long-term
or short-term depending on the length of time the shares were held. However, a
loss recognized by a shareholder in the disposition of shares on which capital
gain dividends were paid (or deemed paid) before the shareholder had held his or
her shares for more than six months would be treated as a long-term capital loss
for tax purposes.
A gain realized on the redemption, sale, or exchange of shares would not be
affected by the reacquisition of shares. A loss realized on a redemption, sale,
or exchange of shares would be disallowed to the extent that the shares disposed
of were replaced (whether through reinvestment of distributions or otherwise)
within a period of 61 days beginning 30 days before and ending 30 days after the
date on which the shares were disposed. Under such circumstances, the basis of
the shares acquired would be adjusted to reflect the disallowed loss.
TAXATION OF NON-U.S. SHAREHOLDERS
U.S. taxation of a shareholder who is a non-resident alien or a non-U.S.
corporation, partnership, trust, or estate depends on whether the payments
received from a Fund are "effectively connected" with a U.S. trade or business
carried on by such a shareholder. Ordinarily, income from the Fund will not be
treated as "effectively connected."
If the payments received from the Fund are effectively connected with a U.S.
trade or business of the shareholder, then all distributions of net investment
income and net capital gains of the Fund and gains realized upon the redemption,
exchange, or other taxable disposition of shares will be subject to U.S. federal
income tax at the graduated rates applicable to U.S. citizens, residents, or
domestic entities, although the tax may be eliminated under the terms of an
applicable U.S. income tax treaty. Non-U.S. corporate shareholders also may be
subject to a branch profits tax with respect to payments from the Fund.
If the shareholder is not engaged in a U.S. trade or business, or the
payments received from the Fund are not effectively connected with the conduct
of such a trade or business, the shareholder will generally be subject to U.S.
tax withholding at the rate of 30% (or a lower rate under an applicable U.S.
income tax treaty) on distributions of net investment income and net realized
short-term capital received. Non-U.S. shareholders not engaged in a U.S. trade
or business, or
STATEMENT OF ADDITIONAL INFORMATION 13
having no effectively connected income, may also be subject to U.S. tax at the
rate of 30% (or a lower treaty rate) on additional distributions resulting from
the Fund's election to treat any non-U.S. taxes it pays as though the taxes were
paid by its shareholders.
Distributions of net realized long-term capital gains to non-U.S.
shareholders and any capital gains realized by them upon the redemption or other
taxable disposition of shares generally will not be subject to U.S. tax. In the
case of individuals and other non-exempt, non-U.S. shareholders who fail to
furnish the Fund with required certifications regarding their foreign status on
IRS Form W-8 or an appropriate substitute, the Fund may be required to impose
backup withholding of U.S. tax at the rate of 31% on distributions of net
realized capital gains and proceeds of redemptions and exchanges.
The information above is only a summary of some of the tax considerations
affecting the Fund and its shareholders; no attempt has been made to discuss
individual tax consequences. The Fund and the Fund's distributions may also be
subject to state, local, or foreign taxes. A prospective investor may wish to
consult a tax advisor to determine whether the Fund is a suitable investment
based on his or her tax situation.
ABOUT THE TRUST
American Century International Bond Funds (the "Trust") is a registered
open-end management investment company that was organized as a Massachusetts
business trust on August 28, 1991. The Trust was formerly known as "Benham
International Funds." American Century -- Benham International Bond Fund
(formerly known as American Century--Benham European Government Bond Fund and
Benham European Government Bond Fund) is currently the sole series of the Trust.
The Board of Trustees may create additional series from time to time.
The Declaration of Trust permits the Board of Trustees to issue an unlimited
number of full and fractional shares of beneficial interest without par value,
which may be issued in series (funds). Shares issued are fully paid and
nonassessable and have no preemptive, conversion, or similar rights.
Shares of the Fund have equal voting rights, provided that each series votes
separately on matters affecting only that series. Voting rights are not
cumulative. In the election of Trustees, each nominee may receive only one vote
from each shareholder, and, because the election requires only a simple
majority, more than 50% of the shares voting in an election can elect all of the
Trustees.
Each shareholder has rights to dividends and distributions declared by the
Fund and to the net assets of the Fund upon its liquidation or dissolution
proportionate to his or her share ownership interest in the Fund.
Shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners 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.
CUSTODIAN BANKS: State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts, 02101 and Commerce Bank, N.A., 1000 Walnut, Kansas City,
Missouri 64106 serve as custodians of the Fund's assets. Services provided by
the custodian bank include (i) settling portfolio purchases and sales, (ii)
reporting failed trades, (iii) identifying and collecting portfolio income, and
(iv) providing safekeeping of securities. The custodian takes no part in
determining the Fund's investment policies or in determining which securities
are sold or purchased by the Fund.
INDEPENDENT AUDITORS: KPMG Peat Marwick LLP, 1000 Walnut, Suite 1600, Kansas
City, Missouri 64106, serves as the Trust's independent auditors audits the
14 AMERICAN CENTURY INVESTMENTS
annual financial statements.
For the current fiscal year, which started on January 1, 1997, the Trustees
of the Fund have selected Coopers & Lybrand LLP to serve as independent auditors
of the Fund. The address of Coopers & Lybrand LLP is City Center Square, 1100
Main Street, Suite 900, Kansas City, Missouri 64105-2140.
MULTIPLE CLASS STRUCTURE
The Fund's 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
Advisor Class and an Institutional Class. Not all funds offer all three classes.
The Investor Class is made available to investors directly by the investment
manager through its affiliated broker-dealer, American Century Investment
Services, Inc., for a single unified management fee, without any load or
commission. 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
Manager as Investor Class shareholders. As a result, the Manager is able to
charge these classes a lower unified management fee. In addition to the
management fee, however, Advisor Class shares are subject to a Master
Distribution and Shareholder Services Plan (described below). The plan has been
adopted by the Fund's 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 Fund's Advisor Class
has approved and entered into a Master Distribution and Shareholder Services
Plan, with respect to the Advisor Class (the "Plan"). The Master Distribution
and Shareholder Services Plan is described below.
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), hereinafter referred to as the "independent trustees"] determined that
there was a reasonable likelihood that the Plan would benefit the Fund 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 terminate
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 plans will be made in accordance with Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers.
MASTER DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
As described in the Prospectuses, the Fund's Advisor Class of shares is 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 Fund's shares in various investment products or in connection with various
financial services.
Certain recordkeeping and administrative services that are provided by the
Fund's 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
STATEMENT OF ADDITIONAL INFORMATION 15
provide various distribution services.
To enable the Fund's 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 Fund's Board of Trustees has adopted
the 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 Fund's
Advisor Class shares, 0.25% of which is paid for Shareholder Services (as
described above) and 0.25% of which is paid for distribution services.
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 Fund's
Advisor Class shares; (c) compensation to, and expenses (including overhead and
telephone expenses) of, Distributor; (d) the printing of prospectuses,
statements of additional information and reports for other than existing
shareholders; (e) the preparation, printing and distribution of sales literature
and advertising materials provided to the Fund's 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 Fund pursuant to the terms of this Agreement and in accordance
with Rule 12b-1 of the Investment Company Act.
