N-14
Initial Statement
As filed with the Securities and Exchange Commission on March 13, 2002
Registration Nos. 2-99222 and 811-4363
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. _____ [ ]
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AMERICAN CENTURY GOVERNMENT INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
4500 Main Street
P.O. Box 419200
Kansas City, MO 64141-6200
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 816-531-5575
Charles A. Etherington
Vice President and Associate General Counsel
4500 Main Street, P.O. Box 419200, Kansas City, MO 64141-6200
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective under the Securities Act of 1933.
Calculation of Registration Fee under the Securities Act of 1933: No filing fee
is required because an indefinite number of shares have previously been
registered on Form N-1A (Registration Nos. 2-99222 and 811-4363) pursuant to
Rule 24f-2 under the Investment Company Act of 1940. The Registrant is filing as
an exhibit to this Registration Statement an opinion related to the legality of
shares being issued in connection with this Registration Statement. Pursuant to
Rule 429, this Registration Statement relates to the aforesaid Registration
Statement on Form N-1A.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
Prospectus and Proxy Statement
April 15, 2002
Treasury Fund
Important Voting Information Inside!
TABLE OF CONTENTS
Important Information You Should Consider ................................. 2
Notice of Special Meeting of Shareholders ................................. 5
Combined Prospectus/Proxy Statement ....................................... 6
Proposal One: Election of Trustees
Nominees .................................................................. X
Information Regarding Nominees ............................................ X
The Board of Trustees ..................................................... X
Selection of Independent Auditors ......................................... X
Compensation of Trustees .................................................. X
Ownership of Fund Shares .................................................. X
Voting Information ........................................................ X
Proposal Two: Reorganization
Comparison of Certain Information Regarding the Funds ..................... 7
Primary Federal Income Tax Consequences ................................... 7
Risk Factors .............................................................. 8
Transaction and Operating Expense Information ............................. 8
Additional Information About the Proposed Transaction ..................... 9
Summary of Plan of Reorganization ......................................... 9
Description of the Securities of Government Bond .......................... 10
Reasons Supporting the Reorganization ..................................... 10
Federal Income Tax Consequences ........................................... 11
Capitalization ............................................................ 12
Information About the Funds ............................................... 12
Fundamental Investment Policies ........................................... 13
Information Relating to Voting Matters .................................... 13
General Information ....................................................... 13
Voting and Revocation of Proxies .......................................... 13
Record Date ............................................................... 14
Quorum .................................................................... 14
Shareholder Vote Required ................................................. 14
Cost of Proxy Solicitation ................................................ 15
Certain Shareholders ...................................................... 15
Appraisal Rights .......................................................... 15
Annual Meetings ........................................................... 15
Additional Information .................................................... 16
Litigation ................................................................ 16
Other Business ............................................................ 16
Shareholder Inquiries ..................................................... 16
Management's Discussion of Fund Performance ............................... 17
Report Highlights ......................................................... 17
Our Message to You ........................................................ 18
Performance & Portfolio Information ....................................... 19
Management Q&A ............................................................ 20
Appendix I ................................................................ X
Appendix II ............................................................... XS
American Century Investments
P.O. Box 419200
Kansas City, Missouri 64141-6200
April 15, 2002
Dear American Century Treasury Fund Shareholder:
I am writing to ask for your support of important proposals affecting your fund.
The proposals will be voted on at an upcoming Special Meeting of shareholders to
be held on Friday, August 2, 2002. Please take a few minutes to read the
enclosed materials, complete and sign the proxy voting card and mail it back to
us.
At the Special Meeting, you are being asked to elect nominees to serve on the
Board of Trustees of your fund. The enclosed materials give more detailed
information about the nominees. We encourage you to vote "FOR" all the nominees.
In addition, as a shareholder of the American Century Treasury Fund, you are
being asked to approve the combination of your fund with the American Century
Government Bond Fund.
The reason for the combination is twofold. First, the reorganization will permit
investors to select one general-purpose government bond fund with broad
investment objectives and policies, while maintaining the same intermediate-term
maturity range.
Second, management believe it will be more efficient to have the funds'
portfolio management team focus on a single, larger portfolio of assets rather
than continue to manage similar, smaller portfolios.
The Board of Trustees of your fund has unanimously voted in favor of this
reorganization and believes the combination is in your fund's and your best
interests. We encourage you to vote "FOR" the reorganization. The enclosed
materials give more detailed information about the proposed reorganization and
the reasons why we recommend you vote for it.
Please don't put these materials aside, thinking that you will return to them at
another time. If shareholders don't return their proxies, additional expenses
must be incurred to pay for follow-up mailings and phone calls. PLEASE TAKE A
FEW MINUTES TO REVIEW THE ENCLOSED MATERIALS AND VOTE YOUR SHARES TODAY. If you
have any questions or need any help in voting your shares, please call us at
1-800-331-8331.
To more efficiently handle this proxy solicitation, we have hired Alamo Direct
to act as our proxy solicitor. They might be calling you during the solicitation
process to ask if you have questions or concerns about the voting process and to
assist you with your vote.
I appreciate your consideration of these important proposals. Thank you for
investing with American Century and for your continued support.
Sincerely,
William M. Lyons
President
IMPORTANT INFORMATION YOU SHOULD CONSIDER
The following Q&A is a brief summary of some of the issues that may be important
to you. It may not contain all of the information or topics that you think are
important and, as a result, is qualified in its entirety by the more detailed
information contained elsewhere in this document, or incorporated into this
document. Please read all the enclosed proxy materials before voting. PLEASE
REMEMBER TO VOTE YOUR SHARES AS SOON AS POSSIBLE. If enough shareholders return
their proxy cards soon, additional costs for follow-up mailings and phone calls
may be avoided.
What is the purpose of the upcoming meeting?
At the Special Meeting, you are being asked to elect nominees to serve on the
Board of Trustees of American Century Government Income Trust. In addition, your
Board of Trustees has recommended combining Treasury into Government Bond. This
combination requires approval of Treasury shareholders. The Special Meeting to
vote on these proposals will be held on Friday, August 2, 2002, at 10:00 a.m.
(Central time) at American Century Tower I, 4500 Main Street, Kansas City,
Missouri. Shareholders of record as of the close of business on April 5, 2002,
are eligible to vote.
Who are the nominees for Trustee? Have all of them been elected before?
The Nominating Committee of your Board of Trustees has proposed that
shareholders elect eight members to the Board of Trustees of American Century
Government Income Trust. The nominees are:
Albert Eisenstat
Ronald J. Gilson
Kathryn A. Hall
William M. Lyons
Myron S. Scholes
Kenneth E. Scott
James E. Stowers III
Jeanne D. Wohlers
Albert Eisenstat, Kathryn Hall and William M. Lyons are being considered by
shareholders for the first time. A full discussion of the proposal to elect
Trustees begins on page ___.
When will the proposal regarding the Trustees take effect if it is approved?
The proposal regarding the Trustees will be effective immediately upon approval.
Why is the reorganization being proposed?
The reorganization seeks to improve operational and investment management
efficiencies by combining funds with similar investment objectives and
investment policies, approaches, procedures and portfolio securities. Combining
these similar funds will permit the portfolio management team to focus its
resources on a single, larger fund, rather than divide its time between similar
smaller funds.
How will the reorganization be accomplished?
Shareholders of Treasury are being asked to approve the combination of their
fund with Government Bond according to the Agreement and Plan of Reorganization
described on page ___. The reorganization will take the form of a transfer of
assets by Treasury in exchange for shares of Government Bond. Treasury will then
make a liquidating distribution to its shareholders of the Government Bond
shares received in the exchange.
What will shareholders get if the reorganization is approved?
As a result of the liquidating distribution, you will receive shares of
Government Bond in an amount equal to the value of your Treasury shares on the
date the combination takes place (probably September 3, 2002). The total dollar
value of your account after the reorganization will be the same as the total
dollar value of your account before the reorganization. However, because the net
asset value (price per share) of Government Bond may be different from the net
asset value of Treasury, you may receive a different number of shares than the
number of shares of Treasury that you have. After the reorganization, you will
own shares of Government Bond rather than shares of Treasury.
Why did the Board of Trustees approve the reorganization?
After reviewing many factors, your Board of Trustees unanimously determined that
the reorganization was in the best interests of Treasury and its shareholders.
Some of the factors considered include:
* Compatibility of the investment objectives, policies, restrictions, and
investments of the funds.
* The potential cost savings that could benefit shareholders of the funds
if the reorganization is approved.
* Elimination of duplicate expenses and internal competition between the
funds.
* The benefits that may result to the advisor and its affiliates if the
reorganization is consummated.
* The tax consequences to the funds and shareholders if the reorganization
is consummated.
Will the exchange of Treasury shares for shares of Government Bond cause
shareholders to realize income or capital gains for tax purposes?
No. The exchange of shares in the reorganization will be tax-free. We will
obtain a tax opinion confirming that the reorganization will not be a taxable
event for you for federal income tax purposes. Your tax basis and holding period
for your shares will be unchanged.
How does the total expense ratio of Government Bond compare to that of Treasury?
The total expense ratios of the funds are the same.
Is Government Bond riskier than Treasury?
Only slightly. Both funds invest in U.S. Treasury securities guaranteed by the
direct full faith and credit pledge of the U.S. government, and both funds may
invest in securities issued by U.S. government agencies and instrumentalities
other than the U.S. Treasury. Government Bond, however, is permitted to invest
an unlimited percentage of its assets in securities (including mortgage-backed
securities) issued by agencies and instrumentalities of the U.S. government
other than the U.S. Treasury. This wider range of permissible U.S. government
securities makes Government Bond only slightly riskier than Treasury.
Are distributions from Government Bond state tax-free?
Not necessarily. Shareholders should note that the income from securities issued
by U.S. government agencies and instrumentalities may be subject to state income
tax. Accordingly, a higher percentage of Government Bond's distributions will be
subject to state income taxes.
When and how will the reorganization take place?
Subject to receiving shareholder approval, the reorganization is scheduled to
take place on September 3, 2002. After the funds have calculated the value of
their assets and liabilities on August 30, 2002, Treasury will transfer its
assets and liabilities to Government Bond in exchange for the appropriate number
of Government Bond shares. Treasury will then make a liquidating distribution of
those Government Bond shares pro rata to its shareholders according to the value
of their accounts immediately prior to the transfer of assets. THE VALUE OF YOUR
ACCOUNT WILL NOT CHANGE AS A RESULT OF THIS REORGANIZATION.
Will the reorganization affect the management team of Treasury?
American Century Investment Management, Inc. will continue to manage the assets
of Government Bond after the reorganization. The portfolio management team for
Government Bond is led by Robert V. Gahagan, Portfolio Manager. Mr. Gahagan has
been a member of the team that manages Treasury since January 1998 and the team
that manages Government Bond since March 2002. He joined American Century in
October 1983. He has bachelor's degrees in economics and an MBA from the
University of Missouri-Kansas City.
How will distribution, purchase and redemption procedures and exchange rights
change as a result of the reorganization?
They won't. Government Bond has the same distribution, purchase and exchange
policies and procedures as Treasury.
How will the proposed changes affect your account?
If the proxy proposals are approved, Treasury will be combined with Government
Bond and your services will be transferred. American Century will ensure your
services will continue and no action is required on your part. Please review the
following information to answer questions you may have about services and
transactions during the proxy period.
Account number
- - Your account number will change and you will receive a transaction
confirmation with the new number in early September.
Automatic services
- - If you have any of the services below, they will be transferred and you
will receive a service update as a confirmation.
* automatic investments * direct deposits,
* automatic exchanges * dividend options
* automatic redemptions * required minimum distributions
* automatic transfers
- - If you have any of these services, they will occur in August as
scheduled unless we contact you for instructions.
Transactions
- - Purchases may be made into your current account until August 16.
- - You may continue to make exchanges or redemptions on your current
account through August 30.
If shareholders send their proxies in now as requested, can they change their
vote later?
Yes! A proxy can be revoked at any time using any of the voting procedures
described on your proxy vote card or by attending the meeting and voting in
person. Even if you plan to attend the meeting to vote in person, we ask that
you return the enclosed proxy vote card. Doing so will help us achieve a quorum
for the meeting.
How do shareholders vote their shares?
We've made it easy for you. You can vote online, by phone, by mail or by fax. To
vote online, access the Web site listed on your proxy card (you will need the
control number that appears on the right-hand side of your proxy card). To vote
by telephone, call the toll-free number listed on your proxy card (you will need
the control number that appears on the right-hand side of your proxy card). To
vote by mail, complete, sign and send us the enclosed proxy voting card in the
enclosed postage-paid envelope. To vote by fax, send your fax to the toll-free
number listed on your proxy card.
Your shares will be voted EXACTLY as you tell us. If you simply sign the
enclosed proxy card and return it, we will follow the recommendation of your
Board of Trustees and vote it "FOR" all proposals. You also may vote in person
at the meeting on Friday, August 2, 2002.
Where can shareholders get more information about the funds?
A copy of Government Bond's Prospectus accompanies this proxy statement. In
addition, the Manager's Discussion and Analysis of Fund Performance portion of
Government Bond's most recent Annual Report to Shareholders is included in this
document on page . If you would like a copy of Treasury's prospectus or either
fund's Statement of Additional Information or most recent annual or semiannual
report, please call us at 1-800-331-8331.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
AMERICAN CENTURY GOVERNMENT INCOME TRUST
American Century Investments
P. O. Box 419200
Kansas City, Missouri 64141-6200
1-800-331-8331
To be held on Friday, August 2, 2002
To American Century Treasury Shareholders:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the shareholders of the
American Century Treasury Fund, a portfolio of American Century Government
Income Trust ("Treasury"), will be held at American Century Tower I, 4500 Main
Street, Kansas City, Missouri on Friday, August 2, 2002, at 10:00 a.m. (Central
time) for the following purposes:
PROPOSAL 1. To elect a Board of Trustees of eight members to hold office until
their successors are duly elected and qualified;
PROPOSAL 2. To consider and act upon a proposal to approve an Agreement and Plan
of Reorganization and the transactions contemplated thereby, including:
(a) the transfer of substantially all of the assets and liabilities of Treasury
to the American Century Government Bond Fund, another investment portfolio of
American Century Government Income Trust ("Government Bond"), in exchange for
shares in Government Bond; and
(b) the distribution of Government Bond shares to the shareholders of Treasury
according to their respective interests.
PROPOSAL 3. To transact such other business as may properly come before the
Special Meeting or any adjournment(s) thereof.
Information regarding the nominees for the Board of Trustees begins on page ___
of this Combined Prospectus/Proxy Statement. The proposed reorganization, the
Agreement and Plan of Reorganization and related matters are described in the
attached Combined Prospectus/Proxy Statement beginning on page ___.
Shareholders of record as of the close of business on April 5, 2002, are
entitled to notice of, and to vote at, the Special Meeting or any adjournment(s)
thereof.
