UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4363
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AMERICAN CENTURY GOVERNMENT INCOME TRUST
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(Exact name of registrant as specified in charter)
4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
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(Address of principal executive offices) (Zip code)
DAVID C. TUCKER, ESQ., 4500 MAIN STREET, 9TH FLOOR, KANSAS CITY, MISSOURI 64111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
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Date of fiscal year end: MARCH 31
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Date of reporting period: MARCH 31, 2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
[front cover]
American Century Investments
ANNUAL REPORT
[photo of boy]
MARCH 31, 2005
Ginnie Mae Fund
Government Bond Fund
Inflation-Adjusted Bond Fund
Short-Term Government Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You 1
GINNIE MAE
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio at a Glance and Yields . . . . . . . . . . . . . . . . . . . . . .3
Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . . . . 4
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
GOVERNMENT BOND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Portfolio at a Glance and Yields . . . . . . . . . . . . . . . . . . . . . .9
Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . . . .10
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
INFLATION-ADJUSTED BOND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Portfolio at a Glance and Yields . . . . . . . . . . . . . . . . . . . . . 16
Portfolio Composition by Maturity . . . . . . . . . . . . . . . . . . . . .17
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SHORT-TERM GOVERNMENT
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Portfolio at a Glance and Yields . . . . . . . . . . . . . . . . . . . . . 21
Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . . . .22
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Shareholder Fee Examples . . . . . . . . . . . . . . . . . . . . . . . . . . .27
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . 30
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . . .33
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 35
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . 53
OTHER INFORMATION
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
The opinions expressed in each of the Portfolio Commentaries reflect those of
the portfolio management team as of the date of the report, and do not
necessarily represent the opinions of American Century or any other person in
the American Century organization. Any such opinions are subject to change at
any time based upon market or other conditions and American Century disclaims
any responsibility to update such opinions. These opinions may not be relied
upon as investment advice and, because investment decisions made by American
Century funds are based on numerous factors, may not be relied upon as an
indication of trading intent on behalf of any American Century fund. Security
examples are used for representational purposes only and are not intended as
recommendations to purchase or sell securities. Performance information for
comparative indices and securities is provided to American Century by third
party vendors. To the best of American Century's knowledge, such information is
accurate at the time of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the annual report for the Ginnie Mae,
Government Bond, Inflation-Adjusted Bond and Short-Term Government funds for the
year ended March 31, 2005.
The report includes comparative performance figures, portfolio and market
commentary, summary tables, a full list of portfolio holdings, and financial
statements and highlights. We hope you find this information helpful in
monitoring your investment.
Through our Web site, americancentury.com, we provide quarterly commentaries on
all American Century portfolios, the views of our senior investment officers,
and other communications about investments, portfolio strategy, and the markets
Your next shareholder report for these funds will be the semiannual report dated
September 30, 2005, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER
AMERICAN CENTURY COMPANIES, INC.
/s/James E. Stowers III
James E. Stowers III
CHAIRMAN OF THE BOARD
AMERICAN CENTURY COMPANIES, INC.
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1
Ginnie Mae - Performance
TOTAL RETURNS AS OF MARCH 31, 2005
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AVERAGE ANNUAL RETURNS
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SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
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INVESTOR CLASS 2.11% 5.88% 6.30% 7.55% 9/23/85
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CITIGROUP 30-YEAR
GNMA INDEX(1) 2.98% 6.68% 7.02% 8.43%(2) --
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Advisor Class 1.85% 5.61% -- 5.15% 10/9/97
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C Class 1.10% -- -- 3.49% 6/15/01
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(1) In June 2003, the Salomon 30-Year GNMA Index, the fund's benchmark since
inception, became known as the Citigroup 30-Year GNMA Index.
(2) Since 9/30/85, the date nearest the Investor Class's inception for which
data are available.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made March 31, 1995
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended March 31
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1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
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Investor Class 10.08% 5.87% 10.21% 5.66% 2.01% 11.70% 5.43% 8.03% 2.43% 2.11%
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Citigroup
30-Year
GNMA Index 10.90% 6.01% 10.92% 6.26% 2.96% 11.93% 6.58% 8.41% 3.77% 2.98%
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Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
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2
Ginnie Mae - Portfolio Commentary
PORTFOLIO MANAGER: HANDO AGUILAR
PERFORMANCE SUMMARY
Ginnie Mae offered a positive return--2.11%*--for the year ended March 31, 2005,
in spite of a mixed performance by the bond market. The portfolio's
benchmark--the Citigroup 30-Year GNMA Index--returned +2.98%.
ECONOMIC & MARKET PERSPECTIVE
Economic uncertainty, inflation fears, and rising interest rates fostered bond
market volatility over the course of the fiscal year. After a sharp selloff in
the second quarter of 2004, followed by strong rallies in the third quarter of
2004 and the first 40 days of 2005, the yield on the 10-year Treasury note ended
the period higher, at 4.49%, producing a 0.96% decline for the 10-year note.
Treasury security returns ranged from a 2.23% decline for the five-year note to
a 5.11% gain for the 30-year bond.
U.S. economic growth during the fiscal year was moderate, restrained by
escalating energy prices and rising short-term interest rates. Real annualized
gross domestic product (GDP) in the U.S. was between 3.3% and 4.0% in the last
three quarters of 2004, and the government's initial estimate of first-quarter
2005 GDP was 3.1%.
As the Federal Reserve (the Fed) raised its overnight interest rate target seven
times (to ward off inflation), shorter-maturity notes like the five-year
Treasury suffered price declines as their yields rose with the Fed's rate hikes.
But the 30-year Treasury yield confounded the Fed and investors by FALLING 0.01
point, reducing the difference between long- and short-maturity yields and
flattening the curve between them. That helped higher-yielding,
long-maturity/duration bonds generally outperform shorter-maturity/duration
notes. And higher-yielding sectors of the investment-grade market, including
mortgage-backed securities, generally outperformed lower-yielding U.S.
government debt.
MORTGAGE-MARKET REVIEW
Mortgage-backed bonds were one of the better-performing sectors of the bond
market. While the U.S. bond market as a whole returned 1.15% and the 10-Year
Treasury note ended nearly 1% in the hole, the Fixed Rate Mortgage Backed
Securities component of the Lehman Brothers U.S. Aggregate Index returned 2.61%.
Mortgage-backed bonds were boosted by the fact that mortgage refinancing
activity fell by more than half during the period. Reaching a high of 4126.70 on
April 2, 2004, the Mortgage Bankers Association Refinancing Index
PORTFOLIO AT A GLANCE
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AS OF AS OF
3/31/05 3/31/04
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Average Duration
(effective) 3.1 years 1.7 years
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Average Life 6.0 years 3.1 years
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YIELDS AS OF MARCH 31, 2005
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30-DAY SEC YIELD
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Investor Class 4.06%
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Advisor Class 3.82%
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C Class 3.07%
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*All fund returns and yields referenced in this commentary are for Investor
Class shares.
(continued)
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3
Ginnie Mae - Portfolio Commentary
(MBA Index) plunged rapidly throughout April as the average rate on a 30-year
fixed-rate mortgage shot up from around 5.75%, reaching a high of 6.34% on June
11, 2004. Though mortgage rates later fell back significantly, refinancings
never really recovered, and the MBA Index stood at around 1800 at the end of
March 2005.
GINNIE MAE PERFORMANCE & PORTFOLIO POSITIONING
Though Ginnie Mae underperformed its benchmark for the fiscal year, much of this
underperformance occurred in the first half of the period, in part due to the
portfolio's shorter duration versus the benchmark and its holdings in
higher-coupon GNMAs, whose performance suffered as mortgage refinancings ramped
up in early 2004. Ginnie Mae's relative performance versus the benchmark
improved in the latter part of the period as the portfolio benefited from sector
repositioning. In the second half of the period, the investment team favored
lower-coupon GNMAs. They also underweighted GNMA I TBA or "specified"
pools--pools with a single issuer--in favor of GNMA II securities. More than 30%
of Ginnie Mae's assets were invested in GNMA IIs--pools of GNMA securities with
multiple issuers--to take advantage of the more favorable prepayment and
convexity characteristics available in the GNMA II market. (The multiple-issuer
nature of the GNMA II program provides more predictable prepayments and thus
better price and income return for the overall portfolio under varying interest
rate environments.)
Early in 2005, the team took profits on some of the 6%-coupon GNMA IIs which had
performed well. They also increased the portfolio's holding in 5.5%-coupon GNMA
IIs, which they felt held the potential for additional gains. The team also
continued to extend Ginnie Mae's duration, moving it from 2.8 years on December
31, 2004 to 3.1 years by March 31, 2005.
COMMITMENT TO GINNIE MAE'S INVESTMENT OBJECTIVE
We remain committed to pursuing the fund's objective--seeking high current
income while maintaining liquidity and safety of principal by investing
primarily in GNMA certificates.
TYPES OF INVESTMENTS IN PORTFOLIO
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% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/05 9/30/04
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GNMAs 85.8% 89.7%
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U.S. Government
Agency Collateralized
Mortgage Obligations 8.9% --
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U.S. Government
Agency Securities 5.1% 10.2%
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Other(1) 0.2% 0.1%
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(1) Includes temporary cash investments.
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4
Ginnie Mae - Schedule of Investments
MARCH 31, 2005
Principal Amount Value
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U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES(1) -- 99.1%
$ 20,000,000 GNMA, 5.50%, settlement
date 4/20/05(2) $ 20,181,235
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208,000,000 GNMA, 6.00%, settlement
date 4/20/05(2) 213,655,103
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234,499,551 GNMA, 5.00%, 6/15/33
to 3/15/34 231,710,569
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585,429,418 GNMA, 5.50%, 4/15/33
to 12/20/34(3) 591,068,494
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130,091,702 GNMA, 6.00%, 7/20/16
to 9/20/34 133,596,476
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260,980,943 GNMA, 6.50%, 6/15/23
to 9/20/34 272,779,894
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32,701,455 GNMA, 7.00%, 9/15/08
to 12/20/29 34,641,814
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268,915 GNMA, 7.25%, 9/15/22
to 6/15/23 288,234
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26,331,416 GNMA, 7.50%, 1/15/06
to 2/20/31 28,308,394
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176,327 GNMA, 7.65%, 6/15/16
to 12/15/16 188,215
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258,394 GNMA, 7.75%, 9/20/17
to 8/20/25 276,702
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531,450 GNMA, 7.77%, 4/15/20
to 1/15/21 571,316
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243,554 GNMA, 7.85%, 4/20/21
to 10/20/22 261,053
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50,764 GNMA, 7.89%, 9/20/22 54,447
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430,409 GNMA, 7.98%, 6/15/19
to 6/15/19 465,210
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6,748,686 GNMA, 8.00%, 6/15/06
to 7/20/30 7,281,751
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225,309 GNMA, 8.15%, 1/15/20
to 2/15/21 245,450
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1,533,460 GNMA, 8.25%, 4/15/06
to 5/15/27 1,660,804
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182,808 GNMA, 8.35%, 2/15/20
to 11/15/20 199,988
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5,867,108 GNMA, 8.50%, 12/15/05
to 12/15/30 6,425,110
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664,494 GNMA, 8.75%, 1/15/17
to 7/15/27 726,959
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5,061,023 GNMA, 9.00%, 8/15/08
to 1/15/25 5,486,122
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743,748 GNMA, 9.25%, 7/15/16
to 8/15/26 819,207
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1,465,795 GNMA, 9.50%, 6/15/09
to 7/20/25 1,617,895
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235,351 GNMA, 9.75%, 6/15/05
to 11/20/21 260,832
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488,459 GNMA, 10.00%, 11/15/09
to 1/20/22 550,281
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185,150 GNMA, 10.25%, 5/15/12
to 3/15/19 207,322
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Principal Amount Value
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$ 147,888 GNMA, 10.50%, 3/15/14
to 7/15/19 $ 167,477
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23,064 GNMA, 10.75%, 12/15/09
to 3/15/10 25,149
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342,997 GNMA, 11.00%, 12/15/09
to 6/15/20 378,687
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2,965 GNMA, 11.25%, 2/20/16 3,277
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80,536 GNMA, 11.50%, 7/15/10
to 8/20/19 89,760
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40,546 GNMA, 12.00%, 10/15/10
to 1/15/13 44,982
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17,052 GNMA, 12.25%, 2/15/14
to 5/15/15 19,093
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106,240 GNMA, 12.50%, 5/15/10
to 5/15/15 118,937
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182,036 GNMA, 13.00%, 1/15/11
to 8/15/15 206,299
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101,647 GNMA, 13.50%, 5/15/10
to 11/15/14 115,666
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9,196 GNMA, 13.75%, 8/15/14 10,498
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4,824 GNMA, 14.00%, 6/15/11
to 7/15/11 5,524
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63,236 GNMA, 14.50%, 10/15/12
to 12/15/12 73,005
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75,773 GNMA, 15.00%, 7/15/11
to 10/15/12 87,956
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9,078 GNMA, 16.00%, 10/15/11
to 12/15/11 10,645
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TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
(Cost $1,560,192,432) 1,554,885,832
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U.S. GOVERNMENT AGENCY COLLATERALIZED
MORTGAGE OBLIGATIONS(1) -- 10.2%
9,642,422 GNMA, Series 1998-6,
Class FA, VRN, 3.33%,
4/16/05, resets monthly off
the 1-month LIBOR plus
0.51% with a cap of 9.00% 9,730,380
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7,330,788 GNMA, Series 2002-13,
Class FA, VRN, 3.32%,
4/16/05, resets monthly off
the 1-month LIBOR plus
0.50% with a cap of 8.50% 7,396,706
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7,429,450 GNMA, Series 2003-42,
Class FW, VRN, 3.20%,
4/20/05, resets monthly off
the 1-month LIBOR plus
0.35% with a cap of 7.00% 7,452,090
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8,611,073 GNMA, Series 2004-39,
Class XF, VRN, 3.07%,
4/16/05, resets monthly off
the 1-month LIBOR plus
0.25% with a cap of 7.50% 8,583,001
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14,865,636 GNMA, Series 2004-46,
Class QH, 4.50%, 4/20/25 14,927,268
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See Notes to Financial Statements. (continued)
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5
Ginnie Mae - Schedule of Investments
MARCH 31, 2005
Principal Amount Value
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$ 81,648,711 GNMA, Series 2004-53,
Class FB, VRN, 3.22%,
4/16/05, resets monthly off
the 1-month LIBOR plus
0.40% with a cap of 7.50% $ 82,258,953
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30,000,000 GNMA, Series 2005-24,
Class F, VRN, 2.79%,
4/16/05, resets monthly off
the 1-month LIBOR plus
0.20% with a cap of 7.00% 30,000,000
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TOTAL U.S. GOVERNMENT AGENCY
COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $160,299,089) 160,348,398
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U.S. GOVERNMENT AGENCY
SECURITIES -- 6.0%
25,000,000 FFCB, VRN, 2.77%, 4/18/05,
resets monthly off the
1-month LIBOR minus
0.06% with no caps 25,015,425
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15,000,000 FFCB, VRN, 2.78%, 4/29/05,
resets monthly off the
1-month LIBOR minus
0.07% with no caps 15,002,955
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15,000,000 FHLB, VRN, 2.72%, 4/18/05,
resets monthly off the
1-month LIBOR minus
0.10% with no caps 14,998,620
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Principal Amount Value
- --------------------------------------------------------------------------------
$ 20,000,000 FHLB, VRN, 3.14%, 4/28/05,
resets monthly off the
1-year H15T minus 0.27%
with no caps $ 19,999,200
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18,250,000 FNMA, VRN, 2.63%, 4/7/05,
resets monthly off the
1-month LIBOR minus
0.11375% with no caps 18,246,441
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TOTAL U.S. GOVERNMENT AGENCY
SECURITIES
(Cost $93,238,110) 93,262,641
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TEMPORARY CASH INVESTMENTS -- 0.2%
3,800,000 FHLMC Discount Notes,
2.54%, 4/1/05(4)
(Cost $3,800,000) 3,800,000
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TOTAL INVESTMENT SECURITIES -- 115.5%
(Cost $1,817,529,631) 1,812,296,871
- --------------------------------------------------------------------------------
OTHER ASSETS AND
LIABILITIES -- (15.5)% (242,931,833)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $1,569,365,038
================================================================================
FUTURES CONTRACTS*
Expiration Underlying Face
Contracts Sold Date Amount at Value Unrealized Gain
- --------------------------------------------------------------------------------
990 U.S. Treasury
2-Year Notes June 2005 $204,821,719 $525,955
====================================
*FUTURES CONTRACTS typically are based on an index or specific securities and
tend to track the performance of the index or specific securities while
remaining very liquid (easy to buy and sell). By selling futures, the fund
hedges its investments against price fluctuations.
NOTES TO SCHEDULE OF INVESTMENTS
FFCB = Federal Farm Credit Bank
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GNMA = Government National Mortgage Association
H15T = Federal Reserve H.15 U.S. Treasury Note Constant Maturity 1 Year
LIBOR = London Interbank Offered Rate
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon
will vary significantly from current market rates.
VRN = Variable Rate Note. Interest reset date is indicated, unless otherwise
noted. Rate shown is effective March 31, 2005.
(1) Final maturity indicated, unless otherwise noted.
(2) Forward commitment.
(3) Security, or a portion thereof, has been segregated for forward commitments
and/or futures contracts.
(4) The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
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6
Government Bond - Performance
TOTAL RETURNS AS OF MARCH 31, 2005
----------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 0.50% 6.31% 6.24% 7.89% 5/16/80
- --------------------------------------------------------------------------------
CITIGROUP TREASURY/
MORTGAGE INDEX(1) 1.33% 6.77% 6.96% --(2) --
- --------------------------------------------------------------------------------
CITIGROUP
U.S. TREASURY
10+ YEAR INDEX(1) 2.75% 8.50% 8.97% 10.49%(3) --
- --------------------------------------------------------------------------------
Advisor Class 0.25% 6.05% -- 5.51% 10/9/97
- --------------------------------------------------------------------------------
Performance information prior to September 3, 2002, is that of the American
Century Treasury Fund, all of the net assets of which were acquired by
Government Bond pursuant to a plan of reorganization approved by Treasury
shareholders on August 2, 2002.
(1) When Government Bond merged with the Treasury fund in September 2002, the
fund's benchmark was changed from the Salomon Long-Term Treasury Index to
the Salomon Treasury/Mortgage Index to better reflect the fund's broader
investment mandate. In June 2003, the Salomon Long-Term Treasury Index
became known as the Citigroup U.S. Treasury 10+ Year Index and the Salomon
Treasury/Mortgage Index became known as the Citigroup Treasury/Mortgage
Index.
(2) Index data not available prior to 1982.
(3) Since 5/31/80, the date nearest the Investor Class's inception for which
data are available.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the indices
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the indices do not.
(continued)
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7
Government Bond - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made March 31, 1995
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended March 31
- --------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
- --------------------------------------------------------------------------------------------------
Investor Class 8.42% 4.05% 11.04% 6.09% 1.51% 13.17% 3.01% 13.17% 2.42% 0.50%
- --------------------------------------------------------------------------------------------------
Citigroup
Treasury/
Mortgage Index 10.53% 4.90% 11.73% 6.57% 2.31% 12.53% 5.17% 11.06% 4.21% 1.33%
- --------------------------------------------------------------------------------------------------
Citigroup U.S.
Treasury 10+
Year Index 14.73% 2.84% 20.63% 7.09% 3.00% 12.82% 1.10% 20.45% 6.51% 2.75%
- --------------------------------------------------------------------------------------------------
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the indices
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the indices do not.
- ------
8
Government Bond - Portfolio Commentary
PORTFOLIO MANAGER: BOB GAHAGAN
PERFORMANCE SUMMARY
Government Bond posted a positive return for the year ended March 31, 2005, as
the bond market turned in a mixed performance. Government Bond returned 0.50%,*
underperforming its benchmark--the Citigroup Treasury/Mortgage Index--which
returned 1.33%.
BOND MARKET IS MIXED
Economic uncertainty, inflation fears, and rising interest rates fostered bond
market volatility. A sharp selloff in the second quarter of 2004 raised the
10-year Treasury yield by over a full percentage point from 3.84% at the start
of the fiscal year to 4.87% in June 2004. Later, strong rallies in the third
quarter of 2004 and the first 40 days of 2005 pulled the yield below 4% before
another selloff pushed it above 4.60% in March 2005. By the end of the fiscal
year, the 10-year Treasury yield had settled at 4.49%, resulting in negative
performance (a 0.96% loss) for 10-year note investors. Treasury security returns
ranged from a 2.23% decline for the five-year note to a 5.11% gain for the
30-year bond.
ECONOMIC & MARKET PERSPECTIVE
U.S. economic growth during the fiscal year was moderate, restrained by
escalating energy prices and rising short-term interest rates. Real annualized
gross domestic product (GDP) in the U.S. was between 3.3% and 4.0% in the last
three quarters of 2004, and the government's initial estimate of first-quarter
2005 GDP was 3.1%.
As the economic outlook softened, the Treasury yield curve "flattened." To fight
inflation, the Federal Reserve (the Fed) raised its overnight interest rate
target seven times, from 1% to 2.75%. Shorter-maturity notes like the five-year
Treasury suffered price declines as their yields rose with the Fed's rate hikes.
But the 30-year Treasury yield confounded the Fed and investors by FALLING 0.01
point, reducing the difference between long- and short-maturity yields and
flattening the curve between them. That helped higher-yielding,
long-maturity/duration bonds generally outperform shorter-maturity/duration
notes. And higher-yielding sectors of the investment-grade market, including
mortgage-backed and corporate securities, generally outperformed lower-yielding
U.S. government debt.
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
AS OF AS OF
3/31/05 3/31/04
- --------------------------------------------------------------------------------
Weighted Average
Maturity 5.4 years 3.6 years
- --------------------------------------------------------------------------------
Average Duration
(effective) 3.9 years 3.4 years
- --------------------------------------------------------------------------------
YIELDS AS OF MARCH 31, 2005
- --------------------------------------------------------------------------------
30-DAY SEC YIELD
- --------------------------------------------------------------------------------
Investor Class 3.50%
- --------------------------------------------------------------------------------
Advisor Class 3.25%
- --------------------------------------------------------------------------------
*All fund returns and yields referenced in this commentary are for Investor
Class shares.
(continued)
- ------
9
Government Bond - Portfolio Commentary
GOVERNMENT BOND'S RELATIVE PERFORMANCE STRONGER IN SECOND HALF OF YEAR
Though Government Bond's relatively defensive positioning caused it to
underperform the benchmark for the fiscal year, most of this underperformance
occurred in the first half of the period. Expecting stronger economic growth and
rising interest rates early in 2004, the investment team kept Government Bond's
effective duration shorter than that of its benchmark (a shorter duration slows
downward price movement as interest rates rise). That strategy worked well
versus the benchmark when bond yields soared in April of 2004, but dampened
relative performance when bonds rallied in the third quarter of the year.
But Government Bond outstripped the benchmark in the second half of the fiscal
year as the investment team anticipated (and positioned the portfolio for) the
flattening yield curve, and adjusted portfolio weightings in favor of bond
sectors that performed well. The team underweighted the portfolio's Treasury
holdings versus the benchmark, and overweighted it in agency securities and TIPS
(Treasury Inflation-Protected securities), which outperformed nominal Treasurys
during the fiscal year, and helped Government Bond outperform the benchmark.
Though Government Bond's effective duration was lengthened slightly over the
period to bring it closer to that of the benchmark (from 3.4 years at the end of
March 2004 to 3.9 years on March 31, 2005), it remained short of the benchmark's
duration (4.2 years) at the end of March 2005, in anticipation of further
interest rate increases that are expected during the year.
COMMITMENT TO GOVERNMENT BOND'S INVESTMENT OBJECTIVE
We remain committed to pursuing the fund's objective--seeking high current
income for shareholders.