TRUSTEES AND OFFICERS
The Trust's activities are overseen by a Board of Trustees, including six
independent Trustees. The individuals listed below whose names are marked by an
asterisk (*) are "interested persons" of the Trust (as defined in the 1940 Act)
by virtue of, among other considerations, their affiliation with either Trust;
the Trust's Manager; the Trust's agent for transfer and administrative services,
American Century Services Corporation (ACS); the Trust's distribution agent,
American Century Investment Services, Inc. (ACIS); their parent corporation,
American Century Companies, Inc. (ACC) or ACC's subsidiaries; or other funds
advised by the Manager. Each Trustee listed below also serves as a Trustee or
Director of other funds advised by the Manager. Unless otherwise noted, dates in
parentheses indicate the dates the Trustee or officer began his or her service
in a particular capacity. The Trustees' and officers' address, with the
exception of Mr. Stowers III and Ms. Roepke, is 1665 Charleston Road, Mountain
View, California 94043. The address of Mr. Stowers III and Ms. Roepke is
American Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
TRUSTEES
*JAMES M. BENHAM, Chairman of the Board of Trustees (1991), President and
Chief Executive Officer (1996). Mr. Benham is also President and Chairman of the
Board of the Manager (1971); and a member of the Board of Governors of the
Investment Company Institute (1988). Mr. Benham has been in the securities
business since 1963, and he frequently comments through the media on economic
conditions, investment strategies, and the securities markets.
ALBERT A. EISENSTAT, independent Trustee (1995). Mr. Eisenstat is an
independent Director of each of Commercial Metals Co. (1982), Sungard Data
Systems (1991) and Business Objects S/A (1994). Previously, he served as Vice
President of Corporate Development and Corporate Secretary of Apple Computer and
16 AMERICAN CENTURY INVESTMENTS
served on its Board of Directors (1985 to 1993).
RONALD J. GILSON, independent Trustee (1995). Mr. Gilson is the Charles J.
Meyers Professor of Law and Business at Stanford Law School (1979) and the Mark
and Eva Stern Professor of Law and Business at Columbia University School of Law
(1992). He is counsel to Marron, Ried & Sheehy (a San Francisco law firm, 1984).
MYRON S. SCHOLES, independent Trustee (1991). Mr. Scholes, a principal of
Long-Term Capital Management (1993), is also the Frank E. Buck Professor of
Finance at the Stanford Graduate School of Business (1983), and a Director of
Dimensional Fund Advisors (1982) and the Smith Breeden Family of Funds (1992).
From August 1991 to June 1993, Mr. Scholes was a Managing Director of Salomon
Brothers Inc. (securities brokerage).
KENNETH E. SCOTT, independent Trustee (1991). Mr. Scott is the Ralph M.
Parsons Professor of Law and Business at Stanford Law School (1972) and a
Director of RCM Capital Management (1994).
ISAAC STEIN, independent Trustee (1992). Mr. Stein is former Chairman of the
Board (1990 to 1992) and Chief Executive Officer (1991 to 1992) of Esprit de
Corp. (clothing manufacturer). He is a member of the Board of Raychem
Corporation (electrical equipment, 1993), President of Waverley Associates, Inc.
(private investment firm, 1983), and a Director of ALZA Corporation
(pharmaceuticals, 1987). He is also a Trustee of Stanford University (1994) and
Chairman of Stanford Health Services (hospital, 1994).
*JAMES E. STOWERS III, Trustee (1995). Mr. Stowers III is Chief Executive
Officer and Director of ACC; President, Chief Executive Officer and Director of
ACS and ACIS.
JEANNE D. WOHLERS, independent Trustee (1991). Ms. Wohlers is a private
investor and an independent Director and Partner of Windy Hill Productions, LP.
Previously, she served as Vice President and Chief Financial Officer of Sybase,
Inc. (software company, 1988 to 1992).
OFFICERS
*JAMES M. BENHAM, President and Chief Executive Officer (1996).
*WILLIAM M. LYONS, Executive Vice President (1996); President, Chief
Operating Officer and General Counsel of ACC; Executive Vice President, Chief
Operating Officer and General Counsel of ASC and ACIS; Assistant Secretary of
ACC; Secretary of ACS and ACIS.
*DOUGLAS A. PAUL, Secretary, Vice President, and General Counsel (1991);
Secretary and Vice President of the funds advised by the Manager.
*ROBERT J. LEACH, Controller (1996).
*MARYANNE ROEPKE, CPA, Chief Financial Officer and Treasurer (1995); Vice
President and Assistant Treasurer of ACS.
As of April 7, 1997, the Trustees and officers, as a group, owned less than
1% of the Fund's outstanding shares.
The table below summarizes the compensation that the Trustees of the Fund
received for the Fund's
<TABLE>
<CAPTION>
TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED DECEMBER 31,
1996
Aggregate Pension or Retirement Estimated Total Compensation
Name of Compensation Benefits Accrued As Part Annual Benefits From the American Century
Trustee* From The Fund of Fund Expenses Upon Retirement Family of Funds**
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert A. Eisenstat $7,391 Not Applicable Not Applicable $70,500
Ronald J. Gilson $7,333 Not Applicable Not Applicable $67,500
Myron S. Scholes $7,265 Not Applicable Not Applicable $64,000
Kenneth E. Scott $7,591 Not Applicable Not Applicable $80,273
Ezra Solomon*** $7,356 Not Applicable Not Applicable $65,000
Isaac Stein $7,374 Not Applicable Not Applicable $69,500
Jeanne D. Wohlers $7,488 Not Applicable Not Applicable $75,250
- ------------------------------------------------------------------------------------------------------------------------
* Interested Trustees receive no compensation for their services as such.
** Includes compensation paid by the fifteen investment company members of the
American Century family of funds.
*** Retired December, 1996.
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION 17
fiscal year ended December 31, 1996, as well as the compensation received for
serving as Director or Trustee of all other funds advised by the Manager.
MANAGEMENT
The Fund has an investment management agreement with the Manager dated
August 1, 1997. This agreement was approved by the shareholders of the Fund on
July 30, 1997.
For the services provided to the Fund, the Manager receives a monthly fee
based on a percentage of the average net assets of the Fund. The annual rate at
which this fee is assessed is determined monthly in a two-step process: First, a
fee rate schedule is applied to the assets of all of the funds of its investment
category managed by the Manager (the "Investment Category Fee"). The three
investment categories are Money Market Funds, Bond Funds and Equity Funds.
Second, a separate fee rate schedule is applied to the assets of all of the
funds managed by the Manager (the "Complex Fee"). The Investment Category Fee
and the Complex Fee are then added to determine the unified management fee
payable by the Fund to the Manager.