Please execute and return promptly in the enclosed envelope the accompanying
proxy card, which is being solicited by the Board of Trustees of American
Century Government Income Trust. Please return your proxy card even if you are
planning to attend the meeting. This is important to ensure a quorum at the
meeting. Proxies may be revoked at any time before they are exercised using any
of the voting procedures described on your proxy vote card or by attending the
meeting and voting in person.
David C. Tucker
Senior Vice President
April 15, 2002
COMBINED PROSPECTUS/PROXY STATEMENT
AMERICAN CENTURY GOVERNMENT INCOME TRUST
April 15, 2002
This Combined Prospectus/Proxy Statement is furnished in connection with the
solicitation of votes by the Board of Trustees of American Century Government
Income Trust on behalf of its Treasury Fund ("Treasury"), in connection with a
Special Meeting of Shareholders to be held on Friday, August 2, 2002, at 10:00
a.m. (Central time) at American Century Tower I, 4500 Main Street, Kansas City,
Missouri.
At the Special Meeting, shareholders of Treasury are being asked to elect a
Board of Trustees of eight members to hold office until their successors are
duly elected and qualified.
In addition, shareholders of Treasury are being asked to approve the combination
of their fund with the American Century Government Bond Fund, another series of
American Century Government Income Trust ("Government Bond"). Treasury and
Government Bond are similarly managed, diversified, open-end mutual funds that
invest in a similar mix of fixed-income securities. The purpose of the
reorganization is to streamline American Century's fixed-income lineup and to
achieve management and operational efficiencies. Combining these similar funds
as described further in this Combined Prospectus/Proxy Statement will help
achieve this objective. Each fund has shares registered with the Securities and
Exchange Commission.
Treasury and Government Bond are similarly managed, diversified, open-end mutual
funds that invest in a similar mix of fixed-income securities. The purpose of
the reorganization is to streamline American Century's fixed-income lineup and
to achieve management and operational efficiencies. Combining these similar
funds as described further in this Combined Prospectus/Proxy Statement will help
achieve this objective. Each fund has shares registered with the Securities and
Exchange Commission.
This Combined Prospectus/Proxy Statement constitutes the proxy statement of your
fund for the Special Meeting of Shareholders and a prospectus for the Government
Bond shares that are to be issued to you in connection with the reorganization.
It is intended to give you the information you need to consider and vote on the
proposed reorganization. You should retain this document for future reference. A
Statement of Additional Information about Government Bond, dated August 1, 2001,
has been filed with the Commission and is incorporated into this document by
reference. A copy of the Statement of Additional Information may be obtained
without charge upon request by calling us at 1-800-331-8331 or writing to us at
American Century Investments, 4500 Main Street, P. O. Box 419200, Kansas City,
Missouri 64141-6200.
The principal executive offices of Treasury and Government Bond are located at
American Century Investments, 4500 Main Street, P. O. Box 419200, Kansas City,
Missouri 64141-6200. The funds' telephone number is 1-800-345-2021.
The information contained in this Combined Prospectus/Proxy Statement is
required by rules of the Securities and Exchange Commission, and some of it is
highly technical. If you have any questions about these materials or how to vote
your shares, please call us at 1-800-331-8331.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
Combined Prospectus/Proxy Statement is accurate or complete. Any representation
to the contrary is a criminal offense.
No person has been authorized to give any information or to make any
representations other than those contained in this Combined Prospectus/Proxy
Statement and in the materials expressly incorporated herein by reference. If
given or made, such other information or representations must not be relied upon
as having been authorized by Treasury, Government Bond or anyone affiliated with
American Century Investments.
PLEASE NOTE THAT THE SPECIAL MEETING OF SHAREHOLDERS WILL BE A BUSINESS MEETING
ONLY AND IS NOT A SHAREHOLDER SEMINAR.
PROPOSAL 1: ELECTION OF TRUSTEES
Nominees
The Board of Trustees of American Century Government Income Trust has nominated
eight individuals (the "Nominees") for election to the Board. At the meeting,
the shareholders of Treasury will be asked to elect the Nominees to serve on the
American Century Government Income Trust Board of Trustees. It is intended that
the enclosed Proxy will be voted for the election of the eight Nominees named
below as Trustees, unless such authority has been withheld in the Proxy. The
term of office of each person elected as Trustee will be until his or her
successor is duly elected and shall qualify. Information regarding each Nominee
is set forth below. Each Nominee has consented to serve as a Trustee if elected.
Shareholders are being asked to elect the Nominees to serve as Trustees of the
American Century Government Income Trust Board of Trustees in order to ensure
that at least two-thirds of the members of the Board have been elected by the
shareholders of the Trust as required by the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Investment Company Act provides that
vacancies on the Board of Trustees may not be filled by Trustees unless
thereafter at least two-thirds of the Trustees shall have been elected by
shareholders. To ensure continued compliance with this requirement without
incurring the expense of calling additional shareholder meetings, shareholders
are being asked at this Special Meeting to elect the eight Trustees to hold
office until the next meeting of shareholders. Consistent with the provisions of
the Company's by-laws, and as permitted by Maryland law, the Company does not
anticipate holding annual shareholder meetings. Thus, the Trustees will be
elected for indefinite terms, subject to termination or resignation. Each
Nominee has indicated a willingness to serve as a member of the Board of
Trustees if elected. If any of the Nominees should not be available for
election, the persons named as proxies (or their substitutes) may vote for other
persons in their discretion. However, Management has no reason to believe that
any Nominee will be unavailable for election. In evaluating the Nominees, the
Trustees took into account their background and experience, including their
familiarity with the issues relating to these types of funds and investments as
well as their careers in business, finance, marketing and other areas. The
Trustees also considered the experience of the Nominees as Trustees or Directors
of certain American Century Funds.
INFORMATION REGARDING NOMINEES
The individuals listed in the table below serve as trustees or officers of
Treasury and Government Bond. Trustees listed as interested persons of the funds
(as defined in the Investment Company Act) are "interested" primarily by virtue
of their engagement as officers of American Century Companies, Inc. (ACC) or its
wholly-owned subsidiaries, including the funds' investment adviser, American
Century Investment Management, Inc. (ACIM); the funds' principal underwriter,
American Century Investment Services, Inc. (ACIS); and the funds' transfer
agent, American Century Services Corporation (ACSC).
The other Trustees, (more than two-thirds of the total number) are independent;
that is, they are not employees or officers of, and have no financial interest
in, ACC or any of its wholly-owned subsidiaries, including ACIM, ACIS and ACSC.
All persons named as officers of the funds also serve in similar capacities for
other funds advised by ACIM. Only officers with policy-making functions are
listed. No officer is compensated for his or her service as an officer of the
funds. The listed officers are interested persons of the funds.
Number of
Portfolios
in Fund
Length Complex Other
Position(s) of Time Overseen Directorships
Held with Served Principal Occupation(s) by Held by
Name, Address (Age) Fund (years) During Past 5 Years Director Trustee
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Interested Trustees
....................................................................................................................................
James E. Stowers III Trustee, 6 Co-Chairman, ACC 76 None
4500 Main Street Chairman (September 2000 to present)
Kansas City, MO 64111 of Co-Chief Investment Officer,
(42) the Board U.S. Equities (September 2000
to February 2001)
Chief Executive Officer, ACC
ACIM, ACSC and
other ACC subsidiaries
(June 1996 to September 2000)
President, ACC (January 1995
to June 1997)
President, ACIM and ACSC
(April 1993 to August 1997)
Director, ACC, ACIM, ACSC and other ACC
subsidiaries
William M. Lyons Trustee 1 Chief Executive Officer, ACC 38 None
4500 Main Street and other ACC subsidiaries
Kansas City, MO 64111 (September 2000 to present)
(46) President, ACC (June 1997
to present)
Chief Operating Officer
ACC (June 1996 to
September 2000)
General Counsel, ACC, ACIM,
ACIS, ACSC and other ACC
subsidiaries (June 1989 to
June 1998)
Executive Vice President,
ACC (January 1995
to June 1997)
Also serves as: Executive
Vice President and Chief
Operating Officer, ACIM,
ACSC and other ACC
subsidiaries, and
Executive Vice President
of other ACC subsidiaries
Director, ACIM, ACSC and other
ACC subsidiaries
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Independent Trustees
Albert Eisenstat Trustee 6 General Partner, 38 Independent Director,
1665 Charleston Road Discovery Ventures Sungard Data Systems (1991 to present)
Mountain View, CA 94043 (Venture capital firm, Independent Director, Business Objects S/A
(71) 1996 to 1998) (1994 to present)
...................................................................................................................................................................
Ronald J. Gilson Trustee 6 Charles J. Meyers Professor 38 None
1665 Charleston Road of Law and Business,
Mountain View, CA 94043 Stanford Law School
(55) (1979 to present)
Mark and Eva Stern
Professor of Law and
Business, Columbia
University School of Law
(1992 to present)
Counsel, Marron, Reid &
Sheehy (a San Francisco
law firm, 1984 to present)
Kathryn A. Hall Trustee 0 President and Managing 38 Director, Princeton University.
1665 Charleston Road Director, Laurel Management Investment Company and
Mountain View, CA 94043 Company, L.L.C Stanford Management Company
(44) (1989 to present)
Myron S. Scholes Trustee 21 Partner, Oak Hill Capital 38 Director, Dimensional Fund Advisors
1665 Charleston Road Management, (1999-present) (investment advisor, 1982 to present)
Mountain View, CA 94043 Principal, Long-Term Director, Smith Breeden Family of
(60) Capital Management Funds (1992 to present)
(investment advisor,
1993 to January 1999)
Frank E. Buck Professor
of Finance, Stanford
Graduate School of Business
(1981 to present)
- --------------------------------------------------------------------------------------------------------------------------------------------------------------
Kenneth E. Scott Trustee 30 Ralph M. Parsons Professor 38 Director, RCM Capital Funds, Inc.
1665 Charleston Road of Law and Business, (1994 to present)
Mountain View, CA 94043 Stanford Law School
(73) (1972 to present)
...............................................................................................................................................................
Jeanne D. Wohlers Trustee 17 Director and Partner,, 38 Director, Indus International
1665 Charleston Road Windy Hill Productions, LP (software solutions,
Mountain View, CA 94043 (educational software, January 1999 to present)
(56) 1994 to 1998) Director, Quintus Corporation
(automation solutions,
1995 to present)
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Officers
William M. Lyons President 1 See entry above under 38 See entry above under
4500 Main Street "Interested Trustees". "Interested Trustees".
Kansas City, MO 64111
(46)
................................................................................................................................................................
Robert T. Jackson Executive 1 Chief Administrative Officer Not Not applicable.
4500 Main St. Vice and Chief Financial Officer, applicable
Kansas City, MO 64111 President ACC (August 1997 to present)
(55) and President, ACSC
Chief (January 1999 to present)
Financial Executive Vice President, ACC
Officer (May 1995 to present)
Also serves as: Executive Vice
President and Chief Financial Officer,
ACIM, ACIS and other ACC subsidiaries
Maryanne Roepke, CPA Senior Vice 1 Senior Vice President and Not Not applicable
4500 Main St. President, Assistant Treasurer, ACSC applicable
Kansas City, MO 64111 Treasurer
(45) and Chief
Accounting
Officer
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------
David C. Tucker Senior Vice 3 Senior Vice President, ACIM, Not Not applicable
4500 Main St. President ACIS, ACSC and other ACC applicable
Kansas City, MO 64111 and subsidiaries
(43) General (June 1998 to present)
Counsel General Counsel, ACC,
ACIM, ACIS, ACSC and
other ACC subsidiaries
(June 1998 to present)
Consultant to mutual
fund industry
(May 1997 to April 1998)
................................................................................................................................................................
C. Jean Wade Controller 5 Vice President, ACSC Not Not applicable
4500 Main St. (February 2000 to present) applicable
Kansas City, MO 64111 Controller-Fund Accounting,
(37) ACSC
................................................................................................................................................................
Robert Leach Controller 4 Vice President, ACSC Not applicable Not applicable
4500 Main St. February 2000 to present)
Kansas City, MO 64111 Controller-Fund Accounting,
(35) ACSC
Jon Zindel Tax Officer 4 Vice President, Corporate Tax, Not Not applicable
4500 Main Street ACSC (April 1998 to present) applicable
Kansas City, MO 64111 Vice President, ACIM, ACIS
(34) and other ACC subsidiaries
(April 1999 to present)
President, American Century
Employee Benefit Services, Inc.
(January 2000 to December 2000)
Treasurer, American Century
Ventures, Inc.
(December 1999 to January 2001)
Director of Taxation, ACSC
(July 1996 to April 1998)
- ------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF TRUSTEES
The Board of Trustees oversees the management of all funds issued by American
Century Government Income Trust and meets at least quarterly to review reports
about fund operations. Although the Board of Trustees does not manage the funds,
it has hired the advisor to do so. The Trustees, in carrying out their fiduciary
duty under the Investment Company Act of 1940, are responsible for approving new
and existing management contracts with the funds' advisor. In carrying out these
responsibilities, the Board reviews material factors to evaluate such contracts,
including (but not limited to) assessment of information related to the
advisor's performance and expense ratios, estimates of income and indirect
benefits (if any) accruing to the advisor, the advisor's overall management and
projected profitability, and services provided to the funds and their investors.
The Board has the authority to manage the business of the funds on behalf of
their investors, and it has all powers necessary or convenient to carry out that
responsibility. Consequently, the Trustees may adopt Bylaws providing for the
regulation and management of the affairs of the funds and may amend and repeal
them to the extent that such Bylaws do not reserve that right to the funds'
investors. They may fill vacancies in or reduce the number of Board members, and
may elect and remove such officers and appoint and terminate such agents as they
consider appropriate. They may appoint from their own number and establish and
terminate one or more committees consisting of two or more Trustees who may
exercise the powers and authority of the Board to the extent that the Trustees
determine. They may, in general, delegate such authority as they consider
desirable to any officer of the funds, to any committee of the Board and to any
agent or employee of the funds or to any custodian, transfer or investor
servicing agent, or principal underwriter. Any determination as to what is in
the interests of the funds made by the Trustees in good faith shall be
conclusive.
Committees
The Board of Trustees has four standing committees to oversee specific functions
of the funds' operations. Information about these committees appears in the
table below. The Trustee first named serves as chairman of the committee.
Meetings Held
During last
Committee Members Function Fiscal Year
- ------------------------------------------------------------------------------------------------------------------------------------
Audit Jeanne D. Wohlers The Audit Committee recommends the engagement of the 5
Albert Eisenstat funds' independent auditors and oversees its activities.
Kenneth E. Scott The committee receives reports from the advisor's Internal
Audit Department, which is accountable to the committee.
The committee also receives reporting about compliance
matters affecting the Trust.