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/05 9/30/04
- --------------------------------------------------------------------------------
U.S. Government Agency
Mortgage-Backed
Securities 26.2% 27.0%
- --------------------------------------------------------------------------------
U.S. Government Agency
Collateralized Mortgage
Obligations 22.3% 19.5%
- --------------------------------------------------------------------------------
U.S. Government Agency
Securities 18.0% 24.7%
- --------------------------------------------------------------------------------
U.S. Treasury Securities 12.1% 13.9%
- --------------------------------------------------------------------------------
U.S. Government Agency
Asset-Backed Securities 5.0% 6.7%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 2.1% 8.2%
- --------------------------------------------------------------------------------
Collateral Received for
Securities Lending 14.3% --
- --------------------------------------------------------------------------------
- ------
10
Government Bond - Schedule of Investments
MARCH 31, 2005
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES(1) -- 37.7%
$ 7,750,595 FHLMC, 4.50%, 1/1/19(2) $ 7,603,186
- --------------------------------------------------------------------------------
9,636,510 FHLMC, 5.50%, 10/1/34 9,667,909
- --------------------------------------------------------------------------------
33,500,000 FNMA, 6.00%, settlement
date 4/13/05(3) 34,243,298
- --------------------------------------------------------------------------------
29,000,000 FNMA, 6.50%, settlement
date 4/13/05(3) 30,096,548
- --------------------------------------------------------------------------------
24,000,000 FNMA, 5.00%, settlement
date 4/18/05(3) 23,985,000
- --------------------------------------------------------------------------------
15,285,000 FNMA, 5.50%, settlement
date 4/18/05(3) 15,576,363
- --------------------------------------------------------------------------------
12,600,000 FNMA, 5.00%, settlement
date 5/12/05(3) 12,285,000
- --------------------------------------------------------------------------------
13,995,242 FNMA, 4.50%, 5/1/19 13,695,562
- --------------------------------------------------------------------------------
1,549,705 FNMA, 6.50%, 3/1/32(2) 1,611,219
- --------------------------------------------------------------------------------
1,712,458 FNMA, 7.00%, 6/1/32(2) 1,806,186
- --------------------------------------------------------------------------------
2,142,545 FNMA, 6.50%, 8/1/32(2) 2,228,422
- --------------------------------------------------------------------------------
4,520,783 FNMA, 5.50%, 9/1/34 4,530,435
- --------------------------------------------------------------------------------
26,869,549 FNMA, 5.50%, 10/1/34 26,926,915
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
(Cost $185,135,399) 184,256,043
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY COLLATERALIZED
MORTGAGE OBLIGATIONS(1) -- 32.1%
23,156,034 FHLMC, Class EF SEQ, VRN,
3.21%, 4/15/05, resets
monthly off the 1-month
LIBOR plus 0.40% with
no caps 23,275,356
- --------------------------------------------------------------------------------
4,256,003 FHLMC, Class FG SEQ, VRN,
3.31%, 4/15/05, resets
monthly off the 1-month
LIBOR plus 0.50% with
no caps 4,291,218
- --------------------------------------------------------------------------------
19,462,765 FHLMC, Class FK SEQ, VRN,
3.16%, 4/15/05, resets
monthly off the 1-month
LIBOR plus 0.35% with
no caps 19,512,804
- --------------------------------------------------------------------------------
7,044,675 FHLMC, Class FM, VRN,
3.16%, 4/15/05, resets
monthly off the 1-month
LIBOR plus 0.35% with
no caps 7,073,671
- --------------------------------------------------------------------------------
3,663,518 FHLMC, Class PY, 4.00%,
2/15/10(2) 3,678,931
- --------------------------------------------------------------------------------
6,963,374 FHLMC, Series 2625, Class FJ
SEQ, VRN, 3.11%, 4/15/05,
resets monthly off the
1-month LIBOR plus 0.30%
with no caps(2) 6,976,479
- --------------------------------------------------------------------------------
10,000,000 FHLMC, Series 2836,
Class ND, 4.00%, 7/15/13 9,971,240
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 6,832,312 FNMA, Series 2003-42,
Class FK, VRN, 3.25%,
4/25/05, resets monthly off
the 1-month LIBOR plus
0.40% with no caps $ 6,874,959
- --------------------------------------------------------------------------------
12,686,161 FNMA, Series 2003-43,
Class LF, VRN, 3.20%,
4/25/05, resets monthly off
the 1-month LIBOR plus
0.35% with no caps 12,748,273
- --------------------------------------------------------------------------------
10,819,261 FNMA, Series 2003-52,
Class KF SEQ, VRN, 3.25%,
4/25/05, resets monthly off
the 1-month LIBOR plus
0.40% with no caps(2) 10,854,759
- --------------------------------------------------------------------------------
17,439,672 FNMA, Series 2003-84,
Class AL, 4.00%, 4/25/13(2) 17,472,737
- --------------------------------------------------------------------------------
12,069,000 FNMA, Series 2003-124,
Class PB, 4.00%, 3/25/31(2) 12,023,427
- --------------------------------------------------------------------------------
7,486,098 FNMA, Series 2004 T1,
Class 1A2, 6.50%, 1/25/44 7,738,769
- --------------------------------------------------------------------------------
11,610,711 FNMA, Series 2004 W5,
Class F1, VRN, 3.30%,
4/25/05, resets monthly off
the 1-month LIBOR plus
0.45% with no caps 11,670,448
- --------------------------------------------------------------------------------
2,576,681 FNMA Whole Loan, Series
2004 W1, Class 1A1 SEQ,
3.27%, 11/25/43(2) 2,573,297
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $157,041,438) 156,736,368
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES -- 25.9%
7,000,000 FHLMC, 2.875%, 12/15/06(2) 6,883,513
- --------------------------------------------------------------------------------
20,000,000 FHLMC, 5.625%, 3/15/11(2)(4) 21,055,900
- --------------------------------------------------------------------------------
16,700,000 FNMA, 5.25%, 4/15/07(2) 17,100,015
- --------------------------------------------------------------------------------
5,000,000 FNMA, 2.50%, 7/16/07(2) 4,829,820
- --------------------------------------------------------------------------------
18,800,000 FNMA, 3.00%, 8/15/07(2)(4) 18,350,078
- --------------------------------------------------------------------------------
5,000,000 FNMA, 3.125%, 12/15/07(2)(4) 4,871,075
- --------------------------------------------------------------------------------
27,800,000 FNMA, 6.625%, 9/15/09(2) 30,232,056
- --------------------------------------------------------------------------------
5,000,000 FNMA, 6.125%, 3/15/12(2)(4) 5,417,965
- --------------------------------------------------------------------------------
18,025,000 FNMA, 4.625%, 10/15/14(2)(4) 17,679,677
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES
(Cost $128,322,288) 126,420,099
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 17.5%
8,200,000 U.S. Treasury Bonds, 11.25%,
2/15/15(2)(4) 12,560,735
- --------------------------------------------------------------------------------
4,164,000 U.S. Treasury Bonds, 8.875%,
8/15/17(2)(4) 5,790,729
- --------------------------------------------------------------------------------
5,500,000 U.S. Treasury Bonds, 8.00%,
11/15/21(2)(4) 7,470,551
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
11
Government Bond - Schedule of Investments
MARCH 31, 2005
Principal Amount Value
- --------------------------------------------------------------------------------
$ 5,300,000 U.S. Treasury Bonds, 7.25%,
8/15/22(2)(4) $ 6,776,755
- --------------------------------------------------------------------------------
5,700,000 U.S. Treasury Bonds, 7.625%,
11/15/22(2)(4) 7,551,389
- --------------------------------------------------------------------------------
4,835,000 U.S. Treasury Bonds, 6.25%,
8/15/23(2)(4) 5,631,078
- --------------------------------------------------------------------------------
7,550,000 U.S. Treasury Bonds, 6.125%,
11/15/27(2)(4) 8,826,720
- --------------------------------------------------------------------------------
5,500,000 U.S. Treasury Bonds, 5.50%,
8/15/28(2)(4) 5,976,526
- --------------------------------------------------------------------------------
6,000,000 U.S. Treasury Bonds, 5.375%,
2/15/31(2)(4) 6,541,176
- --------------------------------------------------------------------------------
16,677,455 U.S. Treasury Inflation Indexed
Notes, 1.625%, 1/15/15(2)(4) 16,436,415
- --------------------------------------------------------------------------------
1,700,000 U.S. Treasury Notes, 4.25%,
8/15/14(2)(4) 1,667,595
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY SECURITIES
(Cost $84,085,214) 85,229,669
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
ASSET-BACKED SECURITIES -- 7.3%
7,861,148 FHLMC, Series T19, Class A,
VRN, 3.02%, 4/25/05, resets
monthly off the 1-month
LIBOR plus 0.17% with
no caps 7,866,942
- --------------------------------------------------------------------------------
7,555,979 FHLMC, Series T20, Class A7,
VRN, 3.00%, 4/25/05, resets
monthly off the 1-month
LIBOR plus 0.15% with
no caps 7,563,052
- --------------------------------------------------------------------------------
14,955,365 FHLMC, Series T21, Class A,
VRN, 3.03%, 4/25/05, resets
monthly off the 1-month
LIBOR plus 0.18% with
no caps(2) 14,967,060
- --------------------------------------------------------------------------------
2,512,540 FHLMC, Series T34, Class A1V,
VRN, 2.97%, 4/25/05, resets
monthly off the 1-month
LIBOR plus 0.12% with
no caps 2,513,042
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 2,503,934 FHLMC, Series T35, Class A,
VRN, 2.99%, 4/25/05, resets
monthly off the 1-month
LIBOR plus 0.14% with
no caps(2) $ 2,506,505
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
ASSET-BACKED SECURITIES
(Cost $35,411,618) 35,416,601
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 3.0%
14,400,000 FHLMC Discount Notes,
2.54%, 4/1/05(2)(5)
(Cost $14,400,000) 14,400,000
- --------------------------------------------------------------------------------
COLLATERAL RECEIVED FOR
SECURITIES LENDING(6) -- 20.6%
REPURCHASE AGREEMENTS -- 20.6%
- --------------------------------------------------------------------------------
Repurchase Agreement, Barclays Bank plc,
(collateralized by various U.S. Government
Agency obligations in a pooled account at
the lending agent), 2.85%, dated 3/31/05,
due 4/1/05 (Delivery value $45,373,502) 45,369,910
- --------------------------------------------------------------------------------
Repurchase Agreement, UBS AG,
(collateralized by various U.S. Government
Agency obligations in a pooled account at
the lending agent), 2.875%, dated 3/31/05,
due 4/1/05 (Delivery value $55,004,392) 55,000,000
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED FOR
SECURITIES LENDING
(Cost $100,369,910) 100,369,910
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 144.1%
(Cost $704,765,867) 702,828,690
- --------------------------------------------------------------------------------
OTHER ASSETS AND
LIABILITIES -- (44.1)% (215,157,748)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $ 487,670,942
================================================================================
See Notes to Financial Statements. (continued)
- ------
12
Government Bond - Schedule of Investments
MARCH 31, 2005
FUTURES CONTRACTS*
Expiration Underlying Face
Contracts Purchased Date Amount at Value Unrealized Loss
- --------------------------------------------------------------------------------
134 U.S. Treasury
10-Year Notes June 2005 $14,641,594 $(108,622)
====================================
Expiration Underlying Face
Contracts Sold Date Amount at Value Unrealized Gain
- --------------------------------------------------------------------------------
648 U.S. Treasury
2-Year Notes June 2005 $134,065,125 $367,908
- --------------------------------------------------------------------------------
206 U.S. Treasury
5-Year Notes June 2005 22,061,313 29,599
- --------------------------------------------------------------------------------
$156,126,438 $397,507
====================================
*FUTURES CONTRACTS typically are based on an index or specific securities and
tend to track the performance of the index or specific securities while
remaining very liquid (easy to buy and sell). By investing its cash assets in
futures, the fund has increased exposure to certain markets while maintaining
easy access to cash. By selling futures, the fund hedges its investments
against price fluctuations.
SWAP AGREEMENTS**
Unrealized
Notional Amount Description of Agreement Expiration Date Loss
- --------------------------------------------------------------------------------
$10,000,000 Receive semiannually a September 2007 $(239,319)
fixed rate equal to ===========
3.243% and pay quarterly
a variable rate based
on the 3-month LIBOR with
Deutsche Bank Securities, Inc.
**SWAP AGREEMENTS are contracts in which two parties agree to exchange the
returns earned or realized on predetermined investments or instruments. The
fund may enter into swap agreements in order to manage interest, credit, or
market risk or to gain exposure to certain markets.
NOTES TO SCHEDULE OF INVESTMENTS
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
LIBOR = London Interbank Offered Rate
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon
will vary significantly from current market rates.
SEQ = Sequential Payer
VRN = Variable Rate Note. Interest reset date is indicated, unless otherwise
noted. Rate shown is effective March 31, 2005.
(1) Final maturity indicated, unless otherwise noted.
(2) Security, or a portion thereof, has been segregated for a forward
commitment, futures contract and/or swap agreement.
(3) Forward Commitment.
(4) Security, or a portion thereof, was on loan as of March 31, 2005.
(5) The rate indicated is the yield to maturity at purchase.
(6) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions. (See Note 5 in
Notes to Financial Statements.)
See Notes to Financial Statements.
- ------
13
Inflation-Adjusted Bond - Performance
TOTAL RETURNS AS OF MARCH 31, 2005
----------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 2.57% 9.04% 6.78% 2/10/97
- --------------------------------------------------------------------------------
CITIGROUP U.S.
INFLATION-LINKED
SECURITIES INDEX(1) 2.78% 9.79% 7.63%(2) --
- --------------------------------------------------------------------------------
Institutional Class 2.77% -- 6.60% 10/1/02
- --------------------------------------------------------------------------------
Advisor Class 2.33% 8.77% 7.49% 6/15/98
- --------------------------------------------------------------------------------
(1) In June 2003, the Salomon U.S. Inflation-Linked Index, the fund's benchmark
since inception, became known as the Citigroup U.S. Inflation-Linked
Securities Index.
(2) Since 2/28/97, the date nearest the Investor Class's inception for which
data are available.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
(continued)
- ------
14
Inflation-Adjusted Bond - Performance
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made February 10, 1997
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended March 31
- --------------------------------------------------------------------------------------------
1997* 1998 1999 2000 2001 2002 2003 2004 2005
- --------------------------------------------------------------------------------------------
Investor Class -1.98% 3.45% 3.37% 5.52% 12.62% 4.16% 16.42% 10.04% 2.57%
- --------------------------------------------------------------------------------------------
Citigroup U.S.
Inflation-Linked
Securities Index -1.37% 3.93% 4.11% 6.39% 13.54% 4.37% 18.20% 10.83% 2.78%
- --------------------------------------------------------------------------------------------
*From 2/10/97, the Investor Class's inception date. Index data from 2/28/97, the
date nearest the Investor Class's inception for which data are available. Not
annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
- ------
15
Inflation-Adjusted Bond - Portfolio Commentary
PORTFOLIO MANAGER: JEREMY FLETCHER
RETURN SUMMARY & PERSPECTIVE
Inflation-Adjusted Bond returned 2.57%* for the fiscal year ended March 31,
2005, as inflation-indexed securities outperformed most other types of taxable
bonds amid moderate U.S. economic growth, rising interest rates, and
accelerating inflation. By comparison, the fund's benchmark--the Citigroup U.S.
Inflation-Linked Securities Index--returned 2.78%. The fund's return is reduced
by fees, while the benchmark's is not. (Please see pages 14 and 15.)
Inflation-Adjusted Bond performed even better versus the funds in Lipper's
Treasury Inflation Protected Securities category, which averaged a return of
2.24% for the 12 months. The fund finished among the top 35% of its peers (23 of
67) based on those returns, and we talk about the strategies that we employed to
produce that result in the Portfolio Positioning and Strategy section on the
next page.
ECONOMIC & MARKET PERSPECTIVE
U.S. economic growth during the fiscal year was moderate, restrained by
escalating energy prices and rising short-term interest rates. Crude oil spurted
55% higher to over $55 a barrel, fueling concerns about higher inflation and a
global economic slowdown (consumer and business spending were expected to
decline as energy costs soared). Real annualized gross domestic product (GDP) in
the U.S. was between 3.3% and 4.0% in the last three quarters of 2004, and the
government's initial estimate of first-quarter 2005 GDP was 3.1%.
As the economic outlook softened, the Treasury yield curve "flattened." To fight
inflation, the Federal Reserve (the Fed) raised its overnight interest rate
target seven times (the most since 1994-95) from 1% to 2.75%. Shorter-maturity
notes like the five-year Treasury suffered price declines as their yields rose
with the Fed's rate hikes. The five-year Treasury yield increased by almost 1.4
percentage points during the fiscal year.
But the 30-year Treasury yield confounded the Fed and investors by FALLING 0.01
point, reducing the difference between long- and short-maturity yields and
flattening the yield curve. That helped long-maturity/duration bonds enjoy price
gains and generally outperform shorter-maturity/duration notes.
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
AS OF AS OF
3/31/05 3/31/04
- --------------------------------------------------------------------------------
Weighted Average
Maturity 10.6 years 10.7 years
- --------------------------------------------------------------------------------
Average Duration
(effective) 6.6 years 5.3 years
- --------------------------------------------------------------------------------
YIELDS AS OF MARCH 31, 2005
- --------------------------------------------------------------------------------
30-DAY SEC YIELD
- --------------------------------------------------------------------------------
Investor Class 3.07%
- --------------------------------------------------------------------------------
Institutional Class 3.27%
- --------------------------------------------------------------------------------
Advisor Class 2.82%
- --------------------------------------------------------------------------------
*All fund returns and yields referenced in this commentary are for Investor
Class shares.
(continued)
- ------
16
Inflation-Adjusted Bond - Portfolio Commentary
INFLATION-INDEXED SECURITIES PERSPECTIVE
With interest rates rising and overall consumer prices (as measured by the
seasonally adjusted consumer price index for all urban consumers) increasing at
a 4.3% compound annual rate during 2005's first quarter, breakeven rates--
representing the yield gap between inflation-indexed Treasurys and their
conventional counterparts--for Treasury Inflation Protected Securities (TIPS)
finished higher for the 12 months.
Breakeven rates for five-year TIPS climbed 84 basis points, while those for
10-year TIPS increased by 33 basis points. Lastly, breakevens on 30-year TIPS
finished slightly higher but little changed overall, buoyed by the unexpected
"conundrum" of long-term bonds performing well in spite of rising short-term
rates.
PORTFOLIO POSITIONING & STRATEGY
Inflation-Adjusted Bond experienced tremendous growth during the fiscal year as
investors increasingly sought the protection of inflation-indexed securities.
With assets up by more than 50%, we primarily invested the incoming cash into
various-maturity TIPS in an effort to provide investors with market-like
performance. As the accompanying table concerning portfolio composition by
maturity shows, that translated into little overall change in the portfolio's
bond maturity structure.
With the help of our corporate credit research team, we also searched for what
we believed to be value-added securities outside of TIPS. Those efforts landed
two corporate inflation-indexed bonds for the portfolio, both of which are
benchmarked off of the consumer price index--the same inflation index used by
TIPS. One of the bonds was issued by Toyota Motor Credit Corp., the other by
Sallie Mae.
Finally, we used Treasury futures contracts to express our expectations for the
earlier described economic and market environment to shrink the yield gap
between two- and 10-year Treasury bonds (which fell by approximately 80 basis
points--0.80%--over the last six months).
OUR COMMITMENT
Inflation-Adjusted Bond seeks to provide total return and inflation protection
consistent with investment in inflation-indexed securities. We remain committed
to that objective and will endeavor to do so by continuing to primarily invest
in inflation-indexed debt securities.
PORTFOLIO COMPOSITION BY MATURITY
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/05 9/30/04
- --------------------------------------------------------------------------------
0 - 5-Year Notes(1) 24.3% 25.3%
- --------------------------------------------------------------------------------
5 - 10-Year Notes 48.3% 47.9%
- --------------------------------------------------------------------------------
10 - 30-Year Bonds 27.4% 26.8%
- --------------------------------------------------------------------------------
(1) Includes temporary cash investments.
- ------
17
Inflation Adjusted Bond - Schedule of Investments
MARCH 31, 2005
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 91.5%
$64,743,680 U.S. Treasury Inflation
Indexed Bonds, 2.375%,
1/15/25(1) $ 69,660,638
- --------------------------------------------------------------------------------
74,569,852 U.S. Treasury Inflation
Indexed Bonds, 3.625%,
4/15/28(1) 98,043,324
- --------------------------------------------------------------------------------
60,374,877 U.S. Treasury Inflation
Indexed Bonds, 3.875%,
4/15/29 83,048,784
- --------------------------------------------------------------------------------
15,040,060 U.S. Treasury Inflation
Indexed Bonds, 3.375%,
4/15/32 19,964,236
- --------------------------------------------------------------------------------
61,482,659 U.S. Treasury Inflation
Indexed Notes, 3.375%,
1/15/07 64,564,108
- --------------------------------------------------------------------------------
39,540,720 U.S. Treasury Inflation
Indexed Notes, 3.625%,
1/15/08 42,537,669
- --------------------------------------------------------------------------------
35,207,464 U.S. Treasury Inflation
Indexed Notes, 3.875%,
1/15/09 38,837,847
- --------------------------------------------------------------------------------
22,463,790 U.S. Treasury Inflation
Indexed Notes, 4.25%,
1/15/10 25,578,619
- --------------------------------------------------------------------------------
24,157,440 U.S. Treasury Inflation
Indexed Notes, 0.875%,
4/15/10 23,637,983
- --------------------------------------------------------------------------------
42,510,056 U.S. Treasury Inflation
Indexed Notes, 3.50%,
1/15/11 47,501,162
- --------------------------------------------------------------------------------
39,734,300 U.S. Treasury Inflation
Indexed Notes, 3.375%,
1/15/12 44,606,957
- --------------------------------------------------------------------------------
67,132,815 U.S. Treasury Inflation
Indexed Notes, 3.00%,
7/15/12 73,906,650
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$73,195,920 U.S. Treasury Inflation
Indexed Notes, 1.875%,
7/15/13 $ 74,495,001
- --------------------------------------------------------------------------------
71,208,000 U.S. Treasury Inflation
Indexed Notes, 2.00%,
1/15/14 72,908,233
- --------------------------------------------------------------------------------
71,825,020 U.S. Treasury Inflation
Indexed Notes, 2.00%,
7/15/14 73,386,352
- --------------------------------------------------------------------------------
68,906,850 U.S. Treasury Inflation
Indexed Notes, 1.625%,
1/15/15 67,910,939
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY SECURITIES
(Cost $878,591,798) 920,588,502
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 6.6%
25,000,000 SLM Corp., 1.32%, 1/25/10 24,641,214
- --------------------------------------------------------------------------------
42,285,600 Toyota Motor Credit Corp.
Inflation Indexed Bonds,
1.22%, 10/1/09 42,134,640
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $67,247,564) 66,775,854
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 0.2%
2,100,000 FHLMC Discount Notes,
2.54%, 4/1/05(2)
(Cost $2,100,000) 2,100,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 98.3%
(Cost $947,939,362) 989,464,356
- --------------------------------------------------------------------------------
OTHER ASSETS AND
LIABILITIES -- 1.7% 16,937,055
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $1,006,401,411
================================================================================
FUTURES CONTRACTS*
Expiration Underlying Face
Contracts Purchased Date Amount at Value Unrealized Loss
- --------------------------------------------------------------------------------
275 U.S. Treasury
10-Year Notes June 2005 $30,048,047 $(197,400)
====================================
Expiration Underlying Face
Contracts Sold Date Amount at Value Unrealized Gain
- --------------------------------------------------------------------------------
548 U.S. Treasury
2-Year Notes June 2005 $113,376,063 $271,932
====================================
*FUTURES CONTRACTS typically are based on an index or specific securities and
tend to track the performance of the index or specific securities while
remaining very liquid (easy to buy and sell). By investing its cash assets in
futures, the fund has increased exposure to certain markets while maintaining
easy access to cash. By selling futures, the fund hedges its investments
against price fluctuations.
NOTES TO SCHEDULE OF INVESTMENTS
FHLMC = Federal Home Loan Mortgage Corporation
(1) Security, or a portion thereof, has been segregated for futures contracts.
(2) The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
- ------
18
Short-Term Government - Performance
TOTAL RETURNS AS OF MARCH 31, 2005
----------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS -0.16% 4.09% 4.67% 6.19% 12/15/82
- --------------------------------------------------------------------------------
CITIGROUP U.S.