The schedule by which the Investment Category Fee is determined is as
follows:
Category Assets Fee Rate
- -------------------------------------------------------------------
First $1 billion 0.6100%
Next $1 billion 0.5580%
Next $3 billion 0.5280%
Next $5 billion 0.5080%
Next $15 billion 0.4950%
Next $25 billion 0.4930%
Thereafter 0.4925%
- -------------------------------------------------------------------
The Complex Fee Schedule is as follows:
Complex Assets Fee Rate
- -------------------------------------------------------------------
First $2.5 billion 0.3100%
Next $7.5 billion 0.3000%
Next $15.0 billion 0.2985%
Next $25.0 billion 0.2970%
Next $50.0 billion 0.2960%
Next $100.0 billion 0.2950%
Next $100.0 billion 0.2940%
Next $200.0 billion 0.2930%
Next $250.0 billion 0.2920%
Next $500.0 billion 0.2910%
Thereafter 0.2900%
- -------------------------------------------------------------------
The Complex Fee schedule for the Institutional Class is lower by 0.2500% at
each graduated step. For example, if the Investor Class Complex Fee is 0.3000%
for the first $2 billion, the Advisor Class Complex Fee is 0.0500% (0.3000%
minus 0.2500%) for the first $2 billion.
On the first business day of each month, the Fund pays a management fee to
the Manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for the Fund by
the aggregate average daily closing value of the Fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
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 Fund's
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 Fund who are not parties to the agreement or interested persons of the
Manager, cast in person at a meeting called for the purpose of voting on such
approval.
The management agreement provides that it may be terminated at any time
without payment of any penalty by the Fund's Board of Trustees, or by a vote of
a majority of the Fund's shareholders, on 60 days' written notice to the
Manager, and that it shall be automatically terminated if it is assigned.
The management agreement provides that the Manager shall not be liable to
the Fund or its shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
The management agreement also provides that the Manager and its officers,
Trustees and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.
Certain investments may be appropriate for the Fund and also for other
clients advised by the
18 AMERICAN CENTURY INVESTMENTS
Manager. Investment decisions for the Fund and other clients are made with a
view to achieving their respective investment objectives after consideration of
such factors as their current holdings, availability of cash for investment, and
the size of their investment generally. A particular security may be bought or
sold for only one client or series, or in different amounts and at different
times for more than one but less than all clients or series. In addition,
purchases or sales of the same security may be made for two or more clients or
series on the same date. Such transactions will be allocated among clients in a
manner believed by the Manager to be equitable to each. In some cases this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by the Fund.
The Manager may aggregate purchase and sale orders of the Fund with purchase
and sale orders of its other clients when the Manager believes that such
aggregation provides the best execution for the Fund. The Fund's Board of
Trustees has approved the policy of the Manager with respect to the aggregation
of portfolio transactions. Where portfolio transactions have been aggregated,
the Fund participates at the average share price for all transactions in that
security on a given day and share transaction costs on a pro rata basis. The
Manager will not aggregate portfolio transactions of the Fund unless it believes
such aggregation is consistent with its duty to seek best execution on behalf of
the Fund and the terms of the management agreement. The Manager receives no
additional compensation or remuneration as a result of such aggregation.
In addition to managing the Fund, the Manager 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 Government Income Trust, American Century Investment Trust, American
Century Target Maturities Trust, American Century California Tax-Free and
Municipal Funds and American Century Quantitative Equity Funds.
Prior to August 1, 1997, Benham Management Corporation served as the
investment advisor to the Fund. Benham Management Corporation is, like the
Manager, wholly-owned by ACC.
For the fiscal years ended December 31, 1996, 1995, and 1994, the Fund paid
investment advisory fees as listed in the table below.
Investment Advisory Fees
- --------------------------------------------------------------
1996 $1,060,306
1995 $1,017,677
1994 $1,124,210
- --------------------------------------------------------------
The investment management agreement provides that the Manager may delegate
certain responsibilities under the agreement to a subadvisor. Currently, JPMIM
serves as subadvisor to the Fund under a subadvisory agreement between the
Manager and JPMIM dated August 1, 1997, that was approved by shareholders on
July 30, 1997. This superseded subadvisory agreements dated June 1, 1995,
December 31, 1991, and June 1, 1994. The subadvisory agreement continues for an
initial period of two years and thereafter so long as continuance is
specifically approved by vote of a majority of the Fund's outstanding voting
securities or by vote of a majority of the Fund's Trustees, including a majority
of those Trustees who are neither parties to the agreement nor interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The subadvisory agreement is subject to termination
without penalty on 60 days' written notice by the Manager, the Board of
Trustees, or a majority of the Fund's outstanding shares or 12 months' written
notice by JPMIM and will terminate automatically in the event of (i) its
assignment or (ii) termination of the investment advisory agreement between the
Fund and the Manager.
The subadvisory agreement provides that JPMIM will make investment decisions
for the Fund in accordance with the Fund's investment objective, policies, and
restrictions, and whatever additional written guidelines it may receive from the
Manager from time to time. For these services, the Manager pays JPMIM a monthly
fee at an annual rate of .20% of the Fund's average daily net assets up to $200
million; and .15% of average daily net assets over $200 million. Under the 1991
subadvisory agreement, the Manager paid
STATEMENT OF ADDITIONAL INFORMATION 19
JPMIM a monthly fee at an annual rate of .25% of average daily net assets up to
$200 million, and .05% of average daily net assets in excess of $200 million,
with a minimum annual fee of $250,000.
For the fiscal years ended December 31, 1996, 1995 and 1994, the Manager
paid JPMIM subadvisory fees as listed in the following table:
JPMIM Subadvisory Fees
- -----------------------------------------------------------------
1996 $470,287
1995 $434,795
1994 $480,751
- -----------------------------------------------------------------
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend paying agent for the Fund.
It provides physical facilities, including computer hardware and software and
personnel, for the day-to-day administration of the Fund and of the Manager. The
Manager pays American Century Services Corporation for such services.
Prior to August 1, 1997, the Fund paid American Century Services Corporation
directly for its services as transfer agent and administrative services agent.
For the fiscal years ended December 31, 1996, and 1995, the fees paid for
administrative services and for transfer agent services are listed in the
following table:
Administrative Transfer Agent
Services Services
- ----------------------------------------------------------------
1996 $263,533 $239,896
1995 $264,019 $222,006
- ----------------------------------------------------------------
DISTRIBUTION OF FUND SHARES
The Fund's shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
Manager. The Manager pays all expenses for promoting and distributing the Fund's
shares. 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.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Fund's shares are continuously offered at NAV. Share certificates are
issued (without charge) only when requested in writing. Certificates are not
issued for fractional shares. Dividend and voting rights are not affected by the
issuance of certificates.
American Century may reject or limit the amount of an investment to prevent
any one shareholder or affiliated group from controlling the Trust or one of its
series; to avoid jeopardizing a series' tax status; or whenever, in management's
opinion, such rejection is in the Trust's or a series' best interest. As of
April 7, 1997, Charles Schwab & Co., 101 Montgomery Street, San Francisco,
California 94104, was the record holder of 34% of the outstanding shares of the
Fund with 6,986,691.849 shares. As of that date, no other shareholder was the
record holder or beneficial owner of 5% or more of the Fund's total shares
outstanding.