....................................................................................................................................
Nominating Kenneth E. Scott The Nominating Committee primarily considers and 5
Ronald J. Gilson recommends individuals for nomination as trustees. The
Albert Eisenstat names of potential trustee candidates are drawn from a
Myron S. Scholes number of sources, including recommendations from members
Jeanne D. Wohlers of the Board, management and shareholders. This committee
also reviews and makes recommendations to the Board with
respect to the composition of Board committees and other
Board-related matters, including its organization, size,
composition, responsibilities, functions and compensation.
Portfolio Myron S. Scholes The Portfolio Committee reviews quarterly the investment 5
Ronald J. Gilson activities and strategies used to manage fund assets. The
committee regularly receives reports from portfolio managers,
credit analysts and other investment personnel concerning
the funds' investments.
Quality Ronald J. Gilson The Quality of Service Committee reviews the level and quality 5
of Myron S. Scholes of transfer agent and administrative services provided to the
Service William M. Lyons funds and their shareholders. It receives and reviews reports
comparing those services to those of fund competitors and
seeks to improve such services where feasible and appropriate.
- ------------------------------------------------------------------------------------------------------------------------------------
Selection of Independent Auditors
The 1940 Act requires that a fund's independent auditors be selected by a
majority of those Trustees who are not "interested persons" (as defined in the
1940 Act) of the Fund. One of the purposes of the Audit Committee is to
recommend to a fund's Board of Trustees the selection, retention or termination
o f independent auditors for the fund. A copy of the Audit Committee's charter,
which describes the Audit Committee's purposes, duties and powers, is attached
as Appendix I to this Prospectus/Proxy Statement.
At meetings held according to the following schedule, the Audit Committee
recommended, and the Board of Trustees/Directors, including a majority of those
Trustees who are not "interested persons," approved the selection of
PricewaterhouseCoopers LLP as the independent auditors for each Fund overseen by
the Board.
Fund Company Date Approved by Board Fiscal Year End
- ------------ ---------------------- ---------------
American Century Investment Trust 03/13/02 02/28/03
American Century Government Income Trust 03/13/02 03/31/03
American Century Municipal Trust 03/06/01 05/31/02
American Century California Tax-Free and Municipal Funds 08/06/01 09/30/02
American Century Target Maturities Trust 08/06/01 09/30/02
American Century Quantitative Equity Funds 12/14/01 12/31/02
American Century International Bond Funds 12/14/01 12/31/02
PricewaterhouseCoopers LLP, a major international accounting firm, has acted as
auditors of the funds overseen by the Board of Trustees since October 1997.
After reviewing the audited financial statements for the fiscal year ended March
31, 2001, the Audit Committee recommended to the Board of Trustees that such
financial statements be included in each fund's annual report to shareholders. A
copy of the audit committee's report for each fund are attached as Appendix II
to this proxy statement.
Audit Fees. For the fiscal year ending in 2001, PricewaterhouseCoopers LLP
billed American Century funds $754,825.00 for services rendered for the audit
of each fund's annual financial statements.
All Other Fees. For the fiscal years ending in 2001, PricewaterhouseCoopers LLP
billed American Century funds $1,125,719.00 for services other than those
described above. The Audit Committee considered the compatibility of these
non-audit services with PricewaterhouseCoopers' independence.
Compensation of Trustees
The Trustees serve as trustees for eight American Century investment companies.
Each Trustee who is not an interested person as defined in the Investment
Company Act receives compensation for service as a member of the Board of all
eight companies based on a schedule that takes into account the number of
meetings attended and the assets of the funds for which the meetings are held.
These fees and expenses are divided among the eight investment companies based,
in part, upon their relative net assets. Under the terms of the management
agreement with the advisor, the funds are responsible for paying such fees and
expenses.
The following table shows the aggregate compensation paid by all the funds
issued by American Century Government Income Trust for the periods indicated and
by the seven other investment companies served by the Board of Trustees to each
Trustee who is not an interested person as defined in the Investment Company
Act.
Aggregate Trustee Compensation for Fiscal Year Ended March 31, 2001
Total Compensation Total Compensation from the
Name of Trustee from the Funds(1) American Century Family of Funds(2)
- --------------- ----------------- -----------------------------------
Albert Eisenstat $20,864 $79,750
....................................................................................................................................
Ronald J. Gilson $23,747 $87,750
Myron S. Scholes $19,466 $74,750
Kenneth E. Scott $21,888 $82,000
Isaac Stein(3) $11,085 $13,500
- ------------------------------------------------------------------------------------------------------------------------------------
Jeanne D. Wohlers $19,860 $76,000
1 Includes compensation paid to the trustees during the fiscal year ended March
31, 2001, and also includes amounts deferred at the election of the trustees
under the Amended and Restated American Century Mutual Funds Deferred
Compensation Plan for Non-Interested Directors and Trustees. The total amount of
deferred compensation included in the preceding table is as follows: Mr.
Eisenstat, $46,000; Mr. Gilson, $87,000; Mr. Scholes, $71,750; Mr. Scott,
$40,000; and Ms. Wohlers, $19,800.
2 Includes compensation paid by the eight investment company members of the
American Century family of funds served by this Board.
3 Mr. Stein retired from the Board on September 15, 2000.
The funds have adopted the Amended and Restated American Century Deferred
Compensation Plan for Non-Interested Directors. Under the plan, the independent
Trustees may defer receipt of all or any part of the fees to be paid to them for
serving as trustees of the funds.
All deferred fees are credited to an account established in the name of the
Trustees. The amounts credited to the account then increase or decrease, as the
case may be, in accordance with the performance of one or more of the American
Century funds that are selected by the Trustee. The account balance continues to
fluctuate in accordance with the performance of the selected fund or funds until
final payment of all amounts credited to the account. Trustees are allowed to
change their designation of mutual funds from time to time.
No deferred fees are payable until such time as a Trustee resigns, retires or
otherwise ceases to be a member of the Board of Trustees. Trustees may receive
deferred fee account balances either in a lump sum payment or in substantially
equal installment payments to be made over a period not to exceed 10 years. Upon
the death of a Trustee, all remaining deferred fee account balances are paid to
the Trustee's beneficiary or, if none, to the Trustee's estate.
The plan is an unfunded plan and, accordingly, the funds have no obligation to
segregate assets to secure or fund the deferred fees. To date, the funds have
voluntarily funded their obligations. The rights of Trustees to receive their
deferred fee account balances are the same as the rights of a general unsecured
creditor of the funds. The plan may be terminated at any time by the
administrative committee of the plan. If terminated, all deferred fee account
balances will be paid in a lump sum.
No deferred fees were paid to any Trustee under the plan during the fiscal year
ended March 31, 2001.
Ownership of Fund Shares
The Trustees owned shares in the funds as of December 31, 2001, as shown in the
table below:
Name of Trustees(1)
- ------------------------------------------------------------------------------------------------------------------------------------------------
James E. William M. Albert Ronald J.
Stowers III Lyons Eisenstat Gilson
- ------------------------------------------------------------------------------------------------------------------------------------------------
Dollar Range of Equity Securities in the Funds:
Treasury A A A A
Government Bond A A A A
Aggregate Dollar Range of Equity
Securities in all Registered Investment
Companies Overseen by Director in
Family of Investment Companies E E E E
- ------------------------------------------------------------------------------------------------------------------------------------------------
Name of Trustees(1)
- ------------------------------------------------------------------------------------------------------------------------------------------------
Myron S. Kenneth E. Jeanne D.
Scholes Scott Wohlers
- ------------------------------------------------------------------------------------------------------------------------------------------------
Dollar Range of Equity Securities in the Funds:
Treasury A A A
Government Bond A A A
Aggregate Dollar Range of Equity
Securities in all Registered Investment
Companies Overseen by Trustee in
Family of Investment Companies E E E
Ranges: A-none, B-$1-$10,000, C-$10,001-$50,000, D-$50,001-$100,000, E-More than $100,000
1 Kathryn A. Hall did not own any shares as of December 31, 2001.
Voting Information
Each Nominee will be elected to the Board of Trustees of American Century
Government Income Trust if he or she receives the approval of a majority of the
votes of American Century Government Income Trust represented at the meeting,
provided at least a quorum (50% of the outstanding votes), is represented in
person or by proxy. The election of Trustees is determined by the votes received
from all American Century Government Income Trust shareholders without regard to
whether a majority of shares of any one fund voted in favor of a particular
Nominee or all Nominees as a group. By completing the proxy, you give the named
proxies the right to cast your votes. If you elect to withhold authority for any
nominees, you may do so by striking a line through the Nominee name on the
proxy, as further explained on the proxy itself. The Board of Trustees does not
contemplate that any Nominee will be unable to serve as a member of the Board of
Trustees for any reason, but if that should occur prior to the Special Meeting,
the individuals named as proxies reserve the right to substitute another person
or persons of their choice as Nominee or Nominees.
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE NOMINEES.
PROPOSAL 2: REORGANIZATION
COMPARISON OF CERTAIN INFORMATION REGARDING THE FUNDS
The following chart is provided to show a comparison of certain key attributes
of Treasury with Government Bond. For additional information about the funds,
see the section titled "Information About the Funds" starting on page ___.
Treasury Government Bond
- ------------------------------------------------------------------------------------------------------------------------------------
Type of Fund Intermediate U.S. Treasury Fund General U.S. Treasury Fund
Investment Objective The fund seeks the highest level of current The fund seeks high current income.
income exempt from state income tax, and
also seeks safety of capital
Investment Policies The fund buys U.S. Treasury securities The fund buys U.S. Treasury securities guaranteed by
guaranteed by the full faith and credit the full faith and credit pledge of the U.S. government,
pledge of the U.S. government, and and securities, including mortgage-backed securities, issued by
securities issued by the U.S. government the U.S. government and its agencies and instrumentalities
its agencies and instrumentalities other other than the U.S. Treasury.
than the U.S. Treasury.
Weighted Average No Restriction No Restriction
Portfolio Maturity
Credit Quality
Total Expense Ratio Investor Class 0.51% Investor Class 0.51%
Advisor Class 0.76% Advisor Class 0.76%
Distribution Policy Same as Government Bond Distributions from net income are declared
daily and paid monthly. Capital gains
distributions are paid once a year, usually
in December.
Purchases and Exchanges Same as Government Bond See pages 20-23 of the Investor Class Prospectus and pages 19-21
of the Advisor Class Prospectus
Redemption Policies Same as Government Bond See pages 20-23 of the Investor Class Prospectus and pages 19-21
of the Advisor Class Prospectus
Investment Advisor Same as Government Bond American Century Investment Management,
Inc. ("ACIM")
Transfer Agent Same as Government Bond American Century Services Corporation
("ACSC")
Distributor Same as Government Bond American Century Investment Services, Inc.
("ACIS")
Custodians Same as Government Bond J.P. Morgan Chase and Co. and Commerce
Bank, N.A.
Independent Auditors Same as Government Bond PricewaterhouseCoopers LLP
PRIMARY FEDERAL INCOME TAX CONSEQUENCES
The exchange of Treasury shares for Government Bond shares in the reorganization
will be tax-free to shareholders. We will obtain a tax opinion confirming that
the reorganization will not be a taxable event for shareholders of either fund
for federal income tax purposes. A shareholder's aggregate tax basis and holding
period for Government Bond shares received in the reorganization will be
identical to the aggregate tax basis and holding period for the Treasury shares
exchanged in the transaction. The tax consequences of the reorganization are
described in more detail on page _____ of this Combined Prospectus/Proxy
Statement.
RISK FACTORS
Interest rate changes affect the share value of both Treasury and Government
Bond. Generally, when interest rates rise, the funds' share values will decline.
The opposite is true when interest rates decline. The degree to which interest
rate changes affect a fund's performance varies and is related to the weighted
average maturity of a particular fund. In general, when interest rates rise, you
can expect the share value of a long-term bond fund to fall more than that of a
short-term bond fund. When rates fall, the opposite is true. Because neither
Government Bond nor Treasury is restricted to a particular weighted average
maturity, the share value of both funds are comparably sensitive to interest
rate fluctuation. The fund managers monitor the weighted average maturity of
both Treasury and Government Bond. The managers seek to adjust the weighted
average maturity as appropriate, taking into account market conditions and other
relevant factors.
Government Bond may also purchase mortgage-backed securities issued by U.S.
government agencies and instrumentalities. The most significant additional risk
for Treasury shareholders as a result of the reorganization is prepayment risk.
Government Bond may invest a greater percentage of its assets in mortgage-backed
securities. When homeowners refinance their mortgages to take advantage of
declining interest rates, their existing mortgages are prepaid. The mortgages,
which back the securities purchased by the fund, may be prepaid in this fashion.
When this happens, the fund will be required to purchase new securities at
current market rates, which will usually be lower. Because of this prepayment
risk, Government Bond may benefit less from declining interest rates than
Treasury.
Your Board of Trustees does not believe that the reorganization exposes
shareholders of Treasury to any substantially or different risks than they are
exposed to as shareholders of Treasury. For a new discussion of the various
investment policies, approaches and procedures of Government Bond, and the risks
associated therewith, please see the accompanying Prospectus beginning at page
11 of the Investor Class Prospectus and page 10 of the Advisor Class prospectus.
TRANSACTION AND OPERATING
EXPENSE INFORMATION
The tables below compare various shareholder transaction and annual fund
operating expenses of Treasury as of its most recent fiscal year end (March 31,
2001) with Government Bond as of its most recent fiscal year end (March 31,
2001). After the reorganization, the expense levels of the surviving fund will
be the same as those shown for Government Bond (Pro Forma).
Annual Operating Expenses (expenses that are deducted from fund assets)
Management Distribution and Other Total Annual Fund
Fee(1) Service (12b-1) Fees(2) Expenses(3) Operating Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury (Investor) 0.51% None 0.00% 0.51%
....................................................................................................................................
Government Bond (Investor) 0.51% None 0.00% 0.51%
Government Bond (Investor Pro Forma) 0.51% None 0.00% 0.51%
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury (Advisor) 0.26% 0.50% 0.00% 0.76%
....................................................................................................................................
Government Bond (Advisor) 0.26% 0.50% 0.00% 0.76%
Government Bond (Advisor Pro Forma) 0.26% 0.50% 0.00% 0.76%
1 Based on expenses incurred during the funds' most recent fiscal year. The
funds have stepped fee schedules. As a result, the funds' management fee rate
generally decreases as fund assets increase.
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 advisor, and a portion is used to compensate them for
distribution and other shareholder services.
3 Other expenses, which include the fees and expenses of the funds' independent
trustees, their legal counsel and interest, are expected to be less than 0.005%
for the current fiscal year.
Examples
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury (Investor) $52 $163 $285 $640
....................................................................................................................................