TREASURY/AGENCY
1- TO 3-YEAR
INDEX(1) -0.27% 4.80% 5.43% 7.22%(2) --
- --------------------------------------------------------------------------------
Advisor Class -0.41% 3.83% -- 3.68% 7/8/98
- --------------------------------------------------------------------------------
(1) In June 2003, the Salomon 1- to 3-Year Treasury/Agency Index, the fund's
benchmark since inception, became known as the Citigroup U.S.
Treasury/Agency 1- to 3-Year Index.
(2) Since 12/31/82, the date nearest the Investor Class's inception for which
data are available.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
(continued)
- ------
19
Short-Term Government - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made March 31, 1995
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended March 31
- --------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
- --------------------------------------------------------------------------------------------------
Investor Class 7.05% 4.69% 6.66% 5.39% 2.51% 9.25% 4.68% 5.52% 1.40% -0.16%
- --------------------------------------------------------------------------------------------------
Citigroup U.S.
Treasury/Agency
1- to 3-Year
Index 7.67% 5.39% 7.49% 6.09% 3.72% 9.77% 5.61% 6.71% 2.45% -0.27%
- --------------------------------------------------------------------------------------------------
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
- ------
20
Short-Term Government - Portfolio Commentary
PORTFOLIO MANAGER: BOB GAHAGAN
PERFORMANCE SUMMARY
Short-Term Government posted a slightly negative return (-0.16%*) for the year
ended March 31, 2005, but outperformed its benchmark, the Citigroup U.S.
Treasury/Agency 1- to 3-Year Index, which returned -0.27%. Year-to-date,
Short-Term Government is also ahead of its benchmark, returning -0.10%, compared
with the -0.24% return of the benchmark.
BOND MARKET IS MIXED
Economic uncertainty, inflation fears, and rising interest rates fostered bond
market volatility. A sharp selloff in the second quarter of 2004 raised the
10-year Treasury yield by over a full percentage point from 3.84% at the start
of the fiscal year to 4.87% in June 2004. Later, strong rallies in the third
quarter of 2004 and the first 40 days of 2005 pulled the yield below 4% before
another selloff pushed it above 4.60% in March 2005. By the end of the fiscal
year, the 10-year Treasury yield had settled at 4.49%, resulting in negative
performance (a 0.96% loss) for 10-year note investors. Treasury security returns
ranged from a 2.23% decline for the five-year note to a 5.11% gain for the
30-year bond.
ECONOMIC & MARKET PERSPECTIVE
U.S. economic growth during the fiscal year was moderate, restrained by
escalating energy prices and rising short-term interest rates. Real annualized
gross domestic product (GDP) in the U.S. was between 3.3% and 4.0% in the last
three quarters of 2004, and the government's initial estimate of first-quarter
2005 GDP was 3.1%.
As the economic outlook softened, the Treasury yield curve "flattened." To fight
inflation, the Federal Reserve (the Fed) raised its overnight interest rate
target seven times, from 1% to 2.75%. Shorter-maturity notes like the five-year
Treasury suffered price declines as their yields rose with the Fed's rate hikes.
But the 30-year Treasury yield confounded the Fed and investors by FALLING 0.01
point, reducing the difference between long- and short-maturity yields and
flattening the curve between them. That helped higher-yielding,
long-maturity/duration bonds generally outperform shorter-maturity/duration
notes. And higher-yielding sectors of the investment-grade market, including
mortgage-backed and corporate securities, generally outperformed lower-yielding
U.S. government debt.
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
AS OF AS OF
3/31/05 3/31/04
- --------------------------------------------------------------------------------
Weighted Average
Maturity 2.5 years 2.1 years
- --------------------------------------------------------------------------------
Average Duration
(effective) 1.6 years 1.6 years
- --------------------------------------------------------------------------------
YIELDS AS OF MARCH 31, 2005
- --------------------------------------------------------------------------------
30-DAY SEC YIELD
- --------------------------------------------------------------------------------
Investor Class 3.00%
- --------------------------------------------------------------------------------
Advisor Class 2.75%
- --------------------------------------------------------------------------------
*All fund returns and yields referenced in this commentary are for Investor
Class shares.
(continued)
- ------
21
Short-Term Government - Portfolio Commentary
FAVORABLE POSITIONING HELPED SHORT-TERM GOVERNMENT OUTPERFORM THE BENCHMARK
Expecting stronger economic growth and rising interest rates early in 2004, the
investment team had Short-Term Government's effective duration set shorter than
that of its benchmark-- a shorter duration slows downward price movement as
interest rates rise. That strategy worked well versus the benchmark when bond
yields soared in April of 2004, but dampened relative performance when bonds
rallied in the third quarter of the year.
But Short-Term Government still performed better than its benchmark during the
fiscal year, and for 2005 to date. The portfolio's bias toward a flattening
yield curve helped out in the second half of the fiscal year, as did the team's
portfolio weightings, which favored bond sectors that performed well. The team
underweighted Short-Term Government's Treasury holdings versus the benchmark,
cutting them from around 12% at the beginning of the period to 4.8% as of March
31, 2005 (based on net assets). The portfolio had a significant overweight in
mortgage-backed securities (MBS), which outperformed nominal Treasurys during
the second half of the fiscal year, and helped Short-Term Government stay ahead
of its benchmark. At the end of the period, the portfolio's duration remained
slightly short of its benchmark's, in anticipation of further interest rate
increases expected during the year.
COMMITMENT TO SHORT-TERM GOVERNMENT'S INVESTMENT OBJECTIVE
We remain committed to pursuing the fund's objective--seeking high current
income for shareholders while maintaining safety of principle.
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/05 9/30/04
- --------------------------------------------------------------------------------
Collateralized Mortgage
Obligations 40.3% 30.5%
- --------------------------------------------------------------------------------
U.S. Government Agency
Mortgage-Backed
Securities 22.9% 17.0%
- --------------------------------------------------------------------------------
U.S. Government Agency
Securities 20.2% 41.2%
- --------------------------------------------------------------------------------
U.S. Treasury Securities
and Equivalents 3.9% 4.6%
- --------------------------------------------------------------------------------
Asset-Backed Securities 3.5% 4.1%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 4.7% 2.6%
- --------------------------------------------------------------------------------
Collateral Received for
Securities Lending 4.5% --
- --------------------------------------------------------------------------------
- ------
22
Short-Term Government - Schedule of Investments
MARCH 31, 2005
Principal Amount Value
- --------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS(1) -- 49.1%
$ 9,001,125 Bank of America Commercial
Mortgage Inc., Series 2004-1,
Class A1 SEQ, 3.16%,
11/10/39(2) $ 8,706,537
- --------------------------------------------------------------------------------
71,000,000 Bear Stearns Commercial
Mortgage Securities
STRIPS - COUPON, Series
2004 T16, Class X2, VRN,
0.97%, 4/1/05(2) 2,960,404
- --------------------------------------------------------------------------------
6,269,453 Bear Stearns Commercial
Mortgage Securities, Series
2003 2, Class A5, 3.99%,
1/25/33 (Acquired 12/10/04,
Cost $6,293,943)(2)(3) 6,223,717
- --------------------------------------------------------------------------------
88,380,903 Commercial Mortgage
Acceptance Corp. STRIPS -
COUPON, Series 1998 C2,
Class X, VRN, 1.16%, 4/1/05(2) 3,316,051
- --------------------------------------------------------------------------------
15,520,010 FHLMC, Class FK SEQ, VRN,
3.16%, 4/15/05, resets
monthly off the 1-month
LIBOR plus 0.35% with
no caps(2) 15,597,718
- --------------------------------------------------------------------------------
7,044,675 FHLMC, Class FM, VRN,
3.16%, 4/15/05, resets
monthly off the 1-month
LIBOR plus 0.35% with
no caps 7,073,671
- --------------------------------------------------------------------------------
17,416,730 FHLMC, Class FM, VRN,
3.16%, 4/15/05, resets
monthly off the 1-month
LIBOR plus 0.35% with
no caps 17,508,916
- --------------------------------------------------------------------------------
35,841,000 FHLMC, Class OA, 3.50%,
4/15/10 35,837,882
- --------------------------------------------------------------------------------
12,453,479 FHLMC, Class PY, 4.00%,
2/15/10(2) 12,505,870
- --------------------------------------------------------------------------------
16,961,414 FHLMC, Class UA, 3.50%,
4/15/09 16,971,235
- --------------------------------------------------------------------------------
20,000,000 FHLMC, Series 2005-2937,
Class KA, 4.50%, 12/15/14 20,086,680
- --------------------------------------------------------------------------------
17,041,091 FHLMC, Series 2605,
Class PB, 4.00%, 11/15/10(2) 17,082,466
- --------------------------------------------------------------------------------
13,966,354 FHLMC, Series 2624,
Class FE SEQ, VRN, 3.11%,
4/15/05, resets monthly off
the 1-month LIBOR plus
0.30% with no caps 13,993,798
- --------------------------------------------------------------------------------
11,837,736 FHLMC, Series 2625,
Class FJ SEQ, VRN, 3.11%,
4/15/05, resets monthly off
the 1-month LIBOR plus
0.30% with no caps(2) 11,860,014
- --------------------------------------------------------------------------------
11,524,201 FHLMC, Series 2709,
Class PA, 3.75%, 1/15/11 11,553,461
- --------------------------------------------------------------------------------
20,465,417 FHLMC, Series 2831,
Class AF, VRN, 3.11%,
4/15/05 20,576,483
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$16,434,000 FHLMC, Series 2888,
Class GA, 4.00%, 10/15/11 $ 16,446,999
- --------------------------------------------------------------------------------
4,254,077 First Union National Bank
Commercial Mortgage,
Series 2001 C3, Class A1
SEQ, 5.20%, 8/15/33 4,292,691
- --------------------------------------------------------------------------------
16,894,951 FNMA, Class PA, 4.00%,
5/15/09 16,970,336
- --------------------------------------------------------------------------------
7,636,973 FNMA, Series 2002-74,
Class PB, 5.00%, 9/25/11 7,646,198
- --------------------------------------------------------------------------------
23,193,907 FNMA, Series 2003-17,
Class FN, VRN, 3.15%,
4/25/05 23,305,516
- --------------------------------------------------------------------------------
13,166,939 FNMA, Series 2003-24,
Class BF, VRN, 3.20%,
4/25/05 13,227,086
- --------------------------------------------------------------------------------
10,248,467 FNMA, Series 2003-42,
Class FK, VRN, 3.25%,
4/25/05, resets monthly off
the 1-month LIBOR plus
0.40% with no caps 10,312,438
- --------------------------------------------------------------------------------
12,686,161 FNMA, Series 2003-43,
Class LF, VRN, 3.20%,
4/25/05, resets monthly off
the 1-month LIBOR plus
0.35% with no caps 12,748,272
- --------------------------------------------------------------------------------
18,032,102 FNMA, Series 2003-52,
Class KF SEQ, VRN, 3.25%,
4/25/05, resets monthly off
the 1-month LIBOR plus
0.40% with no caps(2) 18,091,265
- --------------------------------------------------------------------------------
12,791,696 FNMA, Series 2003-57,
Class KL, 3.50%, 3/25/09 12,787,385
- --------------------------------------------------------------------------------
14,972,195 FNMA, Series 2004 T1,
Class 1A2, 6.50%, 1/25/44 15,477,537
- --------------------------------------------------------------------------------
11,610,711 FNMA, Series 2004 W5,
Class F1, VRN, 3.30%,
4/25/05, resets monthly off
the 1-month LIBOR plus
0.45% with no caps 11,670,448
- --------------------------------------------------------------------------------
9,056,358 FNMA Whole Loan, Series
2004 W1, Class 1A1 SEQ,
3.27%, 11/25/43(2) 9,044,467
- --------------------------------------------------------------------------------
26,526,130 GMAC Commercial Mortgage
Securities Inc. STRIPS -
COUPON, Series 2000 C3,
Class X, VRN, 1.34%, 4/1/05
(Acquired 2/22/02, Cost
$1,824,708)(3) 1,421,907
- --------------------------------------------------------------------------------
10,000,000 Greenwich Capital
Commercial Funding Corp.,
Series 2005 GG3, Class A2,
VRN, 4.31%, 4/1/05(2) 9,852,340
- --------------------------------------------------------------------------------
8,560,066 Morgan Stanley Capital I,
Series 2004 T13, Class A1
SEQ, 2.85%, 9/13/45(2) 8,286,076
- --------------------------------------------------------------------------------
17,544,039 Washington Mutual, Inc.,
Series 2002 AR19, Class A6,
4.16%, 2/25/33(2) 17,579,548
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
23
Short-Term Government - Schedule of Investments
MARCH 31, 2005
Principal Amount Value
- --------------------------------------------------------------------------------
$ 7,150,000 Washington Mutual, Series
2003 AR4, Class A6, 3.42%,
5/25/33(2) $ 6,986,966
- --------------------------------------------------------------------------------
40,000,000 Washington Mutual, Series
2003 AR5, Class A6, 3.70%,
6/25/33(2) 39,152,081
- --------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $479,212,896) 477,154,459
- --------------------------------------------------------------------------------
FIXED-RATE U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES(1) -- 26.2%
5,870,503 FHLMC, 5.00%, 6/1/09(2) 5,948,252
- --------------------------------------------------------------------------------
12,885,846 FHLMC, 5.00%, 7/1/09(2) 13,056,507
- --------------------------------------------------------------------------------
503,323 FHLMC, 6.50%, 1/1/11 525,422
- --------------------------------------------------------------------------------
784,768 FHLMC, 6.50%, 5/1/11 820,681
- --------------------------------------------------------------------------------
701,637 FHLMC, 6.50%, 12/1/12 734,006
- --------------------------------------------------------------------------------
2,067,844 FHLMC, 6.00%, 2/1/13 2,136,809
- --------------------------------------------------------------------------------
100,258 FHLMC, 7.00%, 11/1/13 105,372
- --------------------------------------------------------------------------------
87,649 FHLMC, 7.00%, 12/1/14 92,107
- --------------------------------------------------------------------------------
3,283,460 FHLMC, 6.00%, 1/1/15 3,394,389
- --------------------------------------------------------------------------------
1,320,463 FHLMC, 7.50%, 5/1/16 1,391,080
- --------------------------------------------------------------------------------
2,416,353 FHLMC, 5.50%, 11/1/17 2,468,201
- --------------------------------------------------------------------------------
22,429,480 FHLMC, 5.50%, 11/1/18(2) 22,915,864
- --------------------------------------------------------------------------------
14,550,604 FHLMC, 4.50%, 6/1/19 14,258,936
- --------------------------------------------------------------------------------
22,000,000 FNMA, 5.50%, settlement
date 4/13/05(4) 22,034,364
- --------------------------------------------------------------------------------
34,175,000 FNMA, 6.00%, settlement
date 4/13/05(4) 34,933,276
- --------------------------------------------------------------------------------
34,175,000 FNMA, 6.50%, settlement
date 4/13/05(4) 35,467,226
- --------------------------------------------------------------------------------
35,000,000 FNMA, 5.00%, settlement
date 4/18/05(4) 34,978,126
- --------------------------------------------------------------------------------
13,300,000 FNMA, 5.50%, settlement
date 4/18/05(4) 13,553,525
- --------------------------------------------------------------------------------
20,250,000 FNMA, 5.00%, settlement
date 5/12/05(4) 19,743,750
- --------------------------------------------------------------------------------
37,428 FNMA, 8.00%, 5/1/12 39,608
- --------------------------------------------------------------------------------
2,971,528 FNMA, 6.50%, 1/1/13 3,104,260
- --------------------------------------------------------------------------------
27,859 FNMA, 6.50%, 3/1/13 29,112
- --------------------------------------------------------------------------------
321,742 FNMA, 6.00%, 6/1/13 332,402
- --------------------------------------------------------------------------------
31,760 FNMA, 6.50%, 6/1/13 33,184
- --------------------------------------------------------------------------------
83,180 FNMA, 6.00%, 1/1/14 85,977
- --------------------------------------------------------------------------------
736,539 FNMA, 6.00%, 7/1/14 761,258
- --------------------------------------------------------------------------------
1,081,394 FNMA, 5.50%, 4/1/16 1,103,195
- --------------------------------------------------------------------------------
6,518,801 FNMA, 4.50%, 5/1/19 6,379,214
- --------------------------------------------------------------------------------
6,364,043 FNMA, 4.50%, 6/1/19 6,227,770
- --------------------------------------------------------------------------------
1,156,240 FNMA, 7.00%, 5/1/32 1,219,525
- --------------------------------------------------------------------------------
931,338 FNMA, 7.00%, 5/1/32 982,313
- --------------------------------------------------------------------------------
3,048,261 FNMA, 7.00%, 6/1/32 3,215,101
- --------------------------------------------------------------------------------
696,551 FNMA, 7.00%, 6/1/32 734,897
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,891,091 FNMA, 7.00%, 8/1/32 $ 1,994,596
- --------------------------------------------------------------------------------
25,686 GNMA, 5.50%, 1/20/09 26,319
- --------------------------------------------------------------------------------
31,062 GNMA, 9.00%, 12/20/16 33,733
- --------------------------------------------------------------------------------
142,794 GNMA, 9.00%, 8/20/17 155,397
- --------------------------------------------------------------------------------
32,386 GNMA, 9.50%, 11/20/19 35,870
- --------------------------------------------------------------------------------
TOTAL FIXED-RATE U.S. GOVERNMENT
AGENCY MORTGAGE-BACKED
SECURITIES
(Cost $255,485,878) 255,051,624
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES -- 24.6%
84,000,000 FHLB, 2.00%, 2/13/06(5) 82,887,168
- --------------------------------------------------------------------------------
29,850,000 FHLB, 2.50%, 3/30/06(2) 29,493,203
- --------------------------------------------------------------------------------
23,900,000 FHLB, 1.875%, 6/15/06(5) 23,366,504
- --------------------------------------------------------------------------------
72,000,000 FHLMC, 2.875%, 12/15/06(5) 70,801,848
- --------------------------------------------------------------------------------
32,000,000 FNMA, 5.25%, 6/15/06(2) 32,542,464
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES
(Cost $241,557,025) 239,091,187
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES(1) -- 4.3%
1,859,287 Ameriquest Mortgage
Securities Inc., Series
2003-5, Class A3 SEQ,
3.03%, 7/25/33(2) 1,855,957
- --------------------------------------------------------------------------------
3,801,451 Ameriquest Mortgage
Securities Inc., Series
2003-8, Class AV2, VRN,
3.28%, 4/25/05, resets
monthly off the 1-month
LIBOR plus 0.43% with
no caps(2) 3,808,792
- --------------------------------------------------------------------------------
106,368 Asset Backed Funding Corp.
Non-Improvement Trust,
Series 2003-1, Class N1,
6.90%, 7/26/33 106,250
- --------------------------------------------------------------------------------
2,192,919 Centex Home Equity, Series
2004 C, Class AF1, VRN,
2.82%, 4/1/05 2,181,255
- --------------------------------------------------------------------------------
12,748,431 FNMA STRIPS - COUPON,
Series 2002 T7, Class S1,
5.25%, 5/25/05 61,078
- --------------------------------------------------------------------------------
30,000,000 Ford Credit Auto Owner Trust,
Series 2005 A, Class A4 SEQ,
3.72%, 10/15/09(2) 29,584,380
- --------------------------------------------------------------------------------
4,270,167 Long Beach Mortgage Loan
Trust, Series 2003-3, Class A ,
VRN, 3.17%, 4/25/05, resets
monthly off the 1-month
LIBOR plus 0.32% with
no caps(2) 4,280,193
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
24
Short-Term Government - Schedule of Investments
MARCH 31, 2005
Principal Amount Value
- --------------------------------------------------------------------------------
$ 32,442 Morgan Stanley Capital I,
Series 2002-NC2, Class A2,
VRN, 3.19%, 4/25/05, resets
monthly off the 1-month
LIBOR plus 0.34% with
no caps $ 32,466
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $42,375,130) 41,910,371
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 3.0%
16,600,000 U.S. Treasury Notes, 6.50%,
10/15/06(5) 17,298,379
- --------------------------------------------------------------------------------
12,000,000 U.S. Treasury Notes, 3.00%,
11/15/07(5) 11,743,128
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY SECURITIES
(Cost $29,564,474) 29,041,507
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY
SECURITIES AND EQUIVALENTS(6) -- 1.8%
15,000,000 BECC, 3.28%, 11/15/06(2) 14,064,346
- --------------------------------------------------------------------------------
382,500 TIGR, 3.205%, 11/15/06 211,133
- --------------------------------------------------------------------------------
1,813,000 TR, 1.90%, 2/15/06 1,756,844
- --------------------------------------------------------------------------------
1,077,000 TR, 3.23%, 11/15/06 1,010,623
- --------------------------------------------------------------------------------
100,000 U.S. Treasury Corpus, 3.28%,
11/15/06 93,762
- --------------------------------------------------------------------------------
TOTAL ZERO-COUPON U.S. TREASURY
SECURITIES AND EQUIVALENTS
(Cost $17,349,333) 17,136,708
- --------------------------------------------------------------------------------
ADJUSTABLE-RATE U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES(1) -- 1.7%
27,066 FHLMC, 3.97%, 8/1/18 27,702
- --------------------------------------------------------------------------------
113,138 FHLMC, 3.78%, 11/1/18 114,967
- --------------------------------------------------------------------------------
483,255 FHLMC, 3.99%, 9/1/20 490,184
- --------------------------------------------------------------------------------
63,056 FHLMC, 3.50%, 1/1/21 63,298
- --------------------------------------------------------------------------------
75,335 FHLMC, 5.01%, 3/1/24 77,877
- --------------------------------------------------------------------------------
19,206 FNMA, 7.49%, 8/1/14 19,735
- --------------------------------------------------------------------------------
123,703 FNMA, 3.00%, 4/1/16 124,191
- --------------------------------------------------------------------------------
9,930 FNMA, 4.125%, 8/1/16 10,167
- --------------------------------------------------------------------------------
79,685 FNMA, 4.11%, 1/1/17 81,894
- --------------------------------------------------------------------------------
330,799 FNMA, 5.18%, 5/1/17 335,290
- --------------------------------------------------------------------------------
184,006 FNMA, 4.44%, 7/1/17 188,654
- --------------------------------------------------------------------------------
71,143 FNMA, 4.85%, 7/1/17 71,970
- --------------------------------------------------------------------------------
180,665 FNMA, 3.77%, 2/1/18 184,008
- --------------------------------------------------------------------------------
102,107 FNMA, 4.75%, 2/1/18 104,490
- --------------------------------------------------------------------------------
79,702 FNMA, 3.08%, 5/1/18 81,669
- --------------------------------------------------------------------------------
71,803 FNMA, 3.97%, 6/1/18 73,220
- --------------------------------------------------------------------------------
84,655 FNMA, 3.96%, 8/1/19 86,662
- --------------------------------------------------------------------------------
623,970 FNMA, 3.94%, 9/1/19 636,707
- --------------------------------------------------------------------------------
216,675 FNMA, 3.80%, 1/1/20 218,771
- --------------------------------------------------------------------------------
87,602 FNMA, 4.30%, 3/1/21 89,908
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 52,833 FNMA, 3.58%, 8/1/21 $ 54,241
- --------------------------------------------------------------------------------
147,349 FNMA, 3.52%, 5/1/22 148,052
- --------------------------------------------------------------------------------
68,377 FNMA, 3.81%, 5/1/22 69,817
- --------------------------------------------------------------------------------
83,208 FNMA, 4.40%, 1/1/23 85,036
- --------------------------------------------------------------------------------
21,543 FNMA, 3.875%, 6/1/23 22,379
- --------------------------------------------------------------------------------
23,954 FNMA, 3.875%, 7/1/23 24,883
- --------------------------------------------------------------------------------
296,339 FNMA, 3.34%, 8/1/23 304,855
- --------------------------------------------------------------------------------
109,929 FNMA, 3.85%, 8/1/23 113,156
- --------------------------------------------------------------------------------
1,831,651 FNMA, 4.41%, 5/1/25 1,865,163
- --------------------------------------------------------------------------------
38,038 FNMA, 4.35%, 10/1/25 39,389
- --------------------------------------------------------------------------------
18,305 FNMA, 4.375%, 4/1/26 18,586
- --------------------------------------------------------------------------------
27,475 FNMA, 3.78%, 1/1/27 28,301
- --------------------------------------------------------------------------------
40,221 FNMA, 5.01%, 1/1/27 40,908
- --------------------------------------------------------------------------------
62,969 FNMA, 3.875%, 1/1/29 64,282
- --------------------------------------------------------------------------------
9,983,454 FNMA, 4.66%, 3/1/33(2) 9,992,848
- --------------------------------------------------------------------------------
49,690 GNMA, 3.375%, 5/20/17 50,137
- --------------------------------------------------------------------------------
145,607 GNMA, 3.875%, 2/20/21 148,748
- --------------------------------------------------------------------------------
51,592 GNMA, 4.625%, 11/20/21 52,452
- --------------------------------------------------------------------------------
1,655 GNMA, 3.375%, 1/20/22 1,686
- --------------------------------------------------------------------------------
97,569 GNMA, 4.25%, 8/20/26 100,763
- --------------------------------------------------------------------------------
TOTAL ADJUSTABLE-RATE U.S.
GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
(Cost $16,689,522) 16,307,046
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 5.8%
56,300,000 FHLB Discount Notes,
2.40%, 4/1/05(2)(7)
(Cost $56,300,000) 56,300,000
- --------------------------------------------------------------------------------
COLLATERAL RECEIVED FOR
SECURITIES LENDING(8) -- 5.5%
REPURCHASE AGREEMENTS -- 5.5%
- --------------------------------------------------------------------------------
Repurchase Agreement, Barclays Bank plc,
(collateralized by various U.S. Government
Agency obligations in a pooled account at
the lending agent), 2.85%, dated 3/31/05,
due 4/1/05 (Delivery value $48,454,030) 48,450,194
- --------------------------------------------------------------------------------
Repurchase Agreement, UBS AG,
(collateralized by various U.S. Government
Agency obligations in a pooled account at
the lending agent), 2.875%, dated 3/31/05,
due 4/1/05 (Delivery value $5,000,399) 5,000,000
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED FOR
SECURITIES LENDING
(Cost $53,450,194) 53,450,194
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 122.0%
(Cost $1,191,984,452) 1,185,443,096
- --------------------------------------------------------------------------------
OTHER ASSETS AND
LIABILITIES -- (22.0)% (213,552,121)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $ 971,890,975
================================================================================
See Notes to Financial Statements. (continued)
- ------
25
Short-Term Government - Schedule of Investments
MARCH 31, 2005
FUTURES CONTRACTS*
Expiration Underlying Face
Contracts Purchased Date Amount at Value Unrealized Loss
- --------------------------------------------------------------------------------
300 U.S. Treasury
5-Year Notes June 2005 $32,128,125 $(188,175)
====================================
Expiration Underlying Face
Contracts Sold Date Amount at Value Unrealized Gain
- --------------------------------------------------------------------------------
988 U.S. Treasury
2-Year Notes June 2005 $204,407,938 $154,652
====================================
*FUTURES CONTRACTS typically are based on an index or specific securities and
tend to track the performance of the index or specific securities while
remaining very liquid (easy to buy and sell). By investing its cash assets in
futures, the fund has increased exposure to certain markets while maintaining
easy access to cash. By selling futures, the fund hedges its investments agains
price fluctuations.
SWAP AGREEMENTS**
Unrealized
Notional Amount Description of Agreement Expiration Date Loss
- --------------------------------------------------------------------------------
$20,000,000 Receive semiannually a September 2007 $(482,269)
fixed rate equal to ===========
3.24375% and pay quarterly
a variable rate based
on the 3-month LIBOR with
Deutsche Bank Securities, Inc.
**SWAP AGREEMENTS are contracts in which two parties agree to exchange the
returns earned or realized on predetermined investments or instruments. The
fund may enter into swap agreements in order to manage interest, credit, or
market risk or to gain exposure to certain markets.
NOTES TO SCHEDULE OF INVESTMENTS
BECC = Book Entry Callable Corpus
Equivalent = Security whose principal payments are secured by U.S. Treasurys
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GMAC = General Motors Acceptance Corporation
GNMA = Government National Mortgage Association
LIBOR = London Interbank Offered Rate
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon
will vary significantly from current market rates.
SEQ = Sequential Payer
STRIPS = Separate Trading of Registered Interest and Principal of Securities
TIGR = Treasury Investment Growth Receipts
TR = Treasury Receipts
VRN = Variable Rate Note. Interest reset date is indicated, unless otherwise
noted. Rate shown is effective March 31, 2005.
(1) Final maturity indicated, unless otherwise noted.
(2) Security, or a portion thereof, has been segregated for a forward
commitment, futures contract and/or swap agreement.
(3) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at March 31, 2005, was $7,645,624,
which represented 0.8% of total net assets.
(4) Forward commitment.
(5) Security, or a portion thereof, was on loan as of March 31, 2005.
(6) The rate indicated is the yield to maturity at purchase. These securities
are issued at a substantial discount from their value at maturity.
(7) The rate indicated is the yield to maturity at purchase.
(8) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions. (See Note 5 in
Notes to Financial Statements.)
See Notes to Financial Statements.
- ------
26
Shareholder Fee Examples (Unaudited)
Fund shareholders may incur two types of costs: (1) transaction costs, including
sales charges (loads) on purchase payments and redemption/exchange fees; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in your fund and to compare these costs
with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2004 to March 31, 2005.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond Fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
American Century may charge you a $12.50 semiannual account maintenance fee if
the value of those shares is less than $10,000. We will redeem shares
automatically in one of your accounts to pay the $12.50 fee. In determining your
total eligible investment amount, we will include your investments in all
PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered
under your Social Security number. PERSONAL ACCOUNTS include individual
accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell
Education Savings Accounts and IRAs (including traditional, Roth, Rollover,
SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you
have only business, business retirement, employer-sponsored or American Century
Brokerage accounts, you are currently not subject to this fee. We will not
charge the fee as long as you choose to manage your accounts exclusively online.
If you are subject to the Account Maintenance Fee, your account value could be
reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is not
the actual return of a fund's share class. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
(continued)
- ------
27
Shareholder Fee Examples (Unaudited)
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
- --------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 10/1/04 - EXPENSE
10/1/04 3/31/05 3/31/05 RATIO*
- --------------------------------------------------------------------------------
GINNIE MAE SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,009.80 $2.86 0.57%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,008.50 $4.11 0.82%
- --------------------------------------------------------------------------------
C Class $1,000 $1,004.80 $7.85 1.57%
- --------------------------------------------------------------------------------
HYPOTHETICAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,022.09 $2.87 0.57%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,020.84 $4.13 0.82%
- --------------------------------------------------------------------------------
C Class $1,000 $1,017.10 $7.90 1.57%
- --------------------------------------------------------------------------------
GOVERNMENT BOND SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,007.50 $2.50 0.50%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,006.20 $3.75 0.75%
- --------------------------------------------------------------------------------
HYPOTHETICAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,022.44 $2.52 0.50%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,021.19 $3.78 0.75%
- --------------------------------------------------------------------------------
*Expenses are equal to the class's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
182, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
(continued)
- ------
28
Shareholder Fee Examples (Unaudited)
- --------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 10/1/04 - EXPENSE
10/1/04 3/31/05 3/31/05 RATIO*
- --------------------------------------------------------------------------------
INFLATION-ADJUSTED BOND SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,021.20 $2.47 0.49%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,022.20 $1.46 0.29%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,019.90 $3.73 0.74%
- --------------------------------------------------------------------------------
HYPOTHETICAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,022.49 $2.47 0.49%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,023.49 $1.46 0.29%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,021.24 $3.73 0.74%
- --------------------------------------------------------------------------------
SHORT-TERM GOVERNMENT SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,002.60 $2.85 0.57%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,001.30 $4.09 0.82%
- --------------------------------------------------------------------------------
HYPOTHETICAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,022.09 $2.87 0.57%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,020.84 $4.13 0.82%
- --------------------------------------------------------------------------------
*Expenses are equal to the class's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
182, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
- ------
29
Statement of Assets and Liabilities
MARCH 31, 2005
- ----------------------------------------------------------------------------------------------------
GOVERNMENT INFLATION- SHORT-TERM
GINNIE MAE BOND ADJUSTED BOND GOVERNMENT
- ----------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------
Investment securities, at
value (cost of $1,817,529,631,
$604,395,957, $947,939,362,
and $1,138,534,258,
respectively) -- including
$--, $138,066,618, $--, and
$63,407,787 of securities
on loan, repectively $1,812,296,871 $602,458,780 $ 989,464,356 $1,131,992,902
- ------------------------------
Investments made with cash
collateral received for
securities on loan, at value
(cost of $--, $100,369,910,
$--, and $53,450,194,
respectively) -- 100,369,910 -- 53,450,194
- ----------------------------------------------------------------------------------------------------
Total investment securities,
at value (cost of
$1,817,529,631, $704,765,867,
$947,939,362, and
$1,191,984,452, respectively) 1,812,296,871 702,828,690 989,464,356 1,185,443,096
- ------------------------------
Cash -- -- 9,219,309 --
- ------------------------------
Receivable for
investments sold -- -- -- 129,814
- ------------------------------
Receivable for capital
shares sold 415,785 194,871 1,644,193 48,496
- ------------------------------
Interest receivable 7,330,468 2,908,712 6,664,121 4,349,318
- ----------------------------------------------------------------------------------------------------
1,820,043,124 705,932,273 1,006,991,979 1,189,970,724
- ----------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------
Payable for collateral
received for securities
on loan -- 100,369,910 -- 53,450,194
- ------------------------------
Disbursements in excess of
demand deposit cash 5,554,348 325,629 -- 1,689,674
- ------------------------------
Payable for
investments purchased 243,127,988 116,776,892 -- 161,747,055
- ------------------------------
Payable for variation margin
on futures contracts 278,438 196,849 12,328 156,000
- ------------------------------
Unrealized depreciation on
swap agreements -- 239,319 -- 482,269
- ------------------------------
Accrued management fees 748,228 192,365 335,569 462,838
- ------------------------------
Distribution fees payable 24,578 10,270 59,490 9,345
- ------------------------------
Service fees payable 18,766 10,270 59,490 9,345
- ------------------------------
Dividends payable 925,740 139,827 123,691 73,029
- ----------------------------------------------------------------------------------------------------
250,678,086 218,261,331 590,568 218,079,749
- ----------------------------------------------------------------------------------------------------
NET ASSETS $1,569,365,038 $487,670,942 $1,006,401,411 $ 971,890,975
====================================================================================================
See Notes to Financial Statements. (continued)
- ------
30
Statement of Assets and Liabilities
MARCH 31, 2005
- ----------------------------------------------------------------------------------------------------
GOVERNMENT INFLATION- SHORT-TERM
GINNIE MAE BOND ADJUSTED BOND GOVERNMENT
- ----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------------------------------
Capital paid in $1,616,757,851 $494,088,103 $ 963,138,816 $1,009,445,066
- ------------------------------
Accumulated undistributed
net realized gain (loss)
on investment transactions (42,686,008) (4,528,690) 1,663,069 (30,495,750)
- ------------------------------
Net unrealized
appreciation (depreciation)
on investments (4,706,805) (1,888,471) 41,599,526 (7,058,341)
- ----------------------------------------------------------------------------------------------------
$1,569,365,038 $487,670,942 $1,006,401,411 $ 971,890,975
====================================================================================================
INVESTOR CLASS
- ----------------------------------------------------------------------------------------------------
Net assets $1,482,998,883 $438,996,974 $646,214,272 $928,459,942
- ------------------------------
Shares outstanding 143,463,962 41,717,352 57,429,992 98,347,779
- ------------------------------
Net asset value per share $10.34 $10.52 $11.25 $9.44
- ----------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------------------------------------------------------
Net assets N/A N/A $65,058,409 N/A
- ------------------------------
Shares outstanding N/A N/A 5,781,777 N/A
- ------------------------------
Net asset value per share N/A N/A $11.25 N/A
- ----------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ----------------------------------------------------------------------------------------------------
Net assets $72,571,008 $48,673,968 $295,128,730 $43,431,033
- ------------------------------
Shares outstanding 7,020,455 4,625,448 26,232,288 4,600,458
- ------------------------------
Net asset value per share $10.34 $10.52 $11.25 $9.44
- ----------------------------------------------------------------------------------------------------
C CLASS
- ----------------------------------------------------------------------------------------------------
Net assets $13,795,147 N/A N/A N/A
- ------------------------------
Shares outstanding 1,334,530 N/A N/A N/A
- ------------------------------
Net asset value per share $10.34 N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
31
Statement of Operations
YEAR ENDED MARCH 31, 2005
- ----------------------------------------------------------------------------------------------------
GOVERNMENT INFLATION- SHORT-TERM
GINNIE MAE BOND ADJUSTED BOND GOVERNMENT
- ----------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------
INCOME:
- ------------------------------
Interest $ 67,376,353 $ 15,481,693 $ 33,550,783 $ 26,158,199
- ------------------------------
Securities lending -- 104,053 -- 51,747
- ----------------------------------------------------------------------------------------------------
67,376,353 15,585,746 33,550,783 26,209,946
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------
Management fees 9,131,125 2,287,600 3,307,321 5,619,539
- ------------------------------
Distribution fees:
- ------------------------------
Advisor Class 156,728 115,063 446,404 119,933
- ------------------------------
C Class 85,659 -- -- --
- ------------------------------
Service fees:
- ------------------------------
Advisor Class 156,728 115,063 446,404 119,933
- ------------------------------
C Class 28,553 -- -- --
- ------------------------------
Trustees' fees and expenses 63,914 19,143 29,886 39,314
- ------------------------------
Other expenses 4,187 4,398 1,891 1,417
- ----------------------------------------------------------------------------------------------------
9,626,894 2,541,267 4,231,906 5,900,136
Amount reimbursed -- (93) (68) (13)
- ----------------------------------------------------------------------------------------------------
9,626,894 2,541,174 4,231,838 5,900,123
- ----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 57,749,459 13,044,572 29,318,945 20,309,823
- ----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------
Net realized gain (loss)
on investment transactions 8,226,349 (4,143,015) 3,166,481 (9,447,709)
- ------------------------------
Change in net unrealized
appreciation (depreciation)
on investments (35,435,008) (7,406,492) (10,774,581) (13,319,896)
- ----------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED LOSS (27,208,659) (11,549,507) (7,608,100) (22,767,605)
- ----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ 30,540,800 $ 1,495,065 $ 21,710,845 $ (2,457,782)
====================================================================================================
See Notes to Financial Statements.
- ------
32
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2005 AND MARCH 31, 2004
- ----------------------------------------------------------------------------------------------------
GINNIE MAE GOVERNMENT BOND
- ----------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS 2005 2004 2005 2004
- ----------------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income $ 57,749,459 $ 53,033,625 $ 13,044,572 $ 14,543,140
- ------------------------------
Net realized gain (loss) 8,226,349 14,487,357 (4,143,015) 14,120,081
- ------------------------------
Change in net
unrealized depreciation (35,435,008) (25,526,185) (7,406,492) (16,138,592)
- ----------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 30,540,800 41,994,797 1,495,065 12,524,629
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------
From net investment income:
- ------------------------------
Investor Class (72,275,870) (85,987,626) (12,225,426) (13,905,575)
- ------------------------------
Advisor Class (2,776,887) (3,009,151) (1,172,247) (1,047,833)
- ------------------------------
C Class (419,480) (205,440) -- --
- ------------------------------
From net realized gains:
- ------------------------------
Investor Class -- -- (6,666,179) (12,736,151)
- ------------------------------
Advisor Class -- -- (732,581) (1,042,497)
- ----------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions (75,472,237) (89,202,217) (20,796,433) (28,732,056)
- ----------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ----------------------------------------------------------------------------------------------------
Net decrease in net
assets from capital
share transactions (132,063,076) (387,867,574) (6,215,372) (105,493,796)
- ----------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS (176,994,513) (435,074,994) (25,516,740) (121,701,223)
NET ASSETS
- ----------------------------------------------------------------------------------------------------
Beginning of period 1,746,359,551 2,181,434,545 513,187,682 634,888,905
- ----------------------------------------------------------------------------------------------------
End of period $1,569,365,038 $1,746,359,551 $487,670,942 $ 513,187,682
====================================================================================================
See Notes to Financial Statements. (continued)
- ------
33
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2005 AND MARCH 31, 2004
- ----------------------------------------------------------------------------------------------------
INFLATION-ADJUSTED BOND SHORT-TERM GOVERNMENT
- ----------------------------------------------------------------------------------------------------
INCREASE (DECREASE)
IN NET ASSETS 2005 2004 2005 2004
- ----------------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income $ 29,318,945 $ 16,508,436 $ 20,309,823 $ 15,603,999
- ------------------------------
Net realized gain (loss) 3,166,481 2,542,731 (9,447,709) 2,981,522
- ------------------------------
Change in net unrealized
appreciation (depreciation) (10,774,581) 27,498,849 (13,319,896) (4,266,637)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 21,710,845 46,550,016 (2,457,782) 14,318,884
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------
From net investment income:
- ------------------------------
Investor Class (21,185,489) (13,056,523) (20,427,361) (16,310,386)
- ------------------------------
Institutional Class (2,343,420) (1,510,496) -- --
- ------------------------------
Advisor Class (5,790,036) (1,941,417) (905,665) (859,194)
- ------------------------------
From net realized gains:
- ------------------------------
Investor Class (1,548,568) (2,759,214) -- --
- ------------------------------
Institutional Class (159,704) (313,466) -- --
- ------------------------------
Advisor Class (548,631) (509,299) -- --
- ----------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions (31,575,848) (20,090,415) (21,333,026) (17,169,580)
- ----------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ----------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from capital
share transactions 367,757,684 193,865,123 (48,130,024) 21,148,230
- ----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS 357,892,681 220,324,724 (71,920,832) 18,297,534
NET ASSETS
- ----------------------------------------------------------------------------------------------------
Beginning of period 648,508,730 428,184,006 1,043,811,807 1,025,514,273
- ----------------------------------------------------------------------------------------------------
End of period $1,006,401,411 $648,508,730 $ 971,890,975 $1,043,811,807
====================================================================================================
See Notes to Financial Statements.
- ------
34
Notes to Financial Statements
MARCH 31, 2005
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Government Income Trust (the trust) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Ginnie Mae Fund (Ginnie Mae), Government
Bond Fund (Government Bond), Inflation-Adjusted Bond Fund (Inflation-Adjusted),
and Short-Term Government Fund (Short-Term Government) (collectively, the funds)
are four funds in a series issued by the trust. The funds are diversified under
the 1940 Act.
Ginnie Mae seeks high current income while maintaining liquidity and safety of
principal by investing primarily in Government National Mortgage Association
securities. In addition, the fund may buy other U.S. government securities,
including U.S. Treasury securities and other securities issued or guaranteed by
the U.S. government and its agencies and instrumentalities. Government Bond
seeks high current income and intends to pursue this objective by investing in
securities, including mortgage-backed securities, issued or guaranteed by the
U.S. government and its agencies and instrumentalities. Inflation-Adjusted seeks
to provide total return and inflation protection consistent with investment in
inflation-indexed securities issued by the U.S. Treasury, by other U.S.
government agencies and instrumentalities, and by other non-U.S. government
entities such as U.S. corporations. Short-Term Government seeks high current
income while maintaining safety of principal. Short-Term Government intends to
pursue its objective by investing in U.S. government securities, including U.S.
Treasury securities and other securities issued or guaranteed by the U.S.
government and its agencies and instrumentalities. In addition, Short-Term
Government may also invest in investment-grade debt securities, including debt
securities of U.S. companies, and non-U.S. government mortgage-backed,
asset-backed and other fixed income securities. The following is a summary of
the funds' significant accounting policies.
MULTIPLE CLASS -- Ginnie Mae is authorized to issue the Investor Class, the
Advisor Class, and the C Class. Government Bond and Short-Term Government are
authorized to issue the Investor Class and the Advisor Class. Inflation-Adjusted
is authorized to issue the Investor Class, the Institutional Class, and the
Advisor Class. The C Class may be subject to a contingent deferred sales charge.
The share classes differ principally in their respective sales charges and
shareholder servicing and distribution expenses and arrangements. All shares of
the funds represent an equal pro rata interest in the assets of the class to
which such shares belong, and have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except for class specific
expenses and exclusive rights to vote on matters affecting only individual
classes. Income, non-class specific expenses, and realized and unrealized
capital gains and losses of the funds are allocated to each class of shares
based on their relative net assets.
SECURITY VALUATIONS -- Securities are valued through a commercial pricing
service or at the mean of the most recent bid and asked prices. Debt securities
maturing within 60 days may be valued at cost, plus or minus any amortized
discount or premium. If the funds determine that the market price of a portfolio
security is not readily available, or that the valuation methods mentioned above
do not reflect the security's fair value, such security is valued at its fair
value as determined by, or in accordance with procedures adopted by, the Board
of Trustees or its designee if such fair value determination would materially
impact a fund's net asset value. Circumstances that may cause the funds to fair
value a security include: an event occurred after the close of the exchange on
which a portfolio security principally trades (but before the close of the New
York Stock Exchange) that was likely to have changed the value of the security;
a security has been declared in default; or trading in a security has been
halted during the trading day.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes paydown gain (loss) and accretion of discounts and amortization of
premiums.
SECURITIES ON LOAN -- Government Bond, Inflation-Adjusted and Short-Term
Government may lend portfolio securities through their lending agent to certain
approved borrowers in order to earn additional income. Government Bond,
Inflation-Adjusted and Short-Term Government continue to recognize any gain or
loss in the market price of the securities loaned and record any interest
earned.
FUTURES CONTRACTS -- The funds may enter into futures contracts in order to
manage the funds' exposure to changes in market conditions. One of the risks of
entering into futures contracts is the possibility that the change in value of
the contract may not correlate with the changes in value of the underlying
securities. Upon entering into a futures contract, the funds are required to
deposit either
(continued)
- ------
35
Notes to Financial Statements
MARCH 31, 2005
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
cash or securities in an amount equal to a certain percentage of the contract
value (initial margin). Subsequent payments (variation margin) are made or
received daily, in cash, by the funds. The variation margin is equal to the
daily change in the contract value and is recorded as unrealized gains and
losses. The funds recognize a realized gain or loss when the contract is closed
or expires. Net realized and unrealized gains or losses occurring during the
holding period of futures contracts are a component of realized gain (loss) on
investment transactions and unrealized appreciation (depreciation) on
investments, respectively.
SWAP AGREEMENTS -- The funds may enter into a swap agreement in order to attempt
to obtain or preserve a particular return or spread at a lower cost than
obtaining a return or spread through purchases and/or sales of instruments in
other markets; protect against currency fluctuations; attempt to manage duration
to protect against any increase in the price of securities the fund anticipates
purchasing at a later date; or gain exposure to certain markets in the most
economical way possible. A swap agreement is a contract in which two parties
agree to exchange the returns earned or realized on predetermined investments or
instruments. The funds will segregate cash, cash equivalents or other
appropriate liquid securities on its records in amounts sufficient to meet
requirements. Unrealized gains are reported as an asset and unrealized losses
are reported as a liability on the Statement of Assets and Liabilities. Swap
agreements are valued daily and changes in value, including the periodic amounts
of interest to be paid or received on swaps are recorded as unrealized
appreciation (depreciation) on investments. Realized gain or loss is recorded
upon receipt or payment of a periodic settlement or termination of swap
agreements. The risks of entering into swap agreements include the possible lack
of liquidity, failure of the counterparty to meets its obligations, and that
there may be unfavorable changes in the underlying investments and instruments.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) has determined are creditworthy pursuant to criteria adopted
by the Board of Trustees. Each repurchase agreement is recorded at cost. Each
fund requires that the collateral, represented by securities, received in a
repurchase transaction be transferred to the custodian in a manner sufficient to
enable each fund to obtain those securities in the event of a default under the
repurchase agreement. ACIM monitors, on a daily basis, the securities
transferred to ensure the value, including accrued interest, of the securities
under each repurchase agreement is equal to or greater than amounts owed to each
fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, each fund, along with other registered investment
companies having management agreements with ACIM, may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are collateralized by U.S. Treasury or Agency
obligations.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The funds may engage in securities
transactions on a when-issued or forward commitment basis. In these
transactions, the securities' prices and yields are fixed on the date of the
commitment. In a when-issued transaction, the payment and delivery are scheduled
for a future date and during this period, securities are subject to market
fluctuations. In a forward commitment transaction, the funds may sell a security
and at the same time make a commitment to purchase the same security at a future
date at a specified price. Conversely, the funds may purchase a security and at
the same time make a commitment to sell the same security at a future date at a
specified price. These types of transactions are executed simultaneously in what
are known as "roll" transactions. The funds will segregate cash, cash
equivalents or other appropriate liquid securities on their records in amounts
sufficient to meet the purchase price. The funds account for "roll" transactions
as purchases and sales; as such these transactions may increase portfolio
turnover.