ACS charges neither fees nor commissions on the purchase and sale of fund
shares. However, ACS may charge fees for special services requested by a
shareholder or necessitated by acts or omissions of a shareholder. For example,
ACS may charge a fee for processing dishonored investment checks or stop-payment
requests. See the Investor Services Guide for more information.
OTHER INFORMATION
For further information, please refer to the registration statement and
exhibits on file with the SEC in Washington, DC. These documents are available
upon payment of a reproduction fee. Statements in the Prospectus and in this
Statement of Additional Information concerning the contents of contracts or
other documents, copies of which are filed as exhibits to the registration
statement, are qualified by reference to such contracts or documents.
SECURITIES RATINGS
Securities rating descriptions provided under this heading are excerpted
from publications of Moody's Investors Service, Inc. and Standard & Poor's
Corporation.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA: Bonds that are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of
20 AMERICAN CENTURY INVESTMENTS
investment risk and are generally referred to as "gilt edge." Interest payments
are protected by a large or exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
AA: Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group, they constitute what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make long-term risks appear somewhat larger than in Aaa securities.
A: Bonds that are rated "A" possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
BAA: Bonds that are rated "Baa" are considered medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
BA: Bonds that are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds that are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be limited.
CAA: Bonds that are rated "Caa" are of poor standing. Such issues may be in
default, or there may be elements of danger present with respect to principal or
interest.
CA: Bonds that are rated "Ca" represent obligations that are speculative to
a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds that are rated "C" are the lowest-rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's may apply the numerical modifier "1" for municipally backed
bonds and modifiers "1," "2," and "3" for corporate-backed municipal bonds. The
modifier "1" indicates that the security ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking, and the
modifier "3" indicates that the issue ranks in the lower end of its generic
rating category.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS
OF NOTES AND VARIABLE-RATE DEMAND OBLIGATIONS:
Moody's ratings for state and municipal short-term obligations are
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable-rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than on fixed maturity dates and payments
relying on external liquidity.
MIG 1/VMIG 1: This designation denotes best quality. There is strong
protection present through established cash flows, superior liquidity support,
or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample,
although not as large as in the preceding group.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
TAX-EXEMPT COMMERCIAL PAPER RATINGS:
Moody's commercial paper ratings are opinions of the ability of issuers to
punctually repay those promissory obligations that have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of
STATEMENT OF ADDITIONAL INFORMATION 21
a rated issuer or issued in conformity with any applicable law. The following
designations, all judged to be investment grade, indicate the relative repayment
ability of rated issuers of securities in which the Funds may invest.
PRIME 1: Issuers rated "Prime 1" (or supporting institutions) have a
superior ability for repayment of senior short-term promissory obligations.
PRIME 2: Issuers rated "Prime 2" (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR MUNICIPAL BONDS:
INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in a small degree.
A: Debt rated "A" has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
SPECULATIVE
BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
BB: Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions that could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B: Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.
CCC: Debt rated "CCC" has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
CC: The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" debt rating.
C: The "C" rating is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI: The "CI" rating is reserved for income bonds on which no interest is
being paid.
D: Debt rated "D" is in default, and payment of interest and/or repayment of
principal is in arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR INVESTMENT GRADE
MUNICIPAL NOTES AND SHORT-TERM DEMAND OBLIGATIONS:
SP-1: Issues carrying this designation have a very strong or strong capacity
to pay principal and inter-
22 AMERICAN CENTURY INVESTMENTS
est. Those issues determined to possess overwhelming safety characteristics will
be given a plus (+) designation.
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR DEMAND OBLIGATIONS
AND TAX-EXEMPT COMMERCIAL PAPER:
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The two rating categories for securities in which the Funds may invest
are as follows:
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
STATEMENT OF ADDITIONAL INFORMATION 23
P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
INVESTOR SERVICES:
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE:
1-800-345-8765
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 OR 816-444-3485
FAX: 816-340-7962
INTERNET: www.americancentury.com
[american century logo]
American
Century(reg.sm)
9709 [recycled logo]
SH-BKT-9857 Recycled
<PAGE>
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
1933 Act Post-Effective Amendment No. 10
1940 Act Amendment No. 11
- --------------------------------------------------------------------------------
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS. Audited financial statements for American Century
International Bond Funds for the fiscal year ended December 31, 1996,
are filed herein as included in the Statement of Additional Information
by reference to the Annual Report dated December 31, 1996, filed on
February 26, 1997 (Accession # 0000880268-97-000002).
(b) EXHIBITS.
(1) (a)Amended and Restated Declaration of Trust, dated May 31, 1995, is
incorporated herein by reference to Exhibit 1 of Post-Effective
Amendment No. 7 filed on April 22, 1996 (Accession #
0000880268-96-000010).
(b) Amendment to the Declaration of Trust dated October 21, 1996 is
incorporated herein to Exhibit 1 of Post-Effective Amendment No. 9
filed April 30, 1997 (Accession # 880268-97-000006).
(2) Amended and Restated Bylaws dated May 17, 1995 are incorporated by
reference to Exhibit 2(b) of Post-Effective Amendment No. 6 filed on
February 29, 1996 (Accession # 0000880268-96-000007).
(3) Not Applicable.
(4) Specimen copy of American Century - Benham International Bond Fund's
share certificate is incorporated herein by reference to Exhibit 4
of the Trust's Registration Statement filed on October 16, 1991.
(5) (a) Investor Class Investment Management Agreement between American
Century International Bond Funds and American Century Investment
Management, Inc., dated August 1, 1997, is incorporated herein by
reference to Exhibit 5 of Post-Effective Amendment #33 to the
Registration Statement of American Century Government Income Trust,
filed July 31, 1997 (Accession #773674-97-000014).
(b) Advisor Class Investment Management Agreement between American
Century International Bond Funds and American Century Investment
Management, Inc., dated August 1, 1997, is incorporated herein by
reference to Exhibit 5 of Post-Effective Amendment #27 to the
Registration Statement of American Century Target Maturities Trust,
filed August 29, 1997 (Accession # 757928-97-000004).
(c) Investment Sub-Advisory Agreement among American Century
International Bond Funds, American Century Investment Management,
Inc., and J.P. Morgan Investment Management Inc., dated August 1,
1997 is included herein.
(6) Distribution Agreement between American Century International Bond
Funds and American Century Investment Services, Inc., dated August
1, 1997, is incorporated herein by reference to Exhibit 6 of
Post-Effective Amendment #33 to the Registration Statement of
American Century Government Income Trust, filed July 31, 1997
(Accession #773674-97-000014).
(7) Not Applicable.
(8) (a) Custodian Agreement between American Century International Bond
Funds and State Street Bank and Trust Company dated August 10, 1993
is incorporated herein by reference to Exhibit 8(a) of
Post-Effective Amendment No. 7 filed on April 22, 1996 (Accession #
0000880268-96-000010).