Government Bond (Investor) $52 $163 $285 $640
- ------------------------------------------------------------------------------------------------------------------------------------
Government Bond (Investor Pro Forma) $52 $163 $285 $640
Treasury (Advisor) $78 $242 $422 $939
....................................................................................................................................
Government Bond (Advisor) $78 $242 $422 $939
Government Bond (Advisor Pro Forma) $78 $242 $422 $939
....................................................................................................................................
CALLOUT
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
ADDITIONAL INFORMATION
ABOUT THE PROPOSED REORGANIZATOIN
SUMMARY OF PLAN OF REORGANIZATION
Subject to receipt of shareholder approval, the reorganization will be carried
out according to the terms of the Agreement and Plan of Reorganization between
the funds. The following is a brief summary of some of the important terms of
that Agreement.
EFFECTIVE TIME OF THE REORGANIZATION. The Agreement requires that the exchange
of assets for stock take place after the close of business on one business day
but before (or as of) the opening of business on the next business day (the
"Effective Time"). It is currently anticipated that the reorganization will take
place after the close of business on August 30, 2002, but before (or as of) the
opening of business on September 3, 2002. However, the Agreement gives the
officers of the funds the flexibility to choose another date.
EXCHANGE OF ASSETS. After the close of business on August 30, 2002, the funds
will determine the value of their assets and liabilities in the same manner as
described on page 24 of the Government Bond Investor Class Prospectus or page 22
of the Government Bond Advisor Class Prospectus. The assets and liabilities of
Treasury will then be transferred to Government Bond in exchange for that number
of full and fractional shares (rounded to the third decimal place) that have the
same aggregate net asset value as the value of the net assets received in the
exchange.
LIQUIDATING DISTRIBUTIONS AND TERMINATION OF TREASURY. Immediately after the
exchange of its assets for the Government Bond shares, Treasury will distribute
pro rata all of the shares received in the exchange to its shareholders of
record at the Effective Time. All of the outstanding shares of Treasury will be
redeemed and canceled and its stock books closed. As a result of the
distribution, Treasury shareholders will become shareholders of Government Bond.
SHAREHOLDER APPROVAL. Consummation of the reorganization requires approval of
Treasury shareholders.
REPRESENTATIONS AND WARRANTIES. The Agreement contains representations and
warranties made by Treasury to Government Bond concerning Treasury's formation
and existence under applicable state law, its power to consummate the
reorganization, its qualification as a "regulated investment company" under
applicable tax law, the registration of its shares under federal law and other
matters that are customary in a reorganization of this type. The representations
and warranties terminate at the Effective Time.
CONDITIONS TO CLOSING. The Agreement contains conditions to closing the proposed
reorganization that benefit each fund. The conditions include (i) that Treasury
shareholders approve the proposed reorganization, (ii) that all representations
of the funds be true in all material respects, (iii) receipt of the tax opinion
described on page _____ under the caption "Federal Income Tax Consequences"," and (iv)
such other matters as are customary in a reorganization of this type.
TERMINATION OF AGREEMENT. The Agreement may be terminated by a fund as a result
of the failure by the other fund to meet one of its conditions to closing, or by
mutual consent.
GOVERNING LAW. The Agreement states that it is to be interpreted under
Massachusetts law, the state of organization of Government Bond and Treasury.
DESCRIPTION OF THE SECURITIES OF GOVERNMENT BOND
Government Bond is a series of shares offered by American Century Government
Income Trust. Each series is commonly referred to as a mutual fund. The assets
belonging to each series of shares are held separately by the custodian.
American Century Government Income Trust is a Massachusetts business trust,
which means its activities are overseen by a Board of Trustees.
Like Treasury, Government Bond currently offers two classes of shares, the
Investor Class and the Advisor Class, although it may offer additional classes
in the future. The Investor Class of shares of Government Bond has no up-front
charges, commissions or 12b-1 fees. 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.
Your Board of Trustees believes there are no material differences between the
rights of a Treasury shareholder and the rights of a Government Bond
shareholder. Each share, irrespective of series or class of a series, is
entitled to one vote for each dollar of net asset value applicable to such share
on all questions, except for those matters that must be voted on separately by
the series or class of a series affected. Matters affecting only one class of a
series 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 of 1940, it is not necessary for
Government Bond to hold annual meetings of shareholders. As a result,
shareholders may not vote each year on the election of Trustees. However,
pursuant to each fund's bylaws, the holders of at least 10% of the votes
entitled to be cast may request the fund to hold a special meeting of
shareholders.
REASONS SUPPORTING THE REORGANIZATION
The Reorganization is part of a broader restructuring program proposed by
American Century Investment Management, Inc. ("ACIM") to respond to changing
industry conditions and investor needs and desires in the fixed-income area. The
mutual fund industry has grown dramatically over the last ten years. During this
period of rapid growth, investment managers have expanded the range of
fixed-income fund offerings that they make available to investors in an effort
to meet and anticipate the growing and changing needs and desires of an
increasingly large and dynamic group of investors. The family of funds advised
by ACIM has followed this pattern. With this expansion, however, has come
increased complexity and competition among fixed-income mutual funds, as well as
increased confusion among investors.
As a result, ACIM has sought ways to restructure and streamline the management
and operations of the funds it advises. ACIM believes, and has advised the Board
of Trustees, that the consolidation of certain ACIM-advised funds would benefit
fund shareholders. ACIM has, therefore, proposed the consolidation of a number
of ACIM-advised funds that ACIM believes have similar or compatible investment
objectives and policies. In many cases, the proposed consolidations are designed
to eliminate the substantial overlap in current offerings by the American
Century family of funds. Consolidation plans are proposed for other American
Century funds that have not gathered enough assets to operate efficiently and,
therefore, face the risk of closure and resulting tax liability for many
shareholders. ACIM believes that these consolidations may help to enhance
investment performance and increase efficiency of operations.
ACIM recommended to the Board of Trustees that Treasury and Government Bond
should be combined to establish a larger fund that has similar investment
policies. The combination was recommended because the current market demand for
Treasury funds is generally weak, Government Bond provides greater potential for
long-term growth through its investments in a wider universe of government
securities, and the funds are managed very similarly. Treasury shareholders
should note that distributions from Government Bond may not be state tax-free.
As part of its analysis, the Board of Trustees recognized that a large fund may
be able to realize certain potential cost savings that could benefit the
shareholders of the funds if the Reorganization is completed. The Reorganization
was also recommended to combine similar funds in an effort to eliminate
duplication of expenses and internal competition. The Board of Trustees reviewed
the expense ratios of both funds and the projected expenses of the combined
fund; the comparative investment performance of the funds; the compatibility of
the investment objectives, policies, restrictions and investments of the funds;
the benefits that may result to ACIM and its affiliates if the Reorganization is
consummated; and the tax consequences of the Reorganization. The Board of
Trustees also noted that the same portfolio management team manages both funds.
During the course of its deliberations, the Board of Trustees noted that the
expenses of the Reorganization will be borne by ACIM.
The Board of Trustees concluded that the Reorganization is in the best interests
of the shareholders of Treasury, and that no dilution of value would result to
the shareholders of the funds from the Reorganization. The Board of Trustees,
including those who are not "interested persons" (as defined in the 1940 Act),
approved the Plan and recommended that shareholders of Treasury vote to approve
the Reorganization.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE
"FOR" THE PLAN OF REORGANIZATION.
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the reorganization is subject to the condition that we receive a
tax opinion to the effect that for federal income tax purposes (i) no gain or
loss will be recognized by you, Treasury or Government Bond, (ii) your basis in
the Government Bond shares that you receive will be the same in the aggregate as
your basis in the Treasury shares held by you immediately prior to the
reorganization, and (iii) your holding period for the Government Bond shares
will include your holding period for your Treasury shares.
We have not sought a tax ruling from the Internal Revenue Service, but are
relying upon the tax opinion referred to above. That opinion is not binding on
the IRS and does not preclude it from taking a contrary position. The opinion
does not cover state or local taxes and you should consult your own advisers
concerning potential tax consequences.
The Agreement and Plan of Reorganization provides that Treasury will declare and
pay dividends prior to the reorganization which, together with all previous
dividends, is intended to have the effect of distributing to the Treasury
shareholders all undistributed ordinary income and net realized capital gains
earned up to and including the Effective Time of the reorganization. The
distributions are necessary to ensure that the reorganization will not create
adverse tax consequences to Treasury. The distributions to shareholders
generally will be taxable to the extent ordinary income and capital gains
distributions are taxable to such shareholders.
CAPITALIZATION (unaudited)
Government Bond
As of March 31,2001 Government Bond Treasury Pro Forma Combined
- ------------------------------------------------------------------------------------------------------------------------------------
Investor Class
Net Assets $121,359,107 $456,294,559 $577,653,666
Shares Outstanding 11,678,650 42,414,465 55,595,354
Net Asset Value Per Share $10.39 $10.76 $ 10.39
- ------------------------------------------------------------------------------------------------------------------------------------
Advisor Class
Net Assets $5,811,796 $23,780,828 $29,592,624
Shares Outstanding 559,282 2,210,700 2,848,101
Net Asset Value Per Share $10.39 $10.76 $ 10.39
INFORMATION ABOUT THE FUNDS
Complete information about Government Bond and Treasury is contained in their
Prospectus. The Government Bond and Treasury Prospectus dated August 1, 2001, is
included with this Prospectus/Proxy Statement. The content of the Prospectus is
incorporated into this document by reference. Below is a list of types of
information about Government Bond and Treasury and the pages in their Prospectus
where the information can be found.
INFORMATION ABOUT THE
FOLLOWING ITEMS CAN BE FOUND ON THE FOLLOWING PAGES
- ------------------------------------------------------------------------------------------------------------------------------------
Government Bond Treasury Government Bond Treasury
Investor Class Investor Class Advisor Class Advisor Class
- ------------------------------------------------------------------------------------------------------------------------------------
An Overview of the Funds 2 2 2 2
Fees and Expenses 8 8 9 9
Objectives, Strategies and Risks 11 11 10 10
Management 17-19 17-19 16-18 16-18
Investing with American Century 20-23 20-23 19-21 19-21
Share Price and Distributions 24-25 24-25 22 22
Taxes 26-27 26-27 23-24 23-24
Multiple Class Information 28 28 25 25
Financial Highlights 29, 33 29, 34 26, 29 26, 30
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information dated March 5, 2001, and the investment objectives of Government
Bond may not be changed without shareholder approval. The Board of Trustees may
change any other policies and investment strategies.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION
This Combined Prospectus/Proxy Statement is being furnished in connection with
the solicitation of proxies by the Board of Trustees of Treasury. Proxies may be
solicited by officers and employees of the investment advisor of the funds,
their affiliates and employees. American Century Investment Management, Inc.,
has hired Alamo Direct to act as proxy solicitor for the reorganization. It is
anticipated that the solicitation of proxies will be primarily by mail,
telephone, facsimile or other electronic means, or personal interview.
Authorizations to execute proxies may be obtained by telephonic or
electronically transmitted instructions in accordance with procedures designed
to authenticate the shareholder's identity and to confirm that the shareholder
has received the Combined Prospectus/Proxy Statement and proxy card. If you have
any questions regarding voting your shares or the proxy, please call us at
1-800-331-8331.
VOTING AND REVOCATION OF PROXIES
The fastest and most convenient way to vote your shares is to complete, sign and
mail the enclosed proxy voting card to us in the enclosed envelope. If you have
access to the Internet, you can vote online, by accessing the website listed on
the proxy card (you will need the control number that appears on the right-hand
side of your proxy card). You also may vote by telephone by calling the
toll-free number listed on your proxy card. In addition, you may vote by faxing
both sides of the completed proxy card to the toll-free number listed on the
proxy card. Your prompt response will help us obtain a quorum for the meeting
and avoid the cost of additional proxy solicitation efforts. If you return your
proxy to us, we will vote it EXACTLY as you tell us. If you simply sign the card
and return it, we will follow the recommendation of the Board of Trustees and
vote "FOR" both proposals.
Any shareholder giving a proxy may revoke it at any time before it is exercised
using any of the voting procedures described on the proxy vote card or by
attending the meeting and voting in person.
RECORD DATE
Only Treasury shareholders of record at the close of business on April 5, 2002,
will be entitled to vote at the meeting. The number of outstanding votes
entitled to vote at the meeting or any adjournment of the meeting as of the
close of business on March 15, 2002 is:
Treasury
Because the record date is April 5, 2002, the total number of votes at the
meeting may be different.
QUORUM
A quorum is the number of shareholders legally required to be at a meeting in
order to conduct business. The quorum for the Special Shareholders Meeting is
40% of the outstanding shares of Treasury entitled to vote at the meeting.
Shares may be represented in person or by proxy. Proxies properly executed and
marked with a negative vote or an abstention will be considered to be present at
the meeting for purposes of determining the existence of a quorum for the
transaction of business. If a quorum is not present at the meeting, or if a
quorum is present at the meeting but sufficient votes are not received to
approve the Agreement and Plan of Reorganization, the persons named as proxies
may propose one or more adjournments of the meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares affected by the adjournment that are represented
at the meeting in person or by proxy. If a quorum is not present, the persons
named as proxies will vote those proxies for which they are required to vote
"FOR" the Agreement and Plan of Reorganization in favor of such adjournments,
and will vote those proxies for which they are required to vote "AGAINST" such
proposals against any such adjournments.
SHAREHOLDER VOTE REQUIRED
The Agreement and Plan of Reorganization must be approved by the holders of a
majority of the outstanding votes of Treasury present at the Special Meeting in
person or by proxy in accordance with the provisions of its Agreement and
Declaration of Trust and the requirements of the Investment Company Act of 1940.
The term "majority of the outstanding shares" means more than 50% of the fund's
outstanding shares present at the Special Meeting in person or by proxy.
In tallying shareholder votes, abstentions and broker non-votes (i.e., proxies
sent in by brokers and other nominees that cannot be voted on a proposal because
instructions have not been received from the beneficial owners) will be counted
for purposes of determining whether or not a quorum is present for purposes of
convening the meeting. Abstentions and broker non-votes will, however, be
considered to be a vote against the Agreement and Plan of Reorganization.
Approval of the reorganization by shareholders of Government Bond is not being
solicited because their approval is not legally required.
COST OF PROXY SOLICITATION. The cost of the proxy solicitation and Special
Meeting will be borne by American Century Investment Management, Inc. and NOT by
the shareholders of the funds.
CERTAIN SHAREHOLDERS
The following table lists, as of March 15, 2002, the names, addresses and
percentage of ownership of each person who owned of record or is known by either
fund to own beneficially 5% or more of any class of Treasury or Government Bond.
The percentage of shares to be owned after consummation of the reorganization is
based upon their holdings and the outstanding shares of both funds as of March
15, 2002. Beneficial ownership information is not required to be disclosed to
the funds, so to the extent that information is provided below, it is done so
using the best information that the funds have been provided.