INCOME TAX STATUS -- It is each fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income for
the funds are declared daily and paid monthly. Distributions from net realized
gains for the funds, if any, are generally declared and paid annually.
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers and
trustees are indemnified against certain liabilities arising out of the
performance of their duties to the funds. In addition, in the normal course of
business, the
(continued)
- ------
36
Notes to Financial Statements
MARCH 31, 2005
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
funds enter into contracts that provide general indemnifications. The funds'
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the funds. The risk of material loss from
such claims is considered by management to be remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with ACIM,
under which ACIM provides the funds with investment advisory and management
services in exchange for a single, unified management fee (the fee) per class.
The Agreement provides that all expenses of the funds, except brokerage
commissions, taxes, interest, fees and expenses of those trustees who are not
considered "interested persons" as defined in the 1940 Act (including counsel
fees) and extraordinary expenses, will be paid by ACIM. The fee is computed and
accrued daily based on the daily net assets of each specific class of shares of
each fund and paid monthly in arrears. The fee consists of (1) an Investment
Category Fee based on the daily net assets of the funds and certain other
accounts managed by the investment advisor that are in the same broad investment
category as each fund and (2) a Complex Fee based on the assets of all the funds
in the American Century family of funds. The rates for the Investment Category
Fee for Ginnie Mae and Short-Term Government range from 0.2425% to 0.3600%, and
for Government Bond and Inflation-Adjusted range from 0.1625% to 0.2800%. The
rates for the Complex Fee (Investor and C Classes) for the funds range from
0.2500% to 0.3100%. The Institutional Class and the Advisor Class is 0.2000% and
0.2500% less, respectively, at each point within the Complex Fee range.
The effective annual management fees for each class of the funds for the year
ended March 31, 2005, were as follows:
- --------------------------------------------------------------------------------
GOVERNMENT INFLATION- SHORT-TERM
GINNIE MAE BOND ADJUSTED GOVERNMENT
- --------------------------------------------------------------------------------
Investor Class 0.57% 0.49% 0.49% 0.57%
- --------------------------------------------------------------------------------
Institutional Class N/A N/A 0.29% N/A
- --------------------------------------------------------------------------------
Advisor Class 0.32% 0.24% 0.24% 0.32%
- --------------------------------------------------------------------------------
C Class 0.57% N/A N/A N/A
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a Master
Distribution and Shareholder Services Plan for the Advisor Class and a Master
Distribution and Individual Shareholder Services Plan for the C Class
(collectively, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans
provide that the Advisor Class and C Class will pay American Century Investment
Services, Inc. (ACIS) the following annual distribution and service fees:
- --------------------------------------------------------------------------------
Advisor C
- --------------------------------------------------------------------------------
Distribution Fee 0.25% 0.75%
- --------------------------------------------------------------------------------
Service Fee 0.25% 0.25%
- --------------------------------------------------------------------------------
The fees are computed and accrued daily based on each class's daily net assets
and paid monthly in arrears. The distribution fee provides compensation for
expenses incurred by financial intermediaries in connection with distributing
shares of the classes including, but not limited to, payments to brokers,
dealers, and financial institutions that have entered into sales agreements with
respect to shares of the funds. The service fee provides compensation for
shareholder and administrative services rendered by ACIS, its affiliates or
independent third party providers for Advisor Class shares and for individual
shareholder services rendered by broker/dealers or other independent financial
intermediaries for
(continued)
- ------
37
Notes to Financial Statements
MARCH 31, 2005
2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
C Class shares. During the year ended March 31, 2005, the Advisor Class received
distribution fee reimbursements of $93, $68 and $13 in Government Bond,
Inflation-Adjusted and Short-Term Government, respectively. The reimbursements
had no impact on the ratio of operating expenses and the ratio of net investment
income to average net assets. Fees incurred under the plans during the year
ended March 31, 2005, are detailed in the Statement of Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the trust's investment advisor, ACIM, the
distributor of the trust, ACIS, and the trust's transfer agent, American Century
Services, LLC (formerly American Century Services Corporation). An officer and
an interested trustee of these entities are officers of unrelated entities and
those unrelated entities own greater than 5% of the shares of Short-Term
Government.
The funds have a bank line of credit agreement with JPMorgan Chase Bank (JPMCB).
Government Bond, Inflation-Adjusted and Short-Term Government have a securities
lending agreement with JPMCB. JPMCB is a custodian of the funds and a wholly
owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in
ACC.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
March 31, 2005, were as follows:
- ------------------------------------------------------------------------------------------
GOVERNMENT INFLATION- SHORT-TERM
GINNIE MAE BOND ADJUSTED GOVERNMENT
- ------------------------------------------------------------------------------------------
PURCHASES
- ------------------------------------------------------------------------------------------
U.S. Treasury &
Government
Agency Obligations $5,189,342,331 $2,497,160,017 $869,403,681 $2,257,324,732
- ------------------------------------------------------------------------------------------
Investment securities
other than U.S. Treasury
& Government
Agency Obligations -- -- -- $106,438,788
- ------------------------------------------------------------------------------------------
PROCEEDS FROM SALES
- ------------------------------------------------------------------------------------------
U.S. Treasury &
Government
Agency Obligations $5,446,465,413 $2,545,677,097 $523,713,364 $2,278,408,112
- ------------------------------------------------------------------------------------------
Investment securities
other than U.S. Treasury
& Government
Agency Obligations -- -- -- $80,216,446
- ------------------------------------------------------------------------------------------
(continued)
- ------
38
Notes to Financial Statements
MARCH 31, 2005
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows (unlimited number of shares
authorized):
- ------------------------------------------------------------------------------------------
GINNIE MAE GOVERNMENT BOND
- ------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2005
- --------------------------
Sold 19,946,445 $ 208,382,783 8,086,239 $ 86,400,776
- --------------------------
Issued in reinvestment
of distributions 5,810,573 60,606,863 1,588,111 16,906,999
- --------------------------
Redeemed (40,283,324) (420,009,000) (10,765,621) (114,813,584)
- ------------------------------------------------------------------------------------------
Net decrease (14,526,306) $(151,019,354) (1,091,271) $ (11,505,809)
==========================================================================================
YEAR ENDED MARCH 31, 2004
- --------------------------
Sold 29,296,390 $ 312,730,806 8,881,624 $ 98,433,750
- --------------------------
Issued in reinvestment
of distributions 6,822,760 72,634,416 2,177,547 23,787,166
- --------------------------
Redeemed (71,706,268) (763,460,507) (20,744,632) (229,609,897)
- ------------------------------------------------------------------------------------------
Net decrease (35,587,118) $(378,095,285) (9,685,461) $(107,388,981)
==========================================================================================
ADVISOR CLASS
- ------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2005
- --------------------------
Sold 4,211,035 $ 44,083,027 2,102,459 $ 22,452,895
- --------------------------
Issued in reinvestment
of distributions 239,445 2,497,129 173,579 1,847,642
- --------------------------
Redeemed (3,204,654) (33,442,837) (1,778,853) (19,010,100)
- ------------------------------------------------------------------------------------------
Net increase 1,245,826 $ 13,137,319 497,185 $ 5,290,437
==========================================================================================
YEAR ENDED MARCH 31, 2004
- --------------------------
Sold 2,625,690 $ 28,012,479 4,482,165 $ 49,523,409
- --------------------------
Issued in reinvestment
of distributions 274,801 2,924,969 180,684 1,972,187
- --------------------------
Redeemed (4,130,203) (44,011,186) (4,487,094) (49,600,411)
- ------------------------------------------------------------------------------------------
Net increase (decrease) (1,229,712) $(13,073,738) 175,755 $ 1,895,185
==========================================================================================
C CLASS
- ------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2005
- --------------------------
Sold 737,130 $ 7,703,967 N/A N/A
- --------------------------
Issued in reinvestment
of distributions 36,142 377,011
- --------------------------
Redeemed (216,680) (2,262,019)
- ------------------------------------------------------------------------------------------
Net increase 556,592 $ 5,818,959
==========================================================================================
YEAR ENDED MARCH 31, 2004
- --------------------------
Sold 708,330 $ 7,555,705 N/A N/A
- --------------------------
Issued in reinvestment
of distributions 16,388 174,469
- --------------------------
Redeemed (414,809) (4,428,725)
- ------------------------------------------------------------------------------------------
Net increase 309,909 $ 3,301,449
==========================================================================================
(continued)
- ------
39
Notes to Financial Statements
MARCH 31, 2005
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Transactions in shares of the funds were as follows (unlimited number of shares
authorized):
- ------------------------------------------------------------------------------------------
INFLATION-ADJUSTED SHORT-TERM GOVERNMENT
- ------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2005
- --------------------------
Sold 28,330,190 $ 316,872,288 9,757,224 $ 92,855,508
- --------------------------
Issued in reinvestment
of distributions 1,551,284 17,175,583 2,063,698 19,626,696
- --------------------------
Redeemed (14,679,749) (162,948,186) (16,600,996) (158,025,826)
- ------------------------------------------------------------------------------------------
Net increase (decrease) 15,201,725 $ 171,099,685 (4,780,074) $ (45,543,622)
==========================================================================================
YEAR ENDED
MARCH 31, 2004
- --------------------------
Sold 31,539,007 $ 348,830,266 26,315,461 $ 253,557,969
- --------------------------
Issued in reinvestment
of distributions 1,260,133 13,875,126 1,614,311 15,575,295
- --------------------------
Redeemed (23,002,647) (251,584,892) (23,563,186) (227,295,141)
- ------------------------------------------------------------------------------------------
Net increase 9,796,493 $ 111,120,500 4,366,586 $ 41,838,123
==========================================================================================
INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2005
- --------------------------
Sold 2,234,652 $ 24,966,020 N/A N/A
- --------------------------
Issued in reinvestment
of distributions 215,757 2,387,895
- --------------------------
Redeemed (1,570,009) (17,409,613)
- ------------------------------------------------------------------------------------------
Net increase 880,400 $ 9,944,302
==========================================================================================
YEAR ENDED MARCH 31, 2004
- --------------------------
Sold 2,835,280 $ 31,469,775 N/A N/A
- --------------------------
Issued in reinvestment
of distributions 163,059 1,796,888
- --------------------------
Redeemed (1,244,834) (13,790,831)
- ------------------------------------------------------------------------------------------
Net increase 1,753,505 $ 19,475,832
==========================================================================================
ADVISOR CLASS
- ------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2005
- --------------------------
Sold 20,198,672 $225,747,660 2,105,959 $ 20,093,923
- --------------------------
Issued in reinvestment
of distributions 555,710 6,166,872 94,927 902,827
- --------------------------
Redeemed (4,049,515) (45,200,835) (2,477,594) (23,583,152)
- ------------------------------------------------------------------------------------------
Net increase (decrease) 16,704,867 $186,713,697 (276,708) $ (2,586,402)
==========================================================================================
YEAR ENDED MARCH 31, 2004
- --------------------------
Sold 7,460,654 $ 82,713,321 3,666,339 $ 35,362,589
- --------------------------
Issued in reinvestment
of distributions 217,776 2,405,374 88,891 857,818
- --------------------------
Redeemed (1,987,114) (21,849,904) (5,903,050) (56,910,300)
- ------------------------------------------------------------------------------------------
Net increase (decrease) 5,691,316 $ 63,268,791 (2,147,820) $(20,689,893)
==========================================================================================
(continued)
- ------
40
Notes to Financial Statements
MARCH 31, 2005
5. SECURITIES LENDING
As of March 31, 2005, securities in Government Bond and Short-Term Government
valued at $138,066,618 and $63,407,787, respectively, were on loan through the
lending agent, JPMCB, to certain approved borrowers. JPMCB receives and
maintains collateral in the form of cash, and/or acceptable securities as
approved by ACIM. Cash collateral is invested in authorized investments by the
lending agent in a pooled account. The value of cash collateral received at
period end is disclosed in the Statement of Assets and Liabilities and
investments made with the cash by the lending agent are listed in the Schedule
of Investments. Any deficiencies or excess of collateral must be delivered or
transferred by the member firms no later than the close of business on the next
business day. The total value of all collateral received, at this date, was
$140,333,457 and $64,660,540, respectively. Government Bond, Inflation-Adjusted
and Short-Term Government's risks in securities lending are that the borrower
may not provide additional collateral when required or return the securities
when due. If the borrower defaults, receipt of the collateral by Government
Bond, Inflation-Adjusted and Short-Term Government may be delayed or limited.
6. BANK LINE OF CREDIT
The funds, along with certain other funds managed by ACIM, have a $575,000,000
unsecured bank line of credit agreement with JPMCB, which was renewed from
$650,000,000 effective December 15, 2004. The funds may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The
funds did not borrow from the line during the year ended March 31, 2005.
7. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2005
and March 31, 2004 were as follows:
- --------------------------------------------------------------------------------
GINNIE MAE GOVERNMENT BOND
- --------------------------------------------------------------------------------
2005 2004 2005 2004
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary income $75,472,237 $89,202,217 $15,615,512 $25,157,441
- --------------------------------------------------------------------------------
Long-term
capital gains -- -- $5,180,921 $3,574,615
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INFLATION-ADJUSTED SHORT-TERM GOVERNMENT
- --------------------------------------------------------------------------------
2005 2004 2005 2004
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary income $29,318,951 $18,860,980 $21,333,026 $17,169,580
- --------------------------------------------------------------------------------
Long-term
capital gains $2,256,897 $1,229,435 -- --
- --------------------------------------------------------------------------------
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of paydown losses, certain income items and net realized gains and losses for
financial statement and tax purposes, and may result in reclassification among
certain capital accounts on the financial statements.
(continued)
- ------
41
Notes to Financial Statements
MARCH 31, 2005
7. FEDERAL TAX INFORMATION (CONTINUED)
The reclassifications below relate primarily to the character differences of
paydown gains and losses and interest on swap agreements.
- ------------------------------------------------------------------------------------------
GOVERNMENT INFLATION- SHORT-TERM
GINNIE MAE BOND ADJUSTED GOVERNMENT
- ------------------------------------------------------------------------------------------
Undistributed net
investment income $(17,722,778) $(353,101) -- $(1,023,203)
- ------------------------------------------------------------------------------------------
Accumulated
undistributed net
realized gain (loss) $17,722,778 $352,242 -- $1,022,010
- ------------------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) -- $859 -- $1,193
- ------------------------------------------------------------------------------------------
As of March 31, 2005, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
- ------------------------------------------------------------------------------------------
GOVERNMENT INFLATION- SHORT-TERM
GINNIE MAE BOND ADJUSTED GOVERNMENT
- ------------------------------------------------------------------------------------------
COMPONENTS OF DISTRIBUTABLE EARNINGS AND TAX COST
- ------------------------------------------------------------------------------------------
Federal tax cost
of investments $1,817,981,570 $704,765,867 $949,992,144 $1,192,465,256
==========================================================================================
Gross tax appreciation
of investments $ 9,956,360 $ 2,449,402 $41,149,027 $ 1,619,440
- -----------------------
Gross tax depreciation
of investments (15,641,059) (4,386,579) (1,676,815) (8,641,600)
- ------------------------------------------------------------------------------------------
Net tax appreciation
(depreciation)
of investments $ (5,684,699) $(1,937,177) $39,472,212 $(7,022,160)
==========================================================================================
Net tax depreciation
on derivatives -- $ (240,178) -- $ (536,042)
- -----------------------
Net tax appreciation
(depreciation) $ (5,684,699) $(2,177,355) $39,472,212 $(7,558,202)
==========================================================================================
Undistributed
ordinary income -- -- -- --
- -----------------------
Accumulated
long-term gains -- -- $3,790,383 --
- -----------------------
Accumulated
capital losses $(41,708,114) $(4,239,806) -- $(27,916,501)
- -----------------------
Capital loss deferral -- -- -- $(2,079,388)
- ------------------------------------------------------------------------------------------
The difference between book-basis and tax-basis cost and unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales and the realization for tax purposes of unrealized gains on certain
futures contracts.
The accumulated capital losses listed above represent net capital loss
carryovers that may be used to offset future realized capital gains for federal
income tax purposes. The capital loss carryovers expire as follows:
- ----------------------------------------------------------------------------------------------------
2007 2008 2009 2011 2012 2013
- ----------------------------------------------------------------------------------------------------
Ginnie Mae -- $(7,179,913) $(255,936) $(285,414) $(22,063,924) $(11,922,927)
- ----------------------------------------------------------------------------------------------------
Government Bond -- -- -- -- -- $(4,239,806)
- ----------------------------------------------------------------------------------------------------
Short-Term
Government $(157,838) $(15,891,898) $(3,678,384) -- -- $(8,188,381)
- ----------------------------------------------------------------------------------------------------
The capital loss deferrals represent net capital losses incurred in the
five-month period ended March 31, 2005. The funds have elected to treat such
losses as having been incurred in the following fiscal year for federal income
tax purposes.
8. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The funds hereby designate capital gains dividends for the fiscal year ended
March 31, 2005, as follows:
- --------------------------------------------------------------------------------
GINNIE MAE GOVERNMENT BOND INFLATION-ADJUSTED SHORT-TERM GOVERNMENT
- --------------------------------------------------------------------------------
-- $5,171,365 $2,256,903 --
- --------------------------------------------------------------------------------
- ------
42
Ginnie Mae - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.61 $10.85 $10.58 $10.63 $10.16
- ------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.37(1) 0.29(1) 0.48(1) 0.58(1) 0.68
- -------------------------
Net Realized and
Unrealized Gain (Loss) (0.15) (0.04) 0.35 (0.01) 0.47
- ------------------------------------------------------------------------------------------
Total From
Investment Operations 0.22 0.25 0.83 0.57 1.15
- ------------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.49) (0.49) (0.56) (0.62) (0.68)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.34 $10.61 $10.85 $10.58 $10.63
==========================================================================================
TOTAL RETURN(2) 2.11% 2.43% 8.03% 5.43% 11.70%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.58% 0.59% 0.59% 0.59% 0.59%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 3.58% 2.77% 4.46% 5.42% 6.57%
- -------------------------
Portfolio Turnover Rate 315% 356% 356% 218% 143%
- -------------------------
Net Assets, End of Period
(in thousands) $1,482,999 $1,676,815 $2,100,358 $1,699,876 $1,358,978
- ------------------------------------------------------------------------------------------
(1) Computed using the average shares outstanding.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
43
Ginnie Mae - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.61 $10.85 $10.58 $10.63 $10.16
- ------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.35(1) 0.27(1) 0.46(1) 0.55(1) 0.65
- -------------------------
Net Realized and
Unrealized Gain (Loss) (0.16) (0.04) 0.35 (0.01) 0.47
- ------------------------------------------------------------------------------------------
Total From
Investment Operations 0.19 0.23 0.81 0.54 1.12
- ------------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.46) (0.47) (0.54) (0.59) (0.65)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.34 $10.61 $10.85 $10.58 $10.63
==========================================================================================
TOTAL RETURN(2) 1.85% 2.18% 7.76% 5.17% 11.42%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.83% 0.84% 0.84% 0.84% 0.84%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 3.33% 2.52% 4.21% 5.17% 6.32%
- -------------------------
Portfolio Turnover Rate 315% 356% 356% 218% 143%
- -------------------------
Net Assets, End of Period
(in thousands) $72,571 $61,288 $75,999 $42,675 $28,102
- ------------------------------------------------------------------------------------------
(1) Computed using the average shares outstanding.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
44
Ginnie Mae - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2005 2004 2003 2002(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.61 $10.85 $10.57 $10.63
- --------------------------------------------------------------------------------
Income From
Investment Operations
- ----------------------------
Net Investment Income(2) 0.28 0.22 0.40 0.37
- ----------------------------
Net Realized and
Unrealized Gain (Loss) (0.17) (0.05) 0.36 (0.02)
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.11 0.17 0.76 0.35
- --------------------------------------------------------------------------------
Distributions
- ----------------------------
From Net
Investment Income (0.38) (0.41) (0.48) (0.41)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.34 $10.61 $10.85 $10.57
================================================================================
TOTAL RETURN(3) 1.10% 1.60% 7.23% 3.41%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.58% 1.42% 1.33% 1.34%(4)
- ----------------------------
Ratio of Net Investment
Income to Average
Net Assets 2.58% 1.94% 3.72% 4.51%(4)
- ----------------------------
Portfolio Turnover Rate 315% 356% 356% 218%(5)
- ----------------------------
Net Assets, End of Period
(in thousands) $13,795 $8,257 $5,078 $806
- --------------------------------------------------------------------------------
(1) June 15, 2001 (commencement of sale) through March 31, 2002.
(2) Computed using the average shares outstanding.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. Total
returns for periods less than one year are not annualized. The total return
of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated was
calculated for the year ended March 31, 2002.
See Notes to Financial Statements.
- ------
45
Government Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.93 $11.25 $10.60 $10.76 $10.03
- ------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.29(1) 0.28(1) 0.38 0.48 0.55
- -------------------------
Net Realized and
Unrealized Gain (Loss) (0.24) (0.02) 0.99 (0.16) 0.73
- ------------------------------------------------------------------------------------------
Total From
Investment Operations 0.05 0.26 1.37 0.32 1.28
- ------------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.30) (0.29) (0.38) (0.48) (0.55)
- -------------------------
From Net
Realized Gains (0.16) (0.29) (0.34) -- --
- ------------------------------------------------------------------------------------------
Total Distributions (0.46) (0.58) (0.72) (0.48) (0.55)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.52 $10.93 $11.25 $10.60 $10.76
==========================================================================================
TOTAL RETURN(2) 0.50% 2.42% 13.17% 3.01% 13.17%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.50% 0.51% 0.51% 0.51% 0.51%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 2.70% 2.56% 3.34% 4.45% 5.37%
- -------------------------
Portfolio Turnover Rate 553% 376% 229% 164% 108%
- -------------------------
Net Assets, End of Period
(in thousands) $438,997 $468,052 $590,433 $421,312 $391,306
- ------------------------------------------------------------------------------------------
(1) Computed using the average shares outstanding.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
46
Government Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.93 $11.25 $10.60 $10.76 $10.03
- ------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.26(1) 0.25(1) 0.35 0.46 0.53
- -------------------------
Net Realized and
Unrealized Gain (Loss) (0.24) (0.02) 0.99 (0.16) 0.73
- ------------------------------------------------------------------------------------------
Total From
Investment Operations 0.02 0.23 1.34 0.30 1.26
- ------------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.27) (0.26) (0.35) (0.46) (0.53)
- -------------------------
From Net
Realized Gains (0.16) (0.29) (0.34) -- --
- ------------------------------------------------------------------------------------------
Total Distributions (0.43) (0.55) (0.69) (0.46) (0.53)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.52 $10.93 $11.25 $10.60 $10.76
==========================================================================================
TOTAL RETURN(2) 0.25% 2.16% 12.89% 2.75% 12.89%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.75% 0.76% 0.76% 0.76% 0.76%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 2.45% 2.31% 3.09% 4.20% 5.12%
- -------------------------
Portfolio Turnover Rate 553% 376% 229% 164% 108%
- -------------------------
Net Assets, End of Period
(in thousands) $48,674 $45,136 $44,456 $42,285 $9,898
- ------------------------------------------------------------------------------------------
(1) Computed using the average shares outstanding.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
47
Inflation-Adjusted Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $11.45 $10.86 $9.89 $9.87 $9.41
- ------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.45 0.39 0.48 0.38 0.67
- -------------------------
Net Realized and
Unrealized Gain (Loss) (0.17) 0.67 1.12 0.02 0.46
- ------------------------------------------------------------------------------------------
Total From
Investment Operations 0.28 1.06 1.60 0.40 1.13
- ------------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.45) (0.39) (0.48) (0.38) (0.67)
- -------------------------
From Net
Realized Gains (0.03) (0.08) (0.15) --(1) --
- ------------------------------------------------------------------------------------------
Total Distributions (0.48) (0.47) (0.63) (0.38) (0.67)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $11.25 $11.45 $10.86 $9.89 $9.87
==========================================================================================
TOTAL RETURN(2) 2.57% 10.04% 16.42% 4.16% 12.62%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.50% 0.50% 0.51% 0.51% 0.51%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 3.77% 3.50% 4.20% 3.12% 6.75%
- -------------------------
Portfolio Turnover Rate 68% 54% 136% 40% 39%
- -------------------------
Net Assets, End of Period
(in thousands) $646,214 $483,353 $352,315 $185,518 $57,577
- ------------------------------------------------------------------------------------------
(1) Per-share amount was less than $0.005.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
48
Inflation-Adjusted Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2005 2004 2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.45 $10.86 $10.84
- --------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------
Net Investment Income 0.47 0.41 0.20
- -----------------------------------------
Net Realized and Unrealized Gain (Loss) (0.17) 0.67 0.17
- --------------------------------------------------------------------------------
Total From Investment Operations 0.30 1.08 0.37
- --------------------------------------------------------------------------------
Distributions
- -----------------------------------------
From Net Investment Income (0.47) (0.41) (0.20)
- -----------------------------------------
From Net Realized Gains (0.03) (0.08) (0.15)
- --------------------------------------------------------------------------------
Total Distributions (0.50) (0.49) (0.35)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $11.25 $11.45 $10.86
================================================================================
TOTAL RETURN(2) 2.77% 10.24% 3.53%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.30% 0.30% 0.31%(3)
- -----------------------------------------
Ratio of Net Investment Income
to Average Net Assets 3.97% 3.70% 3.80%(3)
- -----------------------------------------
Portfolio Turnover Rate 68% 54% 136%(4)
- -----------------------------------------
Net Assets, End of Period (in thousands) $65,058 $56,103 $34,196
- --------------------------------------------------------------------------------
(1) October 1, 2002 (commencement of sale) through March 31, 2003.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated was
calculated for the year ended March 31, 2003.