(b) Amendment No. 1 dated December 1, 1994 to the Custodian
Agreement between American Century International Bond Funds and
State Street Bank and Trust Company dated August 10, 1993 is
incorporated herein by reference to Exhibit 8(b) of Post-Effective
Amendment No. 7 filed on April 22, 1996 (Accession #
0000880268-96-000010).
(c) Amendment No. 2 dated March 4, 1996 to the Custodian Agreement
between American Century International Bond Funds and State Street
Bank and Trust Company dated August 10, 1993 is incorporated herein
by reference to Exhibit 8(c) of Post-Effective Amendment No. 7 filed
on April 22, 1996 (Accession # 0000880268-96-000010).
(9) Transfer Agency Agreement between American Century International
Bond Funds and American Century Services Corporation dated as of
August 1, 1997, is incorporated herein by reference to Exhibit 9 of
Post-Effective Amendment No. 33 to the Registration Statement of the
American Century Government Income Trust filed on July 31, 1997
(Accession # 773674-97-000014).
(10)Opinion and consent of counsel as to the legality of the securities
being registered, dated February 27, 1997, is incorporated herein by
reference to Rule 24f-2 Notice filed on February 27, 1997 (Accession
# 880268-97-000004).
(11)Consent of KPMG Peat Marwick LLP, independent auditors, is included
herein.
(12)Not Applicable.
(13)Letter of Understanding relating to initial capital, dated December
20, 1991, is incorporated herein by reference to Exhibit 13 to
Pre-Effective Amendment No. 1 filed on December 26, 1991.
(14)(a)American Century Individual Retirement Account Plan, including
all instructions and other relevant documents, dated February 1992,
is incorporated herein by reference to Exhibit 14(a) to
Post-Effective Amendment No. 2 filed on April 30, 1993.
(b) American Century Pension/Profit Sharing Plan, including all
instructions and other relevant documents, dated February 1992, is
incorporated herein by reference to Exhibit 14(b) to Post-Effective
Amendment No. 2 filed on April 30, 1993.
(15)Not Applicable.
(16)Schedule for computation of each performance quotation provided in
response to Item 22 is incorporated herein to Exhibit 16 of
Post-Effective Amendment No. 9 filed April 30, 1997 (Accession #
880268-97-000006).
(17)Power of Attorney dated February 28, 1997 is incorporated herein to
Exhibit 17 of Post-Effective Amendment No. 9 filed April 30, 1997
(Accession # 880268-97-000006).
(18)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 is incorporated herein by reference to Exhibit 18 of
Post-Effective Amendment #27 to the Registration Statement of
American Century Target Maturities Trust, filed August 29, 1997
(Accession # 757928-97-000004).
Item 25. Persons Controlled by or Under Common Control with Registrant.
Not Applicable.
Item 26. Number of Holders of Securities.
As of August 31, 1997, American Century - Benham International Bond Fund
(the sole operating series of American Century International Bond Funds) had
7,551 shareholders of record.
Item 27. Indemnification.
As stated in Article VII, Section 3 of the Declaration of Trust,
incorporated herein by reference to Exhibit 1 to the Registration Statement,
"The Trustees shall be entitled and empowered to the fullest extent
permitted by law to purchase insurance for and to provide by resolution or
in the Bylaws for indemnification out of Trust assets for liability and for
all expenses reasonably incurred or paid or expected to be paid by a Trustee
or officer in connection with any claim, action, suit, or proceeding in
which he or she becomes involved by virtue of his or her capacity or former
capacity with the Trust. The provisions, including any exceptions and
limitations concerning indemnification, may be set forth in detail in the
Bylaws or in a resolution adopted by the Board of Trustees."
Registrant hereby incorporates by reference, as though set forth fully
herein, Article VI of the Registrant's Bylaws, amended on May 17, 1995,
appearing as Exhibit 2(b) to Post-Effective Amendment No. 6 filed on
February 29, 1996 (Accession # 0000880268-96-000007).
Item 28. Business and other Connections of Investment Advisor.
American Century Investment Management, Inc., the investment manager to each
of the Registrant's Funds, is engaged in the business of managing
investments for deferred compensation plans and other institutional
investors.
Item 29. Principal Underwriters.
The Registrant's distribution agent, American Century Investment Services,
Inc., is distribution agent to American Century California Tax-Free and
Municipal Funds, American Century Government Income Trust, American Century
Municipal Trust, American Century Target Maturities Trust, American Century
Quantitative Equity Funds, American Century International Bond Funds,
American Century Investment Trust, American Century Variable Portfolios,
Inc., American Century Capital Portfolios, Inc., American Century Mutual
Funds, Inc., American Century Premium Reserves, Inc., American Century
Strategic Asset Allocations, Inc. and American Century World Mutual Funds,
Inc. The information required with respect to each director, officer or
partner of American Century Investment Services, Inc. is incorporated herein
by reference to American Century Investment Services, Inc. Form B-D filed on
November 21, 1985 (SEC File No. 8-35220; Firm CRD No. 17437).
Item 30. Location of Accounts and Records.
American Century Investment Management, Inc., the Registrant and its agent
for transfer and administrative services, American Century Services
Corporation, maintain their principal office at 4500 Main St., Kansas City,
MO 64111. American Century Services Corporation maintains physical
possession of each account, book, or other document, and shareholder records
as required by ss.31(a) of the 1940 Act and rules thereunder. The computer
and data base for shareholder records are located at Central Computer
Facility, 401 North Broad Street, Sixth Floor, Philadelphia, PA 19108.
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 10/Amendment No. 11 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Mountain View, and State of
California, on the 19th day of September, 1997. I hereby certify that this
Amendment meets the requirements for immediate effectiveness pursuant to Rule
485(b).
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
By: /s/ Douglas A. Paul
Douglas A. Paul
Secretary, Vice President and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 10/Amendment No. 11 has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Date
<S> <C> <C>
* Chairman of the Board of Trustees, September 19, 1997
- --------------------------------- President, and
James M. Benham Chief Executive Officer
* Trustee September 19, 1997
- ---------------------------------
Albert A. Eisenstat
* Trustee September 19, 1997
- ---------------------------------
Ronald J. Gilson
* Trustee September 19, 1997
- ---------------------------------
Myron S. Scholes
* Trustee September 19, 1997
- ---------------------------------
Kenneth E. Scott
* Trustee September 19, 1997
- ---------------------------------
Isaac Stein
* Trustee September 19, 1997
- ---------------------------------
James E. Stowers III
* Trustee September 19, 1997
- ---------------------------------
Jeanne D. Wohlers
* Chief Financial Officer, Treasurer September 19, 1997
- ---------------------------------
Maryanne Roepke
</TABLE>
/s/ Douglas A. Paul
*by Douglas A. Paul, Attorney in Fact (pursuant to a Power of Attorney dated
February 28, 1997).