Number of Percent of Percent Owned After
Shareholder Name and Address Shares Owned Ownership Reorganization
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury
Investor % %
Advisor % %
....................................................................................................................................
Government Bond
Investor % %
Advisor % %
As of March 15, 2002, the directors and officers of the issuer of Treasury, as a
group, owned less than 1% of the outstanding shares of Treasury. As of March 15,
2002, the trustees and officers of the issuer of Government Bond, as a group,
owned less than 1% of the outstanding shares of Government Bond.
APPRAISAL RIGHTS
Shareholders of Treasury are not entitled to any rights of share appraisal under
its Agreement and Declaration of Trust, or under the laws of the State of
Massachusetts.
Shareholders have, however, the right to redeem their Treasury shares until the
reorganization. Thereafter, shareholders may redeem the Government Bond shares
they received in the reorganization at Government Bond's net asset value as
determined in accordance with its then-current prospectus.
ANNUAL MEETINGS
Government Bond does not intend to hold annual meetings of shareholders.
Shareholders of Government Bond have the right to call a special meeting of
shareholders and such meeting will be called when requested in writing by the
shareholders of record of 10% or more of the fund's votes. To the extent
required by law, American Century Government Income Trust will assist in
shareholder communications on such matters.
Treasury does not intend to hold an annual meeting of shareholders this year for
the election of Trustees or the ratification of the appointment of auditors.
ADDITIONAL INFORMATION
Information about Treasury and Government Bond is incorporated into this
document by reference from their Prospectus dated August 1, 2001 and Statement
of Additional Information dated March 5, 2001. A copy of the Prospectus
accompanies this document, and a copy of the funds' Statement of Additional
Information, or their most recent annual or semiannual reports may be obtained
without charge by calling us at 1-800-331-8331.
Reports and other information filed by Treasury and Government Bond may be
inspected and copied at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such materials may
be obtained by mail from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates. This information may also be obtained from the EDGAR
database at www.sec.gov, or by email request at publicinfo@sec.gov.
LITIGATION
Neither Treasury nor Government Bond is involved in any litigation or
proceeding.
OTHER BUSINESS
The Board of Trustees is not aware of any other business to be brought before
the meeting. However, if any other matters come before the meeting, it is the
intention that proxies that do not contain specific restrictions to the contrary
will be voted on such matters in accordance with the judgment of the persons
named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to us at the address or telephone number
set forth on the cover page of this Combined Prospectus/Proxy Statement.
SHAREHOLDERS ARE REQUESTED TO DATE AND SIGN EACH ENCLOSED PROXY AND RETURN IT IN
THE ENCLOSED ENVELOPE. PLEASE RETURN YOUR PROXY CARD EVEN IF YOU ARE PLANNING TO
ATTEND THE MEETING. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
MANAGEMENT'S DISCUSSION
OF FUND PERFORMANCE FOR GOVERNMENT BOND
This section contains excerpts of management's discussion of fund performance
from the Annual Report of Long-Term Treasury dated March 31, 2001 and its
Semiannual Report dated September 30, 2001. Last fall the shareholders of
Long-Term Treasury approved a change in the investment objective of the fund and
its name was changed to Government Bond. Please remember when reviewing this
material that prior to December 3, 2001, the fund was named and managed as a
Long-Term Treasury fund. As a result, the strategies and results discussed in
this section may not be reflective of the strategies and results of the
Government Bond fund. For a complete copy of either of the reports, please call
us at 1-800-331-8331.
ANNUAL REPORT HIGHLIGHTS - DATED MARCH 31, 2001
[LONG-TERM TREASURY]
Total Returns: AS OF 3/31/01
6 Months 7.91%(1)
1 Year 11.86%
30-Day SEC Yield: 5.05%
Inception Date: 9/8/92
Net Assets: $127.2 million
1 Not annualized.
OUR MESSAGE TO YOU
Economic and financial market conditions have changed dramatically since our
last annual report to you. A year ago, a booming economy, inflation fears, and
rising interest rates had created a difficult environment for U.S. bonds.
By contrast, conditions became almost ideal for investment-grade bonds during
the year ended March 31, 2001. Higher interest rates a year ago slowed the
economy dramatically, particularly the technology and manufacturing sectors.
Bonds rallied strongly as stock prices and interest rates fell.
The rally boosted American Century's Short-, Intermediate-, and [Long-Term
Treasury] funds to fiscal year total returns that were significantly above their
historical averages. The funds' investment team reviews economic and market
conditions as well as strategy and performance.
The sudden change in the financial climate also reminded investors about the
value of diversification. Risk reduction was easy to ignore during the extended
stock rally from 1995 to 2001 but last year reminded everyone that downturns
still occur. Investors who are sensitive to overall portfolio volatility should
keep some fixed-income securities in their portfolios to absorb the shocks that
changing economic conditions can bring.
Turning to corporate matters, we're proud to announce that for the second
consecutive year, American Century's fund performance reports, like this one,
earned the Communications Seal from DALBAR, Inc., an independent financial
services research firm. The Seal recognizes communications excellence in the
industry.
What's more, American Century made Fortune Magazine's list of the "100 Best
Companies to Work for in America" for the second year in a row. This is
important for us because we think it demonstrates our commitment to attract and
retain the best people to serve our shareholders. We believe that ultimately our
success, and that of our investors, is based on the quality of our "intellectual
capita' - the collective wisdom of our investment and service professionals.
As always, we appreciate your continued confidence in American Century.
Sincerely,
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Co-Chairman of the Board
PERFORMANCE & PORTFOLIO INFORMATION
Effective December 3, 2001, the name of Long-Term Treasury was changed to
Government Bond.
Total Returns as of March 31, 2001
[Long-Term Treasury]--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF MARCH 31, 2001
INVESTOR CLASS (INCEPTION 9/8/92) ADVISOR CLASS (INCEPTION 1/12/98)
LONG-TERM SALOMON LONG-TERM GENERAL U.S. TREASURY FUNDS(2) LONG-TERM SALOMON LONG-TERM
TREASURY TREASURY INDEX AVERAGE RETURN FUND'S RANKING TREASURY TREASURY INDEX
========================================================================================================================
6 MONTHS(1) 7.91% 8.70% 7.42% -- 7.78% 8.70%
1 YEAR 11.86% 12.82% 11.41% 6 OUT OF 17 11.58% 12.82%
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 6.95% 7.56% 6.04% 4 OUT OF 16 6.69% 7.56%
5 YEARS 8.64% 9.07% 7.51% 4 OUT OF 13 -- --
LIFE OF FUND 8.06% 8.98%(3) 7.33%(4) 2 OUT OF 9(4) 5.78% 7.45%(5)
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Index data since 8/31/92, the date nearest the class's inception for which
data are available.
(4) Since 9/10/92, the date nearest the class's inception for which data are
available.
(5) Index data since 12/31/97, the date nearest the class's inception for which
data are available.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 3/31/01
Salomon Long-Term
Treasury Index $20,913
[Long-Term Treasury] $19,414
Long-Term Salomon Long-Term
Treasury Treasury Index
DATE VALUE VALUE
- ---- ----- -----
9/8/1992 $10,000 $10,000
12/31/1992 $9,998 $10,244
3/31/1993 $10,648 $10,916
6/30/1993 $11,195 $11,512
9/30/1993 $11,981 $12,219
12/31/1993 $11,762 $12,016
3/31/1994 $10,953 $11,282
6/30/1994 $10,574 $10,987
9/30/1994 $10,501 $10,908
12/31/1994 $10,674 $11,098
3/31/1995 $11,309 $11,808
6/30/1995 $12,494 $13,102
9/30/1995 $12,767 $13,400
12/31/1995 $13,797 $14,510
3/31/1996 $12,831 $13,548
6/30/1996 $12,809 $13,522
9/30/1996 $12,994 $13,728
12/31/1996 $13,608 $14,383
3/31/1997 $13,170 $13,933
6/30/1997 $13,883 $14,697
9/30/1997 $14,692 $15,544
12/31/1997 $15,616 $16,557
3/31/1998 $15,868 $16,806
6/30/1998 $16,551 $17,589
9/30/1998 $17,748 $18,979
12/31/1998 $17,608 $18,789
3/31/1999 $16,872 $17,997
6/30/1999 $16,470 $17,541
9/30/1999 $16,437 $17,521
12/31/1999 $16,076 $17,153
3/31/2000 $17,355 $18,537
6/30/2000 $17,539 $18,718
9/30/2000 $17,990 $19,239
12/31/2000 $19,203 $20,642
3/31/2001 $19,414 $20,913
$10,000 investment made 9/8/92*
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The
Salomon Long-Term Treasury Index is provided for comparison in each graph.
Long-Term Treasury's total returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the total
return of the index does not. The graphs are based on Investor Class shares
only; performance for other classes will vary due to differences in fee
structures (see the Total Returns table above). Past performance does not
guarantee future results. Investment return and principal value will fluctuate,
and redemption value may be more or less than original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED MARCH 31)
Long-Term Salomon Long-Term
Treasury Treasury Index
DATE RETURN RETURN
- ---- ------ ------
3/31/1993* 6.48% 9.16%
3/31/1994 2.86% 3.35%
3/31/1995 3.25% 4.67%
3/31/1996 13.46% 14.73%
3/31/1997 2.65% 2.84%
3/31/1998 20.48% 20.63%
3/31/1999 6.33% 7.09%
3/31/2000 2.86% 3.00%
3/31/2001 11.86% 12.82%
* Fund data from 9/8/92, the class's inception date. Index data from 8/31/92,
the date nearest the class's inception for which data are available.
YIELDS AS OF MARCH 31, 2001 PORTFOLIO AT A GLANCE
30-Day SEC Yield 4.79% 3/31/01 3/31/00
Number of Securities 9 8
Weighted Average
Maturity 18.8 yrs 19.8 yrs
Expense Ratio (for
Investor Class) 0.51% 0.51%
MANAGEMENT Q&A
An interview with a portfolio manager on the [Long-Term Treasury] fund investment team.
How did the fund perform during the year ended March 31, 2001?
[Long-Term Treasury] achieved its highest fiscal year total return since 1998
and beat its peer group average. The fund returned 11.86%, outpacing the 11.41%
average return of 17 "General U.S. Treasury Funds" tracked by Lipper Inc.*
Finishing ahead of the Lipper category average was a notable achievement because
the fund had a significant handicap compared with the average during the fiscal
year. We manage [Long-Term Treasury] to be a pure play on the long end of the
Treasury market, with a weighted average maturity near 20 years. But the Lipper
category includes funds with much shorter maturities. They had a clear advantage
during the period as intermediate-term Treasurys outperformed long-term
Treasurys.
What factors helped the fund beat its Lipper average category?
One was yield. [Long-Term Treasury] generated a higher yield than its peers,
resulting from a combination of the portfolio's longer maturity and lower
expenses. As of March 31, 2001, the funds' 30-day SEC yield was 5.05%, compared
with the 4.45% average yield of its Lipper category.
As for expenses, the fund's 0.51% annualized expense ratio during the period was
significantly lower than the 0.78% average expense ratio for its Lipper
category.
Did any holdings provide notable additional value?
Our position in Treasury inflation-indexed securities (TIIS, about 5% of the
portfolio as of March 31, 2001) continued to pay off well. These securities
offer a guaranteed rate of return above inflation, as measured by the consumer
price index.
While TIIS fell in and out of favor during 2000, they came on strong in the
first three months of 2001 as inflation ticked steadily higher. In addition,
expectations for stronger economic conditions later this year or next year
boosted demand for TIIS. Finally there's been some talk of reducing issuance,
which increased the attractiveness of existing TIIS.
In 2001, long-term Treasurys have given back some of their 2000 gains. With
interest rates still falling, why haven't Treasury bonds performed better?
Long-term Treasury yields have climbed in 2001 because of changing expectations
about supply, the prospects for an economic recovery, and inflation.
Last year, a dwindling supply of long-term Treasurys caused prices to rise and
yields to fall, contributing to an inverted yield curve. Federal budget
surpluses reduced the government's need to issue Treasury bonds and allowed the
treasury to buy back older, higher interest rate bonds. Then later in the year,
the entire Treasury market go t a boost from expectations that the Federal
Reserve would cut interest rates in 2001.
This year, despite interest rate cuts in January and March, the long end of the
Treasury market hasn't rallied - the rate cuts were already priced into the
market last year. Now the market is pricing an economic recovery and a possible
inflation threat later in the year or next year, causing long-term yields to
rise.
One more factor: the arrival of a new administration in Washington has led to
some uncertainty about the future of the Treasury buyback program that buoyed
Treasurys last year.
What's your outlook for Treasury supply for the remainder of 2001?
We think supply will continue to dwindle. In the first quarter alone, the
Treasury bought back $18 billion in bonds and projected that it will buy back
about $35 Billion during 2001. That, combined with talk about eliminating
30-year bond auctions, has helped support Treasury bond prices to a certain
degree.
However, we believe it's highly unlikely that the 30-year Treasury bond will
disappear altogether. The possibility of smaller federal budget surpluses -
stemming from a slowing economy, stepped up government spending, and tax cuts -
could slow down buybacks and support continued issuance.
Given the uncertainty surrounding the future of long Treasurys, we added a 5%
position in 27-year zero-coupon bonds. These long-term zeros position the fund
for a performance boost if supply concerns for long-term bonds resurface.
What's your economic and interest rate outlook?
Our view is that the economy isn't as weak as many observers seem to fear and
that we'll avoid a recession. For that reason, we believe that interest rates
may be at or near their bottom for this particular cycle.
Given that outlook, what's your current strategy?
With returns for the remainder of the year more likely to come from income than
appreciation, we're favoring opportunities that produce income. That's why we
plan to maintain our holdings in TIIS, which offered more attractive "real"
yields than nominal 30-year Treasury bonds.
The real yield on a 30-year Treasury bond at the end of the period was 1.94%
(its nominal, or stated yield of 5.44% minus the inflation rate of 3.50%). TIIS,
by comparison, carried a real yield of nearly 4%.
We're likely to continue holding TIIS until the real yields on nominal Treasury
bonds are more in line with those of TIIS. We also plan to keep the fund's
interest rate sensitivity - as measured by its duration - neutral to the overall
long-term Treasury market.
1 All fund returns and yields referenced in this interview are for Investor
Class shares.
TYPES OF INVESTMENTS IN THE PORTFOLIO
(as of 3/31/01)
Treasury Bonds 81%
Treasury Inflation-Indexed Notes 5%
STRIPS 5%
Temporary Cash Investments 9%
TYPES OF INVESTMENTS IN THE PORTFOLIO
(as of 9/30/00)
Treasury Bonds 81%
Treasury Inflation-Indexed Notes 9%
STRIPS 4%
Temporary Cash Investments 9%
REPORT HIGHLIGHTS - DATED SEPTEMBER 30, 2001
OUR MESSAGE TO YOU
Tragically, the six months ended September 30, 2001, opened a new era of
vulnerability and uncertainty for U.S. citizens and investors. September 11
changed forever our perception of the world and our place in it. We pay tribute
to those who died that day, as well as the heroic efforts of emergency
personnel.