See Notes to Financial Statements.
- ------
49
Inflation-Adjusted Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $11.45 $10.86 $9.89 $9.87 $9.41
- ------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.42 0.36 0.45 0.36 0.65
- -------------------------
Net Realized and
Unrealized Gain (Loss) (0.17) 0.67 1.12 0.02 0.46
- ------------------------------------------------------------------------------------------
Total From
Investment Operations 0.25 1.03 1.57 0.38 1.11
- ------------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.42) (0.36) (0.45) (0.36) (0.65)
- -------------------------
From Net
Realized Gains (0.03) (0.08) (0.15) --(1) --
- ------------------------------------------------------------------------------------------
Total Distributions (0.45) (0.44) (0.60) (0.36) (0.65)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $11.25 $11.45 $10.86 $9.89 $9.87
==========================================================================================
TOTAL RETURN(2) 2.33% 9.78% 16.13% 3.88% 12.35%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.75% 0.75% 0.76% 0.76% 0.76%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 3.52% 3.25% 3.95% 2.87% 6.50%
- -------------------------
Portfolio Turnover Rate 68% 54% 136% 40% 39%
- -------------------------
Net Assets, End of Period
(in thousands) $295,129 $109,053 $41,673 $9,613 $1,079
- ------------------------------------------------------------------------------------------
(1) Per-share amount is less than $0.005.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
50
Short-Term Government - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $9.66 $9.69 $9.46 $9.47 $9.19
- ------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.19(1) 0.15(1) 0.29 0.45 0.54
- -------------------------
Net Realized and
Unrealized Gain (Loss) (0.21) (0.02) 0.23 (0.01) 0.28
- ------------------------------------------------------------------------------------------
Total From
Investment Operations (0.02) 0.13 0.52 0.44 0.82
- ------------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.20) (0.16) (0.29) (0.45) (0.54)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $9.44 $9.66 $9.69 $9.46 $9.47
==========================================================================================
TOTAL RETURN(2) (0.16)% 1.40% 5.52% 4.68% 9.25%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.58% 0.59% 0.59% 0.59% 0.59%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 2.04% 1.54% 2.96% 4.67% 5.87%
- -------------------------
Portfolio Turnover Rate 283% 232% 185% 165% 92%
- -------------------------
Net Assets, End of Period
(in thousands) $928,460 $996,677 $957,413 $832,199 $797,718
- ------------------------------------------------------------------------------------------
(1) Computed using the average shares outstanding.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
51
Short-Term Government - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $9.66 $9.69 $9.46 $9.47 $9.19
- ------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.17(1) 0.13(1) 0.26 0.42 0.52
- -------------------------
Net Realized and
Unrealized Gain (Loss) (0.21) (0.02) 0.23 (0.01) 0.28
- ------------------------------------------------------------------------------------------
Total From
Investment Operations (0.04) 0.11 0.49 0.41 0.80
- ------------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.18) (0.14) (0.26) (0.42) (0.52)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $9.44 $9.66 $9.69 $9.46 $9.47
==========================================================================================
TOTAL RETURN(2) (0.41)% 1.15% 5.26% 4.42% 8.98%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.83% 0.84% 0.84% 0.84% 0.84%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 1.79% 1.29% 2.71% 4.42% 5.62%
- -------------------------
Portfolio Turnover Rate 283% 232% 185% 165% 92%
- -------------------------
Net Assets, End of Period
(in thousands) $43,431 $47,135 $68,102 $36,430 $4,334
- ------------------------------------------------------------------------------------------
(1) Computed using the average shares outstanding.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
52
Report of Independent Registered Public Accounting Firm
To the Trustees of the American Century Government Income Trust and Shareholders
of the Ginnie Mae Fund, the Government Bond Fund, the Inflation-Adjusted Bond
Fund, and the Short-Term Government Fund:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Ginnie Mae Fund, the Government
Bond Fund, the Inflation-Adjusted Bond Fund, and the Short-Term Government Fund
(four of the six funds comprising the American Century Government Income Trust,
hereafter referred to as the "Funds") at March 31, 2005, the results of each of
their operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods presented, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at March 31, 2005 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
May 12, 2005
- ------
53
Management
The individuals listed below serve as trustees or officers of the funds. Each
trustee serves until his or her successor is duly elected and qualified or until
he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the remaining
independent trustees. The independent trustees have extended the mandatory
retirement age of Mr. Eisenstat to 75. Mr. Scott may serve until age 77 based on
an extension granted under retirement guidelines in effect prior to March 2004.
Those listed as interested trustees are "interested" primarily by virtue of
their engagement as officers of American Century Companies, Inc. (ACC) or its
wholly-owned, direct or indirect, subsidiaries, including the funds' investment
advisor, American Century Investment Management, Inc. (ACIM); the funds'
principal underwriter, American Century Investment Services, Inc. (ACIS); and
the funds' transfer agent, American Century Services, LLC (ACS LLC).
The other trustees (more than three-fourths of the total number) are
independent; that is, they have never been employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned, direct or indirect,
subsidiaries, including ACIM, ACIS, and ACS LLC. The trustees serve in this
capacity for eight registered investment companies in the American Century
family of funds.
All persons named as officers of the funds also serve in similar capacities for
the other 13 investment companies advised by ACIM or American Century Global
Investment Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless
otherwise noted. 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 and are appointed or
re-appointed on an annual basis.
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
ANTONIO CANOVA, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1961
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): Less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer, Brocade
Communications Systems, Inc. (May 2001 to present); Vice
President-Administration, Brocade Communications Systems, Inc. (November 2004 to
present); Vice President-Finance, Brocade Communications Systems, Inc. (November
2000 to November 2004); Vice President, Chief Financial Officer and Secretary,
Wireless Inc. (April 2000 to November 2000)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
ALBERT EISENSTAT, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1930
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 9
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Private Investor
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Independent Director, Sungard Data Systems
(1991 to present); Independent Director, Business Objects S/A (1994 to present);
Independent Director, Commercial Metals (1983 to 2001)
- --------------------------------------------------------------------------------
(continued)
- ------
54
Management
INDEPENDENT TRUSTEES (CONTINUED)
- --------------------------------------------------------------------------------
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): Less than 1 year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and Manager, Regis
Management Company, LLC (April 2004 to present); Partner and Founder, Bay
Partners (Venture capital firm, 1976 to present); Partner and Founder, Ware &
Freidenrich (1968 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee, Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 9
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of Law
and Business, Stanford Law School (1979 to present); Marc and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
KATHRYN A. HALL, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Co-Chief Executive Officer and
Chief Investment Officer, Offit Hall Capital Management, LLC (April 2002 to
present); President and Managing Director, Laurel Management Company, L.L.C.
(1996 to April 2002)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 24
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Oak Hill Platinum
Partners, and a Partner, Oak Hill Capital Management (1999 to present); Frank E.
Buck Professor of Finance-Emeritus, Stanford Graduate School of Business (1981
to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Chicago Mercantile Exchange
(2000 to present)
- --------------------------------------------------------------------------------
KENNETH E. SCOTT, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1928
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 33
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Ralph M. Parsons Professor of Law
and Business, Stanford Law School (1972 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Professor of Economics, Stanford
University (1977 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present); Director, Watson Wyatt Worldwide (2002 to present); Director,
Palmsource Inc. (2002 to present)
- --------------------------------------------------------------------------------
(continued)
- ------
55
Management
INDEPENDENT TRUSTEES (CONTINUED)
- --------------------------------------------------------------------------------
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 20
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Director and Partner,
Windy Hill Productions, LP (educational software, 1994 to 1998)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Quintus Corporation (automation
solutions, 1995 to present)
- --------------------------------------------------------------------------------
INTERESTED TRUSTEE
- --------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC
(September 2000 to present); President, ACC (June 1997 to present); Chief
Operating Officer, ACC (June 1996 to September 2000); Also serves as: Chief
Executive Officer and President, ACIS, ACGIM, ACIM and other ACC subsidiaries;
Executive Vice President, ACS LLC; Director, ACC, ACGIM, ACIM, ACIS, ACS LLC and
other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: President
LENGTH OF TIME SERVED (YEARS): 4
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: See entry under "Interested
Trustee."
- --------------------------------------------------------------------------------
ROBERT T. JACKSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Executive Vice President
LENGTH OF TIME SERVED (YEARS): 9
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC
(August 1997 to present); Chief Financial Officer, ACC (May 1995 to October
2002); Executive Vice President, ACC (May 1995 to present); Also serves as:
Chief Executive Officer, Chief Financial Officer and President, ACS LLC; Chief
Financial Officer and Executive Vice President, ACGIM, ACIM, ACIS and other ACC
subsidiaries; Treasurer, ACGIM, ACIM and other ACC subsidiaries; Director, ACC
and other subsidiaries
- --------------------------------------------------------------------------------
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer and Chief
Accounting Officer
LENGTH OF TIME SERVED (YEARS): 4
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Assistant Treasurer, ACC (January
1995 to present); Also serves as: Senior Vice President, ACS LLC; Assistant
Treasurer, ACGIM, ACIM, ACIS, ACS LLC and other ACC subsidiaries.
- --------------------------------------------------------------------------------
DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1958
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (February 2001
to present); General Counsel, ACC (June 1998 to present); Also serves as: Senior
Vice President and General Counsel, ACGIM, ACIM, ACIS, ACS LLC and other ACC
subsidiaries
- --------------------------------------------------------------------------------
(continued)
- ------
56
Management
OFFICERS (CONTINUED)
- --------------------------------------------------------------------------------
CHARLES C.S. PARK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Vice President and Chief Compliance Officer
LENGTH OF TIME SERVED (YEARS): 4 and less than 1 year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACS LLC,
ACIM and ACGIM (March 2005 to present); Vice President, ACS LLC and ACIM
(February 2000 to present); Assistant General Counsel, ACS LLC (January 1998 to
March 2005)
- --------------------------------------------------------------------------------
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Controller
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS LLC (February
2000 to present); Controller-Fund Accounting, ACS LLC (June 1997 to present)
- --------------------------------------------------------------------------------
C. JEAN WADE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1964
POSITION(S) HELD WITH FUND: Controller(1)
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS LLC (February
2000 to present); Controller-Fund Accounting, ACS LLC (June 1997 to present)
- --------------------------------------------------------------------------------
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (October 2001
to present); Vice President, Corporate Tax, ACS LLC (April 1998 to present);
Also serves as: Vice President, ACGIM, ACIM, ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
(1) Ms. Wade serves in a similar capacity for seven other investment companies
advised by ACIM.
The SAI has additional information about the funds' trustees and is available
without charge upon request by calling 1-800-345-2021.
- ------
57
Share Class Information
Three classes of shares are authorized for sale by Ginnie Mae: Investor Class,
Advisor Class, and C Class. Two classes of shares are authorized for sale by
Government Bond and Short-Term Government: Investor Class and Advisor Class.
Three classes of shares are authorized for sale by Inflation-Adjusted Bond:
Investor Class, Institutional Class, and Advisor Class. The total expense ratio
of Institutional Class shares is lower than that of Investor Class shares. The
total expense ratios of Advisor and C Class shares are higher than that of
Investor Class shares.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through a
broker-dealer, which may require payment of a transaction fee to the broker.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) in an American Century fund or at least $10
million in multiple funds. In recognition of the larger investments and account
balances and comparatively lower transaction costs, the total expense ratio of
Institutional Class shares is 0.20% less than the total expense ratio of
Investor Class shares.
ADVISOR CLASS shares are sold primarily through institutions such as investment
advisors, banks, broker-dealers, insurance companies, and financial advisors.
Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and
distribution fee. The total expense ratio of Advisor Class shares is 0.25%
higher than the total expense ratio of Investor Class shares.
C CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. C Class shares redeemed within 12 months of purchase are
subject to a contingent deferred sales charge (CDSC) of 1.00%. There is no CDSC
on shares acquired through reinvestment of dividends or capital gains. C Class
shares also are subject to a Rule 12b-1 service and distribution fee of 1.00%.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
- ------
58
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' investment advisor, is
responsible for exercising the voting rights associated with the securities
purchased and/or held by the funds. A description of the policies and procedures
the advisor uses in fulfilling this responsibility is available without charge,
upon request, by calling 1-800-345-2021. It is also available on American
Century's Web site at americancentury.com and on the Securities and Exchange
Commission's Web site at sec.gov. Information regarding how the investment
advisor voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The funds file their complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The funds' Forms N-Q are available on the SEC's Web site at
sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The funds also make their complete schedule
of portfolio
(continued)
- ------
59
Additional Information
holdings for the most recent quarter of their fiscal year available on their Web
site at americancentury.com and, upon request, by calling 1-800-345-2021.
INDEX DEFINITIONS
The following indices are used to illustrate investment market, sector, or style
performance or to serve as fund performance comparisons. They are not investment
products available for purchase.
The CITIGROUP 30-YEAR GNMA INDEX is comprised of Government National Mortgage
Association (GNMA) mortgage-backed securities with an aggregate amount
outstanding per coupon of at least $5 billion, an aggregate amount outstanding
per origination year of at least $500 million, and a remaining maturity of at
least one year.
The CITIGROUP TREASURY/MORTGAGE INDEX is comprised of U.S. Treasury securities
with an amount outstanding of at least $1 billion, and mortgage-backed
securities with an aggregate amount outstanding per coupon of at least $5
billion and an aggregate amount outstanding per origination year of at least
$500 million. Both the U.S. Treasury and the mortgage-backed securities included
in the index must have a remaining maturity of at least one year.
The CITIGROUP U.S. INFLATION-LINKED SECURITIES INDEX (ILSI)(SM) measures the
Return of bonds with fixed-rate coupon payments that adjust for inflation as
measured by the Consumer Price Index (CPI).
The CITIGROUP U.S. TREASURY/AGENCY 1- TO 3-YEAR INDEX is a
market-capitalization-weighted index that includes fixed-rate U.S. Treasury and
government agency issues with maturities between one and three years.
The CITIGROUP U.S. TREASURY 10+ YEAR INDEX is a market-capitalization-weighted
index that includes fixed-rate U.S. Treasury issues with maturities of 10 years
or longer.
The LEHMAN BROTHERS FIXED RATE MORTGAGE BACKED SECURITIES (MBS) INDEX is the MBS
Fixed-Rate component of the Lehman Brothers U.S. Aggregate Index. It covers the
mortgage-backed pass-through securities of the Government National Mortgage
Association (GNMA), the Federal National Mortgage Association (FNMA), and the
Federal Home Loan Mortgage Corporation (FHLMC).
The LEHMAN BROTHERS U.S. AGGREGATE INDEX represents securities that are taxable,
registered with the Securities and Exchange Commission, and U.S.
dollar-denominated. The index covers the U.S. investment-grade fixed-rate bond
market, with index components for government and corporate securities, mortgage
pass-through securities, and asset-backed securities.
The MORTGAGE BANKERS ASSOCIATION REFINANCING INDEX is a gauge of mortgage
refinancing activity that covers all U.S. mortgage applications to refinance an
existing mortgage. The index includes conventional and government refinances,
regardless of producer coupon rate refinanced into or out of.
- ------
60
[inside back cover - blank]
[back cover]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE:
1-800-345-2021 or 816-531-5575
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY GOVERNMENT INCOME TRUST
INVESTMENT ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
COMPANIES
The American Century Investments logo, American Century and American Century
Investments are service marks of American Century Proprietary Holdings, Inc.
American Century Investment Services, Inc., Distributor
0505 (c)2005 American Century Proprietary Holdings, Inc.
SH-ANN-43392S All rights reserved.
[front cover]
American Century Investments
ANNUAL REPORT
[photo of woman and girl]
MARCH 31, 2005
Capital Preservation Fund
Government Agency Money Market Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CAPITAL PRESERVATION
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Portfolio Composition by Maturity . . . . . . . . . . . . . . . . . . . . . 2
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
GOVERNMENT AGENCY MONEY MARKET
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Portfolio Composition by Maturity . . . . . . . . . . . . . . . . . . . . . 5
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Shareholder Fee Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . 11
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . . .13
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 14
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . 20
OTHER INFORMATION
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
The opinions expressed in each of the Portfolio Commentaries reflect those of
the portfolio management team as of the date of the report, and do not
necessarily represent the opinions of American Century or any other person in
the American Century organization. Any such opinions are subject to change at
any time based upon market or other conditions and American Century disclaims
any responsibility to update such opinions. These opinions may not be relied
upon as investment advice and, because investment decisions made by American
Century funds are based on numerous factors, may not be relied upon as an
indication of trading intent on behalf of any American Century fund. Security
examples are used for representational purposes only and are not intended as
recommendations to purchase or sell securities. Performance information for
comparative indices and securities is provided to American Century by third
party vendors. To the best of American Century's knowledge, such information is
accurate at the time of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the annual report for the American Century
Capital Preservation and Government Agency Money Market funds for the year ended
March 31, 2005.
The report includes comparative performance figures, portfolio and market
commentary, summary tables, a full list of portfolio holdings, and financial
statements and highlights. We hope you find this information helpful in
monitoring your investment.
Through our Web site, americancentury.com, we provide quarterly commentaries on
all American Century portfolios, the views of our senior investment officers,
and other communications about investments, portfolio strategy, and the markets.
Your next shareholder report for these funds will be the semiannual report dated
September 30, 2005, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER
AMERICAN CENTURY COMPANIES, INC.
/s/James E. Stowers III
James E. Stowers III
CHAIRMAN OF THE BOARD
AMERICAN CENTURY COMPANIES, INC.
- ------
1
Capital Preservation - Performance
TOTAL RETURNS AS OF MARCH 31, 2005
----------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
INCEPTION
1 YEAR 5 YEARS 10 YEARS DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 1.14% 2.28% 3.57% 10/13/72
- --------------------------------------------------------------------------------
90-DAY U.S. TREASURY
BILL INDEX 1.75% 2.51% 3.80% --
- --------------------------------------------------------------------------------
LIPPER U.S. TREASURY
MONEYMARKET FUNDS
AVERAGE RETURN(1) 0.89% 1.99% 3.39% --
- --------------------------------------------------------------------------------
Fund's Lipper Ranking(1)(2) 10 of 86 8 of 73 8 of 53 --
- --------------------------------------------------------------------------------
(1) (c)2005 Reuters. All rights reserved. Any copying, republication or
redistribution of Lipper content, including by caching, framing or similar
means, is expressly prohibited without the prior written consent of Lipper.
Lipper shall not be liable for any errors or delays in the content, or for
any actions taken in reliance thereon.
Lipper Fund Performance -- Performance data is total return, and is
preliminary and subject to revision.
Lipper Rankings -- Rankings are based only on the universe shown. This
listing might not represent the complete universe of funds tracked by Lipper
Inc.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by
Lipper Inc.-A Reuters Company and may be incomplete. No offer or
solicitations to buy or sell any of the securities herein is being made by
Lipper.
(2) Lipper rankings are based on average annual total returns for the fund in a
given category for the periods indicated.
PORTFOLIO COMPOSITION BY MATURITY
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/05 9/30/04
- --------------------------------------------------------------------------------
1-30 days 17% 16%
- --------------------------------------------------------------------------------
31-90 days 56% 36%
- --------------------------------------------------------------------------------
91-180 days 25% 41%
- --------------------------------------------------------------------------------
More than 180 days 2% 7%
- --------------------------------------------------------------------------------
YIELDS AS OF MARCH 31, 2005
- --------------------------------------------------------------------------------
7-DAY CURRENT YIELD
- --------------------------------------------------------------------------------
2.10%
- --------------------------------------------------------------------------------
7-DAY EFFECTIVE YIELD
- --------------------------------------------------------------------------------
2.13%
- --------------------------------------------------------------------------------
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. To obtain performance data current to the most recent month end, please
call 1-800-345-2021 or visit americancentury.com.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
The 7-day current yield more closely reflects the current earnings of the fund
than the total return.
- ------
2
Capital Preservation - Portfolio Commentary
PORTFOLIO MANAGER: LYNN PASCHEN
PERFORMANCE SUMMARY
For the fiscal year ended March 31, 2005, Capital Preservation's total return of
1.14% outpaced the 0.89% average return of the 86 funds in Lipper Inc.'s U.S.
Treasury money market funds category. This performance ranked the fund in the
top 12% of the Lipper category. Capital Preservation's longer-term results are
similarly strong--the fund's five-year return ranked in the top 11% of its
Lipper group, and its 10-year return ranked in the top 15%. (See the previous
page for additional performance information.)
ECONOMIC AND MARKET REVIEW
U.S. economic growth remained solid during the past year. The U.S. economy grew
by 4.4% in 2004, its best calendar year of growth since 1999. In addition, the
preliminary estimate of economic growth for the first quarter of 2005 was an
annual rate of 3.1%.
Inflation also increased substantially--the consumer price index rose by 3.1%
during the one-year period ended March 31, 2005, compared with 1.7% for the 12
months ended March 31, 2004. The primary reason for the higher inflation rate
was rising energy prices, which surged by 12.4% during the fiscal year, but
noteworthy increases in transportation and medical care costs also contributed.
In this environment, the Federal Reserve began a gradual program of short-term
interest rate increases in June 2004. The Fed raised its federal funds rate
target seven times in the ensuing nine months, each time by a quarter-point. The
Fed's efforts boosted the federal funds rate from a 46-year low of 1% to 2.75%,
its highest level since October 2001.
Treasury money market rates tracked the Fed's rate hikes. The three-month
Treasury bill yield rose from 0.95% to 2.79% during the one-year period.
PORTFOLIO STRATEGY
Capital Preservation's seven-day current yield increased from 0.56% at the
beginning of the fiscal year to 2.10% as of March 31, 2005. The fund's yield
does not yet fully reflect the Fed's most recent rate hike on March 22; it is
anticipated that the yield will increase gradually in the coming weeks as
existing securities in the portfolio mature and are replaced by new,
higher-yielding securities.
We shortened the fund's average maturity during the fiscal year to allow its
yield to more quickly reflect rising money market rates. The average maturity
peaked at 82 days early in the period, and then we allowed it to gradually
shorten to less than 50 days by the fall of 2004. Although we generally kept the
average maturity between 50 and 60 days during the last half of the period, we
took advantage of opportunities to extend the average maturity out to around 65
days when yields on longer-term securities became more attractive.
The weighted average maturity reflects the economic impact of the fund's dollar
rolls. Dollar rolls are simultaneous buy/sell transactions that result in a
receivable on the fund's statement of assets and liabilities but do not result
in individual security positions on the fund's schedule of investments.