EXHIBIT DESCRIPTION
EX-99.B1 a)Amended and Restated Declaration of Trust, dated May 31, 1995,
is incorporated herein by reference to Exhibit 1 of
Post-Effective Amendment No. 7 filed on April 22, 1996 (Accession
# 0000880268-96-000010).
b) Amendment to the Declaration of Trust dated October 21, 1996
is incorporated herein to Exhibit 1 of Post-Effective Amendment
No. 9 filed April 30, 1997 (Accession # 880268-97-000006).
EX-99.B2 Amended and Restated Bylaws dated May 17, 1995 are incorporated
by reference to Exhibit 2(b) of Post-Effective Amendment No. 6
filed on February 29, 1996 (Accession # 0000880268-96-000007).
EX-99.B4 Specimen copy of American Century - Benham International Bond
Fund's share certificate is incorporated herein by reference to
Exhibit 4 of the Trust's Registration Statement filed on October
16, 1991.
EX-99.B5 a) Investor Class Investment Management Agreement between
American Century International Bond Funds and American Century
Investment Management, Inc., dated August 1, 1997, is
incorporated herein by reference to Exhibit 5 of Post-Effective
Amendment #33 to the Registration Statement of American Century
Government Income Trust, filed July 31, 1997 (Accession
#773674-97-000014).
b) Advisor Class Investment Management Agreement between American
Century International Bond Funds and American Century Investment
Management, Inc., dated August 1, 1997, is incorporated herein by
reference to Exhibit 5 of Post-Effective Amendment #27 to the
Registration Statement of American Century Target Maturities
Trust, filed August 29, 1997 (Accession # 757928-97-000004).
c) Investment Sub-Advisory Agreement among American Century
International Bond Funds, American Century Investment Management,
Inc., and J.P. Morgan Investment Management Inc., dated August 1,
1997 is included herein.
EX-99.B6 Distribution Agreement between American Century International
Bond Funds and American Century Investment Services, Inc., dated
August 1, 1997, is incorporated herein by reference to Exhibit 6
of Post-Effective Amendment #33 to the Registration Statement of
American Century Government Income Trust, filed July 31, 1997
(Accession #773674-97-000014).
EX-99.B8 a) Custodian Agreement between American Century International
Bond Funds and State Street Bank and Trust Company dated August
10, 1993 is incorporated herein by reference to Exhibit 8(a) of
Post-Effective Amendment No. 7 filed on April 22, 1996 (Accession
# 0000880268-96-000010).
b) Amendment No. 1 dated December 1, 1994 to the Custodian
Agreement between American Century International Bond Funds and
State Street Bank and Trust Company dated August 10, 1993 is
incorporated herein by reference to Exhibit 8(b) of
Post-Effective Amendment No. 7 filed on April 22, 1996 (Accession
# 0000880268-96-000010).
c) Amendment No. 2 dated March 4, 1996 to the Custodian Agreement
between American Century International Bond Funds and State
Street Bank and Trust Company dated August 10, 1993 is
incorporated herein by reference to Exhibit 8(c) of
Post-Effective Amendment No. 7 filed on April 22, 1996 (Accession
# 0000880268-96-000010).
EX-99.B9 Transfer Agency Agreement between American Century International
Bond Funds and American Century Services Corporation dated as of
August 1, 1997, is incorporated herein by reference to Exhibit 9
of Post-Effective Amendment No. 33 to the Registration Statement
of the American Century Government Income Trust filed on July 31,
1997 (Accession # 773674-97-000014).
EX-99.B10 Opinion and consent of counsel as to the legality of the
securities being registered, dated February 27, 1997, is
incorporated herein by reference to Rule 24f-2 Notice filed on
February 27, 1997 (Accession # 880268-97-000004).
EX-99.B11 Consent of KPMG Peat Marwick LLP, independent auditors, is
included herein.
EX-99.B13 Letter of Understanding relating to initial capital, dated
December 20, 1991, is incorporated herein by reference to Exhibit
13 to Pre-Effective Amendment No. 1 filed on December 26, 1991.
EX-99.B14 a) American Century Individual Retirement Account Plan, including
all instructions and other relevant documents, dated February
1992, is incorporated herein by reference to Exhibit 14(a) to
Post-Effective Amendment No. 2 filed on April 30, 1993.
b) American Century Pension/Profit Sharing Plan, including all
instructions and other relevant documents, dated February 1992,
is incorporated herein by reference to Exhibit 14(b) to
Post-Effective Amendment No. 2 filed on April 30, 1993.
EX-99.B16 Schedule for computation of each performance quotation provided
in response to Item 22 is incorporated herein to Exhibit 16 of
Post-Effective Amendment No. 9 filed April 30, 1997 (Accession #
880268-97-000006).
EX-99.B17 Power of Attorney dated February 28, 1997 is incorporated herein
to Exhibit 17 of Post-Effective Amendment No. 9 filed April 30,
1997 (Accession # 880268-97-000006).
EX-99.B18 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 is incorporated herein by
reference to Exhibit 18 of Post-Effective Amendment #27 to the
Registration Statement of American Century Target Maturities
Trust, filed August 29, 1997 (Accession # 757928-97-000004).
EX-27.1 Financial Data Schedule.
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
INVESTMENT SUBADVISORY AGREEMENT
J.P. MORGAN INVESTMENT MANAGEMENT INC.
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
(American Century--Benham International Bond Fund)
Agreement effective this August 1, 1997, between AMERICAN CENTURY
INTERNATIONAL BOND FUNDS (the "Trust"), a business trust organized under the
laws of the Commonwealth of Massachusetts, acting on behalf of American
Century--Benham International Bond Fund, a portfolio of the Trust (formerly
known as Benham European Government Bond Fund) (the "Fund"), and American
Century Investment Management, Inc. ("ACIM") a corporation organized under the
laws of the state of Delaware, with offices located at 4500 Main Street, Kansas
City, Missouri, 64141-6200, hereby agree with J. P. MORGAN INVESTMENT MANAGEMENT
INC. (the "Sub-Advisor"), a corporation organized under the laws of the state of
Delaware with offices located at 522 Fifth Avenue, New York, New York 10036, as
follows:
I. INVESTMENT DESCRIPTION - APPOINTMENT. The Trust desires to appoint the
Sub-Advisor to provide certain investment advisory services to the Fund
in accordance with the Fund's Prospectus and Statement of Additional
Information as in effect and as amended from time to time, in such
manner and to such extent as may be approved by the Board of Trustees
of the Trust. The Trust agrees to provide the Sub-Advisor copies of all
amendments to the Fund's Prospectus and Statement of Additional
Information on an ongoing basis. In consideration for the compensation
set forth below the Sub-Advisor accepts the appointment and agrees to
furnish the services described herein.