But September 11 also brought a new sense of resolve. The terrorists sought to
devastate America, but our business community - including your American Century
investment management team - worked hard to keep the U.S. financial markets
active and functioning smoothly. From an investment policy standpoint, nothing
has changed here at American Century. Our portfolio managers continue to follow
their time-tested strategies, regardless of market, political, and economic
conditions.
There have been a few important changes to the investment team's executive
leadership that we want to bring to your attention. Effective July 1, 2001,
Randall Merk, formerly a senior vice president and chief investment officer
(CIO) for American Century's fixed-income discipline, became president and CIO
of American Century's investment management subsidiary. He succeeded Robert
Puff, Jr., who became the subsidiary's chairman. Randy is now responsible for
all of American Century's investment management functions, including portfolio
management, research, and trading.
David MacEwen, a senior vice president who previously oversaw all of American
Century's municipal bond and money market portfolios and municipal credit
research, assumed Randy's role as CIO for fixed income. Dave is responsible for
portfolio management and research for all of the company's bond and money market
funds.
Amid the current uncertainty, you can count on your investment professionals at
American Century to continue to follow the practices and procedures that have
been in place here for years, guiding your investments through all types of
market conditions.
As always, we appreciate your continued confidence in American Century,
especially during these difficult times.
An interview with a portfolio manager for Long-Term Treasury.
How did the fund perform during the six months ended September 30, 2001?
We managed Long-Term Treasury to be a pure play on the long end of the Treasury
market, and its performance was consistent with that strategy. The fund returned
4.91% compared with 4.90% for the Salomon Brothers Long-Term Treasury Index (all
fund returns and yields referenced in this interview are for Investor Class
shares).
Intermediate-term Treasurys outperformed long-term Treasurys, which affected
comparative fund return data. Long-Term Treasury's "peer group" (17 "General
U.S. Treasury Funds" tracked by Lipper Inc.) included funds with much shorter
maturities. So it's no surprise that the average return of the peer group -
5.28% -- was higher than the fund's return.
At the beginning of the period, the Federal Reserve's (the Fed's) aggressive
interest rate cuts fanned inflation fears, dampening long-term bond prices more
than those of shorter-term securities. Then, at the end of the period,
anticipation of increased government spending to pay for September 11 and
war-related expenses raised the specter of increased bond issuance. That,
combined with the Treasury's temporary suspension of its bond buyback program
after the attacks, kept a lid on bond prices and prevented yields from falling.
What happened to the fund's yield?
It fell during the full six-month period, as you'd expect when interest rates
are falling, but it remained competitive with the peer group average. As of
September 30, 2001, Long-Term Treasury's 30-day SEC yield was 4.73%. That was
lower than its 5.05% yield on march 31, 2001, but still higher than the peer
group's 4.15% average yield on September 30.
One of the advantages of having a longer weighted average maturity than the peer
group is that we consistently have a higher yield. Lower expenses also help. As
of September 30, 2001, Long-Term Treasury's expense ratio was 0.51% annualized,
compared with the peer group's 0.82% average. All else being equal, lower
expenses mean higher yields and returns for shareholders.
What else affected fund performance?
Two factors: investing in Treasury inflation-indexed securities (TIIS) when
yields favored them over conventional Treasury bonds, and buying Treasury
zero-coupon bonds (STRIPS) to take advantage of changes in the shape of the
Treasury yield curve. Both factors were notable because they affected
performance and they illustrate how we actively manage the portfolio.
We typically invest in TIIS when we think real (after-inflation) yields on TIIS
are attractive compared with those of conventional Treasury bonds with similar
maturities. That was the case in late March, when 2029 maturity TIIS yielded
3.47% compared with 5.44% for a 2029 T-bond. Given our expectation that CPI
inflation would be 2.5% to 3%, that made the expected return on TIIS about 6% to
6.5%, significantly higher than the 5.44% 2029 T-bond yield.
We sold our TIIS in May when the conventional T-bond yield climbed to 5.9% --
much closer to TIIS' expected return of 6% to 6.5%. TIIS outperformed
conventional T-bonds during our holding period.
How did you use STRIPS to take advantage of changes in the shape of the yield
curve?
As last summer approached, many investors started to believe that the Fed was
nearing the end of its rate-reduction campaign, especially after it cut rates in
May (the fifth time overall).
We anticipated that the Treasury yield curve would "flatten" (the difference
between 10- and 30-year Treasury yields would shrink), which is typical when the
Fed finishes lowering interest rates.
We underweighted the 20-year portion of the curve and "barbelled" the portfolio
with temporary cash investments at one end and 30-year STRIPS at the other. The
fund outperformed until September, when the terrorist attacks caused the yield
curve to steepen sharply. That caused the fund to underperform in September, but
some of that underperformance was offset by our duration strategy. (Duration
measures the portfolio's sensitivity to interest rate changes - a longer
duration means the fund's share price will change more when interest rates
fluctuate.)
Yields for 30-year Treasury bonds rose after September 11 as the market
anticipated a wave of issuance to pay for increased government spending. But we
had shortened Long-Term Treasury's duration by selling some 30-year bonds. We
later reversed that trade after prices on bonds fell markedly. By the end of
September, the fund's duration was back to a more neutral position, around 11
years.
Shifting gears, please explain the changes outlined in the prospectus supplement
included with this report.
The supplement describes the following changes that were approved recently by
shareholder vote:
First, effective December 3, 2001, we will widen the fund's investment scope to
include all U.S. government securities - including mortgage-backed securities -
of all maturities.
Second, reflecting the fund's broader scope, it will be renamed "American
Century Government Bond," effective December 3, 2001.
These changes embrace the recent evolution of the U.S. government bond market,
including cut backs in 30-year Treasury bond auctions, the 10-year note
replacing the 30-year bond as the Treasury benchmark issue, mortgage-backed
securities becoming the largest sector of the government bond market, and agency
debt increasingly assuming a benchmark role in the market.
How will this affect your investment strategy?
We'll still use the same disciplined investment approach, but now we can apply
it more broadly. The changes free us to look for the best relative values,
yields, and appreciation potential throughout the U.S. government bond market.
TOTAL RETURNS AS OF SEPTEMBER 30, 2001
INVESTOR CLASS (INCEPTION 9/8/92) ADVISOR CLASS (INCEPTION 1/12/98)
LONG-TERM SALOMON LONG-TERM GENERAL U.S. TREASURY FUNDS(2) LONG-TERM SALOMON LONG-TERM
TREASURY TREASURY INDEX AVERAGE RETURN FUND'S RANKING TREASURY TREASURY INDEX
=================================================================================================================
6 MONTHS(1) ... 4.91% 4.90% 5.28% -- 4.78% 4.90%
1 YEAR ....... 13.21% 14.03% 12.97% 5 OUT OF 16 12.93% 14.03%
=================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS ....... 4.69% 4.95% 4.42% 5 OUT OF 15 4.43% 4.95%
5 YEARS ....... 9.41% 9.83% 8.01% 2 OUT OF 13 -- --
LIFE OF FUND .. 8.17% 9.03%(3) 7.42%(4) 2 OUT OF 9(4) 6.31% 7.79%(5)
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Index data since 8/31/92, the date nearest the class's inception for which
data are available.
(4) Since 9/30/92, the date nearest the class's inception for which data are
available.
(5) Index data since 12/31/97, the date nearest the class's inception for which
data are available.
GROWTH OF $10,000 OVER LIFE OF FUND
The graph at left shows the growth of a $10,000 investment over the life of the fund, while the graph below shows the fund's year-by-year performance. The Salomon Long-Term Treasury Index is provided for comparison in each graph. Long-Term Treasury's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total return of the index does not. The graphs are based on Investor Class shares only; performance for other classes will vary due to differences in fee structures (see the Total Returns table above). Past performance does not guarantee future results. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost.
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED SEPTEMBER 30)
* Fund data from 9/8/92, the class's inception date. Index data from 8/31/92,
the date nearest the class's inception for which data are available.
Appendix I.
AMERICAN CENTURY FUNDS
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
ORGANIZATION
* The Audit Committee of the Board of Directors shall be composed entirely of
directors who are independent of the management of the Funds and have no
relationship with the Funds that might interfere with the exercise of their
independence as committee members.
STATEMENT OF PURPOSE
* The Audit Committee shall be responsible for assisting the Directors in
fulfilling their responsibilities to the shareholders in the areas of the
Funds' accounting and financial reporting policies and practices, internal
controls and compliance with applicable laws and regulations.
* The Audit Committee shall oversee the independent audit of the Funds'
financial statements.
* The Audit Committee shall be responsible for fostering communication of
information among the Directors, internal auditors and independent auditors.
* The Audit Committee shall act as a liaison between the Funds' independent
auditors and the full Board of Directors.
The function of the Audit Committee is oversight; it is management's
responsibility to maintain appropriate systems for accounting and internal
control, and the auditor's responsibility to plan and carry out a proper
audit.
DUTIES AND POWERS
The Audit Committee shall have the following duties and responsibilities:
* To recommend to the Board of Directors the selection, retention or
termination of the Funds' independent auditors and evaluate the independence
of such auditors;
* To meet with the Funds' independent auditors, including private meetings, as
necessary;
* to review the arrangements for and the scope of the current year's
annual audit and any special audits;
* to discuss any matters of concern relating to the Funds' financial
statements, including any adjustments to such statements recommended by
the independent auditors, or other results of such audits;
* to consider the independent auditors' comments with respect to the
Funds' financial policies, procedures and internal accounting controls
and management's responses thereto; and
* to review the form of opinion the independent auditors propose to render
to the Board of Directors and the shareholders;
* To review the auditors' assessment of the adequacy and effectiveness of the
Funds' internal controls and elicit recommendations for improving such
controls;
* To review the fees charged for Fund auditing and other services provided by
the independent auditors pursuant to engagements authorized by the Committee
or the Board of Directors;
* To assess significant risks or exposures identified by the auditors and
steps recommended to minimize such risks and exposures;
* To review and consider changes in Fund accounting policies or practices
proposed by management or the independent auditors;
* To retain outside counsel or other experts at the expense of the Funds in
order to fully discharge its responsibilities;
* To investigate any matters brought to the Audit Committee's attention that
are within the scope of its duties; and
* To review this Charter at least annually and recommend any changes to the
full Board of Directors.
MEETINGS
* The Audit Committee shall hold regular meetings and special meetings, if
necessary, to carry out its designated duties and responsibilities.
* The Audit Committee shall meet regularly with the Treasurer and internal
auditors.
Appendix II.
American Century Government Income Trust
Report of the Audit Committee
The Audit Committee oversees the Fund's financial reporting process on behalf of
the Board of Directors/Trustees. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles, their judgments as to the
quality, not just the acceptability, of the Fund's accounting principles and
such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the independent auditors the auditors' independence from management and the
Fund including the auditor's letter and the matters in the written disclosure
required by the Independence Standards Board and considered the compatibility of
non-audit services with the auditors' independence.
The Committee discussed with the Fund's independent auditors the overall scope
and plans for the audits. The Committee meets with independent auditors, with
and without management present, to discuss the results of their examinations,
their evaluations of the Fund's internal controls, and the overall quality of
the Fund's financial reporting.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Trustees/Directors (and the Board has approved) that
the audited financial statements be included in the Annual Report to
shareholders for the year ended March 31, 2001. The Committee and the Board
also have approved the selection of PricewaterhouseCoopers, LLP as the Fund's
independent auditors.
Jeanne D. Wohlers, Committee Chair
Albert Eisenstat, Committee Member
Kenneth E. Scott, Committee Member
AMERICAN CENTURY GOVERNMENT INCOME TRUST
American Century Investments
4500 Main Street
P.O. Box 419200
Kansas City, Missouri 64141-6200
1-800-331-8331
Statement of Additional Information
2002 Special Meeting of Shareholders of American Century Government Income Trust
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement/Prospectus dated April
15, 2002 for the Special Meeting of Shareholders to be held on August 2, 2002.
Copies of the Combined Proxy Statement/Prospectus may be obtained at no charge
by calling 1-800-331-8331.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement/Prospectus.
Further information about Treasury is contained in and incorporated
herein by reference to its Statement of Additional Information dated March 5,
2002. The audited financial statements and related independent accountant's
report for Treasury contained in the Annual Report dated August 31, 2001 are
incorporated herein by reference. No other parts of the Annual Report are
incorporated by reference herein.
Further information about Government Bond is contained in and
incorporated herein by reference to its Statement of Additional Information
dated March 5, 2002. The audited financial statements and related independent
accountant's report for Government Bond contained in the Annual Report dated
August 31, 2001 are incorporated herein by reference. No other parts of the
Annual Report are incorporated by reference herein.
The date of this Statement of Additional Information is April 15, 2002.
TABLE OF CONTENTS
General Information
Pro Forma Financial Statements
GENERAL INFORMATION
The shareholders of Treasury are being asked to approve or disapprove
an Agreement and Plan of Reorganization (the "Reorganization Agreement") dated
as of _____, 2002 between American Century Government Income Trust and the
transactions contemplated thereby. The Reorganization Agreement contemplates the
transfer of substantially all of the assets and Treasury to Government Bond in
exchange for full and fractional shares representing interests in Government
Bond. The shares issued by Government Bond will have an aggregate net asset
value equal to the aggregate net asset value of the shares Treasury, that are
outstanding immediately before the effective time of the Reorganization.
Following the exchange, Treasury will each make a liquidating
distribution to its shareholders of the Government Bond shares received in the
exchange. Each shareholder owning shares of Treasury at the Effective Time of
the reorganization will receive shares of Government Bond of equal value, plus
the right to receive any unpaid dividends that were declared before the
Effective Time of the Reorganization on the Treasury shares exchanged.
The Special Meeting of Shareholders to consider the Reorganization
Agreement and the related transactions will be held at 10:00 a.m. Central time
on August 2, 2002 at American Century Tower I, 4500 Main Street, Kansas City,
Missouri. For further information about the transaction, see the Combined Proxy
Statement/Prospectus.