OUR COMMITMENT
We will continue to seek maximum safety and liquidity, as well as the highest
rate of return consistent with an investment in short-term U.S. Treasury
securities.
- ------
3
Capital Preservation - Schedule of Investments
MARCH 31, 2005
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY BILLS(1) -- 82.5%
$ 100,000,000 U.S. Treasury Bills, 2.26%,
4/7/05 $ 99,964,400
- --------------------------------------------------------------------------------
50,000,000 U.S. Treasury Bills, 2.72%,
4/15/05 49,947,111
- --------------------------------------------------------------------------------
200,000,000 U.S. Treasury Bills, 2.26%,
4/21/05 199,740,625
- --------------------------------------------------------------------------------
25,000,000 U.S. Treasury Bills, 2.26%,
4/28/05 24,960,859
- --------------------------------------------------------------------------------
275,000,000 U.S. Treasury Bills, 2.38%,
5/5/05 274,380,918
- --------------------------------------------------------------------------------
150,000,000 U.S. Treasury Bills, 2.36%,
5/12/05 149,599,268
- --------------------------------------------------------------------------------
150,000,000 U.S. Treasury Bills, 2.62%,
5/26/05 149,400,538
- --------------------------------------------------------------------------------
150,000,000 U.S. Treasury Bills, 2.72%,
6/2/05 149,298,625
- --------------------------------------------------------------------------------
250,000,000 U.S. Treasury Bills, 2.66%,
6/9/05 248,695,517
- --------------------------------------------------------------------------------
165,000,000 U.S. Treasury Bills, 2.65%,
6/16/05 164,077,645
- --------------------------------------------------------------------------------
200,000,000 U.S. Treasury Bills, 2.71%,
6/23/05 198,751,253
- --------------------------------------------------------------------------------
200,000,000 U.S. Treasury Bills, 2.65%,
7/14/05 198,470,767
- --------------------------------------------------------------------------------
50,000,000 U.S. Treasury Bills, 2.69%,
7/21/05 49,586,063
- --------------------------------------------------------------------------------
100,000,000 U.S. Treasury Bills, 2.62%,
7/28/05 99,140,813
- --------------------------------------------------------------------------------
50,000,000 U.S. Treasury Bills, 2.77%,
8/18/05 49,466,201
- --------------------------------------------------------------------------------
75,000,000 U.S. Treasury Bills, 2.95%,
9/8/05 74,016,945
- --------------------------------------------------------------------------------
50,000,000 U.S. Treasury Bills, 3.00%,
9/15/05 49,304,167
- --------------------------------------------------------------------------------
50,000,000 U.S. Treasury Bills, 3.05%,
9/22/05 49,264,125
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS 2,278,065,840
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES(1) -- 3.6%
$ 25,000,000 U.S. Treasury Notes, 1.625%,
4/30/05 $ 25,006,848
- --------------------------------------------------------------------------------
50,000,000 U.S. Treasury Notes, 1.125%,
6/30/05 49,855,705
- --------------------------------------------------------------------------------
25,000,000 U.S. Treasury Notes, 5.75%,
11/15/05 25,442,950
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY NOTES 100,305,503
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY
SECURITIES(2) -- 2.3%
20,000,000 STRIPS -- COUPON, 2.88%,
11/15/05 19,646,990
- --------------------------------------------------------------------------------
10,000,000 STRIPS -- PRINCIPAL, 1.65%,
5/15/05 9,980,074
- --------------------------------------------------------------------------------
23,000,000 STRIPS -- PRINCIPAL, 1.87%,
5/15/05 22,948,226
- --------------------------------------------------------------------------------
10,000,000 STRIPS -- PRINCIPAL, 3.26%,
11/15/05 9,801,752
- --------------------------------------------------------------------------------
TOTAL ZERO-COUPON U.S. TREASURY
SECURITIES 62,377,042
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 88.4% 2,440,748,385
- --------------------------------------------------------------------------------
OTHER ASSETS AND
LIABILITIES -- 11.6% 321,051,460
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $2,761,799,845
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) The rates for U.S. Treasury Bills are the yield to maturity at purchase. The
rates for U.S. Treasury Notes are the stated coupon rates.
(2) The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
- ------
4
Government Agency Money Market - Performance
TOTAL RETURNS AS OF MARCH 31, 2005
-------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 1.27% 2.41% 3.72% 4.13% 12/5/89
- --------------------------------------------------------------------------------
90-DAY
U.S. TREASURY
BILL INDEX 1.75% 2.51% 3.80% 4.18%(1) --
- --------------------------------------------------------------------------------
LIPPER U.S.
GOVERNMENT MONEY
MARKET FUNDS
AVERAGE RETURN(2) 0.95% 2.08% 3.53% 3.87%(3) --
- --------------------------------------------------------------------------------
Fund's Lipper
Ranking(2)(4) 11 of 123 11 of 105 12 of 75 4 of 38(3) --
- --------------------------------------------------------------------------------
Advisor Class 1.02% 2.15% -- 2.57% 4/12/99
- --------------------------------------------------------------------------------
(1) Since 11/30/89, the date nearest the Investor Class's inception for which
data are available.
(2) (c)2005 Reuters. All rights reserved. Any copying, republication or
redistribution of Lipper content, including by caching, framing or similar
means, is expressly prohibited without the prior written consent of Lipper.
Lipper shall not be liable for any errors or delays in the content, or for
any actions taken in reliance thereon.
Lipper Fund Performance -- Performance data is total return, and is
preliminary and subject to revision.
Lipper Rankings -- Rankings are based only on the universe shown. This
listing might not represent the complete universe of funds tracked by Lipper
Inc.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by
Lipper Inc.-A Reuters Company and may be incomplete. No offer or
solicitations to buy or sell any of the securities herein is being made by
Lipper.
(3) Since 12/31/89, the date nearest the Investor Class's inception for which
data are available.
(4) Lipper rankings are based on average annual total returns for the fund
(Investor Class only) in a given category for the periods indicated.
PORTFOLIO COMPOSITION BY MATURITY
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/05 9/30/04
- --------------------------------------------------------------------------------
1-30 days 58% 57%
- --------------------------------------------------------------------------------
31-90 days 29% 32%
- --------------------------------------------------------------------------------
91-180 days 7% 6%
- --------------------------------------------------------------------------------
More than 180 days 6% 5%
- --------------------------------------------------------------------------------
YIELDS AS OF MARCH 31, 2005
- --------------------------------------------------------------------------------
7-DAY CURRENT YIELD
- --------------------------------------------------------------------------------
Investor Class 2.21%
- --------------------------------------------------------------------------------
Advisor Class 2.01%
- --------------------------------------------------------------------------------
7-DAY EFFECTIVE YIELD
- --------------------------------------------------------------------------------
Investor Class 2.23%
- --------------------------------------------------------------------------------
Advisor Class 2.03%
- --------------------------------------------------------------------------------
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. To obtain performance data current to the most recent month end, please
call 1-800-345-2021 or visit americancentury.com.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
The 7-day current yield more closely reflects the current earnings of the fund
than the total return.
- ------
5
Government Agency Money Market - Portfolio Commentary
PORTFOLIO MANAGER: ALAN KRUSS
PERFORMANCE SUMMARY
For the fiscal year ended March 31, 2005, Government Agency Money Market's total
return of 1.27%* outpaced the 0.95% average return of the 123 funds in Lipper
Inc.'s U.S. government money market funds category. This performance ranked the
fund in the top 9% of the Lipper category. Government Agency Money Market's
longer-term results are similarly strong--the fund's five-year return ranked in
the top 11% of its Lipper group, and its 10-year return ranked in the top 16%.
(See the previous page for additional performance information.)
ECONOMIC AND MARKET REVIEW
U.S. economic growth remained solid during the past year. The U.S. economy grew
by 4.4% in 2004, its best calendar year of growth since 1999. In addition, the
preliminary estimate of economic growth for the first quarter of 2005 was an
annual rate of 3.1%.
Inflation also increased substantially--the consumer price index rose by 3.1%
during the one-year period ended March 31, 2005, compared with 1.7% for the 12
months ended March 31, 2004. The primary reason for the higher inflation rate
was rising energy prices, which surged by 12.4% during the fiscal year, but
noteworthy increases in transportation and medical care costs also contributed.
In this environment, the Federal Reserve began a gradual program of short-term
interest rate increases in June 2004. The Fed raised its federal funds rate
target seven times in the ensuing nine months, each time by a quarter-point. The
Fed's efforts boosted the federal funds rate from a 46-year low of 1% to 2.75%,
its highest level since October 2001.
Money market rates tracked the Fed's rate hikes. The three-month Treasury bill
yield rose from 0.95% to 2.79% during the one-year period.
PORTFOLIO STRATEGY
Government Agency Money Market's seven-day current yield increased from 0.66% at
the beginning of the fiscal year to 2.21% as of March 31, 2005. The fund's yield
does not yet fully reflect the Fed's most recent rate hike on March 22; it is
anticipated that the yield will increase gradually in the coming weeks as
existing securities in the portfolio mature and are replaced by new,
higher-yielding securities.
We shortened the fund's average maturity during the fiscal year to allow its
yield to more quickly reflect rising money market rates. The average maturity
peaked at 78 days early in the period, and then we allowed it to gradually
shorten to about 30 days by mid-December 2004. However, we extended the average
maturity back out to about 50 days by the end of the period. We reduced our
holdings of floating-rate notes that reset quarterly because their yields had
become less attractive.
OUR COMMITMENT
We will continue to seek maximum safety and liquidity, as well as the highest
rate of return consistent with an investment in short-term U.S. government
agency securities.
*All fund returns and yields referenced in this commentary are for Investor
Class shares.
- ------
6
Government Agency Money Market - Schedule of Investments
MARCH 31, 2005
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES -- 86.5%
$ 245,000 FFCB, 4.20%, 4/19/05 $ 245,121
- --------------------------------------------------------------------------------
1,000,000 FFCB, 1.80%, 4/22/05 999,511
- --------------------------------------------------------------------------------
250,000 FFCB, 1.30%, 6/30/05 249,027
- --------------------------------------------------------------------------------
80,000 FFCB, 1.35%, 6/30/05 79,633
- --------------------------------------------------------------------------------
4,775,000 FFCB, 2.125%, 8/15/05 4,758,162
- --------------------------------------------------------------------------------
250,000 FFCB, 4.875%, 8/23/05 251,627
- --------------------------------------------------------------------------------
100,000 FFCB, 6.70%, 9/13/05 101,522
- --------------------------------------------------------------------------------
12,250,000 FFCB, VRN, 2.88%, 4/5/05,
resets weekly off the
3-month T-Bill plus 0.04%
with no caps 12,248,322
- --------------------------------------------------------------------------------
25,000,000 FFCB, VRN, 2.88%, 4/5/05,
resets weekly off the
3-month T-Bill plus 0.04%
with no caps 25,003,169
- --------------------------------------------------------------------------------
4,500,000 FFCB, VRN, 2.96%, 4/5/05,
resets weekly off the
3-month T-Bill plus 0.12%
with no caps 4,504,478
- --------------------------------------------------------------------------------
6,450,000 FHLB, 1.40%, 4/1/05 6,450,000
- --------------------------------------------------------------------------------
10,000,000 FHLB, 1.40%, 4/4/05 10,000,000
- --------------------------------------------------------------------------------
200,000 FHLB, 4.375%, 4/11/05 200,094
- --------------------------------------------------------------------------------
23,385,000 FHLB, 1.625%, 4/15/05 23,375,855
- --------------------------------------------------------------------------------
46,555,000 FHLB, 4.625%, 4/15/05 46,590,972
- --------------------------------------------------------------------------------
250,000 FHLB, 1.31%, 4/29/05 249,667
- --------------------------------------------------------------------------------
1,000,000 FHLB, 1.50%, 5/4/05 998,991
- --------------------------------------------------------------------------------
500,000 FHLB, 4.10%, 5/6/05 500,687
- --------------------------------------------------------------------------------
8,000,000 FHLB, 1.41%, 5/9/05 7,989,266
- --------------------------------------------------------------------------------
10,230,000 FHLB, 1.50%, 5/13/05 10,214,478
- --------------------------------------------------------------------------------
1,000,000 FHLB, 1.56%, 5/13/05 998,614
- --------------------------------------------------------------------------------
18,010,000 FHLB, 4.125%, 5/13/05 18,040,489
- --------------------------------------------------------------------------------
500,000 FHLB, 5.25%, 5/13/05 501,486
- --------------------------------------------------------------------------------
2,300,000 FHLB, 7.25%, 5/13/05 2,311,827
- --------------------------------------------------------------------------------
10,000,000 FHLB, 1.66%, 5/16/05 10,000,000
- --------------------------------------------------------------------------------
2,000,000 FHLB, 1.50%, 5/19/05 1,996,173
- --------------------------------------------------------------------------------
5,000,000 FHLB, 1.70%, 5/24/05 5,000,000
- --------------------------------------------------------------------------------
50,000 FHLB, 1.81%, 6/1/05 49,882
- --------------------------------------------------------------------------------
2,000,000 FHLB, 2.00%, 6/7/05 1,996,615
- --------------------------------------------------------------------------------
35,800,000 FHLB, 1.625%, 6/15/05 35,715,419
- --------------------------------------------------------------------------------
2,500,000 FHLB, 2.28%, 6/15/05 2,496,374
- --------------------------------------------------------------------------------
100,000 FHLB, 1.65%, 6/17/05 99,724
- --------------------------------------------------------------------------------
500,000 FHLB, 1.35%, 6/30/05 498,076
- --------------------------------------------------------------------------------
2,500,000 FHLB, 1.45%, 6/30/05 2,491,667
- --------------------------------------------------------------------------------
500,000 FHLB, 6.50%, 6/30/05 504,485
- --------------------------------------------------------------------------------
1,500,000 FHLB, 1.375%, 7/22/05 1,492,782
- --------------------------------------------------------------------------------
4,600,000 FHLB, 1.45%, 7/22/05 4,579,287
- --------------------------------------------------------------------------------
700,000 FHLB, 1.52%, 7/22/05 696,305
- --------------------------------------------------------------------------------
500,000 FHLB, 1.64%, 8/1/05 497,719
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,000,000 FHLB, 1.75%, 8/15/05 $ 2,985,168
- --------------------------------------------------------------------------------
9,325,000 FHLB, 3.00%, 8/15/05 9,319,663
- --------------------------------------------------------------------------------
3,000,000 FHLB, 6.875%, 8/15/05 3,043,126
- --------------------------------------------------------------------------------
1,000,000 FHLB, 6.00%, 8/25/05 1,010,565
- --------------------------------------------------------------------------------
1,345,000 FHLB, 1.84%, 8/26/05 1,337,397
- --------------------------------------------------------------------------------
100,000 FHLB, 2.04%, 8/26/05 99,559
- --------------------------------------------------------------------------------
2,000,000 FHLB, 2.10%, 9/2/05 1,990,861
- --------------------------------------------------------------------------------
5,000,000 FHLB, 1.50%, 10/19/05 4,953,496
- --------------------------------------------------------------------------------
10,000,000 FHLB, 2.125%, 11/15/05 9,926,671
- --------------------------------------------------------------------------------
350,000 FHLB, 3.625%, 11/15/05 349,815
- --------------------------------------------------------------------------------
1,000,000 FHLB, 6.50%, 11/15/05 1,019,417
- --------------------------------------------------------------------------------
2,000,000 FHLB, 2.50%, 12/15/05 1,987,538
- --------------------------------------------------------------------------------
10,000,000 FHLB, 3.00%, 1/18/06 10,000,000
- --------------------------------------------------------------------------------
15,000,000 FHLB, VRN, 2.58%, 4/1/05,
resets monthly off the
1-month LIBOR minus 0.11%
with no caps 14,988,600
- --------------------------------------------------------------------------------
46,720,000 FHLB, VRN, 2.45%, 4/5/05,
resets quarterly off the
3-month LIBOR minus 0.12%
with no caps 46,707,753
- --------------------------------------------------------------------------------
20,000,000 FHLB, VRN, 2.72%, 4/18/05,
resets monthly off the
1-month LIBOR minus 0.10%
with no caps 19,996,751
- --------------------------------------------------------------------------------
15,000,000 FHLB, VRN, 2.58%, 4/19/05,
resets quarterly off the
3-month LIBOR minus 0.08%
with no caps 15,000,092
- --------------------------------------------------------------------------------
20,000,000 FHLB, VRN, 2.76%, 4/26/05 19,998,734
- --------------------------------------------------------------------------------
10,000,000 FHLB, VRN, 2.88%, 6/13/05,
resets quarterly off the
3-month LIBOR minus 0.12%
with no caps 9,991,670
- --------------------------------------------------------------------------------
4,875,000 TVA, 6.375%, 6/15/05 4,909,677
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES 424,594,059
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
DISCOUNT NOTES(1) -- 14.7%
2,000,000 FFCB Discount Notes, 2.70%,
4/6/05 1,999,250
- --------------------------------------------------------------------------------
4,100,000 FHLB Discount Notes, 2.40%,
4/1/05 4,100,000
- --------------------------------------------------------------------------------
5,151,000 FHLB Discount Notes, 2.73%,
4/8/05 5,148,261
- --------------------------------------------------------------------------------
3,990,000 FHLB Discount Notes, 2.74%,
4/13/05 3,986,353
- --------------------------------------------------------------------------------
3,000,000 FHLB Discount Notes, 2.75%,
4/15/05 2,996,794
- --------------------------------------------------------------------------------
19,200,000 FHLB Discount Notes, 2.68%,
4/20/05 19,172,963
- --------------------------------------------------------------------------------
949,000 FHLB Discount Notes, 2.70%,
4/22/05 947,505
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
7
Government Agency Money Market - Schedule of Investments
MARCH 31, 2005
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,600,000 FHLB Discount Notes, 2.60%,
4/29/05 $ 1,596,765
- --------------------------------------------------------------------------------
7,236,000 FHLB Discount Notes, 2.71%,
5/4/05 7,218,021
- --------------------------------------------------------------------------------
1,900,000 FHLB Discount Notes, 2.80%,
5/18/05 1,893,054
- --------------------------------------------------------------------------------
1,000,000 FHLB Discount Notes, 2.82%,
5/24/05 995,848
- --------------------------------------------------------------------------------
8,750,000 FHLB Discount Notes, 2.74%,
5/27/05 8,712,705
- --------------------------------------------------------------------------------
11,717,000 FHLB Discount Notes, 2.86%,
6/8/05 11,653,763
- --------------------------------------------------------------------------------
1,594,000 FHLB Discount Notes, 2.96%,
6/28/05 1,582,467
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
DISCOUNT NOTES 72,003,749
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 101.2% 496,597,808
- --------------------------------------------------------------------------------
OTHER ASSETS AND
LIABILITIES -- (1.2)% (5,708,240)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $490,889,568
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
FFCB = Federal Farm Credit Bank
FHLB = Federal Home Loan Bank
LIBOR = London Interbank Offered Rate
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon
will vary significantly from current market rates.
TVA = Tennessee Valley Authority
VRN = Variable Rate Note. Interest reset date is indicated, unless otherwise
noted. Rate shown is effective March 31, 2005.
(1) The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
- ------
8
Shareholder Fee Examples (Unaudited)
Fund shareholders may incur two types of costs: (1) transaction costs, including
sales charges (loads) on purchase payments and redemption/exchange fees; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in your fund and to compare these costs
with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2004 to March 31, 2005.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond Fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
American Century may charge you a $12.50 semiannual account maintenance fee if
the value of those shares is less than $10,000. We will redeem shares
automatically in one of your accounts to pay the $12.50 fee. In determining your
total eligible investment amount, we will include your investments in all
PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered
under your Social Security number. PERSONAL ACCOUNTS include individual
accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell
Education Savings Accounts and IRAs (including traditional, Roth, Rollover,
SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you
have only business, business retirement, employer-sponsored or American Century
Brokerage accounts, you are currently not subject to this fee. We will not
charge the fee as long as you choose to manage your accounts exclusively online.
If you are subject to the Account Maintenance Fee, your account value could be
reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is not
the actual return of a fund's share class. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
(continued)
- ------
9
Shareholder Fee Examples (Unaudited)
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
- --------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 10/1/04 - EXPENSE
10/1/04 3/31/05 3/31/05 RATIO*
- --------------------------------------------------------------------------------
CAPITAL PRESERVATION SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,007.80 $2.40 0.48%
- --------------------------------------------------------------------------------
HYPOTHETICAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,022.54 $2.42 0.48%
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY MONEY MARKET SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,008.50 $2.40 0.48%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,007.30 $3.65 0.73%
- --------------------------------------------------------------------------------
HYPOTHETICAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,022.54 $2.42 0.48%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,021.29 $3.68 0.73%
- --------------------------------------------------------------------------------
*Expenses are equal to the class's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
182, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
- ------
10
Statement of Assets and Liabilities
MARCH 31, 2005
- --------------------------------------------------------------------------------
CAPITAL GOVERNMENT
PRESERVATION AGENCY
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value
(amortized cost and cost for federal
income tax purposes) $2,440,748,385 $496,597,808
- --------------------------------------------
Cash 978,889 1,223,510
- --------------------------------------------
Receivable for investments sold 369,010,747 --
- --------------------------------------------
Receivable for capital shares sold 189,469 13,206
- --------------------------------------------
Interest receivable 2,074,519 3,135,356
- --------------------------------------------------------------------------------
2,813,002,009 500,969,880
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for investments purchased 49,947,111 9,866,401
- --------------------------------------------
Accrued management fees 1,112,617 193,163
- --------------------------------------------
Distribution fees payable -- 2,293
- --------------------------------------------
Service fees payable -- 2,293
- --------------------------------------------
Dividends payable 142,436 16,162
- --------------------------------------------------------------------------------
51,202,164 10,080,312
- --------------------------------------------------------------------------------
NET ASSETS $2,761,799,845 $490,889,568
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital paid in $2,762,014,805 $490,902,856
- --------------------------------------------
Accumulated net realized loss
on investment transactions (214,960) (13,288)
- --------------------------------------------------------------------------------
$2,761,799,845 $490,889,568
================================================================================
INVESTOR CLASS
- --------------------------------------------------------------------------------
Net assets $2,761,799,845 $478,408,902
- --------------------------------------------
Shares outstanding 2,762,014,805 478,420,728
- --------------------------------------------
Net asset value per share $1.00 $1.00
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
Net assets N/A $12,480,666
- --------------------------------------------
Shares outstanding N/A 12,480,815
- --------------------------------------------
Net asset value per share N/A $1.00
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
11
Statement of Operations
YEAR ENDED MARCH 31, 2005
- --------------------------------------------------------------------------------
CAPITAL GOVERNMENT
PRESERVATION AGENCY
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- --------------------------------------------
Interest $45,816,262 $8,461,218
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------
Management fees 13,549,377 2,299,036
- --------------------------------------------
Distribution fees -- Advisor Class -- 7,443
- --------------------------------------------
Service fees -- Advisor Class -- 7,443
- --------------------------------------------
Trustees' fees and expenses 112,248 19,069
- --------------------------------------------
Other expenses 519 --
- --------------------------------------------------------------------------------
13,662,144 2,332,991
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 32,154,118 6,128,227
- --------------------------------------------------------------------------------
NET REALIZED LOSS ON INVESTMENT TRANSACTIONS (180,522) (2,465)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $31,973,596 $6,125,762
================================================================================
See Notes to Financial Statements.
- ------
12
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2005 AND MARCH 31, 2004
- ----------------------------------------------------------------------------------------------------
CAPITAL PRESERVATION GOVERNMENT AGENCY
- ----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2005 2004 2005 2004
- ----------------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income $ 32,154,118 $ 18,565,541 $ 6,128,227 $ 3,630,439
- ---------------------------------
Net realized loss (180,522) (15,356) (2,465) (6,692)
- ----------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 31,973,596 18,550,185 6,125,762 3,623,747
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------
From net investment income:
- ---------------------------------
Investor Class (32,154,118) (18,565,541) (6,078,333) (3,629,418)
- ---------------------------------
Advisor Class -- -- (49,894) (1,021)
- ----------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions (32,154,118) (18,565,541) (6,128,227) (3,630,439)
- ----------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from capital
share transactions (166,318,899) (342,536,944) 1,011,062 (102,050,435)
- ----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS (166,499,421) (342,552,300) 1,008,597 (102,057,127)
NET ASSETS
- ----------------------------------------------------------------------------------------------------
Beginning of period 2,928,299,266 3,270,851,566 489,880,971 591,938,098
- ----------------------------------------------------------------------------------------------------
End of period $2,761,799,845 $2,928,299,266 $490,889,568 $ 489,880,971
====================================================================================================
See Notes to Financial Statements.