II. SERVICES AS INVESTMENT SUB-ADVISOR. Subject to the general supervision
of the Board of Trustees of the Trust and of ACIM, the Fund's
investment manager, the Sub-Advisor will (i) act in conformity with the
Trust's Prospectus and Statement of Additional Information, the
Investment Company Act of 1940, the Investment Advisers Act of 1940,
the Internal Revenue Code and all other applicable federal and state
laws and regulations, as the same may from time to time be amended,
(ii) make investment decisions for the fund in accordance with the
Fund's investment objective(s) and policies as stated in the Fund's
Prospectus and Statement of Additional Information and with such
written guidelines as ACIM may from time to time provide to the
Sub-Advisor; (iii) place purchase and sale orders on behalf of the
Fund; (iv) maintain books and records with respect to the securities
transactions of the Fund and furnish the Trust's Board of Trustees such
periodic, regular and special reports as the Board may request; and (v)
treat confidentially and as proprietary information of the Trust all
records and other information related to the Trust and its prior,
present or potential shareholders. The Sub-Advisor will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification
to and approval in writing by the Trust, which approval shall not be
unreasonably withheld. Such records may not be withheld when the
Sub-Advisor may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust. In
providing those services, the Sub-Advisor will supervise the Fund's
investments and conduct a continual program of investment, evaluation
and, if appropriate, sale and reinvestment of the Fund's assets. In
addition, the Sub-Advisor will furnish the Trust or ACIM with whatever
information, including statistical data, the Trust or ACIM may
reasonably request with respect to the instruments that the Fund may
hold or contemplate purchasing.
III. BROKERAGE
A. Securities. In executing transactions for the Fund and
selecting brokers or dealers, the Sub-Advisor will use its
best efforts to obtain the best net price and execution
available and shall execute or direct the execution of all
such transactions as permitted by law and in a manner that
best suits the interest of the Fund and its shareholders. In
assessing the best net price and execution available for any
Fund transaction, the Sub-Advisor will consider all factors it
deems relevant including, but not limited to, breadth of the
market in the security, the price of the security, the
financial condition and execution capability of the broker or
dealer and the reasonableness of any commission for the
specific transaction and on a continuing basis.. Consistent
with this obligation, when the execution and price offered by
two or more brokers or dealers are comparable, the Sub-Advisor
may, at its discretion, execute transactions with brokers and
dealers who provide the Trust with research advice and other
services, but in all instances best net price and execution
shall control.
On occasions when the Sub-Advisor deems the purchase or sale
of a security to be in the best interest of the Fund as well
as its other clients, the Sub-Advisor may to the extent
permitted by applicable law, but shall not be obligated to,
aggregate the securities to be sold or purchased with those of
its other clients. In such event, allocation of the securities
so purchased or sold will be made by the Sub-Advisor in a
manner it considers to be equitable and consistent with its
fiduciary obligations to the Trust and to such other clients.
Securities so allocated will be delivered in proportion to the
consideration paid. The expenses incurred in the transaction
shall be allocated pro-rata.
B. Foreign Exchange Transactions. The Sub-Advisor is authorized
to effect, on behalf of the Fund, spot and forward foreign
exchange contracts for purposes consistent with the Fund's
investment objectives and policies as described in the Fund's
Prospectus and Statement of Additional Information, as
amended, and with such other operating policies and guidelines
as ACIM may from time to time provide to the Sub-Advisor. The
Sub-Advisor is further authorized to execute such documents as
may be required to effect such transactions. In effecting such
spot and forward foreign exchange contracts and in selecting
counterparties for such contracts, the Sub-Advisor shall use
its best efforts to seek the best overall terms available and
shall execute or direct the execution of all such transactions
as permitted by law and in a manner that best suits the
interests of the Fund and its shareholders.
IV. INFORMATION PROVIDED TO THE TRUST. The Sub-Advisor will keep the Trust
and ACIM informed of developments materially affecting the Fund and
will take initiative to furnish the Trust and ACIM on at least a
quarterly basis with whatever information the Sub-Advisor believes is
appropriate for this purpose. Such regular quarterly reports shall
include (i) a discussion of the Fund's performance relative to its
benchmark, (ii) an assessment of investment decisions and analysis of
the components of the Fund's performance (i.e., bond selection and
currency hedging), (iii) the decisions it has made with respect to the
Fund's assets and the purchase and sale of its portfolio securities,
(iv) the reasons for such decisions and related actions, and (v) the
extent to which those decisions have been implemented.
Sub-Advisor will provide the Trust and ACIM with such investment
records, ledgers, accounting and statistical data, and other
information as the Trust or ACIM requires for the preparation of
registration statements, periodic and other reports and other documents
required by federal and state laws and regulations, and particularly as
may be required for the periodic review, renewal, amendment or
termination of this Agreement, and such additional documents and
information as the Trust and ACIM may reasonably request for the
management of their affairs. At least once annually a representative of
the Sub-Advisor shall attend a meeting of the Board of Trustees to make
a presentation on the Fund's performance during the preceding year.
The Sub-Advisor shall furnish to regulatory authorities any information
or reports in connection with such services as may be lawfully
requested. The Sub-Advisor shall also, at the Trust's request, certify
to the Trust's independent auditors that sales or purchases aggregated
with those of other clients of the Sub-Advisor, as described in Section
3(a) above, were equitably allocated.
In compliance with the requirements of the Investment Company Act of
1940, the Sub-Advisor hereby agrees that all records that it maintains
for the Fund are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's
request. Sub-Advisor further agrees to preserve for the periods of time
prescribed by the Investment Company Act of 1940 and the Investment
Advisers Act of 1940 the records required to be maintained thereunder.
V. LIABILITY AND INDEMNIFICATION OF THE SUB-ADVISOR. The Sub-Advisor shall
be responsible for the exercise of reasonable care in carrying out its
responsibilities hereunder; provided, however, that no provision of
this Agreement shall be construed to protect any trustee, director,
officer, agent or employee of the Sub-Advisor from liability by reason
of negligence, willful malfeasance, bad faith in the performance of
such person's duties or by reason of reckless disregard of obligations
and duties hereunder.
ACIM shall indemnify and hold harmless the Sub-Advisor from and against
all claims, losses, liabilities or damages (including reasonable
attorneys fees and other related expenses), arising from or in
connection with the performance by the Sub-Advisor of its duties
hereunder and not resulting from the Sub-Advisor's negligence, willful
malfeasance, bad faith in the performance of its duties or by reason of
its reckless disregard of obligations and duties hereunder.
VI. COMPENSATION. In consideration of the services rendered pursuant to
this Agreement, ACIM will pay the Sub-Advisor on the first business day
of each month a fee for the previous month at an annual rate computed
as follows:
0.20% of the Fund's average daily net assets up to $200 million; and
0.15% of the Fund's average daily net assets over $200 million.
The Sub-Advisor shall have no right to obtain compensation directly
from the Fund or the Trust for services provided hereunder and agrees
to look solely to ACIM for payment of fees due. Upon termination of
this Agreement before the end of a month, the fee for that month shall
be prorated according to the proportion that such period bears to the
full monthly period and shall be payable upon the date of termination
of this Agreement. For the purpose of determining fees payable to the
Sub-Advisor, the value of the Fund's net assets shall be computed at
the times and in the manner specified in the Fund's Prospectus or
Statement of Additional Information.