Pro Forma Combining
American Century Treasury and
American Century Government Bond
GOVERNMENT BOND AND TREASURY PROFORMAS
Statement of Assets and Liabilities
MARCH 31, 2001 (UNAUDITED)
Government Treasury Adjustments Pro Forma
Bond -------- ------------ Combining (Note 1)
---- ------------------
ASSETS
Investment securities
at value (cost of $117,968,226,
$455,564,043, and
$573,532,269, respectively) $125,455,833 $474,809,454 $600,265,287
Cash 157,899 108,678 266,577
Receivable for capital shares sold 494,881 512,155 1,007,036
Dividends and interest receivable 1,140,678 6,079,843 7,220,521
-------------- ----------------- --------------- -------------
127,249,291 481,510,130 608,759,421
-------------- ----------------- --------------- -------------
LIABILITIES
Payable for capital shares redeemed - 1,049,317 1,049,317
Dividends payable 24,828 181,757 206,585
Accrued management fees 50,839 195,555 246,394
Distribution fees payable 1,246 3,625 4,871
Service fees payable 1,246 3,625 4,871
Payable for trustees' fees and 187 703 890
expenses Accrued expenses and other 42 161 203
liabilities -------------- ----------------- --------------- -------------
78,388 1,434,743 1,513,131
-------------- ----------------- --------------- -------------
Net Assets $127,170,903 $480,075,387 $607,246,290
============= ================ ============== ==============
NET ASSETS CONSIST OF:
Capital (par value and paid in surplus)$125,974,972 $476,454,096 $602,429,068
Accumulated undistributed net realized
gain (loss) on investment transactions (6,291,676) (15,624,120) (21,915,796)
Net unrealized appreciation on
investments (Note 3) 7,487,607 19,245,411 26,733,018
-------------- ------------- -------------- -------------
$127,170,903 $480,075,387 $607,246,290
============= ============= =============== ==============
Investor Class
Net assets $121,359,107 $456,294,559 $577,653,666
Shares outstanding 11,678,650 42,414,465 1,502,239 (a) 55,595,354
Net asset value per share $10.39 $10.76 $10.39
Advisor Class
Net assets $5,811,796 $23,780,828 $29,592,624
Shares outstanding 559,282 2,210,700 78,119 (a) 2,848,101
Net asset value per share $10.39 $10.76 $10.39
(a) Adjustment to reflect the issuance of Government Bond shares in exchange for
shares of Treasury in connection with the proposed reorganization.
GOVERNMENT BOND AND TREASURY PROFORMAS
Statement of Operations
YEAR ENDED MARCH 31, 2001 (UNAUDITED)
Government Pro Forma
Bond Treasury Adjustments Combining (Note 1)
---- -------- ----------- ------------------
Investment Income
Income:
Interest $6,131,339 $24,264,436 $30,395,775
-------------- ---------------- ------------ -------------
Expenses:
Management fees 499,508 2,044,988 2,544,496
Distribution fees - Advisor Class 11,273 30,940 42,213
Service fees - Advisor Class 11,273 30,940 42,213
Trustees' fees and expenses 3,081 12,583 15,664
-------------- ---------------- ------------ -------------
525,135 2,119,451 2,644,586
-------------- ---------------- ------------ -------------
Net investment income 5,606,204 22,144,985 27,751,189
-------------- ---------------- ------------ -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on
investment transactions 1,831,944 68,222 1,900,166
Change in net unrealized
appreciation on investments 3,731,684 26,323,867 30,055,551
-------------- ---------------- ------------ -------------
Net realized and unrealized
gain on investments 5,563,628 26,392,089 31,955,717
-------------- ---------------- ------------ -------------
Net Increase in Net Assets
Resulting from Operations $11,169,832 $48,537,074 $59,706,906
============== ================ ============ =============
Notes to Pro Forma Financial Statements (unaudited)
1. BASIS OF COMBINATION-The unaudited Pro Forma Combining Schedule of
Investments, Pro Forma Combining Statement of Assets and Liabilities and Pro
Forma Combining Statement of Operations reflect the accounts of the
Government Bond Fund and Treasury Fund (the funds) at and for the year ended
March 31, 2001. The Pro Forma Combining Schedule of Investments and Pro Forma
Combining Statement of Assets and Liabilities assumes the combination was
consummated after the close of business on March 31, 2001. The Pro Forma
Combining Statement of Operations assumes the combination was consummated at
the beginning of the fiscal year ended March 31, 2001.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the non-surviving fund, Treasury Fund, in exchange for
shares of the surviving fund, for purposes of maintaining the financial
statements and performance, Government Bond Fund. Financial information for
Treasury as of March 31, 2001, has been adjusted to reflect the plan of
reorganization effective December 3, 2001, for Treasury and Short-Term
Treasury. Treasury acquired substantially all of the assets of Short-Term
Treasury in exchange for shares of equal value of Treasury and the assumption
by Treasury of all liabilities of Short-Term Treasury.
In accordance with accounting principles generally accepted in the United
States of America, the historical cost of investment securities will be
carried forward to the surviving fund and the results of operations for
pre-combination periods for the surviving fund will not be restated. The pro
forma statements do not reflect the expenses of either fund in carrying out
its obligation under the Agreement and Plan of Reorganization. Under the
terms of the Plan of Reorganization, the combination of the funds will be
treated as a tax-free business combination and accordingly will be accounted
for by a method of accounting for tax-free mergers of investment companies.
The Pro Forma Combining Schedule of Investments, Statement of Assets and
Liabilities and Statement of Operations should be read in conjunction with
the historical financial statements of the funds included or incorporated by
reference in the Statement of Additional Information.
2. PORTFOLIO VALUATION- Securities are valued through valuations obtained from a
commercial pricing service or at the mean of the most recent bid and asked
prices. When valuations are not readily available, securities are valued at
fair value as determined in accordance with procedures adopted by the Board
of Trustees.
3. CAPITAL SHARES-The pro forma net asset value per share assumes the issuance
of shares of the surviving fund that would have been issued at March 31,
2001, in connection with the proposed reorganization. The number of shares
assumed to be issued is equal to the net asset value of shares of the
non-surviving fund, as of March 31, 2001, divided by the net asset value per
share of the shares of the surviving fund as of March 31, 2001. The pro forma
total number of shares outstanding for the combined fund consists of the
following at March 31, 2001:
Additional Shares
Combined Total Outstanding Shares of Assumed Issued
Fund Shares Surviving Fund in Reorganization
------------------------------------------------------------------------------------
Government Bond
Investor 55,595,354 11,678,650 43,916,704
Advisor 2,848,101 559,282 2,288,819
Total Fund 58,443,455 12,237,932 46,205,523
4. to offset future net realized capital gains for federal income tax purposes.
To the extent that those loss carryovers are used to offset capital gains, it
is probable that any gains offset will not be distributed.
Fund Net Capital Loss Carryover
-----------------------------------------------------------------------------
Government Bond $5,410,432
Treasury $15,598,945
PART C OTHER INFORMATION
Item 15 Indemnification.
As stated in Article VII, Section 3 of the Amended and Restated Agreement and
Declaration of Trust, incorporated herein by reference to Exhibit (a) to the
Registration Statement, "The Trustees shall be entitled and empowered to the
fullest extent permitted by law to purchase insurance for and to provide by
resolution or in the Bylaws for indemnification out of Trust assets for
liability and for all expenses reasonably incurred or paid or expected to be
paid by a Trustee or officer in connection with any claim, action, suit, or
proceeding in which he or she becomes involved by virtue of his or her capacity
or former capacity with the Trust. The provisions, including any exceptions and
limitations concerning indemnification, may be set forth in detail in the Bylaws
or in a resolution adopted by the Board of Trustees."
Registrant hereby incorporates by reference, as though set forth fully herein,
Article VI of the Registrant's Amended and Restated Bylaws, dated March 9, 1998,
appearing as Exhibit 2b to Post-Effective Amendment No. 23 to the Registration
Statement on Form N-1A of American Century Municipal Trust filed March 26, 1998.
The Registrant has purchased an insurance policy insuring its officers and
directors against certain liabilities which such officers and directors may
incur while acting in such capacities and providing reimbursement to the
Registrant for sums which it may be permitted or required to pay to its officers
and directors by way of indemnification against such liabilities, subject in
either case to clauses respecting deductibility and participation.
Item 16 Exhibits (all exhibits not filed herewith are being incorporated
herein by reference).
(1) (a) Amended and Restated Agreement and Declaration of Trust, dated March
9, 1998 and amended March 1, 1999 (filed electronically as Exhibit a to
Post-Effective Amendment No. 37 to the Registration Statement of the
Registrant on May 7, 1999, File No. 2-99222).
(b) Amendment No. 1 to the Amended and Restated Agreement and
Declaration of Trust (filed electronically as Exhibit a2 to
Post-Effective Amendment No. 42 to the Registration Statement of the
Registrant on April 19, 2001, File No. 2-99222).
(c) Amendment No. 2 to the Amended and Restated Agreement and
Declaration of Trust, dated August 1, 2001 (filed electronically as
Exhibit a3 to Post-Effective Amendment No. 44 to the Registration
Statement of the Registrant, on July 31, 2001, File No. 2-99222).
(d) Amendment No. 3 to the Amended and Restated Agreement and
Declaration of Trust, dated December 3, 2001 (filed electronically as
Exhibit a4 to Post-Effective Amendment No. 46 to the Registration
Statement of the Registrant, on March 4, 2002, File No. 2-99222).
(e) Amendment No. 4 to the Amended and Restated Agreement and
Declaration of Trust, dated March 13, 2002 (filed electronically as
Exhibit a5 to Post-Effective Amendment No. 46 to the Registration
Statement of the Registrant, on March 4, 2002, File No. 2-99222).
(2) Amended and Restated Bylaws, dated March 9, 1998 (filed electronically
as Exhibit 2b to Post-Effective Amendment No. 23 to the Registration
Statement of American Century Municipal Trust on March 26, 1998, File
No. 2-91229).
(3) Not applicable
(4) Agreement and Plan of Reorganization is included herein.
(5) Not applicable
(6) (a) Management Agreement (Investor Class) between American Century
Government Income Trust and American Century Investment Management,
Inc., dated August 1, 1997 (filed electronically as Exhibit 5 to
Post-Effective Amendment No. 33 to the Registration Statement of the
Registrant on July 31, 1997, File No. 2-99222).
(b) Amendment to the Management Agreement (Investor Class) between
American Century Government Income Trust and American Century Investment
Management, Inc., dated March 31, 1998 (filed electronically as Exhibit
5b to Post-Effective Amendment No. 23 to the Registration Statement of
American Century Municipal Trust on March 26, 1998, File No. 2-91229).
(c) Amendment to the Management Agreement (Investor Class) between
American Century Government Income Trust and American Century Investment
Management, Inc., dated July 1, 1998 (filed electronically as Exhibit d3
to Post-Effective Amendment No 39 to the Registration Statement of the
Registrant on July 28, 1999, File No. 2-99222).
(d) Amendment No. 1 to the Management Agreement (Investor Class) between
American Century Government Income Trust and American Century Investment
Management, Inc., dated September 16, 2000 (filed electronically as
Exhibit d4 to Post-Effective Amendment No. 30 to the Registration
Statement of American Century California Tax-Free and Municipal Funds on
December 29, 2000, File No. 2-82734).
(e) Amendment No. 2 to the Management Agreement (Investor Class) between
American Century Government Income Trust and American Century Investment
Management, Inc., dated August 1, 2001 (filed electronically as Exhibit
d5 to Post-Effective Amendment No. 44 to the Registration Statement of
the Registrant, on July 31, 2001, File No. 2-99222).
(f) Amendment No. 3 to the Management Agreement (Investor Class) between
American Century Government Income Trust and American Century Investment
Management, Inc., dated December 3, 2001 (filed electronically as
Exhibit d6 to Post-Effective Amendment No. 16 to the Registration
Statement of American Century Investment Trust, on November 30, 2001,
File No. 33-65170).
(g) Management Agreement (Advisor Class) between American Century
Government Income Trust and American Century Investment Management,
Inc., dated August 1, 1997 and amended as of June 1, 1998 (filed
electronically as Exhibit 5b to Post-Effective Amendment No. 9 to the
Registration Statement of American Century Investment Trust on June 30,
1999, File No. 33-65170).
(h) Amendment No. 1 to the Management Agreement (Advisor Class) between
American Century Government Income Trust and American Century Investment
Management, Inc., dated September 16, 2000 (filed electronically as
Exhibit d6 to Post-Effective Amendment No. 36 to the Registration
Statement of American Century Target Maturities Trust on April 18, 2001,
File No. 2-94608).
(i) Amendment No. 2 to the Management Agreement (Advisor Class) between
American Century Government Income Trust and American Century Investment
Management, Inc. dated August 1, 2001 (filed electronically as Exhibit
d8 to Post-Effective Amendment No. 44 to the Registration Statement of
the Registrant, on July 31, 2001, File No. 2-99222).
(j) Amendment No. 3 to the Management Agreement (Advisor Class) between
American Century Government Income Trust and American Century Investment
Management, Inc. dated December 3, 2001 (filed electronically as Exhibit
d10 to Post-Effective Amendment No. 16 to the Registration Statement of
American Century Investment Trust, on November 30, 2001, File No.
33-65170).
(k) Management Agreement (C Class) between American Century Target
Maturities Trust, American Century California Tax-Free and Municipal
Funds, American Century Government Income Trust, American Century
Investment Trust, American Century Quantitative Equity Funds, American
Century Municipal Trust and American Century Investment Management Inc.,
dated September 16, 2000 (filed electronically as Exhibit d6 to
Post-Effective Amendment No. 35 to the Registration Statement of
American Century Target Maturities Trust on April 17, 2001, File No.
2-94608).
(l) Amendment No. 1 to the Management Agreement (C Class) between American
Century Target Maturities Trust, American Century California Tax-Free
and Municipal Funds, American Century Government Income Trust, American
Century Investment Trust, American Century Quantitative Equity Funds,
American Century Municipal Trust and American Century Investment
Management Inc., dated August 1, 2001 (filed electronically as Exhibit
d10 to Post-Effective Amendment No. 44 to the Registration Statement of
the Registrant, on July 31, 2001, File No. 2-99222).
(m) Amendment No. 2 to the Management Agreement (C Class) between
American Century Target Maturities Trust, American Century California
Tax-Free and Municipal Funds, American Century Government Income Trust,
American Century Investment Trust, American Century Quantitative Equity
Funds, American Century Municipal Trust and American Century Investment
Management Inc., dated December 3, 2001 (filed electronically as Exhibit
d13 to Post-Effective Amendment No. 16 to the Registration Statement of
American Century Investment Trust, on November 30, 2001, File No.
33-65170).
(n) Management Agreement (Institutional Class) between American Century
Quantitative Equity Funds and American Century Investment Management,
Inc., dated August 1, 1997 (filed electronically as an Exhibit to
Post-Effective Amendment No. 20 to the Registration Statement of
American Century Quantitative Equity Funds on August 29, 1997, File No.
33-19589).
(o) Amendment to Management Agreement (Institutional Class) between
American Century Quantitative Equity Funds and American Century
Investment Management, Inc., dated June 1, 1998 (filed electronically as
Exhibit d6 to Post-Effective Amendment No. 27 to the Registration
Statement of American Century Quantitative Equity Funds on April 27,
2000, File No. 33-19589).