- ------
13
Notes to Financial Statements
MARCH 31, 2005
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Government Income Trust (the trust) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Capital Preservation Fund (Capital
Preservation) and Government Agency Money Market Fund (Government Agency)
(collectively, the funds) are two funds in a series issued by the trust. Capital
Preservation seeks maximum safety and liquidity and intends to pursue its
investment objective by investing in short-term money market securities issued
by the U.S. Treasury that are guaranteed by the direct full faith and credit
pledge of the U.S. government. Government Agency seeks maximum safety and
liquidity and intends to pursue its investment objective by investing in
short-term money market securities issued by the U.S. government and its
agencies and instrumentalities. The following is a summary of the funds'
significant accounting policies.
MULTIPLE CLASS -- Capital Preservation is authorized to issue the Investor
Class. Government Agency is authorized to issue the Investor Class and the
Advisor Class. The share classes differ principally in their respective
shareholder servicing and distribution expenses and arrangements. All shares of
the funds represent an equal pro rata interest in the net assets of the class to
which such shares belong, and have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except for class specific
expenses and exclusive rights to vote on matters affecting only individual
classes. Income, non-class specific expenses, and realized and unrealized
capital gains and losses of the funds are allocated to each class of shares
based on their relative net assets.
SECURITY VALUATIONS -- Securities are generally valued at amortized cost, which
approximates current market value. When such valuations do not reflect market
value, securities may be valued as determined in accordance with procedures
adopted by the Board of Trustees.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The funds may engage in securities
transactions on a when-issued or forward commitment basis. In these
transactions, the securities' prices and yields are fixed on the date of the
commitment. In a when-issued transaction, the payment and delivery are scheduled
for a future date and during this period, securities are subject to market
fluctuations. In a forward commitment transaction, the funds may sell a security
and at the same time make a commitment to purchase the same security at a future
date at a specified price. Conversely, the funds may purchase a security and at
the same time make a commitment to sell the same security at a future date at a
specified price. These types of transactions are executed simultaneously in what
are known as "roll" transactions. The funds will segregate cash, cash
equivalents or other appropriate liquid securities on their records in amounts
sufficient to meet the purchase price.
INCOME TAX STATUS -- It is each fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
short-term capital gains, if any, are declared daily and paid monthly. The funds
do not expect to realize any long-term capital gains, and accordingly, do not
expect to pay any capital gains distributions.
INDEMNIFICATIONS -- Under the trust organizational documents, its officers and
trustees are indemnified against certain liabilities arising out of the
performance of their duties to the funds. In addition, in the normal course of
business, the funds enter into contracts that provide general indemnifications.
The funds' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the funds. The risk of material
loss from such claims is considered by management to be remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
- ------
14
Notes to Financial Statements
MARCH 31, 2005
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with
American Century Investment Management, Inc. (ACIM) (the investment advisor),
under which ACIM provides the funds with investment advisory and management
services in exchange for a single, unified management fee (the fee) per class.
The Agreement provides that all expenses of the funds, except brokerage
commissions, taxes, interest, fees and expenses of those trustees who are not
considered "interested persons" as defined in the 1940 Act (including counsel
fees) and extraordinary expenses, will be paid by ACIM. The fee is computed and
accrued daily based on the daily net assets of each specific class of shares of
each fund and paid monthly in arrears. The fee consists of (1) an Investment
Category Fee based on the daily net assets of the funds and certain other
accounts managed by the investment advisor that are in the same broad investment
category as each fund and (2) a Complex Fee based on the assets of all the funds
in the American Century family of funds. The rates for the Investment Category
Fee range from 0.1370% to 0.2500% and the rates for the Complex Fee (Investor
Class) range from 0.2500% to 0.3100%. The Advisor Class is 0.2500% less at each
point within the Complex Fee range. For the year ended March 31, 2005, the
effective annual Investor Class management fee for the funds was 0.47% and the
effective annual Advisor Class management fee for Government Agency was 0.22%.
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a Master
Distribution and Shareholder Services Plan (the plan) for the Advisor Class,
pursuant to Rule 12b-1 of the 1940 Act. The plan provides that the Advisor Class
will pay American Century Investment Services, Inc. (ACIS) an annual
distribution fee equal to 0.25% and an annual service fee equal to 0.25%. The
fees are computed and accrued daily based on the Advisor Class's daily net
assets and paid monthly in arrears. The distribution fee provides compensation
for expenses incurred by financial intermediaries in connection with
distributing shares of the Advisor Class including, but not limited to, payments
to brokers, dealers, and financial institutions that have entered into sales
agreements with respect to shares of the funds. The service fee provides
compensation for shareholder and administrative services rendered by ACIS, its
affiliates or independent third party providers. Fees incurred under the plan
during the year ended March 31, 2005, are detailed in the Statement of
Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the trust's investment advisor, ACIM, the
distributor of the trust, ACIS, and the trust's transfer agent, American Century
Services, LLC (formerly American Century Services Corporation). JPMorgan Chase
Bank is a custodian of the funds and a wholly owned subsidiary of J.P. Morgan
Chase & Co. (JPM). JPM is an equity investor in ACC.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows (unlimited number of shares
authorized):
- ----------------------------------------------------------------------------------------------
CAPITAL PRESERVATION GOVERNMENT AGENCY
- ----------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------
INVESTOR CLASS
- ----------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2005
- -------------------------
Sold 1,022,169,509 $ 1,022,169,509 261,440,869 $ 261,440,869
- -------------------------
Issued in reinvestment
of distributions 31,077,031 31,077,031 5,922,413 5,922,413
- -------------------------
Redeemed (1,219,565,439) (1,219,565,439) (278,585,412) (278,585,412)
- ----------------------------------------------------------------------------------------------
Net decrease (166,318,899) $ (166,318,899) (11,222,130) $ (11,222,130)
==============================================================================================
YEAR ENDED MARCH 31, 2004
- -------------------------
Sold 1,157,080,209 $ 1,157,080,209 252,164,279 $ 252,164,279
- -------------------------
Issued in reinvestment
of distributions 17,902,935 17,902,935 3,526,624 3,526,624
- -------------------------
Redeemed (1,517,520,088) (1,517,520,088) (357,752,481) (357,752,481)
- ----------------------------------------------------------------------------------------------
Net decrease (342,536,944) $ (342,536,944) (102,061,578) $(102,061,578)
==============================================================================================
(continued)
- ------
15
Notes to Financial Statements
MARCH 31, 2005
3. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Transactions in shares of the funds were as follows (unlimited number of shares
authorized):
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY
- --------------------------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2005
- ----------------------------------------
Sold 14,261,439 $14,261,439
- ----------------------------------------
Issued in reinvestment of distributions 49,894 49,894
- ----------------------------------------
Redeemed (2,078,141) (2,078,141)
- --------------------------------------------------------------------------------
Net increase 12,233,192 $12,233,192
================================================================================
YEAR ENDED MARCH 31, 2004
- ----------------------------------------
Sold 19,824 $19,824
- ----------------------------------------
Issued in reinvestment of distributions 1,021 1,021
- ----------------------------------------
Redeemed (9,702) (9,702)
- --------------------------------------------------------------------------------
Net increase 11,143 $11,143
================================================================================
4. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts on the financial statements.
Following are the capital loss carryovers and capital loss deferral amounts at
March 31, 2005:
- --------------------------------------------------------------------------------
CAPITAL GOVERNMENT
PRESERVATION AGENCY
- --------------------------------------------------------------------------------
Accumulated capital losses $(91,189) $(13,101)
- --------------------------------------------------------------------------------
Capital loss deferral $(87,898) $(187)
- --------------------------------------------------------------------------------
The accumulated capital losses listed above represent net capital loss
carryovers that may be used to offset future realized capital gains for federal
income tax purposes. The capital loss carryovers expire as follows:
- --------------------------------------------------------------------------------
2006 2012 2013
- --------------------------------------------------------------------------------
Capital Preservation -- $(6,263) $(84,926)
- --------------------------------------------------------------------------------
Government Agency $(409) $(10,414) $(2,278)
- --------------------------------------------------------------------------------
The capital loss deferrals represent net capital losses incurred in the
five-month period ended March 31, 2005. The funds have elected to treat such
losses as having been incurred in the following fiscal year for federal income
tax purposes.
- ------
16
Capital Preservation - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.01 0.01 0.01 0.03 0.06
- ------------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.01) (0.01) (0.01) (0.03) (0.06)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================================================
TOTAL RETURN(1) 1.14% 0.60% 1.19% 2.84% 5.75%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.48% 0.48% 0.48% 0.47% 0.47%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 1.12% 0.59% 1.18% 2.76% 5.56%
- -------------------------
Net Assets, End of Period
(in thousands) $2,761,800 $2,928,299 $3,270,852 $3,333,519 $3,461,464
- ------------------------------------------------------------------------------------------
(1) Total return assumes reinvestment of net investment income and capital gains
distributions, if any.
See Notes to Financial Statements.
- ------
17
Government Agency Money Market - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.01 0.01 0.01 0.03 0.06
- ------------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.01) (0.01) (0.01) (0.03) (0.06)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================================================
TOTAL RETURN(1) 1.27% 0.67% 1.25% 2.96% 5.98%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.48% 0.48% 0.48% 0.47% 0.47%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 1.26% 0.67% 1.24% 2.91% 5.82%
- -------------------------
Net Assets, End of Period
(in thousands) $478,409 $489,633 $591,702 $614,223 $600,373
- ------------------------------------------------------------------------------------------
(1) Total return assumes reinvestment of net investment income and capital gains
distributions, if any.
See Notes to Financial Statements.
- ------
18
Government Agency Money Market - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.01 --(1) 0.01 0.03 0.06
- ------------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.01) --(1) (0.01) (0.03) (0.06)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================================================
TOTAL RETURN(2) 1.02% 0.42% 0.99% 2.71% 5.71%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.73% 0.73% 0.73% 0.72% 0.72%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 1.01% 0.42% 0.99% 2.66% 5.57%
- -------------------------
Net Assets, End of Period
(in thousands) $12,481 $248 $236 $219 $2,700
- ------------------------------------------------------------------------------------------
(1) Per-share amount was less than $0.005.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any.
See Notes to Financial Statements.
- ------
19
Report of Independent Registered Public Accounting Firm
To the Trustees of the American Century Government Income Trust and Shareholders
of the Capital Preservation Fund and the Government Agency Money Market Fund:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Capital Preservation Fund and
the Government Agency Money Market Fund (two of the six funds comprising the
American Century Government Income Trust, hereafter referred to as the "Funds")
at March 31, 2005, the results of each of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 2005 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
May 12, 2005
- ------
20
Management
The individuals listed below serve as trustees or officers of the funds. Each
trustee serves until his or her successor is duly elected and qualified or until
he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the remaining
independent trustees. The independent trustees have extended the mandatory
retirement age of Mr. Eisenstat to 75. Mr. Scott may serve until age 77 based on
an extension granted under retirement guidelines in effect prior to March 2004.
Those listed as interested trustees are "interested" primarily by virtue of
their engagement as officers of American Century Companies, Inc. (ACC) or its
wholly-owned, direct or indirect, subsidiaries, including the funds' investment
advisor, American Century Investment Management, Inc. (ACIM); the funds'
principal underwriter, American Century Investment Services, Inc. (ACIS); and
the funds' transfer agent, American Century Services, LLC (ACS LLC).
The other trustees (more than three-fourths of the total number) are
independent; that is, they have never been employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned, direct or indirect,
subsidiaries, including ACIM, ACIS, and ACS LLC. The trustees serve in this
capacity for eight registered investment companies in the American Century
family of funds.
All persons named as officers of the funds also serve in similar capacities for
the other 13 investment companies advised by ACIM or American Century Global
Investment Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless
otherwise noted. 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 and are appointed or
re-appointed on an annual basis.
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
ANTONIO CANOVA, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1961
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): Less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer, Brocade
Communications Systems, Inc. (May 2001 to present); Vice President-
Administration, Brocade Communications Systems, Inc. (November 2004 to present);
Vice President-Finance, Brocade Communications Systems, Inc. (November 2000 to
November 2004); Vice President, Chief Financial Officer and Secretary, Wireless
Inc. (April 2000 to November 2000)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
ALBERT EISENSTAT, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1930
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 9
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Private Investor
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Independent Director, Sungard Data Systems
(1991 to present); Independent Director, Business Objects S/A (1994 to present);
Independent Director, Commercial Metals (1983 to 2001)
- --------------------------------------------------------------------------------
(continued)
- ------
21
Management
INDEPENDENT TRUSTEES (CONTINUED)
- --------------------------------------------------------------------------------
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): Less than 1 year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and Manager, Regis
Management Company, LLC (April 2004 to present); Partner and Founder, Bay
Partners (Venture capital firm, 1976 to present); Partner and Founder, Ware &
Freidenrich (1968 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee, Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 9
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of Law
and Business, Stanford Law School (1979 to present); Marc and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
KATHRYN A. HALL, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Co-Chief Executive Officer and
Chief Investment Officer, Offit Hall Capital Management, LLC (April 2002 to
present); President and Managing Director, Laurel Management Company, L.L.C.
(1996 to April 2002)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 24
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Oak Hill Platinum
Partners, and a Partner, Oak Hill Capital Management (1999 to present); Frank E.
Buck Professor of Finance-Emeritus, Stanford Graduate School of Business (1981
to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Chicago Mercantile Exchange
(2000 to present)
- --------------------------------------------------------------------------------
KENNETH E. SCOTT, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1928
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 33
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Ralph M. Parsons Professor of Law
and Business, Stanford Law School (1972 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Professor of Economics, Stanford
University (1977 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present); Director, Watson Wyatt Worldwide (2002 to present); Director,
Palmsource Inc. (2002 to present)
- --------------------------------------------------------------------------------
(continued)
- ------
22
Management
INDEPENDENT TRUSTEES (CONTINUED)
- --------------------------------------------------------------------------------
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 20
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Director and Partner,
Windy Hill Productions, LP (educational software, 1994 to 1998)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Quintus Corporation (automation
solutions, 1995 to present)
INTERESTED TRUSTEE
- --------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC
(September 2000 to present); President, ACC (June 1997 to present); Chief
Operating Officer, ACC (June 1996 to September 2000); Also serves as: Chief
Executive Officer and President, ACIS, ACGIM, ACIM and other ACC subsidiaries;
Executive Vice President, ACS LLC; Director, ACC, ACGIM, ACIM, ACIS, ACS LLC and
other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: President
LENGTH OF TIME SERVED (YEARS): 4
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: See entry under "Interested
Trustee."
- --------------------------------------------------------------------------------
ROBERT T. JACKSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Executive Vice President
LENGTH OF TIME SERVED (YEARS): 9
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC
(August 1997 to present); Chief Financial Officer, ACC (May 1995 to October
2002); Executive Vice President, ACC (May 1995 to present); Also serves as:
Chief Executive Officer, Chief Financial Officer and President, ACS LLC; Chief
Financial Officer and Executive Vice President, ACGIM, ACIM, ACIS and other ACC
subsidiaries; Treasurer, ACGIM, ACIM and other ACC subsidiaries; Director, ACC
and other subsidiaries
- --------------------------------------------------------------------------------
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer and Chief
Accounting Officer
LENGTH OF TIME SERVED (YEARS): 4
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Assistant Treasurer, ACC (January
1995 to present); Also serves as: Senior Vice President, ACS LLC; Assistant
Treasurer, ACGIM, ACIM, ACIS, ACS LLC and other ACC subsidiaries.
- --------------------------------------------------------------------------------
DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1958
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (February 2001
to present); General Counsel, ACC (June 1998 to present); Also serves as: Senior
Vice President and General Counsel, ACGIM, ACIM, ACIS, ACS LLC and other ACC
subsidiaries
- --------------------------------------------------------------------------------
(continued)
- ------
23
Management
OFFICERS (CONTINUED)
- --------------------------------------------------------------------------------
CHARLES C.S. PARK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Vice President and Chief Compliance Officer
LENGTH OF TIME SERVED (YEARS): 4 and less than 1 year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACS LLC,
ACIM and ACGIM (March 2005 to present); Vice President, ACS LLC and ACIM
(February 2000 to present); Assistant General Counsel, ACS LLC (January 1998 to
March 2005)
- --------------------------------------------------------------------------------
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Controller
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS LLC (February
2000 to present); Controller-Fund Accounting, ACS LLC (June 1997 to present)
- --------------------------------------------------------------------------------
C. JEAN WADE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1964
POSITION(S) HELD WITH FUND: Controller(1)
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS LLC (February
2000 to present); Controller-Fund Accounting, ACS LLC (June 1997 to present)
- --------------------------------------------------------------------------------
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (October 2001
to present); Vice President, Corporate Tax, ACS LLC (April 1998 to present);
Also serves as: Vice President, ACGIM, ACIM, ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
(1) Ms. Wade serves in a similar capacity for seven other investment companies
advised by ACIM.
The SAI has additional information about the funds' trustees and is available
without charge upon request by calling 1-800-345-2021.
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24
Share Class Information
One class of shares is authorized for sale by Capital Preservation: Investor
Class. Two classes of shares are authorized for sale by Government Agency:
Investor Class and Advisor Class. The expense ratio for Advisor Class shares is
higher than that of Investor Class shares.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through a
broker-dealer, which may require payment of a transaction fee to the broker.
ADVISOR CLASS shares are sold primarily through institutions such as investment
advisors, banks, broker-dealers, insurance companies, and financial advisors.
Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and
distribution fee. The total expense ratio of Advisor Class shares is 0.25%
higher than the total expense ratio of Investor Class shares.
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Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' investment advisor, is
responsible for exercising the voting rights associated with the securities
purchased and/or held by the funds. A description of the policies and procedures
the advisor uses in fulfilling this responsibility is available without charge,
upon request, by calling 1-800-345-2021. It is also available on American
Century's Web site at americancentury.com and on the Securities and Exchange
Commission's Web site at sec.gov. Information regarding how the investment
advisor voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
(continued)
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26
Additional Information
QUARTERLY PORTFOLIO DISCLOSURE
The funds file their complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The funds' Forms N-Q are available on the SEC's Web site at
sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The funds also make their complete schedule
of portfolio holdings for the most recent quarter of their fiscal year available
on their Web site at americancentury.com and, upon request, by calling
1-800-345-2021.
INDEX DEFINITION
The following index is used to illustrate investment market, sector, or style
performance or to serve as a fund performance comparison. It is not an
investment product available for purchase.
The 90-DAY U.S. TREASURY BILL INDEX is derived from secondary market interest
rates as published by the Federal Reserve Bank and includes three-month,
six-month, and one-year instruments.
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27
Notes
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28
[inside back cover - blank]
[back cover]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE:
1-800-345-2021 or 816-531-5575
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY GOVERNMENT INCOME TRUST
INVESTMENT ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
COMPANIES
The American Century Investments logo, American Century and American Century
Investments are service marks of American Century Proprietary Holdings, Inc.
American Century Investment Services, Inc., Distributor
0505 (c)2005 American Century Proprietary Holdings, Inc.
SH-ANN-43391S All rights reserved.
ITEM 2. CODE OF ETHICS.
a. The registrant has adopted a Code of Ethics for Senior Financial
Officers that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer, and persons
performing similar functions.
b. No response required.
c. None.
d. None.
e. Not applicable.
f. The registrant's Code of Ethics for Senior Financial Officers was
filed as Exhibit 10(a) to American Century Mutual Fund, Inc.'s Annual
Certified Shareholder Report on Form N-CSR, File No. 811-0816, on
December 23, 2003, and is incorporated herein by reference.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's board has determined that the registrant has at least
one audit committee financial expert serving on its audit committee.
(a)(2) Albert Eisenstat is the registrant's designated audit committee
financial expert. He is "independent" as defined in Item 3 of Form
N-CSR.
(a)(3) Not applicable.
(b) No response required.
(c) No response required.
(d) No response required.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees.
The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the audit of the
registrant's annual financial statements or services that are normally provided
by the accountant in connection with statutory and regulatory filings or
engagements for those fiscal years were as follows:
FY 2004: $78,321
FY 2005: $86,551
(b) Audit-Related Fees.
The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are reasonably
related to the performance of the audit of the registrant's financial statements
and are not reported under paragraph (a) of this Item were as follows:
For services rendered to the registrant:
FY 2004: $0
FY 2005: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit services
with the registrant's investment adviser and its affiliates):
FY 2004: $0
FY 2005: $0
(c) Tax Fees.
The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning were as follows:
For services rendered to the registrant:
FY 2004: $21,130
FY 2005: $17,900
These services included review of federal and state income tax forms
and federal excise tax forms.
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit services
with the registrant's investment adviser and its affiliates):
FY 2004: $0
FY 2005: $0
(d) All Other Fees.
The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than the
services reported in paragraphs (a) through (c) of this Item were as follows:
For services rendered to the registrant:
FY 2004: $0
FY 2005: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit services
with the registrant's investment adviser and its affiliates):
FY 2004: $0
FY 2005: $0
(e)(1) In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation
S-X, before the accountant is engaged by the registrant to render
audit or non-audit services, the engagement is approved by the
registrant's audit committee. Pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X, the registrant's audit committee also
pre-approves its accountant's engagements for non-audit services with
the registrant's investment adviser, its parent company, and any
entity controlled by, or under common control with the investment
adviser that provides ongoing services to the registrant, if the
engagement relates directly to the operations and financial reporting
of the registrant.
(e)(2) All services described in each of paragraphs (b) through (d) of this
Item were pre-approved before the engagement by the registrant's audit
committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of
Regulation S-X. Consequently, none of such services were required to
be approved by the audit committee pursuant to paragraph (c)(7)(i)(C).
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant for each of the last two fiscal years of
the registrant were as follows:
FY 2004: $66,736
FY 2005: $172,900
(h) The registrant's investment adviser and accountant have notified the
registrant's audit committee of all non-audit services that were
rendered by the registrant's accountant to the registrant's investment
adviser, its parent company, and any entity controlled by, or under
common control with the investment adviser that provides services to
the registrant, which services were not required to be pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The
notification provided to the registrant's audit committee included
sufficient details regarding such services to allow the registrant's
audit committee to consider the continuing independence of its
principal accountant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedule of investments is included as part of the report to stockholders
filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
As of the end of the reporting period, the registrant did not have in place
formal procedures by which shareholders may recommend nominees to the
registrant's board. However, all such recommendations directed to the following
address will be forwarded to the Corporate Governance Committee of the board for
consideration: The Corporate Secretary, American Century Funds, P. O. Box
410141, Kansas City, Missouri 64141.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940) are effective based on their evaluation of these controls
and procedures as of a date within 90 days of the filing date of this
report.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) that occurred during the registrant's second
fiscal quarter of the period covered by this report that have
materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Registrant's Code of Ethics for Senior Financial Officers, which is
the subject of the disclosure required by Item 2 of Form N-CSR, was
filed as Exhibit 10(a) to American Century Mutual Fund, Inc.'s
Certified Shareholder Report on Form N-CSR, File No. 811-3706, on
December 23, 2003.
(a)(2) Separate certifications by the registrant's principal executive
officer and principal financial officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are filed and attached hereto as Exhibit
99.302CERT.
(a)(3) Not applicable.
(b) A certification by the registrant's chief executive officer and chief
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, is furnished and attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AMERICAN CENTURY GOVERNMENT INCOME TRUST
By: /s/ William M. Lyons
-------------------------------------------
Name: William M. Lyons
Title: President
Date: May 27, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ William M. Lyons
-------------------------------------------
Name: William M. Lyons
Title: President
(principal executive officer)
Date: May 27, 2005
By: /s/ Maryanne L. Roepke
-------------------------------------------
Name: Maryanne L. Roepke
Title: Sr. Vice President, Treasurer, and
Chief Accounting Officer
(principal financial officer)
Date: May 27, 2005