VII. EXPENSES. The Sub-Advisor will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall
not include brokerage fees or commissions in connection with the
execution of securities transactions.
VIII. SERVICES TO OTHER COMPANIES OR ACCOUNTS. The Trust understands that the
Sub-Advisor now acts, will continue to act as investment advisor to one
or more other investment companies or series of investment companies.
The Trust has no objection to the Sub-Advisor so acting, provided that,
as described in Section 3 above, whenever the Fund and one or more
other accounts or investment companies advised by the Sub-Advisor have
funds available for investment, investments suitable and appropriate
for each will be allocated equitably to each entity in accordance with
procedures. Similarly, opportunities to sell securities will be
allocated in an equitable manner. In addition, the Trust understands
that the persons employed by the Sub-Advisor to assist in the
performance of the Sub-Advisor's duties hereunder will not devote their
full time to such service and nothing contained herein shall be deemed
to limit or restrict the right of the Sub-Advisor or any affiliate of
the Sub-Advisor to engage in and devote time and attention to other
business or to render services of whatever kind or nature.
IX. TERM OF AGREEMENT. This Agreement shall become effective as of the date
the Fund commences its investment operations and shall continue for a
two-year term and thereafter so long as such continuance is
specifically approved at least annually by (i) the Board of Trustees of
the Trust or (ii) a vote of a "majority" (as defined in the Investment
Company Act of 1940, as amended) of the Fund's outstanding voting
securities, provided that in either event the continuance is also
approved by a majority of the Board of Trustees who are not "interested
persons" (as defined in said Act) of any part to this Agreement, by a
vote cast in person at a meeting called for the purpose of voting on
such approval. This Agreement is terminable, without penalty on 60
days' written notice, by ACIM, the Board of Trustees of the Trust, or
by vote of holders of a majority of the Fund's shares, or upon twelve
months' written notice by the Sub-Advisor, and will terminate
automatically upon any termination of the management agreement between
the Trust and ACIM. In addition, this Agreement will also terminate
automatically in the event of its assignment (as defined in said Act).
The Sub-Advisor agrees to notify the Trust of any circumstances that
might result in this Agreement being deemed to be assigned.
X. REPRESENTATIONS OF THE TRUST AND THE SUB-ADVISOR. The Trust represents
that (i) a copy of its Agreement and Declaration of Trust, dated August
28, 1991, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Advisor has been duly authorized, and (iii) it
has acted and will continue to act in conformity with the Investment
Company Act of 1940, as amended, and other applicable laws.
The Sub-Advisor represents that it is authorized to perform the
services described herein.
XI. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
XII. LIMITATION OF LIABILITY. This Agreement has been executed on behalf of
the Trust by the undersigned officer of the Trust solely in his
capacity as an officer of the Trust. No shareholder, trustee, officer,
employee or agent of the Trust shall be subject to claims against or
obligations of the Trust to any extent whatsoever.
XIII. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto.
XIV. GOVERNING LAW. This Agreement shall be governed in accordance with the
laws of the Commonwealth of Massachusetts.
XV. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder, the
Sub-Advisor is and shall be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to
act for or represent the Trust or ACIM in any way, or otherwise be
deemed to be an agent of the Trust or ACIM.
XVI. SEVERABILITY. If any provision of this agreement shall be held or made
invalid by a court decision, statute, rule or similar authority, the
remainder of this Agreement shall not be affected thereby.
XVII. NOTICES. Notices hereunder shall be addressed as follows:
To the Sub-Advisor: J.P. MORGAN INVESTMENT MANAGEMENT INC.
Attention: Ms. Nina Mettelman
522 Fifth Avenue
New York, New York 10036
with a copy to:
J.P. MORGAN INVESTMENT MANAGEMENT INC.
Attention: Mr. Peter Young
28 King Street
London SWIY 6XA
To the Trust: AMERICAN CENTURY INTERNATIONAL BOND FUNDS
Attention: William M. Lyons
Executive Vice President
4500 Main Street
Kansas City, MO 64141-0274
To ACIM: AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
Attention: James E. Stowers, III
4500 Main Street
Kansas City, MO 64141-0274
XVIII. PROMOTION AND DISTRIBUTION. The Sub-Advisor shall have no
responsibility or authority to promote the sale or distribution of the
Trust's shares in any manner.
Executed as of the 1st day of August 1997.
J.P. MORGAN INVESTMENT MANAGEMENT INC.
/s/Frank J. Webb
Name: Frank J. Webb
Title: Vice President
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
/s/Robert C. Puff
Robert C. Puff
President
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
/s/ James M. Benham
James M. Benham
President and Chief Executive Officer
Consent of Independent Auditors
The Board of Trustees and Shareholders
American Century International Bond Funds:
We consent to the inclusion in American Century International Funds'
Post-Effective Amendment No. 10 to the Registration Statement No. 33-43321 on
Form N-1A under the Securities Act of 1933 and Amendment No. 11 to the
Registration Statement No. 811-6441 filed on Form N-1A under the Investment
Company Act of 1940 of our report dated February 7, 1997 on the financial
statements and financial highlights of the American Century-Benham International
Bond Fund (the sole fund comprising American Century International Bond Funds)
for the periods indicated therein, which report has been incorporated by
reference into the Statement of Additional Information of American Century
International Bond Funds. We also consent to the reference to our firm under the
heading "Financial Highlights" in the Prospectus and under the heading "About
the Trust" in the Statement of Additional Information which is incorporated by
reference in the Prospectus.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Kansas City, Missouri
September 24, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ANNUAL REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC.
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> AMERICAN CENTURY-BENHAM EUROPEAN GOVERNMENT BOND FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 213,362,155
<INVESTMENTS-AT-VALUE> 207,581,731
<RECEIVABLES> 8,671,319
<ASSETS-OTHER> 1,200,967
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 217,454,017
<PAYABLE-FOR-SECURITIES> 265,013
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,647,712
<TOTAL-LIABILITIES> 3,912,725
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 221,276,643
<SHARES-COMMON-STOCK> 19,497,985
<SHARES-COMMON-PRIOR> 21,415,792
<ACCUMULATED-NII-CURRENT> 5,135,859
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,670,633)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6,200,577)
<NET-ASSETS> 213,541,292
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,541,139
<OTHER-INCOME> 0
<EXPENSES-NET> 921,786
<NET-INVESTMENT-INCOME> 5,691,353
<REALIZED-GAINS-CURRENT> (9,030,328)
<APPREC-INCREASE-CURRENT> (14,337,955)
<NET-CHANGE-FROM-OPS> (17,748,930)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,735,891
<NUMBER-OF-SHARES-REDEEMED> 6,653,698
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (38,914,434)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,044,125
<OVERDISTRIB-NII-PRIOR> (167,924)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 502,477
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 921,786
<AVERAGE-NET-ASSETS> 226,903,017
<PER-SHARE-NAV-BEGIN> 11.79
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> (1.11)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.95
<EXPENSE-RATIO> 0.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