(p) Amendment No. 1 to the Management Agreement (Institutional Class)
between American Century Quantitative Equity Funds, American Century
Investment Trust and American Century Investment Management, Inc., dated
August 1, 2001, (filed electronically as Exhibit d13 to Post-Effective
Amendment No. 15 to the Registration Statement of American Century
Investment Trust on August 8, 2001, File No. 33-65170).
(q) Amendment No. 2 to the Management Agreement (Institutional Class)
between American Century Quantitative Equity Funds, American Century
Investment Trust, American Century Government Income Trust and American
Century Investment Management, Inc. dated March 1, 2002 (filed
electronically as Post-Effective Amendment No. 46 to the Registration
Statement of the Registrant on March 4, 2002, File No. 2-99222).
(7) (a) Distribution Agreement between American Century Government Income
Trust and American Century Investment Services, Inc., dated March 13,
2000 (filed electronically as Exhibit e7 to Post-Effective Amendment No.
17 to the Registration Statement of American Century World Mutual Funds,
Inc. on March 30, 2000, File No. 33-39242).
(b) Amendment No. 1 to the Distribution Agreement between American
Century Investment Trust and American Century Investment Services, Inc.,
dated June 1, 2000 (filed electronically as Exhibit e9 to Post-Effective
Amendment No. 19 to the Registration Statement of American Century World
Mutual Funds, Inc. on May 24, 2000, File No. 33-39242).
(c) Amendment No. 2 to the Distribution Agreement between American
Century Government Income Trust and American Century Investment
Services, Inc., dated November 20, 2000 (filed electronically as Exhibit
e10 to Post-Effective Amendment No. 29 to the Registration Statement of
American Century Variable Portfolios, Inc. on December 1, 2000, File No.
33-14567).
(d) Amendment No. 3 to the Distribution Agreement between American
Century Government Income Trust and American Century Investment
Services, Inc., dated March 1, 2001 (filed electronically as Exhibit e4
to Post-Effective Amendment No. 35 to the Registration Statement of
American Century Target Maturities Trust on April 17, 2001, File No.
2-94608).
(e) Amendment No. 4 to the Distribution Agreement between American
Century Government Income Trust and American Century Investment
Services, Inc., dated April 30, 2001 (filed electronically as Exhibit e5
to Post-Effective Amendment No. 35 to the Registration Statement of
American Century Target Maturities Trust on April 17, 2001, File No.
2-94608).
(f) Amendment No. 5 to the Distribution Agreement between American
Century Government Income Trust and American Century Investment
Services, Inc. (filed as Exhibit e6 to Post-Effective Amendment No. 21
to the Registration Statement of American Century Capital Portfolios,
Inc., on July 30, 2001, File No. 33-64872).
(g) Amendment No. 6 to the Distribution Agreement between American
Century Government Income Trust and American Century Investment
Services, Inc. (filed as Exhibit e7 to Post-Effective Amendment No. 21
to the Registration Statement of American Century Capital Portfolios,
Inc., on July 30, 2001, File No. 33-64872).
(h) Amendment No. 7 to the Distribution Agreement between American
Century Government Income Trust and American Century Investment
Services, Inc., dated August 1, 2001 (filed electronically as Exhibit d8
to Post-Effective Amendment No. 16 to the Registration Statement of
American Century Investment Trust, on November 30, 2001, File No.
33-65170).
(i) Amendment No. 8 to the Distribution Agreement between American
Century Government Income Trust and American Century Investment
Services, Inc., dated March 1, 2002 (filed electronically as Exhibit e9
to Post-Effective Amendment No. 96 to the Registration Statement of
American Century Mutual Funds, Inc., on February 28, 2002, File No.
2-14213).
(j) Amendment No. 9 to the Distribution Agreement between American
Century Government Income Trust and American Century Investment
Services, Inc., dated March 6, 2002 (filed electronically as Exhibit e10
to Post-Effective Amendment No. 96 to the Registration Statement of
American Century Mutual Funds, Inc., on February 28, 2002, File No.
2-14213).
(8) Not applicable.
(9) (a) Master Agreement by and between Commerce Bank N.A. and Twentieth
Century Services, Inc., dated January 22, 1997 (filed electronically as
Exhibit g2 to Post-Effective Amendment No. 76 to the Registration
Statement of American Century Mutual Funds, Inc. on February 28, 1997,
File No. 2-14213).
(b) Global Custody Agreement between American Century Investments and
The Chase Manhattan Bank, dated August 9, 1996 (filed electronically as
Exhibit 8 to Post-Effective Amendment No. 31 to the Registration
Statement of the Registrant on February 7, 1997, File No. 2-99222).
(c) Amendment to the Global Custody Agreement between American Century
Investments and The Chase Manhattan Bank dated December 9, 2000 (filed
electronically as Exhibit g2 to Pre-Effective Amendment No. 2 to the
Registration Statement of American Century Variable Portfolios II, Inc.
on January 9, 2001, File No. 333-46922).
(10) (a) Master Distribution and Shareholder Services Plan of American
Century Government Income Trust, American Century Investment Trust,
American Century International Bond Fund, American Century Target
Maturities Trust and American Century Quantitative Equity Funds (Advisor
Class), dated August 1, 1997 (filed electronically as Exhibit m1 of
Post-Effective Amendment No. 32 to the Registration Statement of
American Century Target Maturities Trust on January 31, 2000, File No.
2-94608).
(b) Amendment to the Master Distribution and Shareholder Services Plan
of American Century Government Income Trust, American Century Investment
Trust, American Century International Bond Fund, American Century Target
Maturities Trust and American Century Quantitative Equity Funds (Advisor
Class), dated June 29, 1998 (filed electronically as Exhibit m2 to
Post-Effective Amendment No. 23 to the Registration Statement of
American Century Target Maturities Trust on January 31, 2000, File No.
33-19589).
(c) Amendment No. 1 to Master Distribution and Shareholder Services Plan
of American Century Government Income Trust, American Century Investment
Trust, American Century International Bond Fund, American Century Target
Maturities Trust and American Century Quantitative Equity Funds (Advisor
Class) dated August 1, 2001 (filed electronically as Exhibit m3 to
Post-Effective Amendment No. 44 to the Registration Statement of the
Registrant, on July 31, 2001, File No. 2-99222).
(d) Amendment No. 2 to the Master Distribution and Shareholder Services
Plan of American Century Government Income Trust, American Century
Investment Trust, American Century International Bond Fund, American
Century Target Maturities Trust and American Century Quantitative Equity
Funds (Advisor Class), dated December 3, 2001 (filed electronically as
Exhibit m4 to Post-Effective Amendment No. 16 to the Registration
Statement of American Century Investment Trust, on November 30, 2001,
File No. 33-65170).
(e) Master Distribution and Individual Shareholder Services Plan of
American Century Government Income Trust, American Century Investment
Trust, American Century California Tax-Free and Municipal Funds,
American Century Municipal Trust, American Century Target Maturities
Trust and American Century Quantitative Equity Funds (C Class), dated
September 16, 2000 (filed electronically as Exhibit m3 to Post-Effective
Amendment No. 35 to the Registration Statement of American Century
Target Maturities Trust on April 17, 2001, File No. 2-94608).
(f) Amendment No. 1 to Master Distribution and Individual Shareholder
Services Plan of American Century Government Income Trust, American
Century Investment Trust, American Century California Tax-Free and
Municipal Funds, American Century Municipal Trust, American Century
Target Maturities Trust and American Century Quantitative Equity Funds
(C Class), dated August 1, 2001 (filed electronically as Exhibit m5 to
Post-Effective Amendment No. 44 to the Registration Statement of the
Registrant, on July 31, 2001, File No. 2-99222).
(g) Amendment No. 2 to the Master Distribution and Individual
Shareholder Services Plan of American Century Government Income Trust,
American Century Investment Trust, American Century California Tax-Free
and Municipal Funds, American Century Municipal Trust, American Century
Target Maturities Trust and American Century Quantitative Equity Funds
(C Class), dated December 3, 2001 (filed electronically as Exhibit m7 to
Post-Effective Amendment No. 16 to the Registration Statement of
American Century Investment Trust, on November 30, 2001, File No.
33-65170).
(h) Amended and Restated Multiple Class Plan of American Century
California Tax-Free and Municipal Funds, American Century Government
Income Trust, American Century International Bond Fund, American Century
Investment Trust, American Century Municipal Trust, American Century
Target Maturities Trust and American Century Quantitative Equity Funds,
dated November 20, 2000 (filed electronically as Exhibit n to
Post-Effective Amendment No. 35 to the Registration Statement of
American Century Target Maturities Trust on April 17, 2001, File No.
2-94608).
(i) Amendment No. 1 to the Amended and Restated Multiple Class Plan of
American Century California Tax-Free and Municipal Funds, American
Century Government Income Trust, American Century International Bond
Fund, American Century Investment Trust, American Century Municipal
Trust, American Century Target Maturities Trust and American Century
Quantitative Equity Funds, dated August 1, 2001 (filed electronically as
Exhibit n2 to Post-Effective Amendment No. 44 to the Registration
Statement of the Registrant, on July 31, 2001, File No. 2-99222).
(j) Amendment No. 2 to the Amended and Restated Multiple Class Plan of
American Century California Tax-Free and Municipal Funds, American
Century Government Income Trust, American Century International Bond
Fund, American Century Investment Trust, American Century Municipal
Trust, American Century Target Maturities Trust and American Century
Quantitative Equity Funds, dated December 3, 2001 (filed electronically
as Exhibit n3 to Post-Effective Amendment No. 16 to the Registration
Statement of American Century Investment Trust, on November 30, 2001,
File No. 33-65170).
(k) Amendment No. 3 to the Amended and Restated Multiple Class Plan of
American Century California Tax-Free and Municipal Funds, American
Century Government Income Trust, American Century International Bond
Fund, American Century Investment Trust, American Century Municipal
Trust, American Century Target Maturities Trust and American Century
Quantitative Equity Funds (filed electronically as Exhibit n4 to
Post-Effective Amendment No. 46 to the Registration Statement of the
Registrant, on March 4, 2002, File No. 2-99222).
(11) Opinion and Consent of Counsel as to the legality of the securities
being registered (filed electronically as Exhibit i to Post-Effective
Amendment No. 37 to the Registration Statement of the Registrant on May
7, 1999, File No. 2-99222).
(12) Opinion and Consent of Counsel as to the tax matters and consequences to
shareholders is included herein.
(13) (a) Transfer Agency Agreement between American Century Government Income
Trust and American Century Services Corporation, dated August 1, 1997
(filed electronically as Exhibit 9 to Post-Effective Amendment No. 33 to
the Registration Statement of the Registrant on July 31, 1997, File No.
2-99222).
(b) Amendment to the Transfer Agency Agreement between American Century
Government Income Trust and American Century Services Corporation, dated
March 9, 1998 (filed electronically as Exhibit 9b to Post-Effective
Amendment No. 23 to the Registration Statement of American Century
Municipal Trust on March 26, 1998, File No. 2-91229).
(c) Amendment No. 1 to the Transfer Agency Agreement between American
Century Government Income Trust and American Century Services
Corporation, dated June 29, 1998 (filed electronically as Exhibit 9b to
Post-Effective Amendment No. 23 to the Registration Statement of
American Century Quantitative Equity Funds on June 29, 1998, File No.
33-19589).
(d) Amendment No. 2 to the Transfer Agency Agreement between American
Century Government Income Trust and American Century Services
Corporation, dated November 20, 2000 (filed electronically as Exhibit h4
to Post-Effective Amendment No. 30 to the Registration Statement of
American Century California Tax-Free and Municipal Funds on December 29,
2000, File No. 2-82734).
(e) Amendment No. 3 to the Transfer Agency Agreement between American
Century Government Income Trust and American Century Services
Corporation dated August 1, 2001 (filed electronically as Exhibit h5 to
Post-Effective Amendment No. 44 to the Registration Statement of the
Registrant, on July 31, 2001, File No. 2-99222).
(f) Amendment No. 4 to the Transfer Agency Agreement between American
Century Government Income Trust and American Century Services
Corporation dated December 3, 2001 (filed electronically as Exhibit h6
to Post-Effective Amendment No. 16 to the Registration Statement of
American Century Investment Trust, on November 30, 2001, File No.
33-65170).
(g) Credit Agreement between American Century Funds and The Chase
Manhattan Bank, as Administrative Agent, dated as of December 19, 2000
(filed electronically as Exhibit h5 to Post-Effective Amendment No. 33
to the Registration Statement of American Century Target Maturities
Trust on January 31, 2001, File No. 2-94608).
(14) (a) Consent of PricewaterhouseCoopers LLP, independent accountants (to
be filed by amendment).
(b) Consent of KPMG Peat Marwick, LLP, independent auditors (filed
electronically as Exhibit 11 to Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on July 31, 1997, File No.
2-99222).
(15) Not applicable.
(16) (a) Power of Attorney, dated September 16, 2000 (filed electronically as
Exhibit j3 to Post-Effective Amendment No. 41 to the Registration
Statement of the Registrant on February 22, 2001, File No. 2-99222).
(17) (a) Form of proxy vote card is filed herein.
(b) Treasury and Government Bond Prospectuses dated August 1, 2001
(filed electronically on July 31, 2001).
(c) Statement of Additional Information dated March 5, 2002 (filed
electronically on March 4, 2002).
(d) Treasury and Government Bond Annual Reports dated March 31, 2001
(filed electronically on May 31, 2001).
(e) Treasury and Government Bond Semiannual Reports dated September 30,
2001 (filed electronically on November 29, 2001).
Item 17. Undertakings.
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on behalf of the Registrant, in the
City of Kansas City, and State of Missouri, on the 13th day of March, 2002.
AMERICAN CENTURY GOVERNMENT INCOME TRUST
By: /*/William M. Lyons
President and Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
*William M. Lyons President and March 13, 2002
- --------------------------------- Principal Executive
William M. Lyons Officer
*Maryanne Roepke Senior Vice President, March 13, 2002
- --------------------------------- Treasurer and Chief
Maryanne Roepke Accounting Officer
*James E. Stowers III Director and March 13, 2002
- --------------------------------- Chairman of the Board
James E. Stowers III
*Albert A. Eisenstat Director March 13, 2002
- ---------------------------------
Albert A. Eisenstat
*Ronald J. Gilson Director March 13, 2002
- ---------------------------------
Ronald J. Gilson
*Myron S. Scholes Director March 13, 2002
- ---------------------------------
Myron S. Scholes
*Kenneth E. Scott Director March 13, 2002
- ---------------------------------
Kenneth E. Scott
*Jeanne D. Wohlers Director March 13, 2002
- ---------------------------------
Jeanne D. Wohlers
/s/Janet A. Nash
*by Janet A. Nash, Attorney in Fact (pursuant to a Power of Attorney dated
September 16, 2000).
